APOGEE ENTERPRISES, INC. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Transformation: Over the past four years, achieved sustainable operating improvements, exceeded ROIC and margin targets, exited less profitable lines, and made investments in organic capacity and acquisitions like UW Solutions.
• Fiscal 2026 Focus: Navigating market uncertainty, focusing on productivity, cost management, and growth. Phase two of Project Fortify to drive efficiencies, closing Toronto manufacturing site in services, and optimizing metals footprint.
• Tariffs Mitigation: Taking actions like accelerating Canadian production, diverting US project work, evaluating supply chain options, and price actions to mitigate tariff impacts.

Segment Performance

• Metals: Q4 net sales declined 19% to $112 million. Adjusted operating margin in Q4 was 2.8%, but full-year adjusted operating margin was 10.3%.
• Services: Net sales increased 10.9% in Q4, with four consecutive quarters of double-digit growth. Adjusted operating margin was 7.2%.
• Glass: Net sales declined in Q4 due to lower volume. Adjusted operating margin was 14.6%, near the target range of 10%-15%.
• Performance Surfaces: Net sales grew 77% in Q4 due to UW Solutions acquisition, but organic business net sales declined 0.5%. Adjusted operating margin was 19.5%.

Guidance

• Net Sales: Expected between $1,370 million to $1,430 million for fiscal 2026.
• EPS: Range of $3.55 to $4.10, including $0.45 to $0.55 unfavorable impact from tariffs.
• UW Solutions: Expected to contribute ~$100 million revenue with mid-single-digit growth, adjusted EBITDA margin ~20%.
• Project Fortify Phase Two: ~$24M-$26M pretax charges, annualized savings $13M-$15M, mostly in services and metals.

Risks

• Tariffs: Direct tariffs on aluminum products from Canada and retaliatory tariffs, indirect impacts on input costs like aluminum, paint, etc.
• Market Uncertainty: Softness in nonresidential construction, consumer confidence, and potential demand impact from tariffs.

Question and Answer

• Q: Tariff impact EPS and customer acceptance of mitigation? A: Julio Romero asked about tariff impact EPS and customer acceptance. Matt Osberg and Ty Silberhorn responded that direct impact includes services manufacturing shifts, indirect from aluminum cost increase. Mitigation efforts include US manufacturing shifts and productivity initiatives, with confidence in customers accepting some changes.
• Q: UW Solutions integration and tariff impact? A: Jon Braatz inquired about UW Solutions integration. Ty Silberhorn stated integration is mostly complete, minimal tariff impact on UW Solutions. Expect mid/high single-digit growth, flooring portion strong.
• Q: Competitive dynamics and pricing pass-through? A: Gowshi Sriharan asked about competitive dynamics. Ty Silberhorn responded architectural metals see rationality in pricing due to private equity focus on margins. Glass refocused on premium offerings, services leverage engineering for non-curtain wall work.
• Q: M&A opportunities and inventory? A: Gowshi Sriharan asked about M&A and inventory. Ty Silberhorn said active in M&A pipeline, opportunistic in current market. Matt Osberg stated inventory is normal, mostly make-to-order with some make-to-stock.