Slides
Page 1
University of Washington, NanoES – Seattle © Aaron Leitz Photography; courtesy of ZGF Fiscal 2025 Third Quarter Earnings Call January 7, 2025 Apogee Enterprises, Inc. Nasdaq: APOG
Page 2
Non-GAAP measures & forward-looking statements Q3 FY2025 Earnings | January 7, 2025 Apogee Enterprises, Inc. 2 This presentation contains non-GAAP financial measures which the Company uses to evaluate its historical and prospective financial performance, measure operational profitability on a consistent basis, as a factor in determining executive compensation, and to provide enhanced transparency to the investment community. Definitions for these non-GAAP financial measures are included in today’s press release and reconciliations to the most directly comparable GAAP measures are included at the end of this presentation. This presentation contains certain statements that are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. Forward-looking statements generally can be identified by the use of forward- looking terminology such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should,” "will," "continue" or similar words or expressions. All forecasts and projections in this presentation are “forward-looking statements,” and are based on management’s current expectations or beliefs of the Company's near-term results, based on current information available pertaining to the Company. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by the Company. Any or all of our forward- looking statements in this presentation and in any public statements we make could be materially different from actual results. Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other risk factors include, but are not limited to, the risks and uncertainties set forth under the “Risk Factors” section of our Annual Report on Form 10-K for the year ended March 2, 2024, and in subsequent filings with the U.S. Securities and Exchange Commission. We also wish to caution investors that other factors might in the future prove to be important in affecting the Company’s results of operations. New factors emerge from time to time; it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Page 3
Agenda Apogee Enterprises, Inc. 3 Brooklyn Health Center, New York Photo courtesy of Terry Wieckert Q3 FY2025 Earnings | January 7, 2025 Introductory remarks Ty Silberhorn Chief Executive Officer Financial results and outlook Matt Osberg Chief Financial Officer Q&A
Page 4
Apogee Enterprises, Inc. 4 • Net sales approximately in-line with prior year, as growth in Services and sales from UW Solutions offset lower volumes in Glass • Continued volume pressure from soft end market demand • Adjusted operating margin decline vs prior year but above 10% target • Healthy cash flow and strong financial position • Completed the acquisition of UW Solutions • Remain focused on execution, costs, and positioning for growth Net sales $341 M +0.5% year-over-year Adjusted operating income* $35.4 M (5.9)% year-over-year 10.4% (70) bps year-over-year Delivering near-term results while positioning for long-term growth $1.19 (3.3)% year-over-year FY2025 Third Quarter Highlights Adjusted diluted EPS* Adjusted operating margin* *Non-GAAP financial measures, see reconciliation tableQ3 FY2025 Earnings | January 7, 2025
Page 5
Market Outlook 5Apogee Enterprises, Inc. Building Type Forecasted 2025 Growth Rate Multifamily residential -16% Lodging -8% Office (excluding data centers) -3% Commercial -8% Health care +3% Educational +3% Amusement & recreation +4% Transportation +4% • FMI nonresidential building construction forecasted to grow by ~1% in calendar 2025 • FMI forecasted growth for 2025 has been revised downward over the past several quarters • Shifting market dynamics drive a continued focus on diversifying our project mix Source: FMI 2024 North American Engineering and Construction Outlook, Fourth Quarter Edition FMI forecast for construction put in place in the U.S. for selected building types Q3 FY2025 Earnings | January 7, 2025
Page 6
Consolidated Results Apogee Enterprises, Inc. 6 *Non-GAAP financial measure, see reconciliation table $ in millions, except EPS Q3 FY25 Q3 FY24 Change Net sales $341.3 $339.7 0.5% Adjusted operating income* $35.4 $37.6 (5.9)% Adjusted operating margin* 10.4% 11.1% (70) bps Adjusted EBITDA* $45.8 $47.3 (3.1)% Adjusted EBITDA margin* 13.4% 13.9% (50) bps Adjusted diluted EPS* $1.19 $1.23 (3.3)% $ in millions, except EPS FY25 FY24 Change Net sales $1,015.3 $1,055.1 (3.8)% Adjusted operating income* $121.1 $112.0 8.1% Adjusted operating margin* 11.9% 10.6% 130 bps Adjusted EBITDA* $151.5 $142.2 6.6% Adjusted EBITDA margin* 14.9% 13.5% 140 bps Adjusted diluted EPS* $4.08 $3.64 12.1% Third quarter Year-to-date Q3 FY2025 Earnings | January 7, 2025
