Quanex Building Products CORP

Previous wording

The following discussion and analysis contains forward-looking statements based on our current assumptions, expectations, estimates and projections about our business and the homebuilding industry, and therefore, it should be read in conjunction with our accompanying unaudited condensed consolidated financial statements and related notes as of January 31, 2026, and for the three months ended January 31, 2026 and 2025, included elsewhere herein. Actual results could differ from our expectations due to several factors which include, but are not limited to: the impact of market price and demand for our products, economic and competitive conditions, capital expenditures, new technology, regulatory changes and other uncertainties. 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, 2025.

Current wording

The following discussion and analysis contains forward-looking statements based on our current assumptions, expectations, estimates and projections about our business and the homebuilding industry, and therefore, it should be read in conjunction with our accompanying unaudited condensed consolidated financial statements and related notes as of April 30, 2026, and for the three and six months ended April 30, 2026 and 2025, included elsewhere herein. Actual results could differ from our expectations due to several factors which include, but are not limited to: the impact of market price and demand for our products, economic and competitive conditions, capital expenditures, new technology, regulatory changes and other uncertainties. 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, 2025.

Previous wording

Our Extruded Solutions segment manufactures insulating-glass spacers, vinyl and composite profiles, and sealing solutions used in the fabrication of windows, doors, conservatories, roofs, and related building applications. This segment operates across North America and Europe, and its results are influenced by housing starts, energy-efficiency standards, and renovation activity in those regions. In the U.S., demand for insulating-glass spacers and vinyl profiles is supported by increasing adoption of high-performance window systems that improve thermal performance. In the U.K. and continental Europe, our vinyl business serves window fabricators and distributors with a broad offering of vinyl extrusions, decking, and roofing systems. The European market continues to benefit from government-sponsored retrofit programs and EU directives targeting energy efficiency and sustainability in existing building stock.

Current wording

Our Extruded Solutions segment manufactures insulating glass spacers, vinyl and composite profiles, and sealing solutions used in the fabrication of windows, doors, conservatories, roofs, and related building applications. This segment operates across North America and Europe, and its results are influenced by housing starts, energy-efficiency standards, and renovation activity in those regions. In the U.S., demand for insulating-glass spacers and vinyl profiles is supported by increasing adoption of high-performance window systems that improve thermal performance. In the U.K. our vinyl business serves window fabricators and distributors with a broad offering of vinyl extrusions, decking, and roofing systems. The European market continues to benefit from government-sponsored retrofit programs and EU directives targeting energy efficiency and sustainability in existing building stock.

Previous wording

We are monitoring evolving U.S. and global tariff and trade policies, including the recent decision by the U.S. Supreme Court that invalidates certain tariffs imposed under the International Emergency Economic Powers Act. We are assessing the potential impact of this decision and other trade policy developments on our operations, supply chain and cost structure and continue to work with our suppliers and customers to mitigate potential impacts on our business. We are also monitoring ongoing geopolitical tensions and conflicts in various regions of the world, which may contribute to volatility in global markets, supply chains, commodity pricing and foreign currency exchange rates. The extent and duration of current and potential tariff measures and geopolitical developments, and the resulting impact on general economic conditions and our operations, remain uncertain and depend on various factors, including negotiations between the U.S. and affected countries, responses by other governments, potential exemptions, and the availability and cost of alternative sources of supply.

Current wording

We are monitoring evolving U.S. and global tariff and trade policies, including court decisions invalidating certain tariffs. We are assessing the potential impact of these decisions and other trade policy developments on our operations, supply chain and cost structure and continue to work with our suppliers and customers to mitigate potential impacts on our business. We are also monitoring ongoing geopolitical tensions and conflicts in various regions of the world, including the situations in Ukraine and the Middle East, which may contribute to volatility in global markets, supply chains, commodity pricing and foreign currency exchange rates. The extent and duration of current and potential tariff measures and geopolitical developments, and the resulting impact on general economic conditions and our operations, remain uncertain and depend on various factors, including negotiations between the U.S. and affected countries, responses by other governments, potential exemptions, and the availability and cost of alternative sources of supply.

Previous wording

In January 2026, the NAHB forecasted calendar-year housing starts to be approximately 1.3 million and 1.4 million in calendar-year 2026 and 2027. In February 2026, the Ducker forecast indicated that total window shipments are expected to decrease 2.5% in calendar-year 2026.

Current wording

In April 2026, the NAHB forecasted calendar-year housing starts to be approximately 1.3 million in calendar-years 2026 and 2027 and 1.4 million in calendar-year 2028. In May 2026, the Ducker forecast indicated that total window shipments are expected to decrease 3.1% in calendar-year 2026 and 1.3% in calendar-year 2027.

Previous wording

We are impacted by regulation of energy standards. Although the U.S. government has been less aggressively pursuing higher energy efficiency standards in recent years, other countries have implemented higher energy efficiency standards which should bode well for our fenestration-related business in these markets, particularly our warm-edge spacer products, window and door seals and tilt ‘n’ turn micro-ventilation products.

