Quanex Building Products CorporationNXNYSE
LOADING
|||
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter and Full Year 2025 Quanex Building Products Corporation Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand it over to your first speaker today, Scott Zuehlke, Senior Vice President, CFO and Treasurer. Please go ahead.
Scott Zuehlke: 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 Quanex 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.
George Wilson: Thanks, Scott, and good morning to everyone joining the call. I'm encouraged by what we were able to achieve in 2025 despite a challenging macroeconomic environment. Throughout the year, we executed on a disciplined strategy centered on operational rigor, cost efficiency and long-term value creation. We successfully resegmented our business to better align with market opportunities. We established new commercial and operational excellence teams to drive improved performance, and we delivered synergy realization above our original $30 million commitment. In addition, we intensified our focus on working capital efficiency and free cash flow generation while further strengthening our balance sheet. Most importantly, we also continued to improve our safety performance, positioning the company at a world-class standard, which is a critical foundation for sustainable operational reliability and future growth. These achievements collectively reinforce our confidence in the company's future. I'll now provide a brief commentary on the broader macro environment, followed by a summary of our quarterly performance before turning the call back over to Scott for a more detailed financial review. From a macro perspective, the market continues to face demand headwinds. Globally, affordability remains a significant challenge as inflationary cost pressures and ongoing housing inventory shortages continue to drive pricing higher. In the U.S., these factors, combined with a wait-and-see approach ahead of anticipated Federal Reserve rate cuts have kept many consumers on the sidelines. We expect this dynamic to persist into 2026, which we believe could result in a generally flattish demand environment overall. Looking ahead, further interest rate movements, broader economic conditions and regional supply-demand imbalances will ultimately determine whether demand strengthens or remains subdued. That said, we continue to believe the long-term underlying fundamentals of the residential housing market are positive. Demographic trends, household formation and the persistent structural housing shortage all point to substantial latent demand even if near-term conditions are causing consumers to delay purchasing decisions. These same long-term indicators form the basis of the profitable growth strategy that we presented at our Investor Day last February. Our thesis remains intact and the strategic initiatives we outlined are still progressing as planned. While near-term macro pressures have impacted recent results, we remain confident in our long-term outlook and our ability to capitalize on the opportunities ahead. Now for a brief summary of Q4. Market conditions and order demand tracked in line with our expectations during the fourth quarter of 2025. Volumes in our Hardware Solutions segment were up approximately 1% and volumes in our Custom Solutions segment were essentially flat compared to the prior year. However, volumes were pressured in our Extruded Solutions segment, mainly driven by weaker demand across our European and international markets where macroeconomic conditions remain more challenging. Operationally, adjusted EBITDA was impacted by lower volumes in the Extruded Solutions segment as well as costs associated with addressing the operational issue at our window and door hardware facility in Monterrey, Mexico. As discussed on our prior call, the manufacturing issue was identified in Q3, and we quickly determined the root cause and then proceeded to implement a comprehensive remediation plan to correct the issue and stabilize the plant. We noted then that the plan would take time to fully implement, and we continue to work closely with all affected customers to minimize disruption. I'm pleased to report that we are slightly ahead of our initial time line and now expect to return to normal operating conditions early in calendar year 2026. Turning to the balance sheet and cash flows. We are extremely pleased with the progress we are making. As we continue to advance our initiatives around working capital optimization and return on net assets, we are seeing consistent free cash flow generation. This strong cash performance has enabled us to further reduce debt while also being opportunistic in repurchasing shares in the open market. Our current capital allocation priorities remain unchanged. We will continue to focus on debt repayment while opportunistically repurchasing shares when open trading windows allow. Despite the current market headwinds, we believe the resegmentation of our business, combined with synergy realization and operational improvements underway across our facilities, position us to deliver value to our customers and support our long-term profitable growth strategy. I'll now turn the call over to Scott, who will discuss our financial results in more detail.
