Apogee(US:APOG)2025-04-24 19:06Financial 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]