APOG - Earnings call transcript Q3 2022 | Apogee Enterprises, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Apogee Enterprise Fiscal 2022 Third Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to your speaker for today, Jeff Huebschen, you may begin.

Jeff Huebschen

Thank you, Towanda. Good morning, and welcome to Apogee Enterprises Fiscal 2022 Third Quarter Earnings Call. Ty Financial Chief Officer. are Nisheet Officer; today Chief Gupta, me Silberhorn, Executive Apogee's and With I'd are today's slides to to like remind accompany remarks. everyone that there section These Apogee's Investor in are Relations available website. the of

And these our differ provided available results our we which will reflect I'll that is -- could this remind will the non-GAAP about More based Definitions our in affect call with on reconciliation During this the website. earnings management's release forward-looking turn filings. that to be statements. measures measures release can everyone expectations information. reference a are call, to that, and currently GAAP morning, Actual on I'd factors I'll the press contain you, financial financial results Ty. may like in today's materially. call also certain call Apogee's over found measures. and available of in business nearest issued to we and information SEC These

Ty Silberhorn

Thanks, highlights from for Jeff, some update quarter provide and our strategy. I'll third on joining morning. an Today, new and us we're the share executing this thanks, how everyone,

be questions. year provide my and to full Following on course, outlook. ready your we'll the Then, will details take our of quarter comments, more Nisheet

a start delivered slide solid Page quarter performance deck. Let's with quarter. team's highlights, our which third this on X I'm our of the which are efforts, proud of

to earnings now last growth quarter. the margin a Architectural was third past We continued revenue with XX% the in improved quarters. the operating to record our million of earnings strong deliver continued in profitability delivering performance positive each reached X compared momentum, by adjusted Services Margins strong and led sequentially quarter and expansion and continued quarter. margin in adjusted $XX have Services. This

the new during awards years. project build to our several quarter, pipeline we addition, the continuing coming won for In project

adjusted to compared Framing growth. to with supply costs. its We segments. other by headwinds. offset Systems, Through chain year-over gains reached growth Large-Scale are are margins these continued Framing's year-over-year progress encouraging seeing we've in solid X% Optical those some response we and XX expansion. as In beginning have also recovery achieved to quarters, points improved margin in inflation our basis We've of The to we last pricing face taken continue inflation year. actions significant and even X higher

benefits realizing our are We from plant relaunch restructuring drive the to and also of actions our productivity. Lean

We during X%. operating expect had Framing quarter. adjusted the of will Architectural progress margin margin make Glass further fourth

believe Glass Now month but final this quarter. and is we the still gains materialize deliver, compared the segment the of to it solid what was can meaningful we a the from progress in quarter, long way saw productivity second

to flow and Turning the cash sheet. balance

our impact a continue still very Year-to-date, now to these remains flow to improved $XX markets cash net of financial operating what and We of companies, have our is income. adjusted achieved With strong. free which healthy flow, free position million like financial the significant shareholders inflation we had strong position. million Our of We we cash quarter. and many challenging cash more environment. broader flow, in COVID we capital $XX is results generated challenge. already remains XXX% a return this to in continues than

for increases We have other operations. seen materials and meaningful glass, used our cost in freight, aluminum, paint

These service some actions challenges beginning experience Throughout have to inflation cases, to impacted disruptions chain continue are these issues. to and customers. our taken actions also the year, supply in in positive to impact our on mitigate a we supply our results. We have chain have these and

And our our we're controllable benefits pull our as restructuring as pricing appropriate. focus We're to execution. continue costs. from quickly where actions forward on possible. improving adjusted We to managing working closely We've the

us the our narrow previous gives further incremental make guidance our the to end year earnings full expect We confidence in to of quarter. to This range. progress fourth higher the

to I'd who Just attended Investor and our virtually. either thank everyone Day, in hosted ago, X we weeks like person or

During to growth profitable that invested improved outlined on return new Investor deliver capital. our and enterprise we strategy Day,

