Apogee(US:APOG)2024-10-04 15:59Financial Data and Key Metrics Changes - Revenue declined 3% year-over-year, but improved sequentially from an 8% decline in the first quarter [14][20] - Adjusted operating margin improved by 110 basis points to 12.6%, driven by improved pricing and mix, favorable material costs, and lower insurance-related costs [15][20] - Adjusted diluted EPS grew 6% to $1.44, matching the record adjusted EPS reported in the first quarter [15][20] Business Line Data and Key Metrics Changes - Framing net sales declined 11%, primarily due to lower volume from the strategic shift away from lower-margin product lines [16] - Glass net sales declined 4%, driven by lower volume from softening end market demand, but operating margin improved by 490 basis points to a record 23.4% due to strong pricing and mix [16][17] - Services net sales grew 11%, with adjusted operating margin improving 250 basis points to 6.5%, marking the sixth consecutive quarter of sequential margin expansion [17] - LSO sales declined 16%, primarily due to lower volume in the retail channel, with operating margin declining 60 basis points to 19.1% [18] Market Data and Key Metrics Changes - Services backlog ended the quarter at $792 million, down from $867 million last quarter, but up 17% compared to a year ago [17] - The company expects net sales to decline 4% to 7% for the full fiscal year, including declines in Framing, Glass, and LSO, partially offset by growth in Services [20] Company Strategy and Development Direction - The acquisition of UW Solutions is seen as a strategic fit, expanding and diversifying growth opportunities while complementing the existing portfolio [8][10] - The company aims to leverage core capabilities to drive value through integration, expecting to achieve $5 million in annual run rate synergies by the end of fiscal '27 [24] - The focus remains on adding differentiated products into the portfolio, with ongoing M&A efforts to enhance capabilities within the LSO segment [34] Management's Comments on Operating Environment and Future Outlook - Management noted continued softness in some end markets, particularly non-residential construction, but emphasized strong adjusted operating margin expansion and cash flow [5][27] - The outlook for the second half of the fiscal year anticipates a moderation in Glass margins, moving into the upper half of the 10% to 15% target range [21] - The company expects to maintain a strong financial position with low debt and no near-term maturities, supporting growth strategies [19][26] Other Important Information - Cash from operations was strong at $59 million, up 42% compared to the previous year's second quarter [18] - The company refinanced its credit facility, expanding borrowing capacity to support growth strategies [19] Q&A Session Summary Question: Inquiry about cross-selling opportunities with UW Solutions - Management indicated that there is not significant customer overlap, presenting opportunities for complementary offerings, particularly in HD Printable Materials [29][30] Question: Historical growth rate of UW Solutions - Management noted that the Industrial Flooring segment has seen strong growth, approaching double digits, while other segments have lower growth rates [40] Question: Differentiation of UW's flooring products - The flooring business differentiates itself through proprietary coatings applied to engineered wood, enhancing durability and compatibility with robotics [45] Question: Project Fortify restructuring updates - Management stated that approximately $14.7 million in charges have been incurred, with a range of $15 million to $16 million expected, and savings are projected to be at the high end of the previously stated range [50][51]