Good day, and thank you for standing by. Welcome to the second quarter 2022 Quanex Building Products Corporation's earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during that session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Scott Zuehlke, Senior Vice President, Chief Financial Officer 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 are based on current expectations. Actual results or events may differ materially from such statements and guidance. Quanex undertakes no obligation to update or revise any forward-looking statements 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 discuss our record financial results for the second quarter. Net sales increased by 19.4% to $322.9 million during the second quarter of 2022, compared to $270.4 million during the second quarter of 2021. The increase was mostly due to higher prices related to the pass-through of raw material cost inflation, and we suspect there may have been some pull forward of demand as price increases were being implemented. More specifically, we realized net sales growth of 21.7% in our North American Fenestration segment, 13% in our European Fenestration segment, excluding the foreign exchange impact, and 14.7% in our North American Cabinet Components segment. Net income increased by 81.5% to $26.5 million or $0.80 per diluted share during the second quarter of 2022, compared to $14.6 million or $0.43 per diluted share during the second quarter of 2021. On an adjusted basis, EBITDA for the quarter increased by 40.4% to $45.2 million, compared to $32.2 million during the same period of last year. The increase in earnings for the three months ended April 30, 2022 was attributable to continued strong demand and increased pricing, coupled with lower SG&A expense, largely due to lower stock-based comp. Moving on to cash flow and the balance sheet. Cash provided by operating activities was $19.8 million for the second quarter of 2022, compared to $32.4 million for the second quarter of 2021. The value of our inventory continued to increase during the quarter due to inflationary pressures, which had a negative impact on working capital. As a reminder, we usually generate most of our cash in the second half of each year. Our balance sheet continues to be strong. Our liquidity position is solid, and our leverage ratio of net debt to last 12 months adjusted EBITDA decreased to 0.3x as of April 30th, 2022. We will remain focused on generating cash, paying down debt, and opportunistically repurchasing our stock as the year progresses. As stated in our earnings release, demand remains healthy, but inflation and supply chain issues continue to add some pressure. Nevertheless, based on improvements in labor performance, the expected continuation of our pass-through pricing strategy, and conversations with our customers, we are increasing guidance for the fiscal year as follows. Net sales are now expected to be $1.18 billion-$1.2 billion. Adjusted EBITDA is now expected to be $150-$155 million, and free cash flow is forecast to be $65-$70 million. Note that our current expectation is that revenue growth for the remainder of the year will likely be driven more by price as opposed to volume, and we continue to expect margin expansion in the second half. From a cadence perspective for Q3, we expect net sales to be up low double digits year-over-year in our North American Fenestration segment, low to mid single digits year-over-year in our European Fenestration segment, and mid single digits year-over-year in our North American Cabinet Components segment. I'll now turn the call over to George for his prepared remarks. Thanks, Scott. We achieved a record quarter on many different fronts, and we are extremely pleased with these results. We have improved our financial and operational performance over the past few years by staying focused on what we can control. That focus has been on ensuring the health and safety of our teammates, optimizing asset utilization, improving return on invested capital, and generating free cash flow, all while striving to outperform our customers' needs and wants. Even with so much noise in the market, the success of this strategy has been obvious. In addition, the Quanex team is working extremely hard to make the communities in which we live and work better places, whether that is through volunteerism, focusing on our ESG initiatives, or working to develop themselves into better people and teammates. Quanex employees are embracing the opportunity to be a part of something bigger, and for that, I am equally pleased and thankful. I will now discuss our results. As Scott mentioned, demand remained strong across all product lines during the second quarter of 2022, though there may have been some volume pulled forward as price increases were implemented. Volume growth in our fenestration segments and higher prices in all segments, mostly related to the pass-through of raw material cost inflation, resulted in revenue growth of 19.4% year-over-year. On a year-to-date basis, revenue growth of 17.9% versus prior year. The second quarter was no different than the first quarter when it came to dealing with continued supply chain challenges. The