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]

Apogee Enterprises, Inc. Nasdaq: APOG Fiscal 2025 Fourth Quarter Earnings Call April 24, 2025 University of Washington, NanoES – Seattle © Aaron Leitz Photography; courtesy of ZGF Non-GAAP measures & forward-looking statements This presentation contains measures of financial performance that are not defined by U.S. GAAP. We believe that these measures provide useful information and include these measures in other communications to investors. For each of these non-GAAP financial measures, we provide a reconc ...

Financial Data and Key Metrics Changes - Net sales for Q4 decreased by 4.5% to $346 million, impacted by a 7.9% negative effect from an extra week in the previous year and lower volume primarily in metals and glass [29][30] - Adjusted operating margin declined by 120 basis points to 8.3%, driven by unfavorable sales leverage from lower volume and a less favorable product mix [30] - Adjusted diluted EPS decreased by 22% to $0.89 per share, primarily due to lower adjusted operating income and higher interest expense [30] Business Line Data and Key Metrics Changes - Metals segment net sales fell by 19% to $112 million, with a 7.8% decline attributed to the extra week last year and lower volume due to operational disruptions [32] - Services segment achieved a 10.9% increase in net sales, marking the fourth consecutive quarter of double-digit growth, benefiting from increased volume and a favorable mix of projects [33] - Performance Surfaces segment saw a 77% growth in net sales to $47.9 million, primarily due to inorganic sales from UW Solutions, although organic sales declined by 0.5% [35] Market Data and Key Metrics Changes - The non-residential construction market is expected to face continued headwinds, with leading indicators suggesting a cautious outlook for market growth [18][19] - Interest rate-sensitive sectors like office and commercial are projected to decline, while growth is anticipated in education, healthcare, and transportation [19] - Tariffs are expected to impact several aspects of operations, particularly in aluminum costs, which is the largest input cost for the company [21][22] Company Strategy and Development Direction - The company is focused on sustaining progress from its strategic execution while navigating market uncertainties, with an emphasis on productivity and cost management [24][25] - A second phase of Project Fortify is being implemented to drive further efficiencies and align operations with current market conditions [43] - The acquisition of UW Solutions is seen as a significant growth driver, with expectations of double-digit organic growth in the Performance Surfaces business [16][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the impact of tariffs on adjusted EPS, estimating a $0.45 to $0.55 impact, primarily in the first half of fiscal 2026 [40][54] - The company remains confident in its ability to manage through current uncertainties and is focused on long-term growth opportunities [45][46] - Despite challenges, management believes the company is well-positioned to mitigate tariff impacts and improve productivity [42][45] Other Important Information - The company generated $30 million in cash from operations in Q4, with a total of $125 million for the year, while investing $36 million in CapEx [38] - The balance sheet remains strong with a consolidated leverage ratio of 1.3 and no near-term debt maturities [39] - The company plans to share an updated strategy later in the fiscal year to drive a stronger focus on growth [48] Q&A Session Summary Question: Impact of tariffs on EPS - Management discussed the direct and indirect impacts of tariffs, with a significant portion of the EPS impact expected in the first half of the year, and plans to mitigate these effects [51][54] Question: Integration of UW Solutions - The integration of UW Solutions is progressing well, with minimal expected tariff impact, and the business is on track for double-digit growth [59][60] Question: Customer decision-making amid tariff uncertainty - Management noted a general slowdown in customer decisions due to uncertainty around tariffs, affecting the non-residential construction market [65][66] Question: Glass segment margins - Despite volume headwinds, management remains confident that the glass segment can achieve its long-term EBITDA margin targets [68] Question: Expectations for cash flow in fiscal 2026 - Operating cash flow is expected to decline due to arbitration award payments and higher interest expenses, impacting overall cash flow for the year [69][70] Question: Competitive dynamics in the architectural market - Management observed a consistent softness in the market, with competitors focusing on improving operations and margins amid current challenges [74][75]

Core Viewpoint - Apogee Enterprises reported quarterly earnings of $0.89 per share, missing the Zacks Consensus Estimate of $0.90 per share, and down from $1.14 per share a year ago, indicating a -1.11% earnings surprise [1] Financial Performance - The company posted revenues of $345.69 million for the quarter ended February 2025, surpassing the Zacks Consensus Estimate by 2.82%, but down from $361.84 million year-over-year [2] - Over the last four quarters, Apogee has surpassed consensus EPS estimates three times [2] Stock Performance - Apogee Enterprises shares have declined approximately 35.7% since the beginning of the year, compared to a decline of -8.6% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $1.19 on revenues of $336.82 million, and for the current fiscal year, it is $4.43 on revenues of $1.36 billion [7] Industry Outlook - The Glass Products industry, to which Apogee belongs, is currently ranked in the bottom 13% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of Apogee's stock may be influenced by the overall outlook for the industry [8]

