Apogee(US:APOG)2022-06-23 15:15Financial Data and Key Metrics Changes - Revenue grew 9% to $357 million, with operating margins improving significantly to 9.3% and earnings more than doubling to $1 per share [8][17] - Operating income more than doubled compared to the prior year, with gross margins improving 320 basis points to 24% [17][18] - Diluted share count decreased to 22.7 million from 25.8 million a year ago due to recent share repurchases [18] Business Line Data and Key Metrics Changes - Framing Systems revenue grew 19%, with operating income reaching $23.7 million and an operating margin of 14.5%, both records for the segment [18][19] - Architectural Services revenue increased 14% to $103 million, but operating margin decreased to 2.8% due to performance write-downs on projects [21] - Architectural Glass revenue declined 8%, primarily due to lower volumes, but operating margin improved to 6.8%, up from 2.6% last year [22][23] - Large-Scale Optical revenue grew 4%, with margins increasing to 25.8% driven by productivity improvements [23] Market Data and Key Metrics Changes - The backlog for Services increased to $681 million, up from $665 million last quarter, indicating solid order and bidding activity [22] - The overall non-residential construction market shows positive indicators, with the Architectural Billing Index and new construction starts remaining favorable [14][15] Company Strategy and Development Direction - The company aims to become the economic leader in target markets, focusing on improving performance in Framing Systems and Architectural Glass [10][11] - Investments are being made to strengthen M&A capabilities and integrate the Sotawall business into the Services segment [13] - The company is closely monitoring inflation, rising interest rates, and overall economic conditions to manage costs and pricing effectively [14][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing challenges from inflation and supply chain disruptions but remains optimistic about non-residential construction demand [14][15] - The company expects full-year revenue growth primarily driven by Framing Systems and meaningful year-over-year margin expansion [16][27] - Increased guidance for full-year earnings per share by about 20% at the midpoint of the range reflects confidence in the business outlook [16][27] Other Important Information - The company repurchased 1.6 million shares for $74 million during the quarter, increasing debt but maintaining a healthy financial position [25][26] - Full-year capital expenditures are expected to be between $35 million and $40 million, with a focus on high-return projects [24][26] Q&A Session Summary Question: Inquiry about Framing margins and inventory benefits - Management confirmed a $4 million benefit from inventory timing, indicating that margins would have been around 12% without this [30][31] Question: Pricing versus inflation outlook - Management stated that they have managed to stay ahead of raw material costs through pricing actions and cost management, expecting continued volatility [32] Question: Integration timeline for Sotawall and margin recovery - Management indicated that while integration is underway, it may take longer to achieve target service margins due to ongoing project performance issues [34][35] Question: Geographic performance and demand shifts - Management noted no specific geographic area outperformed others, but there is a general increase in demand for institutional projects [37][38] Question: Impact of rising interest rates on end markets - Management suggested that while commercial markets may be impacted, institutional markets could benefit from government infrastructure spending [40][41] Question: Aluminum price volatility and its future impact - Management acknowledged significant volatility in aluminum prices and expects the benefits seen in Q1 may not continue, but they are prepared to manage costs [44][45] Question: Overall market trends and retrofit projects - Management confirmed some demand for retrofits but emphasized that new construction remains a net positive for the business [46][47] Question: Early integration results of Sotawall - Management reported positive early signs from the integration of Sotawall into services, leveraging existing talent and processes [63][64]