Apogee Enterprises, Inc.

Thank you for standing by. And welcome to the Apogee Enterprises second quarter 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, and Jeff Hishman. