Quanex Building Products CORP

Previous wording

The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of April 30, 2025, and for the three and six months ended April 30, 2025 and 2024, included elsewhere herein. For additional information pertaining to our business, including risk factors which should be considered before investing in our common stock, refer to our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.

Current wording

The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of July 31, 2025, and for the three and nine months ended July 31, 2025 and 2024, included elsewhere herein. For additional information pertaining to our business, including risk factors which should be considered before investing in our common stock, refer to our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.

Previous wording

We are a leading manufacturer and component supplier to original equipment manufacturers (OEMs) in various industries, including window, door, solar, refrigeration, custom mixing, building access, and cabinetry markets. The majority of these components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components. Examples of fenestration components include energy-efficient flexible insulating glass spacers, extruded vinyl profiles, window and door screens, precision-formed metal and wood products, window and door seals, and window and door hardware. In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, water retention barriers, conservatory roof components, and building access solutions. For additional discussion of our reportable business segments, see Note 14, “Segment Information.” We leverage efficient production and distribution processes and engineering expertise to provide our customers with specialized products for their specific hardware, extrusion, and custom applications. We believe these capabilities enhance our ability to provide value to our customers. We serve a primary customer base in North America and the United Kingdom (U.K.), and also serve customers in international markets through our operating locations in the U.K., Germany, Mexico, Canada and Italy, as well as through sales and marketing efforts in other countries.

Current wording

We are a leading manufacturer and component supplier to original equipment manufacturers (OEMs) in various industries, including window, door, solar, refrigeration, custom mixing, building access, and cabinetry markets. We have organized our business into three reportable business segments: Hardware Solutions, which manufactures window and door hardware and screens; Extruded Solutions, which manufacturers insulating glass spacers, vinyl window and door profiles, seals, and weatherstripping; and Custom Solutions, which manufactures wood, mixing, and building access solutions. For additional discussion of our reportable business segments, see Note 14, “Segment Information.” We leverage efficient production and distribution processes and engineering expertise to provide our customers with specialized products for their specific hardware, extrusion, and custom applications. We believe these capabilities enhance our ability to provide value to our customers. We serve a primary customer base in North America and the United Kingdom (U.K.), and also serve customers in international markets through our operating locations in the U.K., Germany, Mexico, Canada and Italy, as well as through sales and marketing efforts in other countries.

Previous wording

We currently have four reportable business segments: (1) North American Fenestration segment (“NA Fenestration”), comprising four operating segments, consisting of vinyl profiles, IG spacers, screens, custom compound mixing and other fenestration components; (2) European Fenestration segment (“EU Fenestration”), comprising our U.K.-based vinyl extrusion business, manufacturing vinyl profiles and conservatories, and the European insulating glass business manufacturing IG spacers; (3) North American Cabinet Components segment (“NA Cabinet Components”), comprising our North American cabinet door and components business and two wood-manufacturing plants, and (4) Tyman, which was acquired on August 1, 2024, comprising a leading international supplier of engineered fenestration components and access solutions to the construction industry. We maintain a grouping called Unallocated Corporate & Other, which includes transaction expenses, stock-based compensation, long-term incentive awards based on the performance of our common stock and other factors, certain severance and legal costs not deemed to be allocable to all segments, depreciation of corporate assets, interest expense, other, net, income taxes and inter-segment eliminations, and executive incentive compensation and medical expense fluctuations relative to planned costs as determined during the annual planning process. Other general and administrative costs associated with the corporate office are allocated to the reportable segments, based upon a relative measure of profitability in order to more accurately reflect each reportable business segment's administrative costs.

Current wording

During the three months ended July 31, 2025, in connection with our announced restructuring, we re-evaluated our reportable operating segment presentation and adjusted our segment structure to better align our business operations. As a result, we now report three reportable operating segments: Hardware Solutions, Extruded Solutions, and Custom Solutions. We continue to maintain a grouping called Unallocated Corporate & Other, which includes transaction expenses, stock-based compensation, long-term incentive awards based on the performance of our common stock and other factors, certain severance and legal costs not deemed to be allocable to all segments, depreciation of corporate assets, interest expense, other, net, income taxes and inter-segment eliminations, and executive incentive compensation and medical expense fluctuations relative to planned costs as determined during the annual planning process. Other general and administrative costs associated with the corporate office are allocated to the reportable segments, based upon a relative measure of profitability in order to more accurately reflect each reportable business segment's administrative costs.

Previous wording

On August 1, 2024, we completed the acquisition of Tyman plc, a company incorporated in England and Wales (the “Tyman Acquisition”). The aggregate consideration due pursuant to the Tyman Acquisition at closing comprised of 14,139,477 New Quanex Shares and cash consideration of approximately $504.1 million (being the Pound Sterling amount of cash consideration of £392.2 million in respect of all of the Tyman Shares converted to U.S. Dollars at an exchange rate of 1.2855). New Quanex Shares issued in connection with the Tyman Acquisition on the New York Stock Exchange took effect on August 2, 2024 and Tyman’s shares on the London Stock Exchange were canceled.

Current wording

On August 1, 2024, we completed the acquisition of Tyman plc, a company incorporated in England and Wales (the “Tyman Acquisition”). The aggregate consideration due pursuant to the Tyman Acquisition at closing comprised 14,139,477 New Quanex Shares and cash consideration of approximately $504.1 million (being the Pound Sterling amount of cash consideration of £392.2 million in respect of all of the Tyman Shares converted to U.S. Dollars at an exchange rate of 1.2855). New Quanex Shares issued in connection with the Tyman Acquisition on the New York Stock Exchange took effect on August 2, 2024 and Tyman’s shares on the London Stock Exchange were canceled.

Previous wording

In April 2025, the NAHB forecasted calendar-year housing starts to be approximately 1.4 million in the 2025 and 2026 calendar-years and 1.5 million in 2027. In May 2025, the Ducker forecast indicated that total window shipments are expected to decrease 2.6% in calendar-year 2025 and increase 1.2% in 2026.

Current wording

In July 2025, the NAHB forecasted calendar-year housing starts to be approximately 1.4 million in the 2025, 2026 and 2027 calendar-years. In May 2025, the Ducker forecast indicated that total window shipments are expected to decrease 4.3% and 1.5% in calendar-year 2025 and 2026.

Previous wording

Net Sales. Net sales increased $4.7 million, or 8%, for the three months ended April 30, 2025 compared to the same period in 2024 primarily due to a $5.1 million increase in volumes due to improved demand period over period and $0.2 million of favorable foreign currency rate change partially offset by $0.6 million of base price decreases.

Current wording

Net Sales. Net sales increased $39.9 million, or 30%, for the three months ended July 31, 2025 compared to the same period in 2024 primarily due an increase of $39.9 million related to the acquisition of the Tyman business, a $0.9 million increase in price and raw material indexes, and $2.6 million of favorable foreign currency rate change, partially offset by a $3.5 million decrease in volumes mainly due to softer market demand driven by weaker consumer confidence.

Previous wording

Cost of Sales. The cost of sales increased $3.3 million, or 9%, for the three months ended April 30, 2025 compared to the same period in 2024. Cost of sales increased primarily due to an increase in volumes and foreign currency impacts, partially offset by deflation in the price of raw materials.

Current wording

Cost of Sales. The cost of sales increased $23.8 million, or 26%, for the three months ended July 31, 2025 compared to the same period in 2024. Cost of sales increased primarily due to the acquisition of the Tyman business, pricing and inflation of raw materials, and foreign currency impacts, partially offset by a decrease in volumes.

Previous wording

Selling, General and Administrative. Selling, general and administrative expenses decreased $5.7 million, or 71%, for the three months ended April 30, 2025 compared to the same period in 2024. This decrease is primarily attributable to a decrease in transaction and advisory fees and lower compensation expense including the valuations of our stock-based compensation awards partially offset by an increase in medical expenses during the three months ended April 30, 2025 as compared to the prior year period.

Current wording

Selling, General and Administrative. Selling, general and administrative expenses decreased $1.5 million, or 21%, for the three months ended July 31, 2025 compared to the same period in 2024. This decrease is primarily attributable to a decrease in transaction and advisory fees and lower compensation expense, including the valuations of our stock-based compensation awards, partially offset by an increase in restructuring costs and medical expenses during the three months ended July 31, 2025 as compared to the prior year period.

Previous wording

Interest Expense. Interest expense increased $13.0 million for the three months ended April 30, 2025 compared to the same period in 2024 as a result of an increase in borrowings outstanding during the three months ended April 30, 2025 as compared to the prior year period.

Current wording

Interest Expense. Interest expense increased $13.3 million for the three months ended July 31, 2025 compared to the same period in 2024 as a result of an increase in borrowings outstanding during the three months ended July 31, 2025 as compared to the prior year period.

Previous wording

Income Taxes. We recorded income tax expense of $6.3 million on pre-taxincome of $26.8 million for the three months ended April 30, 2025, an effective rate of 23.5%, and income taxexpense of $4.3 million on pre-taxincome of $19.7 million for the three months ended April 30, 2024, an effective rate of 21.9%. The increase in the effective tax rate year-over-year was primarily driven by discrete items.

Current wording

Income Taxes. We recorded an income tax benefit of $8.2 million on pre-taxloss of $284.2 million for the three months ended July 31, 2025, an effective rate of 2.9%, and income taxexpense of $6.7 million on pre-taxincome of $32.0 million for the three months ended July 31, 2024, an effective rate of 20.9%. The decrease in the effective tax rate year-over-year was primarily driven by discrete items including the asset impairment charges related to goodwill impairment.

Previous wording

Cost of Sales. The cost of sales decreased $20.3 million, or 8%, for the six months ended April 30, 2025 as compared to the same period in 2024. Cost of sales, including labor, decreased primarily due to a decrease in volumes partially offset by inflation of raw materials during the period.

Current wording

Costs of Sales. The cost of sales increased $300.6 million, or 181%, for the nine months ended July 31, 2025 as compared to the same period in 2024. Cost of sales, including labor, increased primarily due to the acquisition of the Tyman business and pricing and inflation of raw materials during the period partially offset by a decrease in volumes.

Previous wording

Selling, Generaland Administrative. Selling, general and administrative expenses increased $2.4 million, or 8%, for the six months ended April 30, 2025 as compared to the same period in 2024. The increase is primarily due to increases in labor costs partially offset by a decrease in professional fees year-over-year.

Current wording

Selling, Generaland Administrative. Selling, general and administrative expenses increased $79.9 million, or 427%, for the nine months ended July 31, 2025 as compared to the same period in 2024. The increase is primarily due to increases in labor costs and other miscellaneous selling, general administrative costs related to the acquisition of the Tyman business costs year-over-year.

Previous wording

Net Sales. Net sales increased $3.7 million, or 3%, comparing the six months ended April 30, 2025 to the same period in 2024, which was primarily driven by a $4.6 million increase in volumes largely due to improved demand year over year and $0.2 million of favorable foreign currency rate change partially offset by $1.1 million of base price decreases.

Current wording

Net Sales. Net sales increased $98.2 million, or 26%, comparing the nine months ended July 31, 2025 to the same period in 2024, which was primarily due to an increase of $115.2 million related to the acquisition of the Tyman business and a $2.9 million of favorable foreign currency rate change, partially offset by a $17.9 million decrease in volumes mainly due to softer market demand driven by weaker consumer confidence and a $2.0 million decrease in price and raw material indexes.

Previous wording

Net Sales. Net sales increased $0.8 million, or 1%, for the six months ended April 30, 2025 compared to the same period in 2024, which was driven by a $3.7 million increase in raw material surcharges partially offset by a $2.9 million decrease in volumes due to softer market demand driven by weaker consumer confidence.

Current wording

Net Sales. Net sales increased $76.6 million, or 37%, for the nine months ended July 31, 2025 compared to the same period in 2024, which was primarily due to an increase of $74.2 million related to the acquisition of the Tyman business and a $5.3 million increase in price and raw material indexes, partially offset by a $2.9 million decrease in volumes mainly due to softer market demand driven by weaker consumer confidence.

Previous wording

Cost of Sales. Cost of sales increased $0.5 million, or 1%, for the six months ended April 30, 2025 compared with the same period in 2024. Cost of sales increased primarily as a result of inflation of raw materials partially offset by lower volumes year-over-year.

Current wording

Cost of Sales. Cost of sales increased $45.4 million, or 26%, for the nine months ended July 31, 2025 compared with the same period in 2024. Cost of sales increased primarily due to the acquisition of the Tyman business and pricing and inflation of raw materials during the period partially offset by a decrease in volumes.

Previous wording

Net Sales. Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the six months ended April 30, 2025 and 2024.

Current wording

Net Sales. Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the nine months ended July 31, 2025 and 2024.

Previous wording

Selling, General and Administrative. Selling, general and administrative expenses decreased $6.3 million, or 54%, for the six months ended April 30, 2025 compared to the same period in 2024. This decrease is primarily attributable to a decrease in transaction and advisory fees and lower compensation expense including the valuations of our stock-based compensation awards partially offset by an increase in medical expenses during the six months ended April 30, 2025 as compared to the prior year period.

Current wording

Selling, General and Administrative. Selling, general and administrative expenses decreased $5.1 million, or 26%, for the nine months ended July 31, 2025 compared to the same period in 2024. This decrease is primarily attributable to a decrease in transaction and advisory fees and lower compensation expense, including the valuations of our stock-based compensation awards, partially offset by an increase in restructuring costs and medical expenses during the nine months ended July 31, 2025 as compared to the prior year period.

Previous wording

Interest Expense. Interest expense increased $26.1 million for the six months ended April 30, 2025 compared to the same period in 2024 primarily as a result of higher borrowings outstanding during the six months ended April 30, 2025 as compared to the prior year period.

Current wording

Interest Expense. Interest expense increased $39.4 million for the nine months ended July 31, 2025 compared to the same period in 2024 primarily as a result of higher borrowings outstanding during the nine months ended July 31, 2025 as compared to the prior year period.

Previous wording

Income Taxes. We recorded income tax expense of $1.3 million on pre-taxincome of $6.9 million for the six months ended April 30, 2025, an effective rate of 18.3%, and income taxexpense of $6.0 million on a pre-tax income of $27.6 million for the six months ended April 30, 2024, an effective rate of 21.6%. The decrease in the effective tax rate year-over-year was primarily driven by discrete items.

Current wording

Income Taxes. We recorded income tax benefit of $6.9 million on pre-taxloss of $277.3 million for the nine months ended July 31, 2025, an effective rate of 2.5%, and income taxexpense of $12.6 million on a pre-tax income of $59.6 million for the nine months ended July 31, 2024, an effective rate of 21.2%. The decrease in the effective tax rate year-over-year was primarily driven by discrete items including the asset impairment charges related to goodwill impairment.

Previous wording

The Amended Credit Agreement (i) increased the senior secured revolving credit facility to an aggregate principal amount of $475 million (the “Revolving Credit Facility”) and (ii) provides for a senior secured term loan A facility in an aggregate principal amount of $500 million (the “Term A Facility” and together with the Revolving Credit Facility, the “Facilities”). The Revolving Credit Facility includes alternative currency, letter of credit, and swing-line sub-facilities of $100 million, $30 million, and $15 million, respectively. We capitalized $13.8 million of deferred financing fees related to the Amended Credit Agreement. The maturity date of the Facilities will be five years after the acquisition effective date, maturing on August 1, 2029.

Current wording

The Amended Credit Agreement (i) increased the senior secured revolving credit facility to an aggregate principal amount of $475 million (the “Revolving Credit Facility”) and (ii) provides for a senior secured term loan A facility in an aggregate principal amount of $500 million (the “Term Loan A Facility” and together with the Revolving Credit Facility, the “Facilities”). The Revolving Credit Facility includes alternative currency, letter of credit, and swing-line sub-facilities of $100 million, $30 million, and $15 million, respectively. We capitalized $13.8 million of deferred financing fees related to the Amended Credit Agreement. The maturity date of the Facilities will be five years after the acquisition effective date, maturing on August 1, 2029.

Previous wording

As of April 30, 2025, we had$62.6 million of cash and equivalents, $723.8 million outstanding under the Facilities, $6.1 million of outstanding letters of credit, and$61.3 million outstanding under finance leases and other debt. Of the$61.3 million outstanding under finance leases and other debt,$57.4 million relates to real estate leases. We had$226.4 million available for use under the Revolving Credit Agreement at April 30, 2025.

Current wording

As of July 31, 2025, we had $66.3 million of cash and equivalents, $672.5 million outstanding under the Facilities, $6.1 million of outstanding letters of credit, and $61.2 million outstanding under finance leases and other debt. Of the $61.2 million outstanding under finance leases and other debt, $58.9 million relates to real estate leases. We had $271.4 million avail able for use under the Revolving Credit Agreement at July 31, 2025.

Previous wording

During December 2021, our Board of Directors approved a stock repurchase program that authorized the repurchase of up to $75.0 million worth of shares of our common stock. Repurchases under the program will be made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. During the three months ended April 30, 2025, we purchased 1,259,407 shares under this program and as of April 30, 2025 we have a maximum of $35.6 million available to purchase shares under this program. The program does not have an expiration date or a limit on the number of shares that may be purchased.

Current wording

During December 2021, our Board of Directors approved a stock repurchase program that authorized the repurchase of up to $75.0 million worth of shares of our common stock. Repurchases under the program will be made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. During the three months ended July 31, 2025, we purchased 100,000 shares under this program and as of July 31, 2025 we have a maximum of $33.6 million available to purchase shares under this program. The program does not have an expiration date or a limit on the number of shares that may be purchased.

Previous wording

We repatriated $23.0 million and $15.3 million of foreign cash during the six months ended April 30, 2025 and 2024, respectively. We expect to repatriate excess cash moving forward and use the funds to retire debt or meet current working capital needs. In the U.K., we insure against a portion of our credit losses. We believe our business model, our current cash reserves and our strong balance sheet leave us well-positioned to manage our business and remain in compliance with our debt covenants.

Current wording

We repatriated $42.4 million and $33.2 million of foreign cash during the nine months ended July 31, 2025 and 2024, respectively. We expect to repatriate excess cash moving forward and use the funds to retire debt or meet current working capital needs. In the U.K., we insure against a portion of our credit losses. We believe our business model, our current cash reserves and our strong balance sheet leave us well-positioned to manage our business and remain in compliance with our debt covenants.

Previous wording

The following table summarizes our cash flow results for the six months ended April 30, 2025 and 2024:

Current wording

The following table summarizes our cash flow results for the nine months ended July 31, 2025 and 2024:

Previous wording

Investing Activities. Cash used for investing activities increased $9.1 million for the six months ended April 30, 2025 compared to the same period in 2024, primarily as a result of an increase in capital expenditures during the six months ended April 30, 2025 compared to the prior year period.

Current wording

Investing Activities. Cash used for investing activities increased $17.3 million for the nine months ended July 31, 2025 compared to the same period in 2024, primarily as a result of an increase in capital expenditures during the nine months ended July 31, 2025 compared to the prior year period. Capital expenditures have increased primarily due to spending for businesses acquired in the Tyman Acquisition.

Previous wording

Financing Activities. Cash used for financing activities increased $8.4 million for the six months ended April 30, 2025 compared to the same period in 2024. The change in investing cash flows is primarily as a result of an increase in the purchase of treasury shares partially offset by an increase in borrowings in long-term debt.

Current wording

Financing Activities. Cash used for financing activities increased $61.9 million for the nine months ended July 31, 2025 compared to the same period in 2024. The change in financing cash flows is primarily as a result of an increase in the purchase of treasury shares and an increase in repayments of long-term debt.

Previous wording

Historically, our strategy for deploying cash has been to invest in organic growth opportunities, develop our infrastructure, and explore strategic acquisitions. Other uses of cash include paying cash dividends to our shareholders and repurchasing our common stock. During the six months ended April 30, 2025 and 2024, we repatriated $23.0 million and $15.3 million, respectively, of foreign earnings from our foreign locations. We maintain cash balances in foreign countries which total $46.0 million as of April 30, 2025.

Current wording

Historically, our strategy for deploying cash has been to invest in organic growth opportunities, develop our infrastructure, and explore strategic acquisitions. Other uses of cash include paying cash dividends to our shareholders and repurchasing our common stock. During the nine months ended July 31, 2025 and 2024, we repatriated $42.4 million and $33.2 million, respectively, of foreign earnings from our foreign locations. We maintain cash balances in foreign countries which total $42.0 million as of July 31, 2025.

Previous wording

For a description of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended October 31, 2024. Our critical accounting policies and estimates have not changed materially during the six months ended April 30, 2025.

Current wording

For a description of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended October 31, 2024. Our critical accounting policies and estimates have not changed materially during the nine months ended July 31, 2025.

Previous wording

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standards setting bodies that we adopt as of the specified effective date. We did not adopt any new accounting pronouncements during the three and six months ended April 30, 2025.

Current wording

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standards setting bodies that we adopt as of the specified effective date. We did not adopt any new accounting pronouncements during the three and nine months ended July 31, 2025.