Financial Data and Key Metrics Changes - Net sales increased by 4.6% to $346.6 million, primarily driven by $22 million of inorganic sales from the acquisition of UW Solutions [10][11] - Adjusted EBITDA margin decreased to 9.9%, primarily due to a less favorable mix and higher aluminum costs [11] - Adjusted diluted EPS declined to $0.56, driven by lower adjusted EBITDA, higher interest expense, and a higher adjusted effective tax rate [11][12] Business Line Data and Key Metrics Changes - Metals segment net sales declined by 3.4%, with adjusted EBITDA margin decreasing to 7.3% due to a less favorable mix and higher aluminum costs [11][12] - Services segment achieved a 7.6% increase in net sales, marking its fifth consecutive quarter of growth, although adjusted EBITDA margin decreased to 5.7% due to higher tariff expenses [12] - Glass segment net sales declined, with adjusted EBITDA margin moderating due to reduced volume from lower end market demand [12] - Performance Surfaces segment saw net sales increase, driven by inorganic sales from UW Solutions, but adjusted EBITDA margin declined to 18.8% due to lower margins from UW Solutions [12] Market Data and Key Metrics Changes - The revenue pipeline for Glass is improving, positioning the segment for growth beginning in Q3 and Q4 [7][10] - Metals showed sequential improvement from Q4, with expectations for continued improvement in Q2 [6][11] Company Strategy and Development Direction - The company is focusing on operational improvements and cost mitigation strategies, particularly through Project Fortify Phase two, which is expected to drive annualized savings of $13 million to $15 million [6][10] - The company is actively pursuing M&A opportunities to diversify its business mix and enhance growth prospects [8][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in building momentum for the second half of the fiscal year, driven by improvements in metals, growth in glass revenues, and strong organic growth in Performance Surfaces [17] - The company raised its fiscal year outlook for net sales and adjusted diluted EPS, expecting net sales in the range of $1.4 billion to $1.44 billion and adjusted diluted EPS between $3.8 and $4.2 [14][17] Other Important Information - The company is experiencing challenges due to increased tariffs but is implementing successful mitigation plans [6][10] - The balance sheet remains strong, with a consolidated leverage ratio of 1.6 and no near-term debt maturities [13] Q&A Session Summary Question: Can you elaborate on the glass business and the revenue pipeline? - Management noted good visibility six months out and mentioned a pivot to smaller jobs to fill gaps due to market softness, with improved quote activity and award rates [22][24] Question: What is the outlook for segment margin targets? - Management indicated that metals and services face headwinds due to tariffs, and while they hope to reach the bottom of their target ranges, it may be challenging in the first half [28][30] Question: What is driving the sequential improvement in the metals segment? - Management highlighted operational improvements and regaining customer confidence as key factors driving sales and margin improvements [40][42] Question: What is the status of Project Fortify Phase two? - Minimal savings were seen in Q1, with more expected to materialize in Q2, particularly following the closure of a Canadian facility [45][47] Question: Can you quantify the EPS impact from tariffs in Q1? - The impact was initially estimated at $0.45 to $0.55, but was updated to $0.35 to $0.45 for the full year, with a favorable trend noted in Q1 [48][50] Question: How is the M&A pipeline being affected by the current environment? - Management stated that while M&A activity has slowed due to macro issues, they continue to focus on strategic targets identified over the past two years [63][65]

