Apogee Enterprises Reports Fiscal 2025 Fourth Quarter and Full Year Results

• Fourth-quarter net sales of $346 million
• Fourth-quarter diluted EPS of $0.11 and adjusted diluted EPS of $0.89
• Full-year net sales of $1.36 billion
• Full-year operating margin of 8.7%; full-year adjusted operating margin improves to 11.0%
• Full-year diluted EPS of $3.89; full-year adjusted diluted EPS grows 4% to $4.97
• UW Solutions acquisition delivers in-line with expectations
• Provides initial outlook for fiscal 2026

Apogee Enterprises, Inc. (NASDAQ:APOG) today reported its fiscal 2025 fourth-quarter and full-year results. The prior year fourth-quarter and full-year results included the impact of an additional week of operations compared to fiscal 2025. The Company reported the following selected financial results:

Change in Segment Names

During the fourth quarter, the Company changed the names of two reporting segments, to better reflect their product focus and capabilities. The previously named Architectural Framing Systems Segment is now referred to as the Architectural Metals Segment. The previously named Large-Scale Optical Segment is now referred to as the Performance Surfaces Segment.

Components of Changes in Net Sales

Three months ended March 1, 2025, compared with the three months ended March 2, 2024

Year ended March 1, 2025, compared with the year ended March 2, 2024

Ty R. Silberhorn, Chief Executive Officer stated, "I am proud of the results our team delivered in fiscal 2025. We expanded adjusted operating margin for the third consecutive year, delivered another year of adjusted ROIC above our targeted level, and achieved record adjusted diluted EPS of $4.97. Through executing our strategy, we've driven sustainable operating improvements, that will serve as the foundation for our continued success."

Mr. Silberhorn continued, "Looking ahead to fiscal 2026, we anticipate current macroeconomic uncertainty to create headwinds in our core non-residential construction market as well as our specialty glass and acrylic markets. Against this backdrop, we're focused on delivering near-term financial results, creating certainty where we are able during a challenging macroeconomic environment, while continuing to make investments in growth opportunities to further our transformation."

Fourth-Quarter Consolidated Results (Fourth Quarter Fiscal 2025 compared to Fourth Quarter Fiscal 2024)

• Net sales decreased 4.5% to $345.7 million. The prior year included an extra week of operations, which negatively impacted net sales by 7.9%. Net sales were also unfavorably impacted by lower volume, primarily in Architectural Metals and Architectural Glass. These items were partially offset by sales growth in Architectural Services and $23.2 million, or 6.4%, of inorganic sales contribution from the acquisition of UW Solutions.
• Gross margin declined 280 basis points to 21.6%, primarily due to $9.4 million of expense related to an arbitration award, the unfavorable sales leverage impact of lower volume, and an unfavorable product mix in Architectural Metals. These items were partially offset by a more favorable mix of projects in Architectural Services, and lower restructuring, short-term incentive, insurance-related, and quality expenses.
• Selling, general and administrative (SG&A) expenses as a percent of net sales increased 140 basis points to 19.8%, primarily due to a $7.6 million impairment charge in Architectural Metals, the unfavorable sales leverage impact of lower volume, as well as $3.1 million of acquisition-related expenses and higher amortization expense associated with the UW Solutions transaction. These items were partially offset by lower restructuring expense and lower long-term incentive costs.
• Operating income was $6.1 million, and operating margin decreased to 1.8%. Adjusted operating income was $28.7 million and adjusted operating margin decreased by 120 basis points to 8.3%. The lower adjusted operating margin was primarily driven by the unfavorable sales leverage impact of lower volume, and a less favorable product mix, partially offset by a more favorable mix of projects in Architectural Services and lower incentive, insurance-related, and quality expenses.
• Net interest expense increased to $3.5 million, compared to $0.9 million, primarily due to increased debt as a result of the acquisition of UW Solutions.
• Other income was $0.1 million, compared to expense of $1.6 million. The prior year included the unfavorable impact of an investment market-valuation adjustment.
• Diluted earnings per share (EPS) were $0.11, compared to $0.71, and adjusted diluted EPS decreased to $0.89, compared to $1.14.

Full-Year Consolidated Results (Fiscal 2025 compared to Fiscal 2024)

• Net sales declined 3.9% to $1.36 billion. The prior year included an extra week of operations, which negatively impacted net sales by 2.0%. Net sales were also unfavorably impacted by lower volume, primarily in Architectural Glass and Architectural Metals. These items were partially offset by net sales growth in Architectural Services, and $32.0 million, or 2.3%, of inorganic sales contribution from the acquisition of UW Solutions.
• Operating margin was 8.7%, compared to 9.4%. Adjusted operating margin increased 70 basis points to 11.0%, primarily driven by a more favorable mix of projects in Architectural Services, lower quality and insurance-related costs, and lower bad debt expense, partially offset by the unfavorable sales leverage impact of lower volume and higher lease costs.
• Diluted EPS was $3.89, compared to $4.51. Adjusted diluted EPS grew 4.2% to a record $4.97.