Current wording

We are impacted by regulation of energy standards. Although the U.S. government has been less aggressively pursuing higher energy efficiency standards in recent years, other countries have implemented higher energy efficiency standards which should bode well for our fenestration-related businesses in these markets, particularly our warm-edge spacer products, window and door seals and tilt ‘n’ turn micro-ventilation products.

Previous wording

Net Sales. Net sales increased $0.2 million, for the three months ended January 31, 2026 compared to the same period in 2025 primarily due to a $3.3 million of favorable foreign currency rate change, a $0.4 million increase in price and raw material indexes, partially offset by a $3.5 million decrease in volumes mainly due to softer market demand.

Current wording

Net Sales. Net sales increased $1.0 million for the three months ended April 30, 2026 compared to the same period in 2025 primarily due to a $4.7 million favorable impact from foreign currency rate changes and a $1.5 million increase in price and raw material indexes, partially offset by a $5.2 million decrease in volumes mainly due to softer market demand.

Previous wording

Cost of Sales. Cost of sales remained flat for the three months ended January 31, 2026 compared to the same period in 2025.

Current wording

Selling, General and Administrative. Selling, general and administrative expense remained flat for the three months ended April 30, 2026 compared to the same period in 2025.

Previous wording

Net Sales. Net sales increased $4.1 million, or 5%, for the three months ended January 31, 2026 compared to the same period in 2025. The increase was primarily driven by a $2.0 million increase in volumes, a $1.7 million favorable impact from pricing and raw material index adjustments, and $0.2 million of favorable tariff-related pricing adjustments.

Current wording

Net Sales. Net sales increased $6.4 million, or 7%, for the three months ended April 30, 2026 compared to the same period in 2025. The increase was primarily driven by a $4.5 million favorable impact from pricing and raw material index adjustments, a $1.4 million increase in volume, a $0.2 million favorable impact from foreign currency rate changes, and $0.3 million of favorable tariff-related pricing adjustments.

Previous wording

Cost of Sales. Cost of sales increased $3.1 million, or 5%, for the three months ended January 31, 2026 compared to the same period in 2025. Cost of sales increased primarily due to higher volumes, pricing and raw material index impacts, and foreign currency movements during the period.

Current wording

Cost of Sales. Cost of sales increased $5.3 million, or 7%, for the three months ended April 30, 2026 compared to the same period in 2025. Cost of sales increased primarily due to higher volumes and foreign currency movements during the period.

Previous wording

Interest Expense. Interest expense decreased $1.8 million for the three months ended January 31, 2026 compared to the same period in 2025 primarily as a result of a decrease in borrowings outstanding during the three months ended January 31, 2026 as compared to the prior year period.

Current wording

Interest Expense. Interest expense decreased $1.9 million for the three months ended April 30, 2026 compared to the same period in 2025 primarily as a result of a decrease in borrowings outstanding during the three months ended April 30, 2026 as compared to the prior year period.

Previous wording

Income Taxes. We recorded an income tax expense of $0.2 million on pre-tax loss of $3.9 million for the three months ended January 31, 2026, an effective rate of (4.4)%, and income tax benefit of $5.1 million on pre-tax loss of $19.9 million for the three months ended January 31, 2025, an effective rate of 25.3%. The decrease in the effective tax rate compared to the prior year was primarily driven by a lower pre-tax loss in the current year, partially offset by a $1.1 million of discrete tax expense, primarily related to equity-based compensation award activity and state deferred tax remeasurement from legal entity reorganization activities, which reduced the expected tax benefit for the period.

Current wording

Income Taxes. We recorded an income tax expense of $3.8 million on pre-tax income of $7.1 million for the three months ended April 30, 2026, an effective rate of 52.9%, and income tax expense of $6.3 million on pre-tax income of $26.8 million for the three months ended April 30, 2025, an effective rate of 23.5%. The increase in the effective tax rate compared to the prior year was primarily driven by $2.1 million of discrete tax items including equity-based compensation award activity, state deferred tax remeasurement from legal entity reorganization activities, and changes in reserves for uncertain tax positions, which had a disproportionate impact on the rate given the lower pre-tax earnings in the current period.

Previous wording

Selling, General and Administrative. Selling, general and administrative expense increased $2.6 million, or 14%, for the three months ended January 31, 2026 compared to the same period in 2025. The increase is primarily due to increases in labor costs and miscellaneous selling and general administrative costs year-over-year.

Current wording

Selling, General and Administrative. Selling, general and administrative expense increased $2.6 million, or 7%, for the six months ended April 30, 2026 compared to the same period in 2025. The increase is primarily due to increases in labor costs and other miscellaneous selling and general administrative costs year-over-year.

Previous wording

Selling, General and Administrative. Selling, general and administrative expenses decreased $0.2 million, or 7%, for the three months ended January 31, 2026 compared to the same period in 2025. This decrease is primarily attributable to a decrease in reorganization costs, which occurred in 2025, partially offset by higher compensation expense, including the valuations of our stock-based compensation awards during the three months ended January 31, 2026 as compared to the prior year period.