Core Viewpoint - Apogee Enterprises reported quarterly earnings of $0.56 per share, exceeding the Zacks Consensus Estimate of $0.50 per share, but down from $1.44 per share a year ago, indicating a significant decline in profitability [1][2] Financial Performance - The company achieved revenues of $346.62 million for the quarter ended May 2025, surpassing the Zacks Consensus Estimate by 7.08% and showing an increase from $331.52 million year-over-year [2] - Over the last four quarters, Apogee has exceeded consensus EPS estimates three times and topped revenue estimates twice [2] Stock Performance - Apogee Enterprises shares have declined approximately 44.5% since the beginning of the year, contrasting with the S&P 500's gain of 4.4% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.65 on revenues of $334.37 million, and for the current fiscal year, it is $3.80 on revenues of $1.39 billion [7] - The trend of estimate revisions prior to the earnings release was unfavorable, which may impact future stock performance [6] Industry Context - The Glass Products industry, to which Apogee belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a relatively strong position within the market [8]

Financial Performance - Apogee's Q1 FY26 net sales reached $346.6 million, a 4.6% year-over-year increase[13, 14] - Adjusted EBITDA was $34.4 million, a 34.7% decrease year-over-year[13, 14] - Adjusted EBITDA margin was 9.9%, a 600 bps decrease year-over-year[13, 14] - Adjusted diluted EPS was $0.56, a 61.1% decrease year-over-year[13, 14] Segment Results - Architectural Metals net sales were $128.6 million, a 3.4% decrease year-over-year, with an adjusted EBITDA margin of 7.3%, a 1060 bps decrease[21, 24] - Architectural Services net sales were $106.5 million, a 7.6% increase year-over-year, with an adjusted EBITDA margin of 5.7%, a 90 bps decrease[21, 24] - Architectural Glass net sales were $73.3 million, a 15.5% decrease year-over-year, with an adjusted EBITDA margin of 18.3%, a 500 bps decrease[21, 24] - Performance Surfaces net sales were $42.3 million, a 99.3% increase year-over-year, with an adjusted EBITDA margin of 18.8%, a 780 bps decrease[21, 24] FY26 Outlook - The company is increasing its full-year FY26 outlook for net sales to $1.40 billion - $1.44 billion[39] - The company is increasing its full-year FY26 outlook for adjusted diluted EPS to $3.80 to $4.20[39]

Financial Performance - Net sales increased by 4.6% to $346.6 million, driven by $22.0 million of inorganic sales from the acquisition of UW Solutions[4] - Net loss of $2.7 million compared to net earnings of $31.0 million in the prior year, representing a decline of 108.7%[1] - Adjusted EBITDA decreased by 34.7% to $34.4 million, with an adjusted EBITDA margin of 9.9%[1] - Diluted loss per share was $0.13, while adjusted diluted earnings per share was $0.56, a decrease of 61.1%[1] - Gross profit decreased by 24.0% to $75,125,000 from $98,855,000 year-over-year[21] - Operating income fell significantly by 83.3% to $6,931,000 compared to $41,381,000 in the prior year[21] - For the three months ended May 31, 2025, the consolidated net loss was $2.688 million, compared to a net earnings of $31.011 million for the same period in 2024[36] - Adjusted EBITDA for the three months ended May 31, 2025, was $34.384 million, with an adjusted EBITDA margin of 9.9%, compared to $52.622 million and 15.9% for the same period in 2024[36] - EBITDA for the three months ended May 31, 2025, was $18.685 million, down from $51.500 million in the same period in 2024[36] Cost and Expenses - Gross margin decreased to 21.7% from 29.8%, primarily due to restructuring charges and higher aluminum costs[4] - Selling, general and administrative (SG&A) expenses as a percentage of net sales increased by 240 basis points to 19.7%[4] - The company incurred $15.3 million in pre-tax costs associated with Project Fortify Phase 2 during the first quarter[12] - The company reported restructuring costs of $15.350 million related to Project Fortify Phase 2 for the three months ended May 31, 2025[37] - The company incurred acquisition-related costs of $349,000 for the three months ended May 31, 2025, related to the integration of the UW Solutions acquisition[41] - The company’s interest expense for the three months ended May 31, 2025, was $3.846 million, compared to $450,000 for the same period in 2024[36] - The income tax expense for the three months ended May 31, 2025, was $5.091 million, compared to $10.063 million for the same period in 2024[36] - The company reported a depreciation and amortization expense of $12.436 million for the three months ended May 31, 2025[36] Sales and Segment Performance - The Architectural Glass segment experienced a 15.5% decline in net sales, dropping to $73,273,000 from $86,703,000[32] - Performance Surfaces segment saw a significant increase in net sales by 99.3%, rising to $42,250,000 from $21,204,000[32] - Segment backlog at the end of the quarter was $682.9 million, down