rate of raw material cost inflation remains a challenge, as we typically see a 30-90-day time lag in passing these increases through to our customers. However, as results show, the pricing mechanisms at our disposal are effective. I will now discuss performance by operating segment, and I will start with North American Fenestration. This segment generated revenue of $177.9 million in Q2, which is $31.8 million or 21.7% higher than prior year Q2. On a year-to-date basis, revenue is $324.5 million, which is $50.3 million or 18.3% higher than prior year. Strong demand in our IG spacer and screens product lines, volume growth in vinyl fencing components, and price increases across all product lines were the main drivers of the growth. We estimate that around a third of the revenue growth in this segment was due to an increase in volume, and the remainder was due to an increase in price. Adjusted EBITDA was $26.3 million or 27.3% higher than prior year. On a year-to-date basis, adjusted EBITDA was $42.5 million or 15.1% higher than prior year. Improved pricing, reworked vinyl extrusion contracts, and volume gains in vinyl fencing components were the primary reasons for the improved performance. We saw margin expansion in Q2 in this segment, and we expect that to continue through the remainder of the year as pricing catches up to inflationary pressures. Our European Fenestration segment generated revenue of $73.4 million in the second quarter, which represents an increase of 19.1% year-over-year. Excluding foreign exchange impact, this would equate to an increase of 13%. On a year-to-date basis, revenue is $132.3 million, which is $21.6 million or 19.5% better than prior year. Excluding foreign exchange impact, this would equate to an increase of 15.6%. For Q2, we estimate that around 20% of the revenue growth in this segment was due to an increase in volume, with price driving the remainder of the growth. Adjusted EBITDA came in at $15.1 million for the quarter, which was $2.3 million better than prior year, but yielded margin compression of approximately 30 basis points. On a year-to-date basis, adjusted EBITDA is $25.5 million, which is $1.9 million better than prior year. Strong demand in both the IG spacers and vinyl extrusions, combined with material-related price increases, accounted for the strong performance year-over-year. The rate of margin compression was significantly lowered in the quarter, and we anticipate that margins will continue to improve as the year progresses and price increases catch up to inflationary pressures. Our North American Cabinet Components segment reported net sales of $72.9 million in Q2, which is 14.7% higher than prior year. On a year-to-date basis, revenue is $135.2 million, which represents an increase of 15% versus prior year. Again, as a reminder, volumes have decreased in this segment year-over-year, mainly because of customers reducing overtime hours worked in their plants, coupled with their supply chain issues. Increases in hardwood index pricing as well as discretionary pricing actions have offset the volume decline and resulted in revenue growth. Adjusted EBITDA was $4.5 million for the quarter, which is $1.4 million better than prior year and resulted in margin expansion of approximately 140 basis points. On a year-to-date basis, adjusted EBITDA of $6.5 million is $200,000 less than prior year and results in year-to-date margin compression of 50 basis points. Timing of price increases, better availability of green lumber, improvements in our lumber yield, and labor efficiencies were the main drivers of the positive results in the quarter. As a reminder, we have material index pricing mechanisms in place, but they typically have a 90-day lag, and we will require a period of flat or declining wood pricing before we're able to fully catch up on our margin performance in this segment. Just like the European Fenestration segment, we do anticipate that margins will improve as the year progresses and price increases catch up to inflationary pressures. Unallocated and corporate costs for the quarter were $3.7 million less than prior year. The main drivers of the lower spending were favorable experiences for medical expenses in the organization, as well as lower stock-based compensation expense. Just a reminder that stock-based comp expense is variable, and it will adjust with fluctuations in our stock price. Despite the challenging supply chain environment and ongoing inflationary pressures, we remain very optimistic on the remainder of the year. Customer backlogs in all segments remain high. In North America, the housing market remains strong despite the recent interest rate hikes. In Continental Europe and the U.K., the demand environment remains healthy, although consumer confidence could be impacted if inflation continues to ramp and energy costs continue to increase. Our balance sheet remains strong and cash flow should improve in the second half of our year. In addition, with six months left in our year, we have enough visibility to be able to provide upward revisions on our full year guidance. To reiterate Scott's comments, we expect the following. Net sales to be $1.18 -$1.2 billion, adjusted