Quanex Building Products Corporation (NYSE:NX) Q2 2020 Earnings Conference Call - Final Transcript

Jun 05, 2020 • 11:00 am ET

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Quanex Building Products Corporation (NYSE:NX) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2020 Quanex Building Products Corporation Earnings Conference Call. [Operator Instructions] I'd now like to hand the conference over to your host today, Mr. Scott Zuehlke, Vice President, Chief Financial Officer and Treasurer. Please go ahead, sir.

Executive
Scott Zuehlke

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, and Quanex undertakes no obligation to update or revise any forward-looking statement to reflect new information or events. For 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 the financial results. We generated revenue of $187.5 million during the second quarter of 2020 compared to $218.2 million during the second quarter of 2019. The decrease was primarily attributable to softer demand in April related to the COVID-19 pandemic. Volume began to decline in late March, which is also when our two manufacturing facilities in the UK were shut down completely to comply with government orders.

We've reported net income of $5.5 million or $0.17 per diluted share for the three months ended April 30, 2020 compared to a net loss of $24 million or $0.73 per diluted share during the three months ended April 30, 2019. The net loss in the second quarter of 2019 was mainly due to a $30 million non-cash goodwill impairment in our North American Cabinet Components segment.

On an adjusted basis, net income was $6.4 million or $0.19 per diluted share during the second quarter of 2020 compared to $6.3 million or $0.19 per diluted share during the second quarter of 2019. The adjustments being made to EPS are for restructuring charges, impairment charges, certain executive severance charges, accelerated D&A, foreign currency transaction impacts, and transaction and advisory fees. Adjusted earnings were essentially flat, with lower SG&A offsetting volume declines related to the pandemic.

On an adjusted basis, EBITDA for the quarter was $21.8 million compared to $23.4 million during the same period of last year.

Moving on to cash flow and the balance sheet, cash provided by operating activities was $2.5 million for the six months ended April 30, 2020 compared to $143,000 for the six months ended April 30, 2019. Year-to-date, as of April 30, free cash flow was slightly lower than last year, mainly due to the negative impact the pandemic had on working capital during the second quarter, as it was hard to adjust the inventories quickly due to the speed at which it hit. However, we expect an improvement in working capital in the second half of the year and have