from $720.3 million at the end of the previous quarter[6] - Net sales for the three months ended May 31, 2025, were $346,622,000, representing a 4.6% increase compared to $331,516,000 for the same period in 2024[21] Financial Outlook - The company raised its fiscal year outlook for net sales to a range of $1.40 billion to $1.44 billion[13] - Projected unfavorable EPS impact from tariffs is estimated to be between $0.35 to $0.45, mostly affecting the first half of the fiscal year[13] - The fiscal 2026 outlook estimates diluted earnings per share to range from $2.59 to $3.12, with adjusted diluted earnings per share projected between $3.80 and $4.20[44] Assets and Liabilities - Total current assets increased slightly to $447,959,000 from $442,104,000[23] - Long-term debt increased to $311,000,000 from $285,000,000, indicating a rise in financial leverage[23] - Cash and cash equivalents at the end of the period were $32,831,000, down from $41,448,000 at the beginning of the period[25]

Company Overview - Apogee Enterprises, Inc. (NASDAQ: APOG) has been facing significant challenges recently, particularly in its revenue, profits, and cash flow [1] Industry Insights - The focus of Crude Value Insights is on oil and natural gas, emphasizing cash flow and the companies that generate it, which leads to value and growth prospects [1]

Core Viewpoint - Apogee Enterprises, Inc. reported disappointing fourth-quarter fiscal 2025 results, leading to a 12% decline in share price, with adjusted EPS missing estimates and a significant year-over-year decrease in earnings and revenues [1][11]. Financial Performance - Adjusted EPS for Q4 fiscal 2025 was 89 cents, below the Zacks Consensus Estimate of 90 cents, and down 21.9% year over year [1] - Including one-time items, EPS was 11 cents, a decrease from 71 cents in the same quarter last year [2] - Revenues for the quarter were $346 million, a 4.5% decline year over year, but exceeded the Zacks Consensus Estimate of $336 million [2] - Cost of sales decreased by 0.8% to $271 million, while gross profit fell 15.7% to $74.6 million, resulting in a gross margin drop to 21.6% from 24.4% [3] Segment Performance - Architectural Metals segment revenues decreased 19.4% year over year to $112 million, with an operating loss of $5.7 million [5] - Architectural Glass segment revenues fell 21.9% to $75 million, with operating profit dropping to approximately $11 million [5] - Architectural Services segment saw a 10.9% revenue increase to $118 million, with operating income rising to $8.6 million [6] - Performance Surfaces segment revenues surged 76.7% to $48 million, attributed to the UW Solutions acquisition, with operating profit slightly down to $6.1 million [7] Cash Position and Debt - Cash and cash equivalents at the end of fiscal 2025 were $41 million, up from $37 million at the end of fiscal 2024 [8] - Cash generated from operating activities was $125 million, down from $204 million the previous year [8] - Long-term debt increased significantly to $285 million from $62 million at the end of fiscal 2024 [9] Fiscal Year 2025 Overview - For fiscal 2025, Apogee reported a record adjusted EPS of $4.97, up from $4.77 in the prior year, meeting the Zacks Consensus Estimate [11] - Total revenues for the year decreased by 3.9% to $1.36 billion, surpassing the Zacks Consensus Estimate of $1.35 billion [11] Fiscal Year 2026 Guidance - The company anticipates net revenues of $1.37-$1.43 billion for fiscal 2026, with adjusted EPS expected to be $3.55-$4.10, factoring in tariff-related headwinds [12] - The UW Solutions business is projected to contribute $100 million to net revenues in fiscal 2026 [13] Stock Performance - Apogee's shares have declined 34.4% over the past year, compared to a 17.3% decline in the industry [14]