Slide strategy has highlighted our X of today's As pillars. X deck, in

the First, in differentiated with we are our target in and to working strategies, cost to economic to markets offerings top go-to-market margin enable generator us become our clear leader target competitive a structures markets. be

actively to will portfolio ROIC manage and our performance. we drive margin higher Second,

investing differentiated scalability this third, we and to by model an and expanding that drive building deliver sustained scaling enable offerings growth. The addressing strengthen to will foundation top-performing and of will core greater accomplish new actively our businesses, is and which We operating will profitable platforms. underperformers And more add capabilities efficiencies, growth.

of third the these each pillars. made X we during quarter, in progress Now

We are to the the and of actions to combined are improved cost approach announced X will also and reduce bringing that leverages realignment continue restructuring higher more in and what of our in the clarity August. execution, costs, to more changes business margins. business units which better a moving we is nearly systems had framing complete, scale go-to-market organization. These execute decentralized enabling The turn capabilities integrated from generate been

making in end Glass. of Architectural We At sale progress the of our facility Statesboro, the completed in we Georgia. also the are quarter,

successfully strategy maintaining actions our this differentiate we delivery deliver flagship for our and levels at did We on while offerings production and We pursue our for customers. facility for us also high All of wrapped where position Minnesota. customers. to focusing service Glass, of location. can value Glass been premium to up more transitioned Dallas in our of all operations has These

productivity our cost business the Services We Systems structure to Framing We're driving are from Sotawall improve segment. track on to margins. transition to also in accelerating improvements segment's Glass and

our improved early fiscal We're will for this and our next year, and transformation move efforts. forward will We be offerings this curtain moving expect projects unify operational complex Sotawall. wall for will completed performance enterprise with enable

businesses areas, several us to across have we provide underway and and strengthen support core This functional So allowing the will projects several back-office processes efficiently. digital new to capabilities systems. more

we these and further in now of make coming progress to We expect systems new the quarters. deploy to are beginning elements

coming Finally, head with reinvigorate those Architectural to are improvement a continuous expand will and In where steps efforts new goal with an promising our to on our to embedding into leader took we develop we initial our Lean parts business, Glass, focus our further Lean how quarters, the ultimate we toolkit the Lean of results. seeing program. important added work and Lean early We other of the of we talent. culture

Apogee, executing financial And our quarters, toward to path driving for strategic are peak for our confident create early we in stages and all it see still Apogee can will I'm positioning stakeholders, quarter ourselves. excited more we several the on of and value continue strategy. we the to over we've I We next new let the to ahead Nisheet goals. for that our that, am the our achieve outlook. long-term over details provide pivot, turn the With me goals about set

Nisheet Gupta

Thank a the everyone. This our momentum and you, fronts. in Apogee We Ty, good business. for positive sustained morning, quarter was on several

strong We progress enterprise flow cash on made further our and continue transformation. we to generate

also by Page Let me presentation. with posted grew provide revenue Starting and Framing Large-Scale some Optical of was on more Systems. This Services details X%. Total on in solid growth. X Architectural growth led the consolidated earnings our quarter. results

remainder million reflecting in over to order that incurred the the reported noncash are expected, in in of in costs expenses cost have restructuring the we Glass, by million million charges. Architectural announced volume restructuring August. in cash margin volumes related of have Of year. been basis this, $X These reduced were segment past of gross As XXX Year-to-date, pretax lower actions fourth million points. the restructuring the and quarter included approximately The lower we anticipate $XX.X costs. The $X were We costs. $X.X our quarter. another the quarter million $X.X to

remain teams complete the are how on the restructuring our tracking our with restructuring. our have pleased quarter some below fiscal the estimates, savings. costs accelerating and track are to be cost of XXXX. in of we executed with first We initial are Restructuring We

was costs, the last $XX.X quarter. operating This million the was from in Excluding $XX.X third year's adjusted down restructuring million. income

significant million market impact of $XX last The Glass to third another gross income the last quarter. As was $X in of continued to year's million a actions took Inflation tax the a has segment. actions quarter upside the related in $XX through cost able Fiscal year's the net million. COVID the in of quarter. in quarter been a inflation also pricing offset impact operating were this for Also, million credit we million. headwind $XX to in of to $X.X inflation added reminder, impact be a year-to-date, response third million. temporary of a included inflation new We $X net third

