Apogee Enterprises, Inc. Q3 FY2026 earnings call

Management Statement and Operational Highlights

• Acknowledged Matt Osberg's departure and welcomed Mark Ogdahl as interim CFO.
• Highlighted customer value, exceptional talent, and the Apogee management system driving value.
• Celebrated UW Solutions' one-year anniversary, pleased with initial results, and sees potential for growth.
• Outlined priorities: become economic leader in target markets, manage portfolio via accretive M&A, strengthen core via efficient operations.

Segment Performance

• Metals: Net sales declined primarily due to lower volume, partially offset by favorable price and product mix. Adjusted EBITDA margin improved to 13.5% driven by increased productivity, cost savings from Fortify phase two, lower incentive compensation expense, and favorable price and product mix.
• Services: Delivered seventh consecutive quarter of year-over-year net sales growth, primarily due to increased volume. Adjusted EBITDA margin increased to 9.7% from lower incentive compensation expense, offset by unfavorable project mix. Backlog ended the quarter at $775 million.
• Glass: Net sales slightly increased to approximately $71 million driven by increased volume and favorable mix, offset by lower price due to end market demand softness. Adjusted EBITDA margin moderated due to lower price and higher material costs, partially offset by higher volume, favorable product mix, and lower incentive compensation expense.
• Performance Surfaces: Net sales increased due to inorganic sales from the UW Solutions acquisition. Adjusted EBITDA margin decreased primarily due to the dilutive impact from UW Solutions and unfavorable productivity, partially offset by favorable product mix and price.

Guidance

• Updated net sales estimate to approximately $1.39 billion and adjusted diluted EPS range of $3.40 to $3.50, including ~$0.30 EPS impact from tariffs.
• Anticipate margin compression in metals and glass due to macroeconomic factors, aluminum price increases, and market dynamics.
• Expanded Fortify phase two scope, expecting ~$28 to $29 million in pretax charges and ~$25 to $26 million in annual pretax savings, with ~$10 million benefit in fiscal 2027.
• Tariff impact expected not to repeat in fiscal 2027.

Risks

• Macroeconomic factors remain challenging, impacting pricing and volume in metals and glass.
• Aluminum price increases continuing to drive volume pressure and margin compression.
• Normalization of incentive compensation expense and higher health insurance costs as headwinds.

Question and Answer

• Q: Board's view on new leadership and strategic direction.

A: No change in strategy, looking for leader with growth, operational, M&A experience.

• Q: M&A activity emphasis.

A: Robust pipeline, UW Solutions was successful, active in M&A.

• Q: Fortify project changes.

A: Cost increases due to headcount and footprint, savings still expected.

• Q: Pricing in glass and performance services.

A: Focus on EBITDA contribution, performance services growth from high margin SKUs.

• Q: Growth trajectory and M&A IRR.

A: Robust M&A pipeline, move faster with discipline, no change in financial analysis but faster execution.

• Q: Fiscal 2027 outlook.

A: Tariffs not repeating, key headwinds and tailwinds considered in AOP.