Business Overview

Apogee Enterprises, Inc. (NASDAQ:APOG) is a leading provider of architectural products and services, offering a diverse portfolio that includes architectural glass, aluminum framing systems, and integrated project management and installation services. With a rich history spanning over five decades, the company has established itself as a trusted partner in the architectural and construction industries, renowned for its commitment to innovation, quality, and customer satisfaction.

Founded in 1949 as a small glass fabrication company serving the Upper Midwest region of the United States, Apogee Enterprises has since evolved into a diversified enterprise with four core business segments: Architectural Framing Systems, Architectural Glass, Architectural Services, and Large-Scale Optical (LSO). Over the following decades, the company steadily expanded its products and services, establishing itself as a leading provider in the architectural products market.

In the 1970s, Apogee entered the custom picture framing market, leveraging its expertise in glass fabrication to offer high-performance glass and acrylic products. This diversification helped the company weather downturns in the construction industry and laid the foundation for its Large-Scale Optical segment. Throughout the 1980s and 1990s, Apogee continued to grow both organically and through strategic acquisitions, expanding its geographical reach and broadening its portfolio of architectural products and services.

However, the company also faced challenges during this period, including volatile construction markets and increased competition from lower-cost overseas manufacturers. To address these challenges, Apogee undertook a major restructuring in the early 2000s, streamlining its operations and refocusing the business on its core architectural and specialty glass capabilities. This transition was not without difficulty, but it ultimately positioned the company for a new era of growth and profitability in the 2010s, as demand for energy-efficient building materials and high-performance glazing systems continued to rise.

The Architectural Framing Systems segment designs, engineers, fabricates, and finishes aluminum window, curtainwall, storefront, and entrance systems for the exterior of buildings. The Architectural Glass segment specializes in coating and fabricating high-performance glass used in custom window and wall systems for non-residential buildings. The Architectural Services segment integrates technical services, project management, and field installation services to design, engineer, fabricate, and install building glass and curtainwall systems. The Large-Scale Optical segment, on the other hand, manufactures high-performance glass and acrylic products for the custom framing, fine art, and engineered optics markets.

Financials

Apogee's financial performance has been steadily improving in recent years, showcasing the company's ability to navigate the evolving market dynamics. In the fiscal year ended March 2, 2024, Apogee reported net sales of $1.42 billion and net income of $99.61 million, with a gross profit margin of 25.9% and an operating margin of 9.4%. The company's strong cash flow generation, with operating cash flow of $204.15 million and free cash flow of $160.97 million, has allowed it to invest in strategic initiatives and maintain a healthy balance sheet.

In the most recent quarter (Q2 2025), Apogee reported revenue of $342.44 million, a 3.2% decline from the previous year. Despite the revenue decrease, net income grew by 8.3% to $30.57 million. Operating cash flow and free cash flow showed significant improvements, increasing by 40.1% to $58.68 million and 33.6% to $50.25 million, respectively. The revenue decline was primarily driven by lower volumes, partially offset by improved pricing and mix.

Breaking down the performance by segment for Q2 2025:

• Architectural Framing Systems net sales were $141.35 million, down 11% from the prior year period, with an operating income of $17.14 million (12.1% of net sales).

• Architectural Glass net sales were $90.10 million, down 4.2% from the prior year, with an operating income of $21.07 million (23.4% of net sales).
• Architectural Services net sales were $98.02 million, up 11.3% from the prior year, with an operating income of $6.13 million (6.3% of net sales).
• Large-Scale Optical net sales were $19.83 million, down 16.1% from the prior year, with an operating income of $3.79 million (19.1% of net sales).

One of the key focus areas for Apogee has been its commitment to operational excellence and cost optimization. The company has implemented its "Apogee Management System," which is based on the principles of Lean and Continuous Improvement, to enhance productivity, reduce waste, and optimize its cost structure. These efforts have contributed to the company's ability to maintain a healthy operating margin, even in the face of market challenges.

The architectural products and services industry has seen a compound annual growth rate (CAGR) of approximately 3-5% over the past 5 years, driven by steady demand in the non-residential construction market. Apogee's performance aligns with these industry trends, as the company continues to navigate market fluctuations and capitalize on growth opportunities.

Liquidity

Apogee's growth strategy is centered around three key pillars: becoming the economic leader in its target markets, actively managing its portfolio to drive higher margins and returns, and strengthening its core capabilities. The company has been actively pursuing initiatives to diversify its revenue streams, explore new growth opportunities, and improve the efficiency and productivity of its operations.

In line with this strategy, Apogee recently announced the completion of the acquisition of UW Interco, LLC ("UW Solutions"), a vertically integrated manufacturer of high-performance coated substrates. This transaction is expected to expand the capabilities and market opportunity of Apogee's Large-Scale Optical segment, creating a new engine for growth. The acquisition is anticipated to contribute approximately $30 million in incremental net sales in fiscal 2025 but reduce adjusted diluted EPS by approximately $0.10 due to increased interest and amortization costs.

Apogee maintains a strong financial position with a debt-to-equity ratio of 0.14x and a cash balance of $51.02 million as of Q2 2025. The company has access to a $700 million senior credit facility, including a $450 million revolving credit facility and a $250 million term loan facility. As of Q2 2025, Apogee had $357.5 million available under the revolving credit facility. The company's current ratio stands at 1.65x, while its quick ratio is 1.32x, indicating a healthy liquidity position.

Outlook and Future Prospects

Despite the challenges posed by the ongoing COVID-19 pandemic and the broader macroeconomic environment, Apogee has demonstrated its resilience and ability to adapt. The company has been proactive in managing its supply chain, implementing cost-saving measures, and supporting its employees and customers during these unprecedented times.

Looking ahead, Apogee's future remains bright. The company's diverse product portfolio, strong customer relationships, and commitment to innovation position it well to capitalize on the ongoing recovery in the non-residential construction market. With a focus on driving operational efficiency, expanding its footprint, and delivering sustainable growth, Apogee Enterprises is poised to continue its trajectory as a leading player in the architectural products industry.

For the full fiscal year 2025, Apogee has provided updated guidance reflecting its stronger-than-expected second-quarter performance. The company expects:

• Net sales to decline 4% to 7%, including approximately 2 percentage points of decline related to fiscal 2025 reverting to a 52-week year and 1 percentage point of decline related to actions from Project Fortify.

• Full-year consolidated adjusted operating margin to improve to approximately 11%, driven by strong margin performance in the first half.
• Framing adjusted operating margin to improve compared to fiscal 2024 and be within the 10% to 15% target range.
• Services segment to see sequential adjusted operating margin improvement in the second half, with full-year adjusted operating margin approaching the 7% to 9% target range.
• LSO operating margin to decline compared to last year, primarily due to lower volume.
• An effective tax rate of approximately 24.5% and full-year capital expenditures of $40 million to $50 million.

Apogee has increased its full-year adjusted EPS outlook to a range of $4.90 to $5.20, up from its previous guidance, reflecting the company's stronger-than-expected second-quarter performance and continued operational improvements.

As Apogee Enterprises continues to execute its strategic initiatives and navigate the evolving market landscape, the company remains well-positioned to capitalize on growth opportunities and deliver value to its shareholders in the coming years.