Apogee Enterprises — Fiscal 2027 Second Quarter Earnings Summary

Financial Performance

• Net sales increased 9.2% year-over-year to $391.1 million for the quarter ended August 29, 2026, compared to $358.2 million in the prior year period.
• Diluted earnings per share (EPS) were $1.07, a 2.7% decrease from $1.10 in the prior year; adjusted diluted EPS increased 19.4% to $1.17 from $0.98.
• Operating income rose 24.5% to $33.5 million from $26.9 million; operating margin improved 110 basis points to 8.6% from 7.5%.
• Gross margin increased 150 basis points to 24.6% from 23.1%.
• Adjusted EBITDA increased 11.7% to $49.5 million from $44.4 million; adjusted EBITDA margin expanded to 12.7% from 12.4%.
• Net earnings decreased 5.4% to $22.4 million from $23.6 million, primarily due to a nonrecurring New Markets Tax Credit in the prior year.
• Interest expense decreased to $3.6 million from $4.1 million, driven by a lower average debt balance.
• Fiscal year-to-date net cash provided by operating activities was $43.3 million, compared to $37.3 million in the prior year.
• Quarter-end long-term debt increased to $335.5 million, resulting in a Consolidated Leverage Ratio of 1.7x.

Guidance and Future Outlook

• The Company raised its fiscal 2027 adjusted diluted EPS guidance range to $3.00–$3.40 from the previous range of $2.70–$3.25.
• Fiscal 2027 net sales guidance was raised to a range of $1.46 billion–$1.50 billion from $1.38 billion–$1.43 billion.
• The outlook assumes interest expense of approximately $15 million, an adjusted effective tax rate of approximately 26%, and capital expenditures between $35 million and $40 million.
• Guidance reflects stronger-than-expected first-half performance, anticipated contributions from Kalwall and Groglass acquisitions, and current macroeconomic conditions.

Business Segments and Product Lines

• Architectural Metals: Net sales increased 1.8% to $143.5 million; adjusted EBITDA was $22.1 million (15.4% margin). Growth was driven by price, productivity, and cost savings, offset by higher aluminum costs and lower volume.
• Architectural Services: Net sales increased 7.9% to $108.5 million; adjusted EBITDA was $6.2 million (5.8% margin). Segment backlog ended the quarter at $833.0 million, up from $792.3 million at the end of fiscal 2026.
• Architectural Glass: Net sales increased 21.1% to $87.4 million, driven by a $16.4 million contribution from the Kalwall acquisition. Adjusted EBITDA was $13.0 million (14.9% margin).
• Performance Surfaces: Net sales increased 14.2% to $55.3 million; adjusted EBITDA was $12.4 million (22.5% margin).
• Corporate and Other: Adjusted EBITDA was an expense of $4.2 million, an improvement from $4.3 million in the prior year, driven by cost savings and lower health insurance costs.
• The Company advanced strategic priorities through the acquisitions of Kalwall (completed July 1, 2026) and Groglass.

Market and Competitive Landscape

• The Company noted a mixed demand environment, with lower volume partially offsetting price increases and acquisition contributions.
• The Architectural Glass segment benefited from favorable mix and the accretive impact of the Kalwall acquisition.
• The Company cited disciplined pricing and productivity initiatives, including Project Fortify 2, as key drivers offsetting cost pressures.

Risks and Challenges

• Forward-looking statements identify risks including North American and global economic conditions, cyclical nature of non-residential construction, and labor sourcing challenges.
• Potential risks include supply chain disruptions, fluctuations in material availability and costs, trade policies, and tariffs.
• Risks also encompass product performance issues, project management risks, cybersecurity threats, regulatory compliance costs, and the successful integration of acquired businesses.

Management Commentary and Tone

• Executive Chair and CEO Don Nolan stated the company is "pleased with the second-quarter results which exceeded our expectations, driven by strong execution across the business."
• Management expressed confidence in the business, citing momentum established in the first half of the year as the basis for raising full-year guidance.
• Early performance at Kalwall was described as "encouraging," with Groglass expected to strengthen the portfolio through differentiated capabilities.

Other Key Points

• The Company returned $27.3 million of cash to shareholders year-to-date through $16.1 million in share repurchases and $11.2 million in dividends.
• Acquisition-related costs for the Kalwall and pending Groglass acquisitions totaled $2.4 million for the quarter.
• Restructuring costs related to Project Fortify Phase 2 were $0 for the quarter, compared to $3.1 million in the prior year period.
• A nonrecurring New Markets Tax Credit settlement gain of $4.6 million occurred in the prior year quarter, contributing to the variance in net earnings.
• The Company hosts a conference call to discuss results, with webcast and presentation slides available on its Investor Relations website.