Quanex Revenue Jumps 77% in Fiscal Q3

Key Points

• Revenue climbed 77% year over year to $495.3 million in Q3, driven mainly by the Tyman acquisition.

• Despite strong gross margin gains, a $302.3 million goodwill impairment resulted in a reported net loss for Q3.

• Adjusted EBITDA guidance for FY2025 was reduced to $235 million, reflecting slower synergy realization and softer demand.

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Quanex Building Products (NYSE:NX), a supplier of window, door, and building supplies, announced its earnings for the third quarter of fiscal 2025 on Sept. 4, 2025. The results revealed a significant jump in net sales, up 77% year over year for Q3, propelled mainly by the acquisition of Tyman. However, a one-time non-cash goodwill impairment charge resulted in a sharp net loss of $276 million for Q3, and adjusted earnings per share fell short of last year's results.

The company’s financial performance exceeded prior revenue expectations but disappointed on profitability, as management reduced full-year adjusted EBITDA guidance for FY2025 to $235 million, down from $270 million–$280 million previously, citing recent demand trends and an updated cost synergy realization model. The period reflected strong progress in integration but highlighted ongoing operational hurdles.

Source: Quanex Building Products. Note: Fiscal 2025's third quarter ended July 31, 2025. Fiscal 2024's Q3 ended July 31, 2024.

Business Overview and Key Focus Areas

Quanex Building Products is a supplier of engineered materials and components used mainly in residential windows, doors, and related building applications. Its product lines include window and door hardware, window profiles, seals and gaskets, spacers, solar and cabinetry components, and building access systems. Through its acquisition of Tyman plc, Quanex broadened its footprint to include additional markets in North America and Europe, as well as an expanded portfolio of hardware and custom mixing products.

Extracting value from strategic acquisitions, achieving cost synergies from Tyman, successfully integrating new business segments, and maintaining strong product quality and service are critical to future results. Environmental and regulatory compliance also remains a steady focus, though recent filings did not note any material issues.

Notable Highlights and Developments in the Quarter

The period delivered dramatic top-line growth as net sales reached $495.3 million, up 77% from the prior year. This expansion was almost entirely due to the Tyman acquisition, with organic sales (excluding Tyman) growing only 1.4%. The underlying drivers were higher prices and pass-throughs on tariffs, which helped offset declining volumes as construction demand in core markets remained muted. Management described the industry backdrop as showing “macroeconomic uncertainty and low consumer confidence,” while acknowledging that the usual seasonal building uptick “didn’t continue to materialize” as hoped.

Profitability presented a mixed story. Gross profit nearly doubled year over year to $138 million, and the gross margin percentage improved to 27.9% from 25.3%. However, Adjusted EBITDA—a non-GAAP measure of operational cash earnings—rose 67.5% year over year for the third quarter of 2025, but the adjusted EBITDA margin percentage dipped slightly to 14.2%. The company reported a staggering net loss, a result of a $302.3 million non-cash goodwill impairment. This charge was related to a re-segmentation of the business post-acquisition, not a reflection of ongoing business weakness.

Quanex’s operating structure now reflects three primary segments: Hardware Solutions (including window and door hardware and screens), Extruded Solutions (such as window profiles, seals and gaskets, spacers, solar, and flashing tape), and Custom Solutions (covering wood products, access systems, and custom mixing). Hardware Solutions recorded the largest dollar increase, with sales jumping by 201.0%, thanks to Tyman’s hardware business. Extruded Solutions saw a 29.6% rise and Custom Solutions rose 40.7% in net sales, both benefiting from the enlarged business mix. Gross margin improved across all segments compared to Q3 FY2024, but adjusted EBITDA margins remained mixed—pointing to some remaining cost and integration challenges, particularly in the Mexico-based window and door hardware units inherited from Tyman.

Supply chain management continues to pose challenges. The company noted that procurement-related cost savings were running “lower than expected,” and the realization of original synergy estimates was pushed out into future quarters. Nonetheless, Quanex still expects to capture about $45 million in cost synergies from the Tyman deal over time, an increase from the earlier $30 million target. Additional share repurchase activity was modest—100,000 shares reacquired at a value of $2.1 million—while the cash position at quarter-end declined to $66.3 million amid continued capital allocation for integration and debt reduction. Free cash flow rose 15.2% year over year for the three months ended July 31, 2025, supporting ongoing liquidity as total liquidity stood at $337.7 million at quarter end.

Dividend payments continued at $0.08 per share, flat with the same quarter last year. Capital expenditures rose to $14.5 million.

Looking Ahead: Guidance and What to Watch

Management has shifted to a more cautious tone for the remainder of fiscal 2025. Quanex now expects net sales of about $1.82 billion for FY2025, down from its prior estimate of $1.84 billion–$1.86 billion, and adjusted EBITDA of $235 million for FY2025, versus a previous $270 million–$280 million. The main reasons cited are softer construction demand and a delay in achieving the full synergy savings from the Tyman integration. The company expects operational issues in the legacy Tyman Mexico window and door hardware business to persist in the near term. No specific timeline for resolution of these challenges was provided.

For investors tracking the business, focus will likely remain on organic growth outside acquisitions, success in capturing merger synergies, supply chain execution, and stabilization of Mexico operations. As building markets remain sluggish, incremental improvements in cash flow, margin expansion, and any signs of growing demand in residential construction or remodeling will be closely watched in future quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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