Financial Data and Key Metrics Changes - Net sales increased by 2.1% to $348.6 million, driven by $18.4 million in inorganic sales from the acquisition of UW Solutions and favorable product mix, partially offset by lower volume, primarily in metals [10] - Adjusted EBITDA margin decreased slightly to 13.2%, primarily due to lower volume and price, as well as higher aluminum and health insurance costs [10] - Adjusted diluted EPS was $1.02, down year-over-year, primarily due to higher amortization and interest expense from the UW Solutions acquisition [11] Business Line Data and Key Metrics Changes - Metals segment net sales declined due to lower volume, but adjusted EBITDA margin improved to 13.5% driven by increased productivity and cost savings from Fortify Phase 2 [11] - Services segment achieved its seventh consecutive quarter of year-over-year net sales growth, with adjusted EBITDA margin increasing to 9.7% due to lower incentive compensation expense [11] - Glass segment net sales increased slightly to approximately $71 million, driven by increased volume and favorable mix, but adjusted EBITDA margin moderated due to lower price and higher material costs [12] Market Data and Key Metrics Changes - Average aluminum prices rose approximately 13% compared to the second quarter and over 50% compared to the third quarter of last year, impacting volume and margin compression in the Metals segment [15] - Backlog for services ended the quarter at $775 million, down slightly from Q2 but up over 4% compared to Q3 of last year [11] Company Strategy and Development Direction - The company remains focused on becoming the economic leader in target markets, managing its portfolio, and pursuing accretive M&A opportunities, with no change in strategic direction [19] - The UW Solutions acquisition is expected to contribute to market and geographical expansion, with fiscal 2026 expectations of $100 million in net sales and approximately 20% adjusted EBITDA margin [7] - The company aims to strengthen its core by driving more efficient operations and enabling sustained profitable growth [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenging macroeconomic factors but believes the company is well-positioned due to operational excellence and a strong balance sheet [8] - The company anticipates continued pressure on pricing and volume in both Metals and Glass segments, with expectations of cost headwinds from normalization of incentive compensation and higher health insurance costs [15] - Management is taking proactive measures, including expanding Project Fortify Phase 2, to manage near-term headwinds and position for growth opportunities [16] Other Important Information - The company reported net cash provided by operating activities of $29.3 million for Q3, down from $31 million in the prior year [12] - The balance sheet remains strong with a consolidated leverage ratio of 1.4x and significant capital available for future deployment [13] Q&A Session Summary Question: What is the board looking for in new leadership? - The company is looking for someone with deep growth and operational excellence experience, particularly in M&A integration [20] Question: Is the updated outlook primarily impacted by aluminum inflation? - Yes, both Metals and Glass segments are experiencing pressure from rising aluminum prices, impacting margins [27] Question: What is the focus on M&A activity going forward? - The company has a robust M&A pipeline and is actively pursuing opportunities, with the UW Solutions acquisition being a successful example [36] Question: How is the company managing pricing discipline in a competitive market? - The company is focused on maximizing EBITDA dollar contribution while protecting premium margins, despite challenges in volume and price [44] Question: What are the near-term priorities for growth? - The company is focused on delivering results, expanding Project Fortify Phase 2, and leveraging the Apogee Management System for cost structure improvements [64][66]

Apogee Enterprises (NasdaqGS:APOG) Q3 2026 Earnings Call January 07, 2026 09:00 AM ET Company ParticipantsJeremy Steffan - VP of Investor Relations and Corporate CommunicationsMark Augdahl - Interim CFODon Nolan - CEOConference Call ParticipantsGowshihan Sriharan - Senior Research AnalystJulio Romero - Equity Research AnalystBrent Thielman - Managing Director and Senior Research AnalystJon Braatz - Senior Equity AnalystOperatorGood day, and thank you for standing by. Welcome to Apogee Enterprises' third qua ...

