Results
Apogee Enterprises Inc.
06/30/2026 | Press release | Distributed by Public on 06/30/2026 13:02
Quarterly Report for Quarter Ending May 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking statements
This Quarterly Report on Form 10-Q, including the section, Management's Discussion and Analysis of Financial Condition and Results of Operations, contains certain statements that are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "believe," "expect," "anticipate," "intend," "estimate," "forecast," "project," "should," "will," "continue" or similar words or expressions. All forecasts and projections in this document are "forward-looking statements," and are based on management's current expectations or beliefs of the Company's near-term results, based on current information available pertaining to the Company. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by the Company. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results.
Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other risk factors include, but are not limited to, the risks and uncertainties set forth under "Risk Factors" section of our Annual Report on Form 10-K for the year ended February 28, 2026, and in subsequent filings with the U.S. Securities and Exchange Commission, including this Quarterly Report on Form 10-Q.
We also wish to caution investors that other factors might in the future prove to be important in affecting the Company's results of operations. New factors emerge from time to time; it is not possible for management to predict all such factors, nor can it assess the impact of each such 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. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
We are a leading provider of architectural products and services for enclosing buildings, and high-performance coating products used in applications for preservation, protection and enhanced viewing. Our four reporting segments are: Architectural Metals, Architectural Services, Architectural Glass, and Performance Surfaces.
Our enterprise strategy is based on the following three key elements:
1.Accelerate Leadership in Target Markets. We intend to enhance our position in targeted end markets by differentiating through deep customer focus and insight, using an informed understanding of customer needs to shape our offerings and delivery models. By aligning our capabilities, investments, and operating approach around this customer-focused strategy, we believe we will be better positioned to differentiate, compete effectively, and strengthen our position in the markets we serve.
2.Grow and Strengthen the Portfolio. We seek to grow and strengthen our portfolio through disciplined organic and inorganic investments in differentiated solutions that align with evolving customer needs. By prioritizing opportunities that enhance our competitive positioning and directly address customer challenges, we will reinforce our disciplined approach to portfolio growth and improvement.
3.Advance Core Capabilities. We expect to advance core capabilities by fostering a culture of continuous improvement grounded in operational excellence, talent development, and disciplined process execution. Through targeted investments in people, systems, and technology, we will strengthen our ability to deliver consistent performance and enhance the customer experience across the organization.
Recent Developments
On May 27, 2026, we entered into a definitive agreement to acquire Keller Companies, Inc. ("KCI"), the controlling shareholder of Kalwall Corporation and Structures Unlimited Inc., for approximately $105 million in cash, subject to certain customary purchase price adjustments. The sellers may also receive up to $10 million in additional earn-out consideration based on achieving certain financial objectives as defined in the agreement. We expect to fund the transaction with cash on hand and borrowings under our existing credit facility, and closing is anticipated in early July, subject to customary conditions. Upon closing, the acquired business is expected to be integrated into our Architectural Glass Segment and its results will be included in our consolidated results of operations from the date of acquisition.
The following selected financial data should be read in conjunction with the Company's Form 10-K for the year ended February 28, 2026, and the consolidated financial statements, including the notes to consolidated financial statements, included therein.
Results of Operations
The following is a discussion of our financial condition and results of operations during the three months ended May 30, 2026 and the three months ended May 31, 2025.
| Three Months Ended |
% of Net Sales
|
|||||||||||||||||||||||||
| (in thousands, except percentages) | May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||||
| Net sales | $ | 342,684 | $ | 346,622 | 100.0 | % | 100.0 | % | ||||||||||||||||||
| Cost of sales | 267,654 | 271,497 | 78.1 | % | 78.3 | % | ||||||||||||||||||||
| Gross profit | 75,030 | 75,125 | 21.9 | % | 21.7 | % | ||||||||||||||||||||
| Selling, general and administrative expenses | 56,191 | 68,194 | 16.4 | % | 19.7 | % | ||||||||||||||||||||
| Operating income | 18,839 | 6,931 | 5.5 | % | 2.0 | % | ||||||||||||||||||||
| Interest expense, net | 2,834 | 3,846 | 0.8 | % | 1.1 | % | ||||||||||||||||||||
| Other expense, net | 73 | 682 | - | % | 0.2 | % | ||||||||||||||||||||
| Earnings before income taxes | 15,932 | 2,403 | 4.6 | % | 0.7 | % | ||||||||||||||||||||
| Income tax expense | 4,397 | 5,091 | 1.3 | % | 1.5 | % | ||||||||||||||||||||
| Net earnings (loss) | $ | 11,535 | $ | (2,688) | 3.4 | % | (0.8) | % | ||||||||||||||||||
| Effective tax rate | 27.6 | % | 211.9 | % | ||||||||||||||||||||||
| Non-GAAP Measures | ||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 32,115 | $ | 34,384 | 9.4 | % | 9.9 | % | ||||||||||||||||||
| Adjusted net earnings | $ | 12,117 | $ | 11,850 | 3.5 | % | 3.4 | % | ||||||||||||||||||
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
•Consolidated net sales decreased 1.1%, to $342.7 million, driven by lower volume within our Architectural Metals and Glass Segments, partially offset by volume improvement within our Architectural Services Segment. Improved pricing and mix within the Architectural Metals Segment offset part of the volume decline.
•Gross margin increased 20 basis to 21.9%, compared to 21.7%, primarily due to price, productivity improvements including savings from Project Fortify Phase 2, and favorable mix, partially offset by higher material and freight costs and impacts from lower volume.
•Selling, general, and administrative (SG&A) expense as a percent of net sales decreased to 16.4%, compared to 19.7%. This improvement was primarily driven by the benefits from cost savings included in Project Fortify Phase 2.
•Operating income increased to $18.8 million from $6.9 million, and operating margin increased 350 basis points to 5.5%.
•Interest expense decreased to $2.8 million, due to a lower average debt balance in the first quarter of fiscal 2027 compared to the prior year.
•Other expense was $0.1 million compared to $0.7 million due to a decline in value of company-owned life insurance assets.
•Income tax expense as a percentage of earnings before income tax was 27.6%, compared to 211.9%. The decline in the effective tax rate was primarily due to generating greater earnings before income taxes compared to the first quarter of last year.
•Net earnings were $11.5 million compared to net loss of $2.7 million.
•Adjusted EBITDA decreased to $32.1 million, compared to $34.4 million, and adjusted EBITDA margin decreased to 9.4%, compared to 9.9%. The decrease in adjusted EBITDA margin was primarily driven by higher material and freight costs and the impacts from lower volume, partially offset by productivity improvements and benefits from cost savings of Fortify Phase 2.
•Adjusted net earnings were $12.1 million compared to $11.9 million.
Use and Reconciliation of Non-GAAP Financial Measures
In addition to reporting financial results in accordance with U.S. GAAP, we also provide certain non-GAAP financial measures. These measures are not in accordance with, nor are they a substitute for U.S. GAAP measures, and may not be comparable to similarly titled measures used by other companies. 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. For each of these non-GAAP measures, we provide a reconciliation between the non-GAAP measure and the most directly comparable U.S. GAAP measure, and an explanation of why we believe the non-GAAP measure provides useful information to management and investors.
Non-GAAP measures include:
•Adjusted net earnings and adjusted earnings per diluted share (adjusted diluted EPS), used by the Company to provide meaningful supplemental information about its operating performance by excluding amounts that are not considered part of core operating results, to enhance comparability from period-to-period.
•Adjusted EBITDA, defined as adjusted net earnings before interest, taxes, depreciation, and amortization, and adjusted EBITDA margin, defined as adjusted EBITDA as a percentage of net sales. We use adjusted EBITDA and adjusted EBITDA margin to assess segment performance and make decisions about the allocation of operating and capital resources by analyzing recent results, trends, and variances of each segment in relation to forecasts and historical performance.