Scott Zuehlke: Thanks, George. On a consolidated basis, we reported net sales of $489.8 million during the fourth quarter of 2025, which represents a decrease of approximately 0.5% compared to $492.2 million for the same period of 2024. We reported net sales of $1.84 billion for the full year, which represents an increase of approximately 43.8% compared to $1.28 billion for 2024. The increase for the full year was primarily driven by the contribution from the Tyman acquisition that closed on August 1, 2024. We reported net income of $19.6 million or $0.43 per diluted share during the 3 months ended October 31, 2025, compared to a net loss of $13.9 million or $0.30 per diluted share during the 3 months ended October 31, 2024. For the full year 2025, we reported a net loss of $250.8 million or $5.43 per diluted share, mainly due to the noncash goodwill impairment reported in the third quarter compared to net income of $33.1 million or $0.90 per diluted share for the full year 2024. On an adjusted basis, net income was $38 million or $0.83 per diluted share during the fourth quarter of 2025 compared to $38.5 million or $0.82 per diluted share during the fourth quarter of 2024. Adjusted net income was $106.4 million or $2.30 per diluted share for fiscal 2025 compared to $97.5 million or $2.66 per diluted share for fiscal 2024. The adjustments being made to EPS are primarily for transaction and advisory fees, amortization of the step-up for purchase price adjustments on inventory and AR related to the Tyman acquisition, restructuring charges, goodwill impairment, amortization expense related to intangible assets, a onetime depreciation adjustment, a pension settlement refund and foreign currency translation impact. Note that our full year effective tax rate decreased from 24.3% at Q3 to 22.6% at year-end. Q4 delivered lower pretax income, excluding discrete and the level of unfavorable permanent tax adjustments decreased relative to our Q3 estimates. With a smaller income base and lower unfavorable permanent items, the overall blended tax rate was reduced for the full year. On an adjusted basis, EBITDA for the quarter decreased by 12.6% to $70.9 million compared to $81.1 million during the same period of last year. For the full year 2025, adjusted EBITDA increased by 33.2% to $242.9 million, which reflects the contribution from the Tyman acquisition and is a new record for Quanex compared to $182.4 million in 2024. On a consolidated basis, the decrease in adjusted earnings for the fourth quarter of 2025 was mainly due to lower volumes related to ongoing macroeconomic uncertainty, coupled with low consumer confidence and the operational challenges at our plant in Monterrey, Mexico that were previously mentioned. The increase in adjusted earnings for the full year 2025 were primarily attributable to the contribution from the Tyman acquisition, combined with the realization of cost synergies. Now results by operating segment. We generated net sales of $226.9 million in our Hardware Solutions segment for the fourth quarter of 2025, an increase of 1.4% compared to $223.6 million in the fourth quarter of 2024. We estimate that volumes were up about 1%, reflecting low growth in the international hardware and North American screens product lines. Pricing was flat in this segment. The tariff impact was about 1%. Foreign exchange was about a 1% benefit, offset by a negative impact of approximately 2% for Monterrey versus Q4 of 2024. For the full year, we reported net sales of $841.7 million in our Hardware Solutions segment, an increase of 96.7% compared to $427.8 million in 2024. The increase was mainly due to the contribution from the Tyman acquisition. Adjusted EBITDA was $29 million in this segment for the fourth quarter or 9.3% lower than prior year, mainly due to an approximately $8 million negative impact related to the operational challenges at our hardware plant in Monterrey, Mexico, partially offset by a favorable cost roll. We made the decision to move to a 24/7 operation in Monterrey in September, which increased labor and expedited freight costs for the quarter, above our initial estimate, but had the positive impact of enabling us to reduce the backlog in a more efficient manner. Adjusted EBITDA increased by 72.7% to $88.8 million in this segment for the full year, driven by the contribution from the Tyman acquisition. Our Extruded Solutions segment generated revenue of $168.6 million in the fourth quarter, which represents a decrease of 6.4% compared to $180.1 million in the fourth quarter of 2024. We estimate that volumes were down approximately 8% year-over-year in this segment for the quarter, with pricing flat and a positive foreign exchange translation impact of about 1.5%. For the full year, we reported net sales of $646.6 million in our Extruded Solutions segment, an increase of 15.5% compared to $560 million in 2024. Again, the increase was driven by the contribution from the Tyman acquisition. Adjusted EBITDA declined to $31.7 million in this segment for the quarter versus $37.9 million during the same period of last year, mainly due to decreased operating leverage related to lower volumes in addition to an unfavorable sales mix. For the full year, adjusted EBITDA came in at $123.4 million in this segment, which represented an increase of 10%. We reported net sales of $103.4 