Quanex Building Products Corporation

Good day, and thank you for standing by. Welcome to the first quarter 2024 Quantix Building Products Corporation earnings conference call. At this time, all participants are in listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during a 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 will now attend the conference. Over to your first speaker today, Scott Zilke, 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 Chairman, President and CEO. This conference call will contain forward-looking statements and some discussion of our non-GAAP measures. Forward-looking statements and guidance discussed on this call and in our earnings release are based on current expectations. Actual results or events may differ materially from such statements and guidance and Quantix 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. Before I start my discussion on the quarter, I'd like to take a moment to publicly thank Bill Griffiths for his many years of dedicated service to Quantix. Bill began his career with Quantix as an independent director in 2009. When the Quantix CEO resigned in 2013, Bill was asked by the board to take over as chairman and CEO, and he held that role for more than six years. He retired as CEO in January of 2020 and then served as chairman for the next four years. Bill was instrumental in transitioning Quantix from a largely commoditized metals company into a true building products manufacturing company. His focus on developing a culture of safety, continuous improvement, and profitable growth positioned us well for the success we are realizing today. Thank you again, Bill, for your commitment, dedication, and service to Quantix and its employees, customers, and shareholders. We wish you and Iris all the best in retirement. I'll now move on to my prepared remarks about our first quarter performance and our current outlook. Overall, the quarter played out as expected. Revenues were down year over year as markets reverted to a more normal seasonal pattern and customer inventory levels declined as lead times and supply chains have improved. In addition, automatic index pricing mechanisms had a negative impact on revenue versus the prior year as raw material costs have declined. Even with lower demand levels, we were able to realize margin expansion on a consolidated basis, mainly due to solid operational performance, holding discretionary pricing, lower stock-based comp expense, and lower interest expense. We were very pleased with our operating cash flow generation, which enabled us to continue to pay down debt in a quarter where we typically draw on our revolver. With respect to the overall macroeconomic environment, we continue to believe we will see an uptick in demand in the second half of the year. In North America, new housing starts data has shown improvement and optimism is building around the prospect of lower interest rates later this year. If and when the Fed does take action to lower interest rates, we believe demand for our products will improve as customers gain confidence and choose to spend more money on housing. In Europe, we believe market improvements will occur at some point, but will lag North America due to the ongoing wars in Ukraine and Gaza and continued pressure on energy costs in these regions. But regardless of the demand equation, we have shown over the past two years that the Quantix operating model is able to react quickly to produce favorable results. In addition, the long-term underlying fundamentals for residential housing continue to be very positive. Globally, inflationary pressures have been mixed. Starting with labor costs, we have seen a slowdown in the rate of wage inflation as hiring in most markets has slowed. For the sourced materials that are most impactful to Quantix, we are seeing a stabilization in pricing and supply for aluminum, steel, and resins. We are still seeing input cost pricing pressures for our films and engineered adhesives. and some of the chemical feedstocks. For our cabinet component products, we are now starting to see upward pricing movements for some of the hardwood species we purchase, as lumber mills have reduced capacity in the market. Finally, from a logistics perspective, we have seen an increase in international shipping costs due to the disrupted shipping lanes in the Middle East. As we look forward to the rest of this year and into next year, I'm still confident that we are well positioned to meet expectations and continue our track record of positive performance. Our operations and supply chain teams are focused on servicing our customers and performing at a high level and are doing a fantastic job of generating operating cash flow. From a growth and strategy execution point of view, our balance sheet is strong and ready to support growth projects as they arise. we continue to identify areas of opportunities to execute on our profitable growth plan, both organically and inorganically. Despite some short-term macro challenges and the uncertainty caused in an election year, we are in track to achieve all of our objectives. I will now turn the call over to Scott, who will discuss our financial results in more detail.