| Apogee Enterprises, Inc. | ||
| Reconciliation of Non-GAAP Financial Measures | ||
| Adjusted EBITDA and Adjusted EBITDA Margin | ||
| (Unaudited) | ||
| Three Months Ended May 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| (In thousands) | Architectural Metals | Architectural Services | Architectural Glass | Performance Surfaces | Corporate and Other | Consolidated | ||||||||||||||||||||||||||||||||
| Net earnings (loss) | $ | 9,759 | $ | 5,372 | $ | 2,496 | $ | 2,628 | $ | (8,720) | $ | 11,535 | ||||||||||||||||||||||||||
| Interest expense (income), net | 386 | (33) | (172) | - | 2,653 | 2,834 | ||||||||||||||||||||||||||||||||
| Income tax expense | 71 | 4,326 | 4,397 | |||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 3,554 | 798 | 3,499 | 3,950 | 778 | 12,579 | ||||||||||||||||||||||||||||||||
| EBITDA | 13,699 | 6,137 | 5,894 | 6,578 | (963) | 31,345 | ||||||||||||||||||||||||||||||||
|
Acquisition-related costs (1)
|
- | - | - | - | 770 | 770 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 13,699 | $ | 6,137 | $ | 5,894 | $ | 6,578 | $ | (193) | $ | 32,115 | ||||||||||||||||||||||||||
| EBITDA margin | 11.2 | % | 5.3 | % | 8.7 | % | 14.8 | % | N/M | 9.1 | % | |||||||||||||||||||||||||||
| Adjusted EBITDA margin | 11.2 | % | 5.3 | % | 8.7 | % | 14.8 | % | N/M | 9.4 | % | |||||||||||||||||||||||||||
| Three Months Ended May 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| (In thousands) | Architectural Metals | Architectural Services | Architectural Glass | Performance Surfaces | Corporate and Other | Consolidated | ||||||||||||||||||||||||||||||||
| Net earnings (loss) | $ | 3,669 | $ | (6,193) | $ | 10,202 | $ | 4,132 | $ | (14,498) | $ | (2,688) | ||||||||||||||||||||||||||
| Interest expense (income), net | 457 | (52) | (145) | - | 3,586 | 3,846 | ||||||||||||||||||||||||||||||||
| Income tax expense | (44) | (8) | 90 | - | 5,053 | 5,091 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 3,813 | 1,072 | 3,270 | 3,550 | 731 | 12,436 | ||||||||||||||||||||||||||||||||
| EBITDA | 7,895 | (5,181) | 13,417 | 7,682 | (5,128) | 18,685 | ||||||||||||||||||||||||||||||||
|
Acquisition-related costs (1)
|
- | - | - | 277 | 72 | 349 | ||||||||||||||||||||||||||||||||
|
Restructuring costs (2)
|
1,471 | 11,248 | - | - | 2,631 | 15,350 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 9,366 | $ | 6,067 | $ | 13,417 | $ | 7,959 | $ | (2,425) | $ | 34,384 | ||||||||||||||||||||||||||
| EBITDA margin | 6.1 | % | (4.9) | % | 18.3 | % | 18.2 | % | (1.5) | % | 5.4 | % | ||||||||||||||||||||||||||
| Adjusted EBITDA margin | 7.3 | % | 5.7 | % | 18.3 | % | 18.8 | % | (0.7) | % | 9.9 | % | ||||||||||||||||||||||||||
|
(1)
|
Acquisition-related costs associated with the pending Keller Companies, Inc. acquisition in fiscal 2027 and UW Solutions acquisition in fiscal 2026, respectively, which management does not consider reflective of core operating performance for the periods presented. | ||||
|
(2)
|
Restructuring costs related to Project Fortify Phase 2, including $7.4 million of asset impairment charges in fiscal 2026.
|
||||
| Reconciliation of Non-GAAP Financial Measures | ||
| Adjusted Net Earnings | ||
| (Unaudited) | ||
| Three Months Ended | ||||||||||||||
| (In thousands) | May 30, 2026 | May 31, 2025 | ||||||||||||
| Net earnings | $ | 11,535 | $ | (2,688) | ||||||||||
|
Acquisition-related costs (1)
|
770 | 349 | ||||||||||||
|
Restructuring costs (2)
|
- | 15,350 | ||||||||||||
|
Income tax impact on above adjustments (3)
|
(188) | (1,161) | ||||||||||||
| Adjusted net earnings | $ | 12,117 | $ | 11,850 | ||||||||||
|
(1)
|
Acquisition-related costs associated with the pending Keller Companies, Inc. acquisition in fiscal 2027 and UW Solutions acquisition in fiscal 2026, respectively, which management does not consider reflective of core operating performance for the periods presented. | ||||
|
(2)
|
Restructuring costs related to Project Fortify Phase 2, including $7.4 million of asset impairment charges in fiscal 2026.
|
||||
| (3) | Income tax impact reflects the estimated blended statutory tax rate for the jurisdictions in which the charge or income occurred. | ||||
Segment Analysis
Disclosures related to our business segments are included in Note 12 of our Consolidated Financial Statements. We manage our business in four reportable segments: Architectural Metals, Architectural Services, Architectural Glass and Performance Surfaces.