million in our Custom Solutions segment during the quarter, which represented growth of 2.1% compared to prior year. We estimate that volumes were flat and price increased by approximately 2% in this segment for the quarter. For the full year, we reported net sales of $388.2 million, which represents an increase of 25.5% year-over-year. Adjusted EBITDA declined to $10.7 million from $15.6 million in this segment for the quarter, mostly due to higher raw material costs and index pricing. Adjusted EBITDA increased by 43.2% to $42.9 million from $30 million in this segment for the year, which was driven by the contribution from the Tyman acquisition. Moving on to cash flow and the balance sheet. Cash provided by operating activities increased significantly to $88.3 million for the fourth quarter of 2025, which compares to $5.5 million for the fourth quarter of 2024. Cash provided by operating activities for the full year 2025 increased by about 86% to $164.9 million compared to $88.8 million for the full year 2024. We maintained focus on managing working capital throughout the year and made progress moving some of the legacy Tyman businesses towards more of a make-to-order model, which decreased inventory and improved cash conversion cycle days. We generated free cash flow of $102.3 million for the full year 2025, an increase of about 98% compared to 2024. As a result, we were able to repay $75 million of debt in 2025. In addition, our liquidity increased by 10% to $372.2 million in the fourth quarter of 2025 compared to the third quarter of 2025, consisting of $76 million in cash on hand plus availability under our senior secured revolving credit facility due 2029, less letters of credit outstanding. As of October 31, 2025, our leverage ratio of net debt to last 12 months adjusted EBITDA was unchanged at 2.6x as compared to the prior quarter. The debt covenant leverage ratio calculation used for quarterly compliance with our lenders is defined in amendment #1 to our second amended and restated credit agreement. This ratio was 2.5x as of October 31, 2025, and excludes real estate leases that are considered finance leases under U.S. GAAP and is calculated on a pro forma basis to include last 12 months adjusted EBITDA from the Tyman acquisition, $30 million of EBITDA for the synergy target related to the acquisition and cash only from domestic subsidiaries. Since we now have 4 full quarters of owning Tyman and have realized the full $30 million of synergies that our lenders gave us credit for, we don't intend to reference the debt covenant leverage ratio going forward. As George mentioned in our earnings release, our long-term view continues to be favorable as the underlying fundamentals for the residential housing market remain positive. However, while we enter fiscal 2026 with a cautious outlook due to the ongoing macroeconomic challenges, we are optimistic that demand for our products will improve as consumer confidence is restored over time. Our current view is that fiscal 2026 could be flat compared to fiscal 2025 from a revenue and adjusted EBITDA perspective with puts and takes, but the first half of 2026 may be more challenged than the first half of 2025, which would imply a somewhat improved second half year-over-year. Having said that, and consistent with the last few years, based on current macro indicators, recent conversations with our customers, limited transparency and varying opinions on the macroeconomic outlook for 2026, we are again taking a measured approach to guidance. We intend to revisit guidance for 2026 when we report earnings for the first quarter. We will stay focused on the things that we can control with an emphasis on generating cash to continue paying down debt and opportunistically repurchasing our stock. In the meantime, please use the following cadence for the first quarter of 2026 versus the fourth quarter of 2025. As a reminder, due to the typical seasonality of our business, our first quarter is usually the weakest quarter of the year. With that said, on a consolidated basis, we expect revenue to be down 16% to 18% in the first quarter of 2026, compared to the fourth quarter of 2025. Adjusted EBITDA margin, again, on a consolidated basis, is expected to be down 800 to 825 basis points in the first quarter of 2026 compared to the fourth quarter of 2025 as lower volumes impact operating leverage. Notwithstanding the significant progress we have made towards stabilizing the operation in Monterrey, we also expect a negative impact of about $3 million during the first quarter of 2026 related to that plant. In addition, the following modeling assumptions should be reasonable for the first quarter of 2026. SG&A of about $73 million, D&A of about $26 million, adjusted D&A, excluding intangible amortization of about $16 million, which should be used to calculate adjusted EPS; interest expense of approximately $12.75 million and a tax rate of 23.5%. Operator, we are now ready to take questions.
Operator: [Operator Instructions]. Our first question will come from the line of Julio Romero from Sidoti.
Julio Romero: Scott, did I hear you correctly that the negative EBITDA impact in the fourth quarter from the Monterrey challenges was $8 million? And if so, your EBITDA margins for the Hardware Solutions segment would have been in the 16% range in the quarter?