EBITDA to be $150 -$155 million, and free cash flow to be $65 -$70 million. These results would equate to another record year for Quanex, and I would like to thank all of my teammates for their continued hard work and execution. With this new guidance announced, our near-term capital deployment focus will be on generating cash, further paying down debt, and getting more aggressive on our share repurchase activity, which reflects our commitment to return capital to our stockholders and increase shareholder value, as well as our confidence in Quanex's long-term prospects relative to our current trading environment. With that operator, we are now ready to take questions. Thank you. As a reminder to ask a question, simply press star one on your telephone. To withdraw the question, press the pound or hash key. Your first question is from Daniel Moore with CJS Securities. Your line is open. Thank you. Thank you, George and Scott for all the color, really helpful and congrats on a very solid quarter. Thanks. You gave all the volume growth, you know, by segment. Maybe just talk to what sort of volume growth is embedded in your revised revenue expectations for the remainder of the year. I don't have that broken out by segment, but I think George alluded to the fact that second half revenue growth year-over-year will be driven mainly predominantly by price versus volume. Got it. That's helpful. You also talked about, you know, potential for pull forward of some demand. I know it's difficult. Any way to quantify it, or maybe describe whether you suspect that occurred across all end markets and to what degree? Really what we'll see, the only ability to really pull ahead volume for us is primarily in the spacer business. It's really the only product that we have that scales well. So, I, you know, we think we've seen some pull ahead in spacers in North America and in Europe. I don't think it will be material and will impact the cadence that we've given you. We usually typically see that when we announce larger price increases. So nothing that I think will impact guidance or is a concern to us right now. Okay. Clearly seeing strong momentum and acceptance on pricing. Just wondering, with all the inflation that we've seen, if you're getting any incremental pushback from customers, you know, across any pieces of the portfolio, or still pretty confident in your ability to at least at this stage or level of inflation to push those through? You know, I think it's really our ability to get prices because I think we work very hard at trying to be transparent with the customer. These aren't margin grabs. We are truly working to just pass through inflationary pressures that we see. You know, we are very, very transparent with the cost pressures that we're getting. I think, you know, our customers have been willing and understanding to accept that. You know, we continue to work together as partners. They're never easy conversations, but I think the fact that we're being transparent is helping in the conversations. Got it. Helpful. Last one, and I'll jump back with any follow-ups. Given, you know, the balance sheet remains still really strong, and the increased cash flow guide for the year, obviously expect for some working capital to catch up a little bit in the back half of the year. You know, I guess, any thoughts about maybe being more aggressive upfront in terms of the share buyback? Is that your expectations for the remainder of the year, or are you being cautious if in case there are any darker clouds, you know, on the horizon from an economic or business perspective? Thanks. No, great question. As I mentioned in our comments, I think, you know, we have seen strength in our cash flow, especially as we expected going into the second half of the year. It's the way it typically works. Considering where our trading is at today, yeah, we think our long-term prospects, not only this year, but what, you know, we expect in terms of execution on a go-forward basis makes repurchase of our stock a very smart buy. I would anticipate upfront that we probably will be more aggressive, definitely at these levels. Got it. Appreciate it. We'll follow up with any others. Your next question comes from Julio Romero with Sidoti & Company. Your line is open. Hey, good morning, George and Scott. Morning. Good morning. Could you speak to European demand? What are you hearing about the impact of energy costs on consumer confidence? Have you seen any change in consumer confidence in Europe over the past three months? You know, I think that there is absolutely some nervousness. I don't know if it's completely translated into us seeing any decline in demand at this point, but you know, you're hearing signs. It will start more with energy costs and really energy disruptions because you know, at least in the markets that we serve today, natural gas is a huge input to making glass. So you know, those things are where we think it'll be hit first. From a consumer side, you know, you hear nervousness, but the demand is still there. To some extent, it becomes even a positive a little bit for us, at least from the energy side, because most of the products that we manufacture are higher