Fourth Quarter Segment Results (Fourth Quarter Fiscal 2025 Compared to Fourth Quarter Fiscal 2024)

Architectural Metals

Net sales declined 19.4% to $112.1 million, driven by lower volume, a less favorable sales mix, and a 7.8% unfavorable impact from the additional week in the prior year. The segment had an operating loss of $5.7 million, which included a $7.6 million impairment charge and $1.3 million of restructuring charges. Adjusted operating income was $3.2 million, or 2.8% of net sales, compared to $12.8 million, or 9.2% of net sales. The lower adjusted operating margin was primarily driven by the unfavorable sales leverage impact of lower volume, a less favorable product mix, and unfavorable productivity impacts from the launch of a more standardized product line across multiple facilities, partially offset by lower quality and short-term incentive costs.

Architectural Services

Net sales increased 10.9% to $117.9 million, primarily due to increased volume and a more favorable mix of projects, partially offset by an 8.4% unfavorable impact from the additional week in the prior year. Operating income improved to $8.6 million. Adjusted operating income increased to $8.5 million, or 7.2% of net sales, compared to $6.1 million, or 5.8% of net sales. The improved adjusted operating margin was primarily driven by a more favorable mix of projects, partially offset by higher short-term incentive compensation and lease expenses. Segment backlog⁵ at the end of the quarter was $720.3 million, compared to $742.2 million at the end of the third quarter.

Architectural Glass

Net sales declined 21.9% to $75.2 million, driven by lower volume, and a 7.4% unfavorable impact from the additional week in the prior year. Operating income was $11.0 million, or 14.6% of net sales, compared to $18.9 million, or 19.7% of net sales. The lower operating margin was primarily driven by the unfavorable sales leverage impact of lower volume, partially offset by lower quality costs.

Performance Surfaces

Net sales increased 76.7% to $47.9 million. This included a 0.5% organic business sales decline, an 8.3% unfavorable impact from the extra week in the prior year, and 85.4% of favorable inorganic contribution from the UW Solutions acquisition. Operating income was $6.1 million, or 12.8% of net sales, which included $3.2 million of acquisition-related costs. Adjusted operating income was $9.3 million, or 19.5% of net sales, compared to $6.9 million, or 25.6% of net sales. The lower adjusted operating margin was primarily driven by the dilutive impact of lower adjusted operating margin from UW Solutions, and the unfavorable sales leverage impact of lower organic volume, partially offset by improved productivity.

Corporate and Other

Corporate and other expense decreased to $13.8 million, compared to $14.5 million, primarily due to lower restructuring charges, lower long-term incentive compensation costs, and lower insurance-related expenses, partially offset by $9.4 million of expense related to an arbitration award.

Financial Condition

Net cash provided by operating activities in the fourth quarter was $30.0 million, compared to $74.9 million in the prior year period. For the full year, net cash provided by operating activities was $125.2 million, compared to $204.2 million last year, primarily reflecting increased cash used for working capital. Capital expenditures for the full year were $35.6 million, compared to $43.2 million last year.

In the fourth quarter, the Company returned $35.8 million of cash to shareholders, through $30.3 million of stock repurchases and $5.5 million of dividends. For the full year, the Company returned $67.1 million of cash to shareholders through share repurchases and dividends, up from $33.0 million in the prior year.

Quarter-end long-term debt increased to $285.0 million, bringing the Consolidated Leverage Ratio⁶ (as defined in the Company's credit agreement) to 1.3x at the end of the quarter.

Subsequent Events

Arbitration Award

As a result of a March 2025 appellate court decision confirming a December 2022 arbitration award, the Company paid the arbitration award, including accrued post-judgment interest, in the amount of $24.7 million, on April 7, 2025. As a result of the decision, we recorded expense of $9.4 million, which represents the impact of the award amount net of existing reserves and estimated insurance proceeds. This impact was recorded in cost of goods sold in the fourth quarter of fiscal 2025.

Project Fortify

The Company completed the initial phase of Project Fortify during the fourth quarter of fiscal 2025, incurring total project pre-tax charges of $16.7 million, with estimated annualized cost savings of approximately $14 million. The Company is announcing a second phase of Project Fortify (referred to as "Project Fortify Phase 2" or "Phase 2") to drive further cost efficiencies, primarily in the Architectural Services and Architectural Metals Segments. Phase 2 will further optimize our manufacturing footprint and align resources to enable a more effective operating model. The Company expects the actions of Phase 2 to incur approximately $24 million to $26 million of pre-tax charges, of which approximately $8 million are expected to be non-cash charges, and deliver estimated annualized pre-tax cost savings of approximately $13 million to $15 million. The Company expects the actions associated with Phase 2 to be substantially completed by the end of the fourth quarter of fiscal 2026.

Fiscal 2026 Outlook

Due to current macroeconomic and tariff-related uncertainty, the Company is providing a wider range of outlook metrics than historical practice. The outlook provided includes the estimated impacts of the prevailing international tariff frameworks in place as of the date of this release.

