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QB

Quanex Building Products CORP (NX)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue rose 76.7% year over year to $495.3M, modestly above consensus, while adjusted EPS of $0.69 missed expectations; GAAP EPS was -$6.04 due to a non-cash $302.3M goodwill impairment tied to re-segmentation at a depressed market valuation .
  • Adjusted EBITDA increased to $70.3M, driven by Tyman contributions and synergy realization; however, operational issues in the legacy Tyman window and door hardware business in Mexico reduced Hardware Solutions EBITDA by nearly $5M in the quarter .
  • Guidance was cut: FY2025 net sales to ~$1.82B (from $1.84–$1.86B) and adjusted EBITDA to ~$235M (from $270–$280M); management provided detailed Q4 modeling assumptions including ~27% gross margin and a 24.5% adjusted tax rate .
  • Balance sheet progress was notable: $51.25M of bank debt repaid in Q3, liquidity improved to $337.7M, and net debt/LTM adjusted EBITDA fell to 2.6x, supporting deleveraging and selective buybacks (100k shares, $2.1M) .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and adjusted profitability: net sales $495.3M, adjusted EPS $0.69, adjusted EBITDA $70.3M; Tyman integration contributed and synergies are tracking with an expanded cost synergy target of ~$45M over time (“above our initial projection of $30 million”) .
  • Cash generation and deleveraging: operating cash flow $60.7M, free cash flow $46.2M; repaid $51.25M of bank debt and maintained a healthy liquidity position of $337.7M .
  • Strategic progress: re-segmentation completed, enabling improved execution and synergy capture; CEO: “we still see a path to realizing approximately $45 million in cost synergies… above our initial projection of $30 million” .

What Went Wrong

  • Operational headwinds in Mexico hardware facility (tooling/equipment issues, expedited freight) pressured segment EBITDA by ~$5M in Q3; management expects continued pressure in Q4 before improvements in early FY2026 .
  • Macro softness and weaker seasonality than anticipated (extended customer downtime around July 4, delayed R&R/new construction pending rate cuts) weighed on volumes and procurement synergies timing .
  • Guidance reduction: FY2025 revenue and adjusted EBITDA were lowered; adjusted tax rate raised to 24.5% vs prior 23.5%, reflecting non-deductible interest .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Net Sales ($USD Millions)$280.3 $452.5 $495.3
Adjusted Diluted EPS ($)$0.81 $0.60 $0.69
GAAP Diluted EPS ($)$0.77 $0.44 ($6.04)
Gross Margin %25.3% 29.0% 27.9%
Adjusted EBITDA ($USD Millions)$42.0 $61.9 $70.3
Adjusted EBITDA Margin %15.0% 13.7% 14.2%

Segment performance (Net Sales and Adjusted EBITDA):

SegmentQ3 2024 Net Sales ($M)Q3 2024 Adj EBITDA ($M)Q3 2024 Adj EBITDA Margin %Q3 2025 Net Sales ($M)Q3 2025 Adj EBITDA ($M)Q3 2025 Adj EBITDA Margin %
Hardware Solutions$75.5 $9.5 12.5% $227.1 $24.7 10.9%
Extruded Solutions$134.6 $27.7 20.6% $174.4 $37.1 21.3%
Custom Solutions$72.7 $6.1 8.4% $102.3 $12.9 12.6%

KPIs and balance sheet:

KPIQ3 2025
Cash from Operations ($M)$60.7
Free Cash Flow ($M)$46.2
Bank Debt Repaid ($M)$51.25
Liquidity ($M)$337.7
Total Debt ($M)$733.7
Cash & Equivalents ($M)$66.3
Net Debt ($M)$667.4
Net Debt / LTM Adj EBITDA (x)2.6x
Share Repurchases100,000 shares; $2.1M; $20.54 avg