Core Viewpoint - Apogee Enterprises experienced a significant decline in share price following disappointing fiscal fourth quarter and full-year 2025 earnings, with a nearly 13% drop in a session where the S&P 500 rose by 2% [1] Financial Performance - Net sales decreased by nearly 5% year over year, totaling less than $346 million, while GAAP net income plummeted by 84% to approximately $2.5 million, or $0.11 per share [2] - Operating income also fell by 22% to $0.89 per share, indicating a mixed quarter for the company [2][3] Segment Performance - Apogee's business is divided into four segments: architectural metals, architectural services, architectural glass, and performance services. Only two segments saw increases in net sales, with one benefiting from an acquisition. The architectural metals segment, the largest by revenue, reported a 19% decline in net sales to $112 million for the quarter [4] Future Guidance - Management's guidance for fiscal 2026 projects net sales between $1.37 billion and $1.43 billion, with operating income per share expected to be between $3.55 and $4.10. This contrasts with fiscal 2025 figures of $1.36 billion in net sales and $4.97 in operating income per share. The consensus analyst estimate for operating income remains at $4.97 per share [5] Overall Assessment - The company is currently in a slump, and a slight anticipated rise in annual net sales is unlikely to improve investor sentiment significantly [6]

Financial Data and Key Metrics Changes - Net sales for Q4 2025 decreased by 4.5% to $346 million, impacted by a 7.9% negative effect from an extra week in the previous year [41] - Adjusted diluted EPS declined by 22% to $0.89 per share, primarily due to lower adjusted operating income and higher interest expense [44] - Full-year adjusted operating margin improved by 70 basis points to 11%, driven by improved margins in services and lower quality-related costs [56] Business Line Data and Key Metrics Changes - Metals segment net sales fell by 19% to $112 million, with adjusted operating margin declining to 2.8% due to operational disruptions and unfavorable sales mix [46][47] - Services segment achieved a 10.9% increase in net sales, marking the fourth consecutive quarter of double-digit growth, with adjusted operating margin improving to 7.2% [49][50] - Glass segment's net sales declined, with adjusted operating margin dropping to 14.6% from 19.7% year-over-year, primarily due to lower volume [52] Market Data and Key Metrics Changes - The nonresidential construction market is expected to face continued headwinds in 2025, with leading indicators suggesting a cautious outlook for growth [24][25] - Interest rate-sensitive sectors like office and commercial are projected to decline, while sectors like education and healthcare show pockets of growth [25] Company Strategy and Development Direction - The company is focused on sustaining ROIC and margin gains while shifting more focus to growth, particularly through the integration of UW Solutions and pursuing M&A opportunities [18][38] - A second phase of Project Fortify is being implemented to drive further efficiencies and align operations with current market conditions [34][66] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the uncertainty in the market due to tariffs and macroeconomic factors but remains confident in the company's ability to manage through these challenges [70][74] - The company expects full-year net sales for fiscal 2026 to be between $1,370 million and $1,430 million, with adjusted diluted EPS ranging from $3.55 to $4.10 [61] Other Important Information - The acquisition of UW Solutions is progressing well, contributing approximately $100 million in revenue and expected to deliver strong growth in the Performance Surfaces segment [61][95] - The company has a strong balance sheet with a consolidated leverage ratio of 1.3% and no near-term debt maturities, providing flexibility for future capital deployment [59] Q&A Session Summary Question: Can you provide more detail on the tariff impact on EPS? - The direct impact of tariffs is primarily related to the services segment, with efforts to accelerate production in the US to mitigate costs [78][81] Question: How is the integration of UW Solutions progressing? - Integration is substantially complete, with the business performing well and expected to achieve double-digit growth [95][96] Question: What is the outlook for cash flow in fiscal 2026? - Operating cash flow is expected to decline due to arbitration award payments and higher interest expenses [110]

Image source: The Motley Fool.Thursday, Apr 17, 2025CALL PARTICIPANTSTy Silberhorn: Chief Executive OfficerMatt Osberg: Chief Financial OfficerJeff Huebschen: Investor RelationsRISKSNonresidential construction forecasts now point to a slight decline, with interest rate-sensitive sectors like office, commercial, lodging, and multifamily projected to decline again in 2025. New tariffs on aluminum products are expected to negatively impact adjusted EPS by $0.45-$0.55 in fiscal 2026, with 60% affecting the Serv ...