fiscal in the fourth quarter pressures into inflation persist expect year. our We will next and

headwinds. over inflation reversal faced this over year-over-year offset cost actions our procurement inflation, expect this as headwinds in tax However, of we offset cost portion $XX market forward, we and $XX the sales we to a of of will larger of million improved of pricing move mix. million cost credit, savings able We new temporary actions actions restructuring of through our and and Between quarter. benefits were

and into am gains. I to will year, we move As quarter the next continue we drive fourth margin confident incremental

technology the in statement. $X value me to write-off company. expense pretax minority nonoperating entire was impairment $X The quarter related glass million, on to the income Let investment interest charge. a debt this a investment by Net included down This Apogee's balances. items shift This represents was driven the million of lower in company.

Our XX.X% last tax in compared to rate third year's was XX.X% quarter.

Over approximately rate but average vary this XX.X%, the can expect of term, we long quarter-to-quarter. tax an from

of share. all share due together, lower it repurchases. our count Putting trend continues to per income GAAP Finally, $X.XX we reported to net stock

and $X.XX restructuring diluted the impairment in per earnings came share. Excluding costs, adjusted at

nice were $X.XX in a with the was share lower year-over-year, quarter. second earnings this improvement While per sequential

pricing X%. X. results, inflation. Starting impact driven compared last grew was offset on Architectural which to The basis point and gains offset This to have to improvement was by cost Systems, which are turn taken revenue of That driven by a margin inflation. year. improved last Let's XX% were XXX from year. pricing Framing the actions actions, to Slide we and primarily benefits Framing segment restructuring Operating with our margin compared is

Moving to down XX%. was Architectural Revenue Glass.

was driven primarily expected, by As volumes. lower this

We the a year, have while last had has a in downturn. projects awards new few construction been in non-residential

included from partially more costs. was also The by strategically favorable million sales. are lower of lower-margin volume away some offset results shifting We restructuring mix. Glass $X.X a

was income operating adjusted X%. costs, restructuring the Excluding

last earlier, mentioned year's second sequentially included X.X% income to the compared new margins Glass related tax operating market of million quarter. credit. in $X.X improved to As quarter

In for as strong new cost at the program. This Services, to segment. well XX%. a We was mix. are to productivity from benefited restructuring savings our execution. Lean improved sales project beginning revenue million. Services Architectural was gains have solid record $XX continue margin from an as also from XX% achieve Operating grew Margins to

favorable less mix. held encouraged by in a margins were Net Services. Architectural and We're past the $XXX to project lower last flow However, order than million. of at flow has year due order X the backlog strong also each increased steadily quarters

million Turning sales Optical, X% third at mix. to last margins onetime to Margins XX.X%. revenue This third were $XX which quarter by mix. expedited Large-Scale lower driven driven quarter. grew costs offset sales last more were solid favorable of primarily the freight, by benefit was Adjusted improved compared year's from year's than from

our Finally, quarter driven $X.X increased increased was to by cost corporate costs. health million. this care This

Turning X. Page to

cash the cash strong. $XX million. from remain flow from million. year-to-date brings $XX Our and sheet was operations to Cash quarter balance flow operations flow This in

year year, generation. which very million. last slowed We year's Based pace of full down enterprise expect Year-to-date, CapEx on lower CapEx $XX from million. is is cash have now strategy level. was approximately our This are for spending, last estimate our cash is million year of year work strong year-to-date below on this of We year. Cash some to record of we than another a as flow we $XX investment completed $XX approximately previous earlier flow.

expect have up completed we will coming we invest ramp advance that work, our strategy. the we in Now quarters CapEx projects our as to in high-return strategy

year. continue return have count share outstanding compared cash reduced We X% buybacks returned and share to to buybacks from our to dividends. have All $XX by million shareholders. we last Year-to-date,

to strong. very $XX remains is sheet Net debt balance Our million. down

we XXXX no have we execute our We begin until have debt revolving to million June on strategy. facility. This no strong as of $XXX new position credit financial and flexibility our provides significant maturities borrowings significant

which of presentation. to Page turning fiscal on for XXXX, Now of the outlook X our our rest is

now Ty As We adjusted we per guidance. between expect year $X.XX full are earnings to year full mentioned, $X.XX our narrowing share.

the impact excludes As this a costs. guidance impairment reminder, restructuring and of

challenges cost expect will We chain quarter. supply inflation continue the in and fourth

expect our and year We working progress closely quarter working Architectural the drive restructuring. in by this to adjusting these are outlook. I us benefits we These by costs also approximately which from further in inflation, efforts mitigate a focus confidence We offset wrap pretax results. pricing million fourth gain quarter, this the to $XX gives to continue the Glass the up headwinds actions full to to of to from exclude In facility sequential our Georgia. acknowledging controllable accelerate on adjusted managing realize intend sale to team's to would in our fourth gain execution, quarter. related of should like Statesboro,

for With progress We a remarks. have are concluding working transformation on backbone platforms. make company. in continued I'll that, hard and And Apogee's Ty turn build some momentum back in made our capabilities is great actions over to and underway, it we announced well restructuring Apogee we teams have of to top-performing creating August. core a to

Ty Silberhorn

very progress encouraged the we Thanks, by are Nisheet To quarter. Gupta. this summarize,

on is financial our delivering doing to show earnings new team executing of another beginning the strategy. significant quarter work momentum, Despite We sustained are some in our entire focused we sequential headwinds, is Our our near-term results. growth.

I'm Lean Our are those The made to plans with by cost higher and actions the we've offset inflation of cost our to progressing benefits. improvement schedule, costs. pleased beginning in early program. allowing accelerate relaunching continuous And to adjustments made impact combined ahead pricing we the response restructuring with those us are progress our of particularly

in questions. now we We confident coming fourth With sustained are strategic quarter are for your to our gains take expect to that, will to further in the profitable position years. I'm growth ready the the execute actions we make Apogee we as taking that pivot. continue

Operator

[Operator Instructions].

first comes CJS Moore with Chris question the Our from of line Securities.

Christopher Moore

Interesting inflation appreciate the discussion, detail. I

to the inflation. some You added actions talked kind offset about by framing the pricing revenue of of flow-through

So is being that pricing time all, first the increased? the quick where the lead is of both and long

Ty Silberhorn

had shorter-term making at look inflationary up kind the those due Framing been both, to Yes. moves to of made in the business that quarter, was close pressures month to through. Part we couple the that of the longer items, time we've of But lead that in that seeing Chris, they as the they're of last we're of those they've of team some able progress started of catching the the items in some each It's pricing and get that, has quarters. challenge some to gaps.

Christopher Moore

it. Got

that on lead do point the mechanics. the the time When Or so a does aluminum So prebuy time? work? you just sign I understand that contract in stuff, long you at how

Nisheet Gupta

Yes, Chris.

and buying So for lead think our if advance Architectural you with Services we business, on about have enough time like those. us aluminum in to hedging commodities be

are the the chain times, back Framing and doing as team locking get in volumes need. know in pricing vendor the to sometimes. to you more soon orders supply we as procurement for the now, place is in months lead shorter is For pricing really and Right Chris, about X is volumes than months, What really challenge going which X locking is like in our the segment, opportunity in limited. the the they're

segment for working So less in towards say segment, long-term contracts. on Services Framing locking pricing pricing, more would in locking I

Christopher Moore

when issue pricing overall, it. of the helpful. kind And still that terms of at forward That's the is in you it Framing that Got catch-up? moving look is biggest

Ty Silberhorn

Framing because far, on they short the and inflation. material headwinds cycle Yes. biggest of by have times, had, the cost

term. kind that's and little the some to do, mix, of They had most right? bit do of they've stuff have So a and they have work a medium-term longer

close we've where trying that's the that price of seen they're you headwinds. as where It's expect, So as the realization, also might gap. the of seen bulk we've the bulk to

for expected still where which given volumes, in top just volumes were look we the bottoming. as is as as we down pricing. see it we was, line, slightly, Nisheet driver the what market, fact, So at on commented If

what number So driving line is actions. that been has of revenue couple framing really quarters top around for the price last the