Page 7
Segment Results 7 • *Adjusted operating margin is a Non-GAAP financial measure, see reconciliation table. • Segment net sales is defined as net sales for a certain segment and includes revenue related to intersegment transactions. • Net sales intersegment eliminations are reported separately to exclude these sales from our consolidated total. • Segment operating income is equal to net sales, less cost of goods sold, SG&A, and any asset impairment charges associated with the segment. • Segment operating income includes operating income related to intersegment sales transactions and excludes certain corporate costs that are not allocated at a segment level. We report these unallocated corporate costs in Corporate and Other. • Operating income does not include any other income or expense, interest expense or income tax expense. Segment net sales $M Adjusted operating margin* Architectural Framing Systems Year-over-year change $138.0 (1.1)% 9.8% (240) bps Architectural Glass Year-over-year change $70.2 (22.8)% 14.4% (230) bps Architectural Services Year-over-year change $104.9 10.8% 8.6% 300 bps Large-Scale Optical Year-over-year change $33.2 27.6% 18.6% (870) bps Third quarter FY2025 Segment net sales $M Adjusted operating margin* Architectural Framing Systems Year-over-year change $412.6 (10.8)% 12.3% (20) bps Architectural Glass Year-over-year change $247.0 (12.5)% 19.5% 210 bps Architectural Services Year-over-year change $302.0 11.0% 7.0% 400 bps Large-Scale Optical Year-over-year change $74.2 2.9% 20.0% (400) bps Year-to-date FY2025 Q3 FY2025 Earnings | January 7, 2025
Page 8
Cash Flow and Balance Sheet Apogee Enterprises, Inc. 8 Commentary • Lower year-to-date free cash flow, primarily driven by increased cash used for working capital • Increased borrowings to fund the acquisition of UW Solutions • Returned $31.3M of cash to shareholders year-to-date • Consolidated Leverage Ratio* (as defined in our credit agreement) of 1.3x Strong financial position – Deploying capital to drive value $ in millions Nine Months Ended 11/30/24 Nine Months Ended 11/25/23 Cash flow from operations $95.1 $129.3 Capital expenditures $24.7 $27.0 Free cash flow* $70.4 $102.3 Share repurchases $15.1 $11.8 Dividends $16.2 $15.7 Nov 30, 2024 Mar 2, 2024 Total debt $272.0 $62.0 Cash & equivalents $43.9 $37.2 Net debt** $228.1 $24.8 *Free cash flow is a non-GAAP financial measure which the Company defines as cash flow from operations less capital expenditures. **Net debt is a non-GAAP financial measure which the Company defines as total debt less cash and cash equivalents. Tables may not foot due to rounding *Consolidated Leverage Ratio is a Non-GAAP Financial Measure. See definition at the end of this presentation. Q3 FY2025 Earnings | January 7, 2025
Page 9
FY2025 Outlook Apogee Enterprises, Inc. 9 Adjusting our guidance to account for UW Solutions and softer market conditions Additional details • Net sales outlook includes: ‒ ~$30 million contribution from the acquisition of UW Solutions ‒ Lower than expected volumes in the fourth quarter ‒ ~2 percentage point decline related to reverting to a 52-week year ‒ ~1 percentage point decline related to Project Fortify • Adjusted diluted EPS now expected at the bottom of our range and includes: ‒ ~$0.05 of dilution related to the acquisition of UW Solutions ‒ Impact of lower-than-expected volumes in the fourth quarter ‒ Reversion to 52-week year expected to reduce adjusted diluted EPS by ~$0.20 compared to FY24 • Assuming effective tax rate of approximately 24.5% • Planning CapEx between $40 to $45 million Adjusted diluted EPS* $4.90 to $5.20 Net sales ~5% decline compared to FY24 *Non-GAAP financial measure, see reconciliation table Q3 FY2025 Earnings | January 7, 2025 Previous range was down 4-7%
Page 10
• Continuing to build momentum through executing our strategy • Solid Q3 results as we manage through market softness • Completed acquisition of UW Solutions • Strong cash flow and financial position • Focused on execution, costs, and positioning for growth Third Quarter Summary Apogee Enterprises, Inc. 10 609 Main| Houston, TX Photo credit: Harmon, Inc. Q3 FY2025 Earnings | January 7, 2025
Page 11
Q&A Apogee Enterprises, Inc. 11 Q3 FY2025 Earnings | January 7, 2025
Page 12