The Company expects net sales in the range of $1.37 billion to $1.43 billion. The Company expects diluted EPS in the range of $2.54 to $3.19 and adjusted diluted EPS in the range of $3.55 to $4.10⁷. This includes a current projected unfavorable EPS impact from tariffs of $0.45 to $0.55, which will mostly impact the first half of fiscal 2026, before mitigation efforts take full effect. The Company's outlook assumes interest expense of $14.5 million to $15.5 million, an effective tax rate of approximately 24.5%, and capital expenditures between $35 million to $40 million.

The Company expects the UW Solutions business, that was acquired in November 2024, to contribute approximately $100 million of net sales with an adjusted EBITDA margin of approximately 20%.

Due to the impacts of moderating operating margins in Metals and Glass, increased interest expense, and tariff-related expenses concentrated in the first half of fiscal 2026, the Company expects more significant year-over-year declines in adjusted diluted EPS in the first and second quarters of fiscal 2026.

Conference Call Information

The Company will host a conference call today at 8:00 a.m. Central Time to discuss this earnings release. This call will be webcast and is available in the Investor Relations section of the Company's website, along with presentation slides, at https://www.apog.com/events-and-presentations. A replay and transcript of the webcast will be available on the Company's website following the conference call.

About Apogee Enterprises

Apogee Enterprises, Inc. (NASDAQ:APOG) is a leading provider of architectural building products and services, as well as high-performance coated materials used in a variety of applications. Headquartered in Minneapolis, MN, our portfolio of industry-leading products and services includes architectural glass, windows, curtainwall, storefront and entrance systems, integrated project management and installation services, and high-performance coatings that provide protection, innovative design, and enhanced performance. For more information, visit www.apog.com.

Use of Non-GAAP Financial Measures

Management uses non-GAAP measures to evaluate the Company's 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. Non-GAAP measures should be viewed in addition to, and not as a substitute for, the reported financial results of the Company prepared in accordance with GAAP. Other companies may calculate these measures differently, limiting the usefulness of the measures for comparison with other companies. This release and other financial communications may contain the following non-GAAP measures:

• 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 the Company does not consider to be 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.
• Adjusted return on invested capital ("ROIC") is defined as adjusted operating income net of tax, divided by average invested capital. The Company believes this measure is useful in understanding operational performance and capital allocation over time.
• 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 dated July 19, 2024. 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.
• Backlog is an operating measure used by management to assess future potential sales revenue. Backlog is defined as the dollar amount of signed contracts or firm orders, generally as a result of a competitive bidding process, which is expected to be recognized as revenue. It is most meaningful for the Architectural Services segment, due to the longer-term nature of their projects. Backlog is not a term defined under U.S. GAAP and is not a measure of contract profitability. Backlog should not be used as the sole indicator of future revenue because the Company has a substantial number of projects with short lead times that book-and-bill within the same reporting period that are not included in backlog.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The words "may," "believe," "expect," "anticipate," "intend," "estimate," "forecast," "project," "should," "will," "continue," and similar expressions are intended to identify "forward-looking statements". These statements reflect Apogee management's expectations or beliefs as of the date of this release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements are qualified by factors that may affect the results, performance, financial condition, prospects and opportunities of the Company, including the following: (A) North American and global economic conditions, including the cyclical nature of the North American and Latin American non-residential construction industries and the potential impact of an economic downturn or recession; (B) U.S. and global instability and uncertainty arising from events outside of our control; (C) actions of new and existing competitors; (D) departure of key personnel and ability to source sufficient labor; (E) product performance, reliability and quality issues; (F) project management and installation issues that could affect the profitability of individual contracts; (G) dependence on a relatively small number of customers in one operating segment; (H) financial and operating results that could differ from market expectations; (I) self-insurance risk related to a material product liability or other events for which the Company is liable; (J) maintaining our information technology systems and potential cybersecurity threats; (K) cost of regulatory compliance, including environmental regulations; (L) supply chain disruptions, including fluctuations in the availability and cost of materials used in our products and the impact of trade policies and regulations, including existing and potential future tariffs; (M) integration and future operating results of acquisitions, including but not limited to the acquisition of UW Solutions, and management of acquired contracts; (N) impairment of goodwill or indefinite-lived intangible assets; (O) our ability to successfully manage and implement our enterprise strategy; (P) our ability to maintain effective internal controls over financial reporting; (Q) our judgements regarding accounting for tax positions and resolution of tax disputes; (R) the impacts of cost inflation and interest rates; and (S) the impact of changes in capital and credit markets on our liquidity and cost of capital. The Company cautions investors that actual future results could differ materially from those described in the forward-looking statements and that other factors may in the future prove to be important in affecting the Company's results, performance, prospects, or opportunities. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can it assess the impact of each 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. More information concerning potential factors that could affect future financial results is included in the Company's Annual Report on Form 10-K and in subsequent filings with the U.S. Securities and Exchange Commission.

• 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, and SG&A.
• 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 separately in Corporate and other.
• Segment operating income does not include any other income or expense, interest expense or a provision for income taxes.