Financial Performance - Fourth-quarter net sales decreased 4.5% to $345.7 million, impacted by an extra week of operations in the prior year which negatively affected sales by 7.9%[9] - Full-year net sales totaled $1.36 billion, with a decline of 3.9% compared to the previous year, also affected by an extra week of operations[9] - Fourth-quarter diluted EPS was $0.11, down 84.5% from $0.71 in the prior year, while adjusted diluted EPS decreased to $0.89 from $1.14[9] - Full-year adjusted diluted EPS grew 4% to a record $4.97, compared to $4.79 in the previous year[3] - Operating income for the fourth quarter was $6.1 million, with an operating margin of 1.8%, down from 6.0% in the prior year[9] - Adjusted operating income for the fourth quarter was $28.7 million, with an adjusted operating margin of 8.3%, a decrease of 120 basis points from the previous year[9] - The company reported a net earnings decline of 84.2% for the three months ended March 1, 2025, totaling $2.5 million[30] - Net earnings for the three months ended March 1, 2025, were $2,485,000, a decrease from $15,736,000 for the same period last year[41] - Net earnings for the twelve months ended March 1, 2025, were $85,052,000, a decrease from $99,613,000 in the prior year, representing a decline of about 14.7%[53] Segment Performance - The Architectural Metals segment saw a 19.4% decline in net sales to $112.1 million, while the Performance Surfaces segment experienced a 76.7% increase to $47.9 million[10][13] - Architectural Metals segment net sales fell by 19.4% to $112.148 million, while Architectural Services increased by 10.9% to $117.895 million[32] - The Architectural Glass segment experienced a decline in net sales by 21.9% to $75.157 million for the three months ended March 1, 2025[32] - The Performance Surfaces segment saw a significant increase in net sales by 76.7% to $47.899 million for the three months ended March 1, 2025[32] Cash Flow and Shareholder Returns - Net cash provided by operating activities in the fourth quarter was $30.0 million, down from $74.9 million in the prior year[15] - The company returned $67.1 million to shareholders through share repurchases and dividends, up from $33.0 million in the prior year[16] - The company reported a net cash provided by operating activities of $125.162 million for the twelve months ended March 1, 2025, down from $204.154 million[39] - Cash dividends per common share increased by 4.0% to $0.26 for the three months ended March 1, 2025[30] Debt and Leverage - Long-term debt increased to $285.0 million, resulting in a Consolidated Leverage Ratio of 1.3x at the end of the quarter[18] - Long-term debt increased significantly to $285 million from $62 million, indicating a rise of 359.7%[37] Future Outlook - The Company expects net sales for fiscal 2026 to be in the range of $1.37 billion to $1.43 billion, with diluted EPS projected between $2.54 and $3.19[21] - Adjusted diluted EPS is expected to range from $3.55 to $4.10, including an unfavorable impact from tariffs of $0.45 to $0.55[21] - Future outlook includes continued focus on integration of the UW Solutions acquisition and potential market expansion strategies[42] Project Fortify - The initial phase of Project Fortify incurred pre-tax charges of $16.7 million, with estimated annualized cost savings of approximately $14 million[19] - The second phase of Project Fortify is expected to incur pre-tax charges of $24 million to $26 million, delivering estimated annualized pre-tax cost savings of $13 million to $15 million[19] - Restructuring charges related to Project Fortify totaled $4,323,000 for the twelve months ended March 1, 2025, down from $12,403,000 in the previous year, reflecting a decrease of approximately 65.2%[59] Acquisition Impact - The acquisition of UW Solutions contributed $23.2 million, or 6.4%, to fourth-quarter net sales and $32.0 million, or 2.3%, to full-year net sales[9] - The UW Solutions business, acquired in November 2024, is expected to contribute approximately $100 million in net sales with an adjusted EBITDA margin of around 20%[21] - Total acquisition-related costs for the three months ended March 1, 2025, amounted to $4,429,000, with integration costs contributing $1,114,000[41] - The total acquisition-related costs amounted to $10,302,000 for the twelve months ended March 1, 2025, compared to no costs reported in the previous year[59] Earnings Adjustments - Adjusted net earnings for the twelve months ended March 1, 2025, were $108,872,000, compared to $105,439,000 for the previous year, reflecting a 2.3% increase[41] - Adjusted operating income for the same period was $149,762,000, compared to $146,236,000 in the prior year, indicating a slight increase of about 1.7%[49] - Adjusted Return on Invested Capital (ROIC) for the twelve months ended March 1, 2025, was 14.9%, down from 16.8% in the previous year[59] - The EBITDA margin for the twelve months ended March 1, 2025, was 12.0%, compared to 12.5% for the previous year, indicating a slight contraction[53] - The operating margin for the twelve months ended March 1, 2025, was 8.7%, compared to 9.4% in the previous year, indicating a decrease of about 7.4%[49] Impairment and Restructuring - The company incurred impairment expenses of $7,634,000 related to intangible assets in the Architectural Metals Segment for the twelve months ended March 1, 2025[50] - Impairment expense for the three months ended March 1, 2025, was $7,634,000, reflecting ongoing challenges in the Architectural Metals Segment[41] - Restructuring charges for the three months ended March 1, 2025, were $1,110,000, compared to $12,403,000 for the same period last year[41] Share Count - The company reported a weighted average diluted shares outstanding of 21,793,000 for the three months ended March 1, 2025[41]