Apogee Enterprises Q2 Earnings Call Highlights

Key Points

• Apogee exceeded expectations in fiscal Q2 2027: Sales rose 9.2% year over year to $391.1 million, adjusted EPS increased more than 19% to $1.17, and adjusted EBITDA margin expanded to 12.7%.
• The company raised its full-year outlook, now projecting $1.46 billion-$1.50 billion in sales and adjusted EPS of $3.00-$3.40, supported by pricing, productivity improvements, cost savings and acquisitions.
• Acquisitions and operating execution remain central to growth: Kalwall is tracking toward its first-year targets, while Groglass is expected to add about $30 million in revenue; Apogee ended the quarter with a 1.7x leverage ratio and continued cash-generation capacity.

Apogee Enterprises NASDAQ: APOG reported fiscal 2027 second-quarter results that exceeded its expectations, supported by pricing actions, productivity gains, cost savings and contributions from its Kalwall acquisition. The company raised its full-year sales and adjusted earnings outlook as management cited continued execution across its operating segments despite mixed market conditions.

Second-quarter net sales rose 9.2% year over year to $391.1 million, while adjusted diluted earnings per share increased more than 19% to $1.17. Adjusted EBITDA margin expanded to 12.7% from 12.4% in the prior-year period.

Chief Executive Officer Don Nolan said the results reflected “disciplined execution across the business,” including swift pricing actions, productivity improvements and Kalwall’s contribution. He said Apogee continues to focus on pricing, operational execution and cost management as market conditions vary by segment.

Raised Fiscal 2027 Outlook

Based on its stronger-than-expected first-half performance, Apogee increased its fiscal 2027 guidance. The company now expects:

• Net sales of $1.46 billion to $1.50 billion.
• Adjusted diluted EPS of $3.00 to $3.40.
• Interest expense of about $15 million.
• An adjusted effective tax rate of about 26%.
• Capital expenditures of $35 million to $40 million.

Chief Financial Officer Mark Augdahl said the revised outlook reflects first-half results, ongoing operating execution, anticipated contributions from Kalwall and Groglass, and current market conditions. Apogee expects net sales and adjusted EPS to be relatively balanced between the third and fourth quarters.

Kalwall and Groglass are expected to make meaningful contributions to revenue growth, although Augdahl said their effect on adjusted diluted EPS during fiscal 2027 is expected to be modest. Both businesses are expected to support Apogee’s cash flow generation profile.

Segment Results Show Pricing and Productivity Benefits

Architectural Metals sales increased 1.8% to about $144 million. Favorable pricing was partly offset by lower volume. Adjusted EBITDA margin improved to 15.4%, aided by price, productivity, favorable mix and savings from the company’s Fortify Phase Two initiative. Higher aluminum costs and lower volume partly offset those benefits.

During the question-and-answer session, Nolan said the Metals segment benefited from pricing actions, productivity improvement and Fortify Phase Two cost actions. He also said the company believes pricing initiatives pulled some volume forward.

Services posted its 10th consecutive quarter of sales growth, with revenue increasing nearly 8%, primarily because of volume. The segment’s adjusted EBITDA margin rose to 5.8% due to higher volume and project mix. Services backlog ended the quarter at $833 million, up 5% from a year earlier and 13% sequentially, reflecting continued project awards in what management described as a highly competitive environment.

Glass sales rose more than 21% to $87.4 million. The Kalwall acquisition contributed $16.4 million in sales, while favorable mix also supported growth. Those gains were partly offset by lower volume and pricing as end-market demand remained soft. Adjusted EBITDA margin was 14.9%, down year over year but significantly improved from 8.7% in the first quarter.

Nolan said Glass market conditions remain challenging, with fewer jobs available and some project delays. However, he attributed the segment’s improved performance to an action plan that has increased order rates, enhanced operating productivity and strengthened cost management.

Performance Surfaces sales increased more than 14% to approximately $55 million, driven by higher volume and favorable pricing. Its adjusted EBITDA margin declined to 22.5% as material costs increased, partly offset by price and volume.

Kalwall Integration and Groglass Acquisition

Apogee said Kalwall continues to perform in line with its acquisition expectations. The company remains on track to achieve its first 12-month targets for Kalwall of approximately $85 million in revenue and a 15% adjusted EBITDA margin.

Nolan said integration activities across finance, human resources, sales, marketing and other functions are proceeding as planned. He said Apogee is seeking to preserve Kalwall’s existing strengths while expanding relationships with architects, designers and glazing contractors across the broader portfolio.

The company also recently announced its acquisition of Groglass, which will become part of the Performance Surfaces segment. Augdahl said Apogee expects Groglass to generate about $30 million in revenue and a 25% adjusted EBITDA margin during its first 12 months under Apogee ownership.

Nolan said Groglass adds differentiated technology, customer relationships and exposure to higher-value end markets, while expanding Apogee’s technical capabilities and presence in Europe. Management said its focus will be on disciplined integration and delivering the strategic and financial benefits underlying the acquisition.

Cash Flow, Leverage and Capital Allocation

Year-to-date net cash provided by operating activities was $43.3 million, compared with $37.3 million a year earlier. During the second quarter, Apogee repurchased $6.4 million of stock and paid $5.5 million in dividends.

The company ended the quarter with a consolidated leverage ratio of 1.7 times, no near-term debt maturities and available capital for the Groglass acquisition and future uses. Augdahl said management is comfortable with its leverage position, noting that it increased following the company’s acquisitions.

Apogee’s acquisition pipeline remains active, according to Augdahl, though he said the company will remain selective and would consider another deal only if it finds the right acquisition at the right price. In the meantime, management said it remains focused on delivering results and generating cash flow.

About Apogee Enterprises (NASDAQ:APOG)

Apogee Enterprises, Inc is a manufacturer of architectural products and high-performance glass and coating solutions. The company serves the commercial construction, architectural, aerospace, defense, medical, electronics and other specialized markets through operations primarily in North America, with products and services sold to customers in additional international markets.

Apogee's Architectural Framing Systems segment produces aluminum framing systems, curtainwall, storefront, windows and related components used in commercial and institutional buildings.

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