Sales and Revenue - In fiscal 2025, the Architectural Metals Segment accounted for approximately 39% of net sales, while the Architectural Services Segment contributed about 31%[20] - The Architectural Glass Segment provides customized solutions and accounted for approximately 21% of net sales in fiscal 2025[20] - The Performance Surfaces Segment, which develops high-performance coated materials, represented approximately 9% of net sales in fiscal 2025[20] - Consolidated net sales for fiscal 2025 were $1.36 billion, a decrease of 3.9% compared to $1.42 billion in fiscal 2024, primarily due to lower volume in Architectural Metals and Architectural Glass, partially offset by a $32.0 million contribution from the acquisition of UW Solutions[131] - Net sales decreased to $524.7 million in fiscal 2025 from $601.7 million in fiscal 2024, primarily due to reduced volume and lower end market demand[136] - The company experienced a decline in net sales in the Architectural Glass segment to $322.2 million in fiscal 2025 from $378.4 million in fiscal 2024, driven by lower volume[137] - Architectural Metals segment net sales decreased by 12.8% to $524.7 million, while Architectural Services saw an increase of 11.0% to $419.9 million[132] Financial Performance - Gross profit for fiscal 2025 was $359.9 million, with a gross margin of 26.4%, an improvement from 25.9% in fiscal 2024, driven by a favorable mix of projects and lower quality-related costs[131] - Operating income decreased to $118.1 million in fiscal 2025, with an operating margin of 8.7%, down from 9.4% in fiscal 2024, primarily due to lower sales volume and acquisition-related expenses[131] - Net earnings for fiscal 2025 were $85.1 million, a decline of 14.6% from $99.6 million in fiscal 2024, with diluted earnings per share (EPS) of $3.89 compared to $4.51 in the previous year[128] - Adjusted operating income grew 2.4% to $149.8 million, with an adjusted operating margin improving to 11.0%[131] - The effective income tax rate increased to 24.4% in fiscal 2025 from 22.9% in fiscal 2024, primarily due to an increase in tax expense for discrete items[131] - Acquisition-related costs totaled $10.3 million in fiscal 2025, impacting net earnings and adjusted earnings per share[149] Employee and Workplace Safety - The company had approximately 4,500 employees as of March 1, 2025, reflecting an increase from 4,400 employees the previous year[44] - The company aims to achieve an incident rate of zero in workplace safety through its enterprise-wide health and safety program[46] - The company conducts annual safety culture assessments and compliance audits to enhance safety programs and employee engagement[47] - The company offers comprehensive health and wellness programs, including medical insurance and preventive care, to support employee well-being[48] - The company emphasizes diversity and inclusion, conducting annual training to reduce bias and promote equal opportunity[49] - The talent management program focuses on employee development, offering training, coaching, and education assistance for career growth[50] Strategic Initiatives and Growth - The company invested in organic and inorganic growth initiatives, including the acquisition of UW Interco, LLC and capacity expansion in the Performance Surfaces segment[21] - The company aims to shift its business mix toward higher operating margin offerings to improve return on invested capital performance[19] - The company is exploring strategic opportunities, including acquisitions and divestitures, to drive long-term growth and efficiency[63] - The company’s strategy includes strengthening core capabilities through a center-led functional expertise model and the Apogee Management System[19] Risks and Challenges - The company is influenced by North American economic conditions, particularly in the non-residential construction industry, which affects sales and operations[56] - The company faces risks from global instability, which could adversely affect operations and project timelines[59] - Supply chain disruptions, particularly in aluminum and raw glass, could negatively impact the company's operating results[70] - Rising interest rates and inflation could reduce demand for the company's products and services, negatively impacting profitability[86] - The company is vulnerable to fluctuations in economic cycles, which may affect supplier performance and contract terms[72] - Difficulties in maintaining information technology systems and potential cybersecurity threats could disrupt business operations and increase expenses[74] - The company