Quanex Building Products Corporation

Good day and thank you for standing by. Welcome to the Q3 2025 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 a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 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 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 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. Although macro headwinds persisted this quarter, I'm pleased with the resilience of our business in the current environment. Following a significant amount of work by our team, new operating segments are in place. Synergy realization remains compelling, and the cash flow generation of the combined entity has been strong. We are confident we are on the right path. We remain focused on achieving our financial and operational objectives and our team continues to prioritize driving both above-market growth and an improved margin profile over time. Our third quarter results were largely shaped by three key factors. First, the macroeconomic environment and the resulting demand and order patterns. Second, the resegmentation of our business units and a resulting goodwill impairment. And third, the integration of timing and the synergies we're beginning to realize from the combination. Let me start with comments on the macroeconomic environment in the markets we serve. In North America for the third quarter of 2025, volumes increased compared to the prior quarter, but not at the rate normal seasonality would have suggested. U.S. customers took extended downtime around the July 4th holiday and volumes remained relatively soft for the remainder of the month. While tariffs continue to add uncertainty, There is also a sentiment that delays to both R&R and new construction projects are a result of consumers waiting for the Federal Reserve to cut interest rates. Altogether, this has led to increased pressure on discretionary spending, resulting in a headwind to consumer and consumer confidence. While volumes are expected to remain soft through the end of the year, we are confident that mid- and long-term indicators favor a strong recovery when rates drop and consumer confidence is restored. Looking at market conditions in Europe, consumer confidence continues to be negatively impacted by higher interest rates and conflicts in the Middle East and Ukraine. However, market share gains in both our vinyl extrusion and insulating glass spacer product lines have helped offset market weakness. Despite ongoing pricing pressure, the Quantix team continues to deliver quality products with excellent operational performance. Now turning to the resegmentation of our business. As we have discussed on prior earnings calls, as well as at our investor day earlier in the year, completing the resegmentation of our business was important for our future success. With this work complete, we are better able to achieve expected synergies, drive innovation and organic growth, and expand into adjacencies. I would like to thank the entire Quantix team for working so hard and efficiently to get us where we are today. From an accounting perspective, one of the impacts of any business resegmentation is a goodwill impairment review. And as you saw in our earnings release, this review resulted in a non-cash goodwill impairment. I want to be clear that this impairment is not related to any performance indicators or changes to the long-term profitability expectations for our business. In fact, the new reporting segments continue to create new opportunities for cost takeout and efficiencies, which will allow for improved performance. However, per accounting rules, we performed goodwill impairment testing on all new reporting units before publicly reporting in the new operating segments, which resulted in the non-cash goodwill impairment. Regardless of the impairment, our business prospects are unchanged. Quantix has strong growth potential, and as macroeconomic uncertainty subsides and customer confidence improves, we believe we are well positioned to capitalize on pent-up demand. Finally, I'd like to discuss the ongoing time and integration process. We continue to make substantial strides on the integration and have finalized and staffed our operational and commercial teams. We have also made significant progress toward building the back office support teams. As we move ahead, our team is capturing meaningful synergies unlocked by the transaction, and we also continue to identify and pursue additional synergies on an ongoing basis. After factoring in these additional synergies, mainly related to headcount, adjusting for lower volumes and pushing out the timing of when we should realize procurement savings, we still see a path to realizing approximately $45 million in cost synergies related to the time and acquisition over time. As a reminder, $45 million in cost synergies is above our initial projection of $30 million at the time of the transaction announcement. We expect to see further synergies, particularly those related to revenue, in the second phase of integration, which is underway. This second phase is rooted in four major themes. go-to-market and geographic expansion strategy, operational footprint optimization, new product and materials development, and finally, current product line portfolio analysis. Each one of these themes is more medium-term focused and directly aligned to the profitable growth strategy that we discussed at our investor day in February. Operationally, we are pleased with what we have accomplished in the first year since the deal closed. We are well positioned due to our healthy balance sheet, flexible financial foundation, and advantaged strategic positioning. Despite the macro challenges, our strong cash flow enabled us to repay over $51 million of bank debt during the quarter. This demonstrates the potential ahead for Quantix as we continue to progress toward our goals, and we remain extremely optimistic moving forward. I want to also take a moment to detail some operational issues we inherited that are specific to our window and door hardware business in Mexico, which impacted results in the third quarter more than expected. Specifically, we identified tooling and equipment issues at our Monterey, Mexico facility, which among other things impacts backlog and leads to inefficiencies and increased costs for items such as expedited freight. These operational challenges negatively impacted EBITDA in the hardware solution segment by almost $5 million in the third quarter alone. As soon as we identified the extent of these issues, we took action. We made leadership changes and are dedicating additional resources and capital to the facility to address and resolve these issues in an expedited manner. We are upgrading the facility's capabilities, processes, and equipment to QUANTIC standards laying a stronger foundation for years to come. We are confident in our recovery plan, although we want to note we expect continued pressure on results in the hardware solution segment in the fourth quarter. Looking ahead, we anticipate gradual progress as we execute on the recovery plan with tangible benefits early in fiscal 2026. Before I conclude my prepared remarks, I want to note that we are updating our guidance for fiscal 2025 due to recent demand trends an updated cost synergy realization and timing model, conversations with customers, and a realistic timeline to address the operational issues in Mexico. Scott will take you through the details, but we remain confident in the strong Quantix team. We have a proven track record and a breadth of products that are unmatched in the industry. We look forward to capitalizing on the opportunities ahead of us and will be positioned to benefit when the macro environment begins to improve. I'll now turn the call over to Scott, who will discuss our financial results in more detail.