Apogee(US:APOG)2021-04-08 18:17Financial Data and Key Metrics Changes - Total revenue decreased by 8% compared to the previous year's fourth quarter, primarily due to softness in non-residential construction markets and project delays [14][15] - Adjusted operating margin improved to 7.1%, a 190 basis point increase from last year's fourth quarter, driven by cost savings initiatives [16] - Adjusted EBITDA rose to $36.2 million from $29.9 million in the previous year's fourth quarter, reflecting improved execution and cost actions [16] - GAAP loss was $1.65 per share, while adjusted EPS grew by 26% to $0.63 per diluted share [17] Business Line Data and Key Metrics Changes - Architectural Framing Systems experienced a 14% revenue decline in the quarter and a 17% decline for the full year, with an adjusted operating margin of 2.7% [17][18] - Architectural Glass revenue was $82 million, down from $98 million in the previous year's fourth quarter, with an adjusted operating margin of 4.4% [18] - Architectural Services revenue increased by 12% to $82 million, with operating income growing by 26% to $10.7 million and a margin improvement to 13.1% [18][19] - Large-Scale Optical revenue remained flat at $22 million, with operating margins of 28.1% [19] Market Data and Key Metrics Changes - The non-residential construction market is entering a downcycle, with uncertainty regarding the duration and nature of the rebound [9][25] - Architectural Services is positioned for growth, executing on projects from its substantial backlog [25] - The company anticipates continued pressure on operating margins in the Architectural Glass segment due to lower demand and higher fixed costs [25] Company Strategy and Development Direction - The company aims to drive near-term cost and operational improvements while positioning for long-term sustainable growth [10][12] - Focus will be on talent management, operational execution, and transforming the enterprise to enhance competitiveness [11][12] - A new enterprise strategy will be developed to identify high-potential markets and improve returns on investment [12][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by the pandemic and the current downturn in non-residential construction, but sees it as an opportunity for transformation [9][44] - There are positive signs in leading indicators, suggesting potential recovery in fiscal '23, but near-term pressures remain [42][43] - The company plans to invest in its enterprise strategy and core processes to better position itself for future growth [25][29] Other Important Information - The company achieved record free cash flow of $116 million, more than double the previous year's level, and paid down $53 million of debt [22][23] - A 7% increase in dividends was announced, with $52.5 million returned to shareholders through dividends and share repurchases [24] Q&A Session Summary Question: How do different areas of Apogee align with the non-residential cycle? - Management indicated that the Services business is strong, while Glass and short lead time Framing are softer, suggesting Services may lag in recovery [31][32] Question: Will shorter lead time Framing recover quickly? - There is expected to be a lag in recovery for shorter lead time projects, with continued pressure across all businesses [34] Question: What is the impact of raw material inflation? - Management acknowledged raw material inflation as a challenge but emphasized strong procurement efforts to offset these pressures [40][58] Question: What is the outlook for the Services business? - The Services business is expected to face some revenue pressure in fiscal '23 and '24, but management is confident in their ability to book new orders [82][84] Question: Are there supply chain issues affecting the business? - Limited disruptions have been observed, with a focus on North America for supply chains, minimizing significant challenges [78] Question: What is the status of the EFCO business? - EFCO is part of the Architectural Framing Systems segment and is making progress as part of an integrated strategy [76] Question: What are the expectations for the high velocity glass plant? - The plant is facing challenges in reaching breakeven volumes, and management is assessing its future as part of the strategic planning process [88]