Scott Zuehlke: Yes. So if you recall on the last quarterly call, we talked about Monterrey being about a $5 million negative impact in Q3. We estimated at the time that 4Q impact would be about the same at $5 million. But the reality was since we went to a 24/7 operation and higher labor costs, higher expedited freight costs, that ended up being around $8 million. And then we alluded to about a $3 million hit we expect in the first quarter. But to your point, yes, it would have been better, but we also had a favorable cost roll impact in the fourth quarter that impacted the -- or helped the Hardware Solutions segment.
Julio Romero: Understood. And then the $3 million drag expected in the first quarter, does that -- does your current kind of informal outlook assume that goes to 0 beyond the first quarter?
Scott Zuehlke: Yes, that's our expectation.
George Wilson: Yes. Our decision to add the 24/7 and do some different things in the plant to speed up that recovery plan. That was really the intent to drive the back order levels down faster than we anticipated. And we're having some very good success at making progress towards that goal.
Julio Romero: Well, it sounds prudent that you're able to get your arms around it for sure. Maybe thinking about the informal outlook, does your current informal outlook assume -- what does that assume from a market volume perspective in terms of the volume you'll get in the first half and the amount of procurement synergies you'll be able to realize as a result?
Scott Zuehlke: Yes. The way I would -- I mean, obviously, somewhat premature until we come out with official guidance. But the way we're looking at it right now for next year from a revenue standpoint, if we say flattish, maybe flat to down volumes with flat to up pricing is how I would look at that. But then on the EBITDA side, the positives would be obviously less Mexico cost next year, plus some additional synergies offset by higher SG&A due to inflation, higher benefits and then bonus accrued at Target. That's kind of how I would look at it.
Julio Romero: Understood. Last one for me is you were able to pay down debt pretty aggressively here in the fiscal year. You also repurchased roughly $3 million of stock here in the fourth quarter. But the shares have been pretty depressed here. Can you just talk about if you were limited by the open repurchase window timing at all during the fourth quarter? And then also if you could comment on whether you've been active on the buyback kind of post quarter end?
Scott Zuehlke: Yes. So we were active somewhat in 4Q. I think we made a conscious decision in the second half of last year to really focus more on paying down debt because the number -- out of pretty much every investor call we had since last 2 quarters, there's a real focus on net leverage. Even though our balance sheet is in good shape, we think it's very healthy, there's this sentiment out there amongst investors that anything above 2x net leverage is a concern. So with that in mind, we chose to pay down debt, even though our shares, we still feel are very cheap. Looking ahead, going forward, clearly, we will be opportunistic. We don't have big windows in between quarters in which we can be in the market. So keep that in mind as well. The other thing to think about is the first quarter and really the second quarter are our low watermarks for the year. So we're trying to balance cash flow generation, stock repurchases with also with debt paydown. We've typically been a net borrower in the first quarter in the past. So we just try to balance all of that. I hope that helps.
Operator: Our next question will come from the line of Steven Ramsey from Thompson Research Group.
Steven Ramsey: I wanted to think about for 2026 with the persistently challenging demand backdrop more recently and looking forward, are you seeing any irrational competitive response in certain geographies or certain product categories?
George Wilson: We -- Steven, we really haven't seen a lot of what I would call irrational pricing where people are going to the market to try to fill up volume. We just haven't seen that. And I think there's still a mentality in the marketplace that supply chain risk for all people is of great priority and importance. So I think our customers evaluate those type of pricing decisions and have to balance, is it the right move to just move to another supplier based on price. There's much more involved in those types of decisions right now. And I would say that, that's the truth globally. So things like being able to supply facilities from multiple ship-to points in a lot of cases, offset price. Now with that being said, I think we -- as commodity prices stabilize or come down, I think we will see pricing pressure, but we're really not seeing anything that I would call irrational at this point.
Steven Ramsey: Okay. That's great to hear. And then also looking at 2026 and the various product components within each segment, are there any certain products that you expect to be better than the flattish level for the year?
George Wilson: I think the one area that is being potentially impacted by tariffs and everything that's going on in the macro drop would be the wood components part of our business that falls under the -- yes, the Custom Solutions group. As those tariffs continue to hang out there and be uncertain, I think that there's an unknown. But if the tariffs stick at a higher level, there could be some opportunity to in-source that demand back into the U.S. to mitigate tariff risk around the globe. So that could be an area of upside. Everything else, I think right now, it's a wait and see, but that's the one area where there could be some potential opportunity.
