Quanex Building Products Corporation

Good day and thank you for standing by. Welcome to the Q2 2023 Quantix Building Products Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Scott Vilke, Senior Vice President, CFO, and Treasurer. Please go ahead.

Thanks for joining the call this morning. On the call with me today is George Wilson, our President and CEO. This conference call will contain forward-looking statements and some discussion of non-GAAP measures. Forward-looking statements and guidance discussed on this call and in our earnings release will are based on current expectations. Actual results or events may differ materially from such statements and guidance, and QuantX undertakes no obligation to update or revise any forward-looking statement to reflect new information or events. For a more detailed description of our forward-looking statement disclaimer and a reconciliation of non-GAAP measures to the most directly comparable GAAP measures, please see our earnings release issued yesterday and posted to our website. I'll now turn the call over to George for his prepared remarks.

Thanks, Scott, and good morning to everyone joining the call. All things considered, and with the tough comp to Q2 of last year, we are pleased with our results for the second quarter of this year. As mentioned on our last earnings call, we believed we were starting to see a return to normal seasonality in our business during Q1 of this year, and our results for the second quarter further reinforce that belief. Solid operational performance during the second quarter was somewhat masked by index-related pricing pressure and continued customer inventory rebalancing in our fenestration segments. Although volumes were down across all segments versus the prior year record levels, we did realize EBITDA margin expansion versus prior year on a consolidated basis. Our strong operational performance also resulted in improved free cash flow. which enabled us to repurchase $5.6 million of our common stock and repay $20 million of debt in the quarter. I will now provide some general comments on each of our reporting segments. In our North American fenestration segment, revenues and earnings were down versus prior year due to lower volumes driven by softer market conditions, weather-related softness in West Coast markets, customer inventory rebalancing for our spacer products and pricing pressures on lower raw material costs related to index pricing mechanisms. Operational performance remains strong in this segment, and we did a good job of controlling costs despite the lower volumes. In looking at the LMI acquisition we completed in November, I am pleased to announce that we have realized our announced synergy goal. This business continues to perform very well, and we are evaluating growth opportunities. Moving on to our North American cabinet component segment. The decrease in revenues year over year was primarily a result of lower market demand and the rollback of hardwood related index pricing. We were able to realize solid margin expansion in this segment despite volume and index pricing pressures. Continued focus on cost controls combined with capitalizing on the timing of lower cost hardwood purchases helped minimize volume impacts. In our European fenestration segment, results were impacted by market softness, customer inventory rebalancing in our spacer business, and foreign exchange impact, which more than offset the share gains in our UK vinyl extrusion product line. Continued improvements in operational metrics combined with sourcing initiatives and pricing carryover all contributed to realizing margin expansion in this segment. Having said that, Challenges related to higher energy costs, higher transportation costs, and general inflation are ongoing in this market, and we continue to work with our customers regarding go-forward pricing expectations. In summary, we continue to execute on our strategic and operational initiatives, and we are controlling what we can control. Near-term inflationary headwinds and index-related pricing pressures present challenges for revenue, but the Quantix team continues to perform. and we remain confident in our ability to meet the net sales and adjusted EBITDA guidance ranges for this year. Optimizing return on invested capital and working capital remain top priorities for improved cash flow generation, which will support our growth initiatives and align well with our road to $2 billion strategy. Although macro headwinds still exist for the entire building product segment, we feel we are very well positioned to execute on our strategy and create value for our shareholders. I will now turn the call over to Scott, who will discuss our financial results in more detail.