Christopher Moore

the And back probably that Day it. talked some the about. really Got goes Investor of more one stuff next we towards

about X,XXX just fiscal target? past, view Is And how trough that a trying is Or -- So 'XX. -- plus the by increase XX% that had basis is the operating I'm to understand talked better of kind that to target trough. we -- point in margin mid-cycle you

you this a understand Or that plus maybe Here, that. help better just on is can XX% mid-cycle? bit me little

Ty Silberhorn

say, looked as putting a achieve. minimum that as would that to that, I Yes. Chris, of we want kind at we're we

us XX%. saw we'll that significant that big comfortably -- a down Now like that if there something that is drop when a that we we XX%. a as strong that's X also expect achieving a with downturn want pandemic would started see then to pull in above might our nearly be we in but the be ago. don't position We very in below years better cycle, But margins,

Operator

of Our next Stine the line question Eric comes from with Craig-Hallum.

Eric Stine

last the it just just on to Is So the but impact say, -- worst quantifying year for appreciate you follow-up of the third the like mean a maybe on and seems XQ. it do quarter. in the cost feel side you fair materials potentially question, that I though, happened that I also it

but love the long Now maybe the of how until you this? steps that is I'd think thoughts, given taking, kind of not case, get all you're you your ahead

Nisheet Gupta

Yes.

close had QX, price we indicated quarter end on you enough highest being inflation and about will quarters. an the saw inflation of are in inflation. X, And inflation, already to earnings release, the we the quarter the we by net net offset to we inflation. enough we quarter have move of as X the And increase improvement gross if as our into X So the X of X and we seeing think

Eric Stine

Got it.

I operational And that curious turning mistaken, start you taking be do some there is Framing, highest just your that's think to just had love know this But you the I'm COVID. think before the I there get prices. Maybe thoughts steps on the and not helpful. That's might some think of since if thoughts you're your would Okay. orders you whether to mean, of that. sustainable? on I of

Ty Silberhorn

Yes.

just we're at still on questions as answered do look or so still I actions look as out COVID, we the still line. went as at Chris, at Framing, we market as see improving this volumes Day negative, Volume was 'XX our talked fiscal positive what there's at taken we effect 'XX. is a we That sequentially Investor takes of As lot top know for at out we We But et earlier market point. and we kind about as our will take for and of price ties variant price with cost. but calendar looking puts into cetera. step bottoming in growth with Omicron the on they've a now well as The quarter-to-quarter.

been from costs, they've their So working They obviously, reinvigorating started side. on restructuring activities. have a Lean

So even volume path. both have still we potential of growth, that of absent on those margin think meaningful to the improvement they continue

Eric Stine

Got it.

the So trend few good. maybe about was for the me. quite a was bit ago, been AIA was commentary it last that the has an ABI, given though, in the potentially, talking bottomed. is was rebound one in a A Obviously, trends this interesting It days it, think that commentary from kind of that Clearly, to have COVID things which end rebound like it sounds cycle, coming the market. you cautious.

view I X, you just your bridge could referenced. So kind curious just the if that and view of that

Ty Silberhorn

at we November, that. Sure. were we think down think more a the those in we And we're And numbers, of right fiscal at we be I of go see in expansionary and looked still looked -- recovery. stage. we're go through to area. when how look others we towards growth tick pointing this a of we kind they And bit 'XX. to at numbers. now, at volume I as couple some those that There's points our bumps at indicative it ABI if It's But everything into as we activity, bottoming this still, look going

quarter-to-quarter right nothing metrics, changed how the now. across So with see lumpiness we're but that. those market has We some could that's viewing all

Operator

line with Romero Our Julio comes Company. from the of next Sidoti question &

Julio Romero

focused focused that of on you you beyond? would referenced out -- be expect services Day the the would what LSO. Investor And CapEx I CapEx your in? And fiscal type high-return about about talked and at to think ramp talk the your more resources be Can you projects? of the Would quarters 'XX those and about segments allocating you be they in that

Nisheet Gupta

Yes.