Financial Data and Key Metrics Changes - Net sales increased by 2.1% to $348.6 million, driven by $18.4 million in inorganic sales from the acquisition of UW Solutions and favorable product mix, partially offset by lower volume primarily in metals [10] - Adjusted EBITDA margin decreased slightly to 13.2%, impacted by lower volume and price, as well as higher aluminum and health insurance costs [10] - Adjusted diluted EPS was $1.02, down year-over-year due to higher amortization and interest expense from the UW Solutions acquisition [11] Business Line Data and Key Metrics Changes - Metals segment net sales declined due to lower volume, but adjusted EBITDA margin improved to 13.5% driven by increased productivity and cost savings from Fortify Phase Two [11] - Services segment achieved its seventh consecutive quarter of year-over-year net sales growth, with adjusted EBITDA margin increasing to 9.7% due to lower incentive compensation expense [11] - Glass segment net sales increased slightly to approximately $71 million, driven by increased volume and favorable mix, though adjusted EBITDA margin moderated due to lower price and higher material costs [12] Market Data and Key Metrics Changes - Average aluminum prices rose approximately 13% from Q2 to Q3 and are up over 50% compared to the same quarter last year, impacting volume and margin [14] - Backlog for services ended the quarter at $775 million, down slightly from Q2 but up over 4% compared to Q3 of last year [11] Company Strategy and Development Direction - The company aims to become the economic leader in target markets with differentiated offerings and competitive cost structures, while also managing its portfolio through creative M&A opportunities [8] - The acquisition of UW Solutions is expected to contribute to market and geographical expansion, with fiscal 2026 expectations of $100 million in net sales and approximately 20% adjusted EBITDA margin [6] - The company is focused on operational excellence through the Apogee Management System (AMS) to drive productivity improvements and cost savings [7] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenging macroeconomic factors but believes the company is well-positioned due to operational excellence, cost-out execution, and a strong balance sheet [7] - The outlook for fiscal 2026 has been updated to expect net sales of approximately $1.39 billion and adjusted diluted EPS in the range of $3.40-$3.50, factoring in tariff impacts and cost headwinds [13] - Management anticipates continued margin pressure in the Metals and Glass segments due to competitive market dynamics and rising aluminum prices [14] Other Important Information - The company is expanding the scope of Project Fortify Phase Two to include further restructuring actions, primarily in Metals and corporate, to manage near-term headwinds [15] - The balance sheet remains strong with a consolidated leverage ratio of 1.4 times and no near-term debt maturities [13] Q&A Session Summary Question: What is the board looking for in new leadership? - The company is seeking someone with deep growth and operational excellence experience, particularly in M&A integration, with no change in strategic direction [18][19] Question: How is the updated outlook impacted by aluminum prices? - The primary issue is the continued increase in aluminum prices, which has led to margin pressures in both Metals and Glass segments [20][25] Question: What is the company's stance on M&A activity? - The M&A pipeline is robust, with successful integration of UW Solutions and ongoing efforts to identify new opportunities for growth [32][34] Question: How does the company view pricing discipline in the current market? - The company is focused on maximizing EBITDA dollar contribution while managing costs and maintaining pricing discipline in a competitive environment [40][41] Question: What are the near-term priorities for the company? - Key priorities include delivering results for the current year, expanding Project Fortify, and leveraging AMS for cost structure improvements [59][60]

Core Insights - Apogee Enterprises, Inc. (APOG) is experiencing growth in its Architectural Services segment, driven by improved pricing and product mix, which is expected to enhance margins in the upcoming quarters [1][3][5] - The company is facing challenges such as inflation, supply-chain disruptions, and elevated interest rates, which could impact revenues [2][15] Segment Performance - The Architectural Services segment has shown year-over-year growth and margin expansion in fiscal 2025, continuing into fiscal 2026, aided by a strategic shift towards premium products [3][11] - Although net sales in the Architectural Glass segment declined in the past two quarters, an improved sales mix and productivity gains are anticipated to positively influence future performance [4][11] Financial Guidance - Apogee raised its fiscal 2026 net revenue guidance to $1.40-$1.44 billion from $1.37-$1.43 billion, and adjusted EPS guidance to $3.80-$4.20 from $3.55-$4.10 [5][11] - The acquisition of UW Interco, LLC for $242 million is expected to contribute approximately $100 million in sales for fiscal 2026, with an adjusted EBITDA margin of around 20% [9][10][11] Strategic Initiatives - The company is implementing Project Fortify to phase out lower-margin products and services, which includes shutting down its Toronto manufacturing site, potentially impacting revenues [12][14] - Apogee's strategic review has led to a focus on profitable growth, with goals including an ROIC greater than 12% and an operating margin exceeding 10% [6][7] Operational Improvements - The company is pursuing operational and commercial improvements, including cost reductions and enhanced supply chain efficiencies, to mitigate inflationary pressures [8][15] - Restructuring costs related to Project Fortify have been significant, with $1.1 million in employee termination costs and $6.2 million in asset impairment charges incurred in fiscal 2024 [13][15] Market Performance - Apogee's stock has declined by 34.9% over the past year, compared to a 14% decline in the industry [16]