Steven Ramsey: Okay. And then on the benefits of the resegmentation, this was a talking point from the Investor Day. You mentioned it. Again, are there any early positive takeaways and results with the resegmentation so far, is there any benefits embedded in the 2026 EBITDA outlook? And then maybe any of the nuances by segment on the sales or margin side with this resegmentation?
George Wilson: Yes. It's still a little early. We're only now 2 quarters into this. But what I would tell you, I think we're already seeing operational improvements by the sharing of best practices, for example, in the Extruded Solutions Group, where you had silicone extrusion, butyl extrusion and then you layer in the Schlegel piece of the business that we acquired from Tyman that has a completely different type of material that they extrude, but it's an extrusion process. And so the sharing of best practices in that division is already paying some operational dividends. I think we're starting to see and put together a plan on what our global footprint will look like. That's long term in nature. But I think we've got a really good feel and good opportunities for what I would say are mid- and longer-term opportunities to continue to grow to better serve our customers, provide new products and new services. And so my biggest excitement right now relies around the process improvements as well as some of the innovation that's being driven through that. So we probably exceeded my expectations from those points already.
Operator: Our next question will come from the line of Reuben Garner from Benchmark.
Reuben Garner: So the Mexico issue seem to be on track, kind of cleared up faster than you expected, which is great to hear. George, just curious, it's been a few months since that came about. Can you go into a little detail about the efforts you guys have made internally to make sure that there weren't risk of similar or other issues at different facilities from Tyman?
George Wilson: Yes. So obviously, being a manufacturing company, things happen in plants. And we identified the issue fairly quick. And when we did, we put a plan in to remediate. And as you mentioned, I'm very happy and pleased with the efforts to get to there. I think we did a great job of mitigating the issue in a relatively quick period of time. Obviously, as a part of that, and I wouldn't just frame it around the time of acquisition, but we looked at every one of our facilities and said that these types of scenarios exist anywhere. So we did a deep dive on that. That's part of what we deem problem-solving philosophy where we go in and we try to identify any like situations. And we have not found that anywhere, and we spent enormous amount of time and effort making sure that the issues that we identified were not going to be replicated or have the risk of being replicated at any other facility. So I feel pretty good about the controls we have in place that we won't see it anywhere else, and I feel really good about the issues to fix the situation in a relatively short period of time to eliminate this on a go-forward basis in Monterrey.
Reuben Garner: Great. And then a clarification on the comments for Q1. Scott, did you say SG&A of $73 million? And if so, maybe I've got it wrong in my model, but that's a big change from where it was a year ago, I think $20 million almost higher on a similar revenue number and also higher than what you just did in the third and fourth quarter. So can you just talk about what's going on there? Is there anything onetime? Is that a good run rate for the full year on a quarterly basis?
Scott Zuehlke: Yes. I think that's a pretty decent run rate on a full year. I mean when you compare it to the later part of last year, one of the main things that sticks out is accruing at target now this year versus last year when we knew halfway through the year, we weren't going to hit those targets. So SG&A came down. There was a couple of onetime benefits last year, first quarter just related to some issues from the legacy Tyman business. And then clearly, when you go into a new year, there's you budget for higher benefit costs, higher inflationary measures, merit increases, things of that nature that just increase SG&A. Now clearly, with that in mind, our job, though, as manager it is to the extent we can operationally become more efficient to offset increased costs as we move through the year.
Reuben Garner: Great. And then I'm going to sneak one more in. You talked about potentially a little bit of price. I assume some of that is carryover from actions throughout this year, maybe related to tariffs and that sort of thing. What are you seeing on the cost side in terms of cost of goods? Is that pretty stable? What -- I guess, ultimately, what does price cost look like in your outlook for '26?
George Wilson: Yes, I'll pick this one, Reuben. Really, from a cost basis, things have I would say, generally stabilized. There's a couple of areas across the different product lines, especially around oil type-based products, anything that's going through a cracked chemical type of process. I think we anticipate we'll see continued inflationary pressure there. But overall, materials have stabilized and the supply of those materials have stabilized. So to be determined. Tariffs do have a big impact right now, but that seems to have softened a little bit or at least not changing on a daily basis.