In of were strategy So in we you've Julio, should as understand to we we do limited investments seen that we be and environment we had our curtail years, had X have we on CapEx there our working we curtailed were where COVID, to given had 'XX, pandemic. last fiscal fiscal the exactly in CapEx, investing. as certain the because to 'XX, in

so are capital, years beyond invested So X speak. where the has those to maintenance business not the

the $XX about segments to strategic segments, and say the on. other years. is you where our go and to of time we million this good investments. investing to clear, will question, a normal When million have range now may CapEx. would have we have to of CapEx -- strategy CapEx the opportunities the other highest over invest like growth have that you CapEx our now not all as invest the So But each company $XX and segments would coming of I think opportunities they these back Services, those in that asked of ideas Services be as

Ty Silberhorn

Julio. Kind Investor capital and that, Day, Services invested to to add would I business. low of back tying generally And Yes. a is

growth. expand to as well Our seen LSO business actually need strong that as about see business. some and in they behavior shifts diversify continues talked buying to positive They've the

some would we them that a to that before a areas to need accretive margin that drive add them. to capital be would and look capital needs potential we on and sustainable meaningful the can And we portion looking would level business. capital good are that going window we really growth our be those invest businesses at capacity then they recover finishing focused or fuel margin for for performing there company. short-term allow is to get wall likely as us we're our of capital those There's the when any Framing, still profitable helping investments so the So that we is expand would markets perform be storefront them Within business payback, capability. still quick at improvement. in to volume Framing, comfortable and Glass at Do really some

Julio Romero

and margin appreciate the if fourth down of saw there. segment costs of guess That's about freight some in I the you run I talk short-term Okay. quarter the by really LSO, you on helpful. can And maybe secondly, to fourth those have are you expected in kind the strong then do how view And like quarter? LSO. a persist you -- typically quarter, into usually

So LSO view fourth kind how shape up? you do of quarter margin to

Nisheet Gupta

Yes. we I expedited where was the season, say and What's seize sure has we third of in quarter one-off. question QX. want Julio the given that can in freight been would freight costs the second continue the to expedited costs shipment that There second question, you demand expect opportunity make I not repeat the could. to part LSO the a holiday segment would in significant marketplace we the again?

Julio Romero

your on margin a Yes. LSO you quarter you have to shaping view view fourth up? Sure. get strong and Typically, how in wanted just that

Nisheet Gupta

I say in with quarter Yes. LSO's margin prior consistent would quarters. be to year are going fourth

LSO, what are will we they back is We at at that be mid-XXs look level. in and

Operator

[Operator Instructions].

Capital. comes Dezellem Will with from question next Tieton Our

William Dezellem

more they you the will to and initiative. it complete I'd lean to back to restart also since Are be to segment process? will the is initiative. first simply do Or restructuring their do first circle longer. Lean have like take anticipating that they to Glass And the the

Ty Silberhorn

come at the Glass, to the this point. Nisheet have really There's little and bit Framing still through in restructuring of efforts do bulk both QX, as on. a commented Well,

that on us prioritize rather the and margin efforts just efforts Where premium that that business. have wanted that as have little that of trying production productivity side a we place. than it on focus. out wanted wanted to getting year, of market of where in we we we really We Glass the of close saw the so costs really footprint and So improvement and we to kind bit midsized floor. really projects our Glass the I the will could in And focus those everywhere. opportunity both on Lean focus behind Framing we to consolidate on in in had do that drive focused initial the we more That's the there fact everything Glass, to think

is flowing a actually, productivity through. and that the So saw build on Glass year in take quarter first fourth into that hold, month started work from a see perspective next We those of we strong to margin as very of then expect I Glass. improvements from as we as we the quarter go last we'll of the commented, some quarter and

Operator

turn queue. further the sure remarks. I'm in back call I to questions no now will Silberhorn over the Ty for closing

Ty Silberhorn

wonderful right. joyful thank to happy of rest great have Thanks, have you as a And safe Well, us strategy a executing of we on new holidays today. your remain value we and you. new for joining All focused a healthy, and for create Thanks all our peak the about, hoping week. talked all year. of stakeholders. will I'm

Operator

call. this participation. gentlemen, today's conference for concludes and Thank Ladies your you

now may You disconnect.

Apogee Enterprises (APOG) 21 Dec 212022 Q3 Earnings call transcript