end on the chain. You know, I think what it does do is when someone has to replace a window or a door, they're actually evaluating energy even more so than they ever have. That may be offsetting or spurring some additional demand. We think that's actually a positive movement, not only in Europe, but in North America on a go-forward basis. I guess a broader question is, can you maybe speak to, you know, the rate of inflation you're seeing and where you're seeing the greatest levels of inflation across your various inputs? I would say generally we are now starting to see some signs of it, the rate of inflation slowing in more areas than not. I would continue to say some of the chemical feedstocks, stabilizers, different inputs into our both spacer and vinyl products continue to be the biggest challenge. Hey, I can add a little bit to that. One positive sign that we're seeing in the cabinet business is the availability of green lumber improving to where that should help us hit our numbers and execute on the margin expansion that we've laid out. Okay. Got it. I guess just last one for me is, I guess more of a broader question again, but how do you think your businesses may perform in a recessionary environment? You know, again, a great question. I will tell you, as much as we're seeing record demand, we also spend an enormous amount of time in our leadership team being prepared and ready to react on the backside. I think the best data point that I can give you is our ability to control what even happened during COVID. We know what triggers the pull. In some segments, we're very labor-driven, so it becomes more of a variable cost that we can back off. I think our performance during that even immediate shock down period will translate well, and we know how to do ups and downs, and we have plans prepared to go should we hit. Got it. I'll hop back in the queue. Thank you. Yep. Your next question comes from Ruben Garner with Benchmark Company. Your line is open. Thank you. Good morning, everybody. I had a little bit of connection issues earlier, and this may be a repeat question, but from Dan, you mentioned pull forward, Scott. I'm trying to understand. You said. I think you said pull forward ahead of price increases. I think I was under the understanding that, you know, the bulk of your business was kind of contractually, you know, on a lag tied to the commodities. Did you guys implement separate price increases and give notice and you started to see orders pick up? Can you kind of just reconcile those comments for me? Yeah. Without getting into specific details, what I will tell you is, and I think I've mentioned this on previous calls as well, there's really three avenues for us in the pricing mechanisms that we currently use. You have the index pricing, which does have the time lags, and then you have the use of surcharges if we can tie it to a specific input cost that's not on a contractual index. Or finally, you know, discretionary permanent price increases that are applied mainly to deal with labor inflation, benefit inflation, and things of that nature. Those, you know, obviously aren't contractual nor bound by the 90-day lags. However, you know, we do have some negotiation periods. We have put in a combination of all three of those. I would tell you, and based on the results, there have been quite a few of the discretionary permanent price increases to help cover other areas that we've seen inflation. Got it. No, that's very helpful. I think that latter part is maybe what's a little bit different here. Clearly in the results, a nice step up as well. Okay. The next thing I want to ask is, you mentioned conversations with your customers, and clearly, you guys are feeling a little bit better about the second half of the year despite what's going on. Is there any way to gauge how much of, you know, maybe that optimism about the next couple of quarters is tied to, you know, I know some of your areas, fenestration in particular, has been one of the more constrained areas, so I'm assuming they have a lot of backlog. Is that, is that the case? Is that why you have maybe increased visibility there? Any color on kind of what gives you the comfort that the second half in particular is gonna kind of maintain some strength? Yeah. It's exactly that, Ruben. I think, you know, we're already one month through our third quarter. When you look at our customers' backlogs that in many cases can extend out to three to six months, both in cabinets as well as any of the fenestration product projects, you know, I think demand is pretty solid. I'm not at all concerned on the revenue number. We don't typically get that level of guidance, but when you see those levels of backlogs exist, it gives us that confidence. We monitor the backlogs quite heavily, and if we start seeing some significant reduction in those, you know, we'll be able to determine if demand's starting to drop. It should give us some visibility and time to prepare. On the question, you know, that was asked earlier about, you know, as we get into a recession. I mean, that will give us some indicators of what's going. We feel pretty comfortable in our sight line, at least for a six-month period