Apogee Enterprises Inc (APOG) Q4 2024 Earnings Call Transcript Highlights: Strong Finish with ...
Revenue: FY24 net sales declined by 2%, Q4 net sales grew 5% to $362 million.
Net Income: Q4 operating income was $21.9 million.
Earnings Per Share (EPS): Adjusted EPS grew 20% to a record $4.77 for FY24, Q4 adjusted diluted EPS grew 33% to $1.14.
Free Cash Flow: Cash flow from operations nearly doubled to a record $204 million for FY24, Q4 generated $75 million.
Gross Margin: Q4 gross margin improved by 170 basis points.
Adjusted Operating Margin: FY24 increased by 160 basis points to 10.3%, Q4 adjusted operating margin expanded 200 basis points to 9.5%.
Adjusted Return on Invested Capital (ROIC): Improved to 16.5% for FY24.
Segment Performance: Glass segment net sales grew 18% in Q4, operating income nearly doubled; Framing net sales declined 6.3% in Q4.
Backlog: Services backlog ended Q4 at $808 million, up 11% from last year.
Debt Reduction: Paid down $39 million of debt in Q4, reducing net leverage ratio to 0.1 times.
Release Date: April 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you provide a quick refresher of the current sales mix within Framing, between shorter cycle work and the longer lead time work, and maybe ballpark what that looks like post the phasing out of some of the longer lead time stuff within framing? A: Ty Silberhorn, CEO of Apogee Enterprises, explained that the company is moving away from certain lower-margin, longer lead time window and wall business products as part of Project Fortify. This includes manufactured curtain wall and window wall for smaller projects, which were underperforming margin-wise. The company is also consolidating manufacturing operations, which should lead to cost synergies. CFO Matthew Osberg added that this transition will create a revenue headwind of about 1 percentage point as they phase out these projects, which will continue into F26 but at a lesser extent.
Q: Could you discuss the diversification of end market mix, particularly how much healthcare and education will make up of the portfolio in the coming years? A: CEO Ty Silberhorn highlighted that Apogee has been actively working to diversify into building types like healthcare, education, and transportation for nearly three years. This diversification is reflected in their project wins and is a strategic focus to mitigate market uncertainties and fluctuations. CFO Matthew Osberg noted improvements in the Services segment's backlog, indicating successful diversification in project types.
Q: Can you provide an update on the geographic expansion in Services, particularly the westward expansion? A: Ty Silberhorn mentioned that the Services segment continues to pursue projects west of the Rockies, including some recent wins contributing to backlog growth. The company is making investments to expand an existing facility in Texas to support this expansion and is considering both organic and inorganic options to establish a footprint in the western U.S. for both Services and Framing segments.
Q: Among the strategies to capture market share and focus on high-growth opportunities, where do you see the low-hanging fruit? A: CEO Ty Silberhorn expressed that while the market softening makes competition stiffer, Apogee sees potential in promoting quality assurance to gain market share, especially in Services and Framing. He emphasized the importance of geographic expansion and a robust M&A pipeline as medium to long-term growth strategies.
Q: Regarding Project Fortify, how will the actions taken, particularly within the Architectural Framing segment, help to level out margins across the cycle? A: Ty Silberhorn explained that Project Fortify involves moving away from underperforming products, which allows for cost reductions and sets a new margin floor for the Framing segment. These actions are expected to stabilize and potentially enhance margins as volumes increase.
Q: What is the status of the annualized cost savings from Project Fortify, and are you on track with the initial projections? A: CFO Matthew Osberg confirmed that they are on track with both the total charges related to Project Fortify and the projected annualized cost savings of $12 million to $14 million, with 60% expected in F25 and the remainder in F26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
