Apogee(US:APOG)2025-06-27 14:00Financial Data and Key Metrics Changes - Net sales increased by 4.6% to $346.6 million, primarily driven by $22 million of inorganic sales from the acquisition of UW Solutions [10][11] - Adjusted EBITDA margin decreased to 9.9%, primarily due to a less favorable mix and higher aluminum costs [11] - Adjusted diluted EPS declined to $0.56, driven by lower adjusted EBITDA, higher interest expense, and a higher adjusted effective tax rate [11][12] Business Line Data and Key Metrics Changes - Metals segment net sales declined by 3.4%, with adjusted EBITDA margin decreasing to 7.3% due to a less favorable mix and higher aluminum costs [11][12] - Services segment achieved a 7.6% increase in net sales, marking its fifth consecutive quarter of growth, although adjusted EBITDA margin decreased to 5.7% due to higher tariff expenses [12] - Glass segment net sales declined, with adjusted EBITDA margin moderating due to reduced volume from lower end market demand [12] - Performance Surfaces segment saw net sales increase, driven by inorganic sales from UW Solutions, but adjusted EBITDA margin declined to 18.8% due to lower margins from UW Solutions [12] Market Data and Key Metrics Changes - The revenue pipeline for Glass is improving, positioning the segment for growth beginning in Q3 and Q4 [7][10] - Metals showed sequential improvement from Q4, with expectations for continued improvement in Q2 [6][11] Company Strategy and Development Direction - The company is focusing on operational improvements and cost mitigation strategies, particularly through Project Fortify Phase two, which is expected to drive annualized savings of $13 million to $15 million [6][10] - The company is actively pursuing M&A opportunities to diversify its business mix and enhance growth prospects [8][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in building momentum for the second half of the fiscal year, driven by improvements in metals, growth in glass revenues, and strong organic growth in Performance Surfaces [17] - The company raised its fiscal year outlook for net sales and adjusted diluted EPS, expecting net sales in the range of $1.4 billion to $1.44 billion and adjusted diluted EPS between $3.8 and $4.2 [14][17] Other Important Information - The company is experiencing challenges due to increased tariffs but is implementing successful mitigation plans [6][10] - The balance sheet remains strong, with a consolidated leverage ratio of 1.6 and no near-term debt maturities [13] Q&A Session Summary Question: Can you elaborate on the glass business and the revenue pipeline? - Management noted good visibility six months out and mentioned a pivot to smaller jobs to fill gaps due to market softness, with improved quote activity and award rates [22][24] Question: What is the outlook for segment margin targets? - Management indicated that metals and services face headwinds due to tariffs, and while they hope to reach the bottom of their target ranges, it may be challenging in the first half [28][30] Question: What is driving the sequential improvement in the metals segment? - Management highlighted operational improvements and regaining customer confidence as key factors driving sales and margin improvements [40][42] Question: What is the status of Project Fortify Phase two? - Minimal savings were seen in Q1, with more expected to materialize in Q2, particularly following the closure of a Canadian facility [45][47] Question: Can you quantify the EPS impact from tariffs in Q1? - The impact was initially estimated at $0.45 to $0.55, but was updated to $0.35 to $0.45 for the full year, with a favorable trend noted in Q1 [48][50] Question: How is the M&A pipeline being affected by the current environment? - Management stated that while M&A activity has slowed due to macro issues, they continue to focus on strategic targets identified over the past two years [63][65]