The following table presents net sales, adjusted EBITDA and adjusted EBITDA margin by segment and the consolidated total.
| Three Months Ended | ||||||||||||||||||||
| (In thousands, except percentages) | May 30, 2026 | May 31, 2025 | % Change | |||||||||||||||||
| Segment net sales | ||||||||||||||||||||
| Architectural Metals | $ | 122,443 | $ | 128,624 | (4.8)% | |||||||||||||||
| Architectural Services | 115,237 | 106,505 | 8.2% | |||||||||||||||||
| Architectural Glass | 67,712 | 73,273 | (7.6)% | |||||||||||||||||
| Performance Surfaces | 44,324 | 42,250 | 4.9% | |||||||||||||||||
| Total segment sales | 349,716 | 350,652 | (0.3)% | |||||||||||||||||
| Intersegment eliminations | (7,032) | (4,030) | 74.5% | |||||||||||||||||
| Net sales | $ | 342,684 | $ | 346,622 | (1.1)% | |||||||||||||||
| Segment adjusted EBITDA | ||||||||||||||||||||
| Architectural Metals | $ | 13,699 | $ | 9,366 | 46.3% | |||||||||||||||
| Architectural Services | 6,137 | 6,067 | 1.2% | |||||||||||||||||
| Architectural Glass | 5,894 | 13,417 | (56.1)% | |||||||||||||||||
| Performance Surfaces | 6,578 | 7,959 | (17.4)% | |||||||||||||||||
| Corporate and Other | (193) | (2,425) | 92.0% | |||||||||||||||||
| Adjusted EBITDA | $ | 32,115 | $ | 34,384 | (6.6)% | |||||||||||||||
| Segment adjusted EBITDA margin | ||||||||||||||||||||
| Architectural Metals | 11.2 | % | 7.3 | % | ||||||||||||||||
| Architectural Services | 5.3 | % | 5.7 | % | ||||||||||||||||
| Architectural Glass | 8.7 | % | 18.3 | % | ||||||||||||||||
| Performance Surfaces | 14.8 | % | 18.8 | % | ||||||||||||||||
| Corporate and Other | N/A | N/A | ||||||||||||||||||
| Adjusted EBITDA margin | 9.4 | % | 9.9 | % | ||||||||||||||||
Architectural Metals
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
•Net sales were $122.4 million, compared to $128.6 million, primarily due to lower volume, partially offset by favorable price and product mix.
•Adjusted EBITDA was $13.7 million, or 11.2% of net sales, compared to $9.4 million, or 7.3% of net sales. The higher adjusted EBITDA margin was primarily driven by improved mix and favorable productivity including cost savings related to Project Fortify Phase 2, partially offset by the impact of lower volume and the impact from higher aluminum costs.
Architectural Services
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
•Net sales were $115.2 million, compared to $106.5 million, driven by increased volume.
•Adjusted EBITDA remained relatively consistent at $6.1 million, or 5.3% of net sales, compared to $6.1 million, or 5.7% of net sales. The decline in adjusted EBITDA margin was driven by unfavorable project mix, mostly offset by benefits from the actions of Project Fortify Phase 2 to reduce the impact of tariffs, and the impact from increased volume.
Cumulative catch-up adjustments on our longer-term contracts for changes in estimates were as follows:
| Three Months Ended | ||||||||||||||
| (in thousands) | May 30, 2026 | May 31, 2025 | ||||||||||||
|
Gross favorable adjustments
|
$ | 4,301 | $ | 5,293 | ||||||||||
|
Gross unfavorable adjustments
|
(4,970) | (5,226) | ||||||||||||
|
Net adjustments
|
$ | (669) | $ | 67 | ||||||||||
Architectural Glass
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
•Net sales were $67.7 million, compared to $73.3 million, driven by lower price and volume due to continued end market softness, partially offset by favorable mix.
•Adjusted EBITDA decreased to $5.9 million, or 8.7% of net sales, compared to $13.4 million, or 18.3% of net sales. The decrease in adjusted EBITDA margin was primarily driven by lower price, reduced volume, and material inflation.
Performance Surfaces
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
•Net sales were $44.3 million, compared to $42.3 million, driven by increased volume and favorable price.