Operator: [Operator Instructions]. Next question will come from the line of Kevin Gainey from Thompson, Davis & Company.
Kevin Gainey: Congrats on another quarter. Maybe we could talk about the synergies to start first and how you guys are thinking how quickly you might be able to achieve the $15 million to get to the ultimate $45 million? And then maybe if you could break down how you're approaching those synergies from like a cost procurement footprint perspective?
Scott Zuehlke: Yes. I think to get at the remaining, really, it's a little less than $15 million because we did realize some in the fourth quarter of 2024. But the way we're looking at fiscal 2026, and I mentioned it earlier about we do expect some additional synergies, probably in the $5 million to $10 million range, and the range is really because of volumes. If volumes are better, then we could be towards the higher end of that range because of procurement synergies. If volumes are worse, it could be on the lower end. So there's a range there. And then going into 2027, there's still some more synergies that we could get at. Outside of that, there are some specific timing of when synergies may hit in 2026, really more on the SG&A side, and I'll just -- I'll leave it at that.
Kevin Gainey: Sounds good. And then as you guys think about the pricing gains that you got in 2025. How much of that was really inflation linked versus kind of structurally? And do you think you have any concerns around givebacks in '26?
George Wilson: As I look at pricing, I think we've been very focused on how to best serve our customers. And I think that's always been our sales philosophy. So our price increases that we pass on in the market really do revolve around inflationary pressures. And so our job and our philosophy with our customers is any sort of margin improvement on our part shouldn't come at the detriment of our customers. Our job is to pass along cost as is true cost. And then for us to improve our margins, that's all driven by operational performance. I think that, that's our philosophy and how to be a good supplier, and we are not predatory in any way, shape or form in terms of how we price to our customers. So in that respect, I think our ability to hold on to price should be pretty strong because I don't think we're out there and we have all the data in the world to support the inflationary costs that we're passing along. I think we're proud of the fact that, that is the approach we take to pricing because I think long term, that's what builds relationships with our customers, and we'll continue to do that on a go-forward basis. So again, long answer to your question, but I think the ability to hold on to price should be pretty strong because it's supported by what we've eaten in terms of cost increases.
Kevin Gainey: Might be a long answer, but I think it was a great answer. Maybe if you guys could talk about demand as well from kind of parse between new residential versus repair and remodel and whether one feels stronger than the other and how you're thinking about it for '26?
George Wilson: Yes. I think for us, our products are fairly agnostic to either of the markets. So that we determine that really by our customer mix. I think right now, we're seeing really similar type of impacts on both R&R and new construction. I do believe that the R&R piece will be -- we see that leads, at least for us because we're weighted more to R&R. I think as we see new construction start to improve, the interesting metric that we'll keep our eye on is the size of homes and multifamily versus single-family and what does that mix look like, the number of window openings in a house. impacts the volume impact of new construction for us. So I think R&R will be the leader on any sort of recovery and that the new construction will be, again, more driven by interest rates and the movements of the Fed as well as availability and affordability of the new housing market. So they're both impacted pretty equal though right now from what we see.
Kevin Gainey: Appreciate the color. And then one final one just on cash flow. You guys typically burn cash in the January quarter. Is there any reason to expect you wouldn't have slightly negative free cash flow in Q1?
Scott Zuehlke: I mean it's possible. I think it just depends on how December and January play out. I mean, as we sit here today, November came in pretty much as expected. So no surprises yet.
George Wilson: The one thing on cash flow that -- again, a lot of it will depend on volume.
Scott Zuehlke: And the timing of CapEx.
George Wilson: Yes, CapEx. The other thing that happened this year, I mean, it wasn't a banner 2025. So as we've stated, the incentive payouts to the executive team and the organization wasn't as high as it typically would be. So it was pretty much under target. So the cash flow outlay to any sort of incentive payment is going to be lower in Q1 than we've typically seen. So this is one of the lower incentive payouts that we've seen in the past future. So that should help cash flow in Q1.
Operator: [indiscernible] the queue, I would like to hand back over to George Wilson for any closing remarks.
George Wilson: I'd like to thank everyone for joining. I want to take a moment to wish everyone a very safe and happy holiday, and we look forward to providing the next update to everyone in March. Thank you.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.