Non-GAAP Measures Apogee Enterprises, Inc. 12 • Adjusted operating income, adjusted operating margin, adjusted net earnings, and adjusted diluted EPS are used by the Company to provide meaningful supplemental information about its operating performance by excluding amounts that are not considered part of core operating results to enhance comparability of results from period to period. • Adjusted EBITDA represents adjusted net earnings before interest, taxes, depreciation, and amortization. The Company believes adjusted EBITDA and adjusted EBITDA margin metrics provide useful information to investors and analysts about the Company’s core operating performance. • Free cash flow is defined as net cash provided by operating activities, minus capital expenditures. The Company considers this measure an indication of its financial strength. However, free cash flow does not fully reflect the Company’s ability to freely deploy generated cash, as it does not reflect, for example, required payments on indebtedness and other fixed obligations. • Consolidated Leverage Ratio is calculated as Consolidated Funded Indebtedness minus Unrestricted Cash at the end of the current period, divided by Consolidated EBITDA (calculated as EBITDA plus certain non-cash charges and allowed addbacks, less certain non-cash income, plus the pro forma effect of acquisitions and certain pro forma run-rate cost savings for acquisitions and dispositions, as applicable for the trailing twelve months ended as of the current period). All capitalized and undefined terms used in this bullet are defined in the Company’s credit agreement. The Company is unable to present a quantitative reconciliation of forward-looking expected Consolidated Leverage Ratio to its most directly comparable forward-looking GAAP financial measure because such information is not available, and management cannot reliably predict all the necessary components of such GAAP financial measure without unreasonable effort or expense. In addition, the Company believes such reconciliation would imply a degree of precision that would be confusing or misleading to investors. Q3 FY2025 Earnings | January 7, 2025
Page 13
Reconciliation of non-GAAP financial measures Apogee Enterprises, Inc. 13 Adjusted net earnings and adjusted diluted earnings per share (Unaudited) Three Months Ended Nine Months Ended In thousands November 30, 2024 November 25, 2023 November 30, 2024 November 25, 2023 Net earnings $ 20,989 $ 26,974 $ 82,566 $ 83,877 Acquisition-related costs (1) Transaction 3,748 — 3,748 — Integration 941 — 941 — Backlog amortization 805 — 805 — Inventory step-up 379 — 379 — Total acquisition-related costs 5,873 — 5,873 — Restructuring charges (2) 912 — 3,213 — NMTC settlement gain (3) — — — (4,687) Income tax impact on above adjustments (4) (1,682) — (2,226) 1,148 Adjusted net earnings $ 26,112 $ 26,974 $ 89,426 $ 80,338 Three Months Ended Nine Months Ended November 30, 2024 November 25, 2023 November 30, 2024 November 25, 2023 Diluted earnings per share $ 0.96 $ 1.23 $ 3.76 $ 3.80 Acquisition-related costs (1) Transaction 0.17 — 0.17 — Integration 0.04 — 0.04 — Backlog amortization 0.04 — 0.04 — Inventory step-up 0.02 — 0.02 — Total acquisition-related costs 0.27 — 0.27 — Restructuring charges (2) 0.04 — 0.15 — NMTC settlement gain (3) — — — (0.21) Income tax impact on above adjustments (4) (0.08) — (0.10) 0.05 Adjusted diluted earnings per share $ 1.19 $ 1.23 $ 4.08 $ 3.64 Weighted average diluted shares outstanding 21,917 22,013 21,937 22,093 Q3 FY2025 Earnings | January 7, 2025 (1) Acquisition-related costs include: • Transaction costs related to the UW Solutions acquisition. • Integration costs related to one-time expenses incurred to integrate the UW Solutions acquisition. • Backlog amortization is related to the value attributed to contracting the backlog purchased in the UW Solutions acquisition. These costs will be amortized in SG&A over the period that the contracted backlog is shipped. • Inventory step-up is related to the incremental cost to value inventory acquired as part of the UW Solutions acquisition at fair value. These costs will be expensed to cost of goods sold over the period the inventory is sold. (2) Restructuring charges related to Project Fortify, including $0.4 million of employee termination costs and $0.5 million of other costs incurred in the third quarter of fiscal 2025, and $1.3 million of employee termination costs, $0.1 million of contract termination costs and $1.8 million of other costs incurred in the first nine months of fiscal 2025. (3) Realization of a New Market Tax Credit (NMTC) benefit during the second quarter of fiscal 2024, which was recorded in other expense (income), net. (4) Income tax impact calculated using an estimated statutory tax rate of 24.5%, which reflects the estimated blended statutory tax rate for the jurisdictions in which the charge or income occurred.
Page 14
Reconciliation of non-GAAP financial measures Apogee Enterprises, Inc. 14 Adjusted operating income (loss) and adjusted operating margin Three Months Ended November 30, 2024 In thousands Architectural Framing Systems Architectural Glass Architectural Services LSO Corporate and Other Consolidated Operating income (loss) $ 12,710 $ 10,118 $ 9,730 $ 4,842 $ (8,771) $ 28,629 Acquisition-related costs (1) Transaction — — — — 3,748 3,748 Integration — — — 147 794 941 Backlog amortization — — — 805 — 805 Inventory step-up — — — 379 — 379 Total acquisition-related costs — — — 1,331 4,542 5,873 Restructuring charges (2) 842 — (717) — 787 912 Adjusted operating income (loss) $ 13,552 $ 10,118 $ 9,013 $ 6,173 $ (3,442) $ 35,414 Operating margin 9.2% 14.4% 9.3% 14.6% N/M 8.4% Acquisition-related costs (1) Transaction — — — — N/M 1.1% Integration — — — 0.4% N/M 0.3% Backlog amortization — — — 2.4% N/M 0.2% Inventory step-up — — — 1.1% N/M 0.1% Total acquisition-related costs — — — 4.0% N/M 1.7% Restructuring charges (2) 0.6% — (0.7)% — N/M 0.3% Adjusted operating margin 9.8% 14.4% 8.6% 18.6% N/M 10.4% Three Months Ended November 25, 2023 In thousands Architectural Framing Systems Architectural Glass Architectural Services LSO Corporate and Other Consolidated Operating income (loss) $ 16,981 $ 15,164 $ 5,288 $ 7,100 $ (6,886) $ 37,647 Operating margin 12.2% 16.7% 5.6% 27.3% N/M 11.1% (Unaudited) Q3 FY2025 Earnings | January 7, 2025 (1) Acquisition-related costs include: • Transaction costs related to the UW Solutions acquisition. • Integration costs related to one-time expenses incurred to integrate the UW Solutions acquisition. • Backlog amortization is related to the value attributed to contracting the backlog purchased in the UW Solutions acquisition. These costs will be amortized in SG&A over the period that the contracted backlog is shipped. • Inventory step-up is related to the incremental cost to value inventory acquired as part of the UW Solutions acquisition at fair value. These costs will be expensed to cost of goods sold over the period the inventory is sold. (2) Restructuring charges related to Project Fortify, including $0.4 million of employee termination costs and $0.5 million of other costs incurred in the third quarter of fiscal 2025.
Page 15
Reconciliation of non-GAAP financial measures Apogee Enterprises, Inc. 15 Adjusted operating income (loss) and adjusted operating margin Nine Months Ended November 30, 2024 In thousands Architectural Framing Systems Architectural Glass Architectural Services LSO Corporate and Other Consolidated Operating income (loss) $ 48,187 $ 48,277 $ 21,483 $ 13,481 $ (19,453) $ 111,975 Acquisition-related costs (1) Transaction — — — — 3,748 3,748 Integration — — — 147 794 941 Backlog amortization — — — 805 — 805 Inventory step-up — — — 379 — 379 Total acquisition-related costs — — — 1,331 4,542 5,873 Restructuring charges (2) 2,755 — (459) — 917 3,213 Adjusted operating income (loss) $ 50,942 $ 48,277 $ 21,024 $ 14,812 $ (13,994) $ 121,061 Operating margin 11.7% 19.5% 7.1% 18.2% N/M 11.0% Acquisition-related costs (1) Transaction — — — — N/M 0.4% Integration — — — 0.2% N/M 0.1% Backlog amortization — — — 1.1% N/M 0.1% Inventory step-up — — — 0.5% N/M — Total acquisition-related costs — — — 1.8% N/M 0.6% Restructuring charges (2) 0.7% — (0.2)% — N/M 0.3% Adjusted operating margin 12.3% 19.5% 7.0% 20.0% N/M 11.9% Nine Months Ended November 25, 2023 In thousands Architectural Framing Systems Architectural Glass Architectural Services LSO Corporate and Other Consolidated Operating income (loss) $ 57,986 $ 49,119 $ 8,211 $ 17,288 $ (20,637) $ 111,967 Operating margin 12.5% 17.4% 3.0% 24.0% N/M 10.6% (Unaudited) Q3 FY2025 Earnings | January 7, 2025 (1) Acquisition-related costs include: • Transaction costs related to the UW Solutions acquisition. • Integration costs related to one-time expenses incurred to integrate the UW Solutions acquisition. • Backlog amortization is related to the value attributed to contracting the backlog purchased in the UW Solutions acquisition. These costs will be amortized in SG&A over the period that the contracted backlog is shipped. • Inventory step-up is related to the incremental cost to value inventory acquired as part of the UW Solutions acquisition at fair value. These costs will be expensed to cost of goods sold over the period the inventory is sold. (2) Restructuring charges related to Project Fortify, including $1.3 million of employee termination costs, $0.1 million of contract termination costs and $1.8 million of other costs incurred in the first nine months of fiscal 2025.
Page 16
Reconciliation of non-GAAP financial measures Apogee Enterprises, Inc. 16 EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin (Earnings before interest, taxes, depreciation, and amortization) (Unaudited) Three Months Ended Nine Months Ended In thousands November 30, 2024 November 25, 2023 November 30, 2024 November 25, 2023 Net earnings $ 20,989 $ 26,974 $ 82,566 $ 83,877 Income tax expense 6,656 8,329 27,268 26,062 Interest expense, net 1,044 1,454 2,634 5,720 Depreciation and amortization 11,134 10,524 30,798 31,185 EBITDA $ 39,823 $ 47,281 $ 143,266 $ 146,874 Acquisition-related costs (1) Transaction 3,748 — 3,748 — Integration 941 — 941 — Inventory step-up 379 — 379 — Total acquisition-related costs 5,068 — 5,068 — Restructuring charges (2) 912 — 3,213 — NMTC settlement gain (3) — — — (4,687) Adjusted EBITDA $ 45,803 $ 47,281 $ 151,547 $ 142,187 EBITDA Margin 11.7% 13.9% 14.1% 13.9% Adjusted EBITDA Margin 13.4% 13.9% 14.9% 13.5% Q3 FY2025 Earnings | January 7, 2025 (1) Acquisition-related costs include: • Transaction costs related to the UW Solutions acquisition. • Integration costs related to one-time expenses incurred to integrate the UW Solutions acquisition. • Inventory step-up is related to the incremental cost to value inventory acquired as part of the UW Solutions acquisition at fair value. These costs will be expensed to cost of goods sold over the period the inventory is sold. (2) Restructuring charges related to Project Fortify, including $0.4 million of employee termination costs and $0.5 million of other costs incurred in the third quarter of fiscal 2025, and $1.3 million of employee termination costs, $0.1 million of contract termination costs and, $1.8 million of other costs incurred in the first nine months of fiscal 2025. (3) Realization of a New Market Tax Credit (NMTC) benefit during the second quarter of fiscal 2024, which was recorded in other expense (income), net.
Page 17
Reconciliation of non-GAAP financial measures Apogee Enterprises, Inc. 17 Fiscal 2025 Outlook Reconciliation of Fiscal 2025 outlook of estimated diluted earnings per share to adjusted diluted earnings per share (Unaudited) Fiscal Year Ending March 1, 2025 Low Range High Range Diluted earnings per share $ 4.40 $ 4.64 Acquisition-related costs (1) Transaction 0.18 0.19 Integration 0.09 0.12 Backlog amortization 0.07 0.07 Inventory step-up 0.15 0.15 Total acquisition-related costs 0.49 0.53 Restructuring charges (2) 0.17 0.21 Income tax impact on above adjustments per share (0.16) (0.18) Adjusted diluted earnings per share $ 4.90 $ 5.20 Q3 FY2025 Earnings | January 7, 2025 (1) Acquisition-related costs include: • Transaction costs related to the UW Solutions acquisition. • Integration costs related to one-time expenses incurred to integrate the UW Solutions acquisition. • Backlog amortization is related to the value attributed to contracting the backlog purchased in the UW Solutions acquisition. These costs will be amortized in SG&A over the period that the contracted backlog is shipped. • Inventory step-up is related to the incremental cost to value inventory acquired as part of the UW Solutions acquisition at fair value. These costs will be expensed to cost of goods sold over the period the inventory is sold. (2) Restructuring charges related to Project Fortify.