•Adjusted EBITDA was $6.6 million, or 14.8% of net sales, compared to $8.0 million, or 18.8% of net sales. The decrease in adjusted EBITDA margin was primarily driven by the net impact of higher material and freight costs, partially offset by productivity.
Corporate and Other
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
•Corporate and Other adjusted EBITDA expense was $0.2 million, compared to $2.4 million, primarily due to an insurance-related benefit.
Backlog
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. Backlog is an operating measure used by management to assess future potential sales revenue. 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 we have a substantial number of projects with short lead times that book-and-bill within the same reporting period that are not included in backlog. It is most meaningful for the Architectural Services segment, due to the long-term nature of their projects.
As of May 30, 2026, segment backlog in the Architectural Services Segment was approximately $734.5 million, compared to approximately $682.9 million at the end of the first quarter of fiscal 2026.
Liquidity and Capital Resources
We rely on cash provided by operations for our ongoing cash requirements, including working capital needs, capital expenditures, satisfaction of contractual commitments (including principal and interest payments on our outstanding indebtedness) and shareholder return through dividend payments and share repurchases.
Operating Activities. Net cash provided by operating activities was $7.4 million for the first three months of fiscal 2027, compared to a use of $19.8 million in the prior year period. The increase in net cash provided by operating activities was driven by higher net earnings and an arbitration settlement payment in the prior year that did not recur.
Investing Activities. Net cash used in investing activities was $9.8 million for the first three months of fiscal 2027, compared to $7.0 million in the prior-year period. The increase net cash used in investing activities was primarily related purchases of marketable securities.
Financing Activities. Net cash used in financing activities was $11.1 million for the first three months of fiscal 2027, compared to $17.6 million of cash provided by financing activities in the prior year period. The change in net cash provided by financing activities was driven by lower net proceeds received from our revolving credit facility, partially offset by $9.7 million of repurchases of common stock.
Additional Liquidity Considerations. We periodically evaluate our liquidity requirements, cash needs and availability of debt resources relative to acquisition plans, significant capital plans, and other working capital needs. See Note 5 to our Consolidated Financial Statements for more information related to our debt agreements.
Outstanding borrowings under the term loan facility were $209.4 million as of May 30, 2026. Outstanding borrowings under the revolving credit facility were $28.0 million as of May 30, 2026.
At May 30, 2026, we had a total of $2.6 million of ongoing letters of credit related to the senior credit facility, construction contracts and insurance collateral that expire in fiscal 2027 and reduce borrowing capacity under the revolving credit facility. As of May 30, 2026, the amount available for revolving borrowings was $419.4 million.
We acquire the use of certain assets through operating leases, such as property, manufacturing equipment, vehicles and other equipment. Future payments for such leases, excluding leases with initial terms of one year or less, were $56.8 million at May 30, 2026, with $11.8 million payable during the remainder of fiscal 2027.
As of May 30, 2026, we had $14.9 million of open purchase obligations, of which payments totaling $7.4 million are expected to become due during the remainder of fiscal 2027.
We are required, in the ordinary course of business, to provide surety or performance bonds that commit payments to our customers for any non-performance. At May 30, 2026, $1.1 billion of these types of bonds were outstanding, of which $239.8 million is in our backlog. These bonds have expiration dates that align with completion of the purchase order or contract. We have not been required to make any payments under these bonds with respect to our existing businesses.
Due to our ability to generate strong cash from operations and our borrowing capability under our committed revolving credit facility, we believe that our sources of liquidity will be adequate to meet our short-term and long-term liquidity and capital expenditure needs. In addition, we believe we have the ability to obtain both short-term and long-term debt to meet our financing needs, including additional sources of debt to finance potential acquisitions, for the foreseeable future. We also believe we will be able to operate our business so as to continue to be in compliance with our existing debt covenants over the next fiscal year.
We continually review our portfolio of businesses and their assets and how they support our business strategy and performance objectives. As part of this review, we may acquire other businesses, pursue geographic expansion, take actions to manage capacity and further invest in, divest and/or sell parts of our current businesses.
Related Party Transactions
No material changes have occurred in the disclosure with respect to our related party transactions set forth in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.
Critical Accounting Policies
There have been no significant changes to our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.
Apogee Enterprises Inc. published this content on June 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on June 30, 2026 at 19:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]