may face increased costs due to changes in trade policies and tariffs, which could adversely affect operating results and profitability[79] - The company has experienced product liability and warranty claims, which could lead to additional expenses and negatively impact operating results[83] - The company’s liquidity may be adversely affected by changes in capital and credit markets, impacting its ability to fund operations and pursue business opportunities[91] - The company’s internal controls over financial reporting may not always prevent misstatements, potentially leading to restatements and regulatory investigations[90] - The number of data security incidents has increased regulatory focus on security requirements, which may lead to additional compliance costs[78] Project and Restructuring Updates - The Company incurred a total of $16.7 million in pre-tax charges related to "Project Fortify," delivering estimated annualized cost savings of approximately $14 million[123] - An extension of "Project Fortify Phase 2" is expected to incur approximately $24 million to $26 million in pre-tax charges, with annualized pre-tax cost savings projected at $13 million to $15 million[124] - The company recognized restructuring charges related to Project Fortify totaling $6.2 million in asset impairment, $5.9 million in employee termination costs, and $0.3 million in other costs for fiscal 2024[156] Shareholder Returns and Stock Performance - Cash dividends paid per share for fiscal 2025 totaled $1.0100, an increase from $0.9700 in fiscal 2024[111] - The Company repurchased a total of 548,337 shares at an average price of $58.70 during the fourth quarter of fiscal 2025[112] - The company returned $67.1 million to shareholders through share repurchases and dividends, compared to $33 million in the prior year[165] Backlog and Contract Management - The company had $394.1 million of backlog bonded by performance bonds with a face value of $1.2 billion as of March 1, 2025[179] - Approximately 36% of total revenue in fiscal 2025 was derived from longer-term, fixed-price contracts, primarily in the Architectural Services Segment[186] - The company measures progress on long-term contracts using an input method, comparing total costs incurred to-date to estimated total costs, recording that proportion of the total contract price as revenue[186] - Architectural Services Segment backlog was $720.3 million at the end of fiscal 2025, down from $807.8 million in the prior year[140] Market and Economic Conditions - The Performance Surfaces Segment relies heavily on the U.S. retail custom picture framing industry, which is sensitive to consumer confidence[57] - The company is exposed to market risks related to changes in interest rates, foreign currency exchange rates, and raw material pricing[206] - A 200 basis point change in interest rates could impact net earnings by approximately $0.6 million[208] - The company manages foreign currency risk through local operations and forward purchase foreign currency contracts[211] - The company cannot accurately calculate the pre-tax impact of a 1% change in commodity costs of aluminum and lumber on fiscal 2025 operating results due to various influencing factors[214] Cybersecurity and Legal Matters - The company reported no material adverse effects from cybersecurity incidents, maintaining a robust cybersecurity risk management program[97] - The Board oversees the cybersecurity risk management program, receiving updates on the Company's cyber risk profile at least twice a year[101] - The Company has not identified any legal proceedings that would have a material adverse effect on its financial condition[106] Impairment and Valuation - The company incurred $7.6 million in pre-tax impairment charges related to indefinite-lived intangibles in the Architectural Metals Segment due to strategic branding changes[88] - A 100 basis point increase in the weighted average cost of capital could decrease estimated fair values of reporting units by $13 million to $60 million[194] - The company has intangible assets with indefinite useful lives, and for fiscal 2025, recognized an impairment expense of $7.6 million due to carrying amounts exceeding fair value[198] - For fiscal 2025, the company bypassed qualitative assessments for goodwill impairment and directly compared fair value to carrying value, with fair value exceeding carrying value across all reporting units[194] - Management is responsible for maintaining adequate internal control over financial reporting to ensure reliability and compliance with accounting principles[215]