now. Got it. Last one for me. You know, it's kind of a piggyback on the share repurchase question. Your balance sheet's in, you know, great shape, and I know you've got quite a bit of cash left to generate this year. What's the M&A landscape look like? Are you guys kind of, you know, pulling back the reins a little bit just given the broader macro risks? Are you still willing to do a deal, a sizable deal if you were to find one? Or are businesses more or less likely to kind of sell in this environment? Yeah. I would answer that we're not pulling back in any way. In fact, I think we're aggressively looking at opportunities in the market. With that being said, however, I will say that we're being very diligent in making sure that whatever we look at fits the strategic plan that we've developed and our roadmap to go forward and grow. It's very defined and we will follow that and not deviate from that path. That we're gonna make sure that we protect our shareholders by not overpaying and falling in love with something. I would tell you generally valuations are still very high and you know we scrub these opportunities with a pretty fine-tooth comb and we're gonna make sure it's done for the right reasons and the right fit. We are not backing away from looking at it at all. Perfect. Congrats on the results and outlook, guys. Good luck going forward. Thanks. Ladies and gentlemen, as a reminder, to ask a question, simply press star one on your telephone. Next question is from Kenneth Zener with KeyBanc Capital. Your line is open. Good morning, everybody. Yes. This is Christian Zyla. Morning, Christian. Last name Ken Zener. Thank you for taking my questions. Morning. Good morning. Last quarter, you guys mentioned there's still room for expansions, specifically in NA Fenestration. It's clear you guys received some of that expansion. How do you feel about the potential left to expand those given the strong pricing and demand? I know you mentioned margin expansion for the back half, but I think maybe breaking down by segment if you can and the potential to grab that. Thank you. Yeah, that first part of your question we couldn't understand. Could you repeat it? Sure. In the NA Fenestration section, just your ability and potential left to grab or expand margins given the strong pricing and demand. Yeah. In our North American Fenestration segment, I think that's what you said, opportunities to expand margin across the different products in that segment. I would say that we've talked in the past about the vinyl fencing product, and we continue to get opportunities to quote more of that business. That could drive some margin expansion for that vinyl business. Our screen business, I think that's gonna be a matter of continuing to become more operationally efficient, and we are pushing price there as well. There's some opportunity, I think, in the screens piece. For spacer, you know, we've talked in the past, the margin profile for that product is good. I think you probably get some leverage there with higher volumes. To the extent we can grow volumes there, I think that would benefit on the margin side as well. Great. Thank you. Lastly, in terms of the three to six month backlog for your customers, is part of that still driven by labor constraint that they're seeing? Do you guys have any visibility on the labor conditions? Is that improving? Has that stabilized? I guess any color for those backlogs and the relation with the labor constraints? We don't get into details of that discussion with our customers. What we see, you know, labor is still a challenge, although we seem to be having a little more success as we've talked about in previous. That, I think that's being driven by more of things that we're doing internally, to help retain as well as a difference in what we're trying to do to attract. I think their backlogs are still really driven by two things. Installer labor, so not only labor in their facilities, but installation labor on the house build. There's, you know, a lot of open projects. You know, new housing may have started to slow down, but there's still a lot that are in process. It's just slow to get any product through the chain. You still got some supply chain. I mean, a lot of our customers source things from Asia and, you know, Shanghai port was effectively closed for nine-10 weeks, which has really caused some issues. Nothing to do with our product line, but, you know, trying to get everything together. For example, in the cabinets, they're not gonna put in a cabinet if they don't have the stove, the refrigerator, and those types of things. Everything's gonna go in and they time it up and, that's been very challenging for the installation guys. I think it's the combination of both that and supply chain. Great. Thank you very much. Appreciate it. Thank you. Thank you. This ends our Q&A session. I will turn the call back to George Wilson for his final remarks. I'd like to thank you all for joining the call today, and we look forward to providing an update on our next earnings call in September. Thank you. With that, we end our program for today. Thank you for participating, and you may now disconnect. Everyone, have a great day.