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD)FY2025$1.84–$1.86B ~$1.82B Lowered
Adjusted EBITDA ($USD)FY2025$270–$280M ~$235M Lowered
Adjusted Tax Rate (%)FY202523.5% (prior) 24.5% Raised
Gross Margin (%)FY2025NA~27% New
SG&A ($USD)FY2025NA~$264M New
Interest Expense ($USD)FY2025NA~$53M New
Adjusted D&A ($USD)FY2025~$60M (prior comment) ~$58M Lowered
CapEx ($USD)FY2025NA~$75M New
Free Cash Flow ($USD)FY2025NA~$80M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Tyman integration & synergiesTarget $30M; reiterated at Investor Day; raised confidence; by Q2, cost synergy target increased to ~$45M over time; run-rate $30M by early FY2026 .Reaffirmed ~$45M cost synergy path; second-phase integration themes (go-to-market, footprint optimization, new product/materials, portfolio analysis) .Positive and progressing
Re-segmentationGoal to report in new segments in 2025 (Q2/Q4) .New segments implemented; impairment testing triggered and resulted in non-cash goodwill impairment, not tied to performance .Implemented; accounting impact absorbed
Tariffs/macro~22% COGS exposed; localized supply chains; surcharge mechanisms; ability to mitigate margin impact .Tariffs continue to add uncertainty; macro softness led to weaker-than-normal seasonality and delayed demand .Ongoing headwind
Mexico operational issuesNot highlighted in Q1/Q2.Tooling/equipment issues at Monterrey; ~$5M EBITDA headwind in Q3; remediation underway; pressure expected in Q4, benefits early FY2026 .Identified and being remediated
European performanceVolumes up YoY in Q2; market share gains in extrusions and spacers .Continued share gains; strong operational delivery despite pricing pressure .Resilient
Deleveraging & buybacksDebt repaid ~$12M in Q1; buybacks $3.7M .Debt repayment $51.25M; buybacks $2.1M; leverage 2.6x, covenant 2.4x .Improving balance sheet

Management Commentary

  • “We are encouraged by the overall resilience of the business… strong cash flow… repay over $51 million in bank debt… we still believe there is a path to realizing approximately $45 million in cost synergies over time” — George Wilson (CEO) .
  • “Operational issues… in Mexico… impacted EBITDA in the Hardware Solutions segment by almost $5,000,000 in the third quarter… we are upgrading the facility’s capabilities… to Quanex standards” — George Wilson (CEO) .
  • “On a consolidated basis for fiscal twenty twenty five, we now estimate… net sales of approximately $1,820,000,000… adjusted EBITDA of approximately $235,000,000… use gross margin ~27%, SG&A ~$264M, adjusted D&A ~$58M, interest expense ~$53M, adjusted tax rate 24.5%” — Scott Zuehlke (CFO) .
  • “We remain optimistic… positioned to capitalize on pent-up demand… as macroeconomic uncertainty subsides and consumer confidence improves” — George Wilson (CEO) .

Q&A Highlights

  • Demand outlook and competitive dynamics: softness remains broadly macro rather than competitive; North American volumes softer than normal seasonality, Europe supported by operational excellence and product quality .
  • Mexico remediation timeline and impact: Q4 likely still pressured, with progress expected late Q4 and tangible benefits early FY2026; ~$5M EBITDA impact in Q3 .
  • Procurement synergies and profitability pressure: lower volumes and timing pushed out procurement synergy realization; combined with Mexico issues led to margin pressure .
  • Q4 revenue cadence: sequential decline of ~$20–$25M driven by market softness; management not attributing to tariff pre-buys .
  • Capital allocation: prioritize debt repayment while opportunistically repurchasing shares; maintain healthy balance sheet amid soft environment .

Estimates Context

MetricQ3 2025 ConsensusQ3 2025 ActualSurprise
Revenue ($USD Millions)$491.650*$495.273 +$3.6M; modest beat
Primary EPS ($)$0.843*$0.69 -$0.153; miss
EBITDA ($USD Millions)$80.567*$65.331 (reported EBITDA) -$15.2M; miss
Forward ConsensusQ4 2025 Consensus
Revenue ($USD Millions)$472.619*
Primary EPS ($)$0.533*
EBITDA ($USD Millions)$60.825*

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Mixed quarter: slight revenue beat but an EPS miss; underlying adjusted profitability improved YoY, yet near-term Mexico operational issues and procurement synergy timing weighed on margins .
  • Guidance reset lowers FY2025 expectations; model Q4 using management’s detailed assumptions (GM ~27%, SG&A ~$264M, adj D&A ~$58M, interest ~$53M, tax 24.5%) and continued hardware segment pressure in Q4 .
  • Deleveraging is a bright spot: strong FCF and ~$51M debt paydown reduced net leverage to 2.6x; liquidity remains robust, supporting flexibility for buybacks and operations .
  • Tyman integration remains strategically accretive: ~$45M cost synergy path reaffirmed; second-phase integration initiatives aim to drive medium-term growth and margin expansion .
  • Regional dynamics: Europe benefits from share gains and operational execution; North America demand softness likely persists into Q4 given seasonality and delayed consumer activity pending rate cuts .
  • Watch catalysts: remediation progress in Mexico, procurement synergy realization pace, macro rate cuts and consumer confidence trajectory—each can swing margins and narrative near term .
  • Near-term positioning: expectations now anchored to reduced FY outlook; set trading framework around potential FCF delivery vs. margin pressure and any operational updates from Mexico, with balance sheet strength a buffer .