Current wording

Selling, General and Administrative. Selling, general and administrative expenses decreased $2.7 million, or 31%, for the six months ended April 30, 2026 compared to the same period in 2025. This decrease is primarily attributable to a decrease in reorganization costs incurred in the prior year period as well as higher cost allocations to the reportable segments in 2026, including for stock-based compensation and medical costs.

Previous wording

Restructuring Charges. Restructuring charges decreased $1.8 million, or 100%, for the three months ended January 31, 2026 compared to the same period in 2025. This decrease is primarily attributable to the restructuring of our operating segments in fiscal 2025. For additional discussion of the restructuring, see the “restructuring” section of Note 1, “Nature of Operations, Basis of Presentation and Significant Accounting Policies”.

Current wording

Restructuring Charges. Restructuring charges decreased $1.8 million, or 100%, for the six months ended April 30, 2026 compared to the same period in 2025. This decrease is primarily attributable to the restructuring of our operating segments in fiscal 2025. For additional discussion of the restructuring, see the “restructuring” section of Note 1, “Nature of Operations, Basis of Presentation and Significant Accounting Policies”.

Previous wording

Historic ally, our principal sources of funds have been cash on hand, cash flow from operations, and borrowings under our credit facilities. As of January 31, 2026, we had $62.3 million of cash and equivalents, $662.0 million outstanding under the Facilities, $6.2 million of outstanding letters of credit, and $55.5 million outstanding under finance leases and other debt. Of the $55.5 million outstanding under finance leases and other debt, $49.3 million relates to real estate leases. We had $269.3 million avail able for use under the revolving credit facility at January 31, 2026.

Current wording

Historic ally, our principal sources of funds have been cash on hand, cash flow from operations, and borrowings under our credit facilities. As of April 30, 2026, we had $63.7 million of cash and equivalents,$660.8 million outstanding under the Facilities,$5.6 million of outstanding letters of credit, and$54.3 million outstanding under finance leases and other debt. Of the $54.3 million outstanding under finance leases and other debt, $48.6 million relatesto real estate leases. We had$264.9 million avail able for use under the revolving credit facility at April 30, 2026.

Previous wording

The following table summarizes our cash flow results for the three months ended January 31, 2026 and 2025:

Current wording

The following table summarizes our cash flow results for the six months ended April 30, 2026 and 2025:

Previous wording

Operating Activities. Cash used for operating activities increased $7.7 million for the three months ended January 31, 2026 compared to the same period in 2025. The increase in cash used was primarily driven by unfavorable changes in working capital, including a smaller decrease in accounts receivable compared to the prior year and higher inventory levels, partially offset by smaller decreases in accounts payable and accrued liabilities. The impact of working capital changes was partially mitigated by a reduction in net loss.

Current wording

Operating Activities. Cash provided by operating activities decreased $17.3 million for the six months ended April 30, 2026 compared to the same period in 2025, resulting in cash used for operating activities of $1.3 million in 2026 compared to cash provided by operating activities of $16.0 million in 2025. The decrease was primarily driven by lower net income and unfavorable changes in working capital, including a larger increase in accounts receivable and a larger decrease in current income taxes payable, partially offset by higher depreciation and amortization expense and smaller decreases in accounts payable and accrued liabilities.

Previous wording

Investing Activities. Cash used for investing activities decreased $0.2 million for the three months ended January 31, 2026 compared to the same period in 2025, primarily due to lower capital expenditures, partially offset by lower proceeds from disposition of assets.

Current wording

Investing Activities. Cash used for investing activities decreased $3.9 million for the six months ended April 30, 2026 compared to the same period in 2025, primarily due to lower capital expenditures, partially offset by lower proceeds from disposition of assets.

Previous wording

Financing Activities. Cash provided by financing activities increased $37.9 million for the three months ended January 31, 2026 compared to the same period in 2025. The change in financing cash flows is primarily as a result of an increase in net borrowings of long-term debt and a decrease in the purchase of treasury shares during the three months ended January 31, 2026 compared to the prior year period.

Current wording

Financing Activities. Cash provided by financing activities increased $40.1 million for the six months ended April 30, 2026 compared to the same period in 2025, resulting in cash provided by financing activities of $9.8 million in 2026 compared to cash used for financing activities of $30.3 million in 2025. The change in financing cash flows was primarily driven by the absence of treasury stock repurchases and higher net borrowings under our credit facilities compared to the prior year period.

Previous wording

Our strategy for deploying cash is 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 own stock. During the three months ended January 31, 2026 and 2025, we repatriated $5.8 million and $11.5 million, respectively, of foreign earnings from our foreign locations. We maintain cash balances in foreign countries which totaled $52.2 million as of January 31, 2026.

Current wording

Our strategy for deploying cash is 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 own stock. During the six months ended April 30, 2026 and 2025, we repatriated $16.8 million and $23.0 million, respectively, of foreign earnings from our foreign locations. We maintain cash balances in foreign countries which totaled$50.3 million as of April 30, 2026.

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, 2025. Our critical accounting policies and estimates have not changed materially during the three months ended January 31, 2026.

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, 2025. Our critical accounting policies and estimates have not changed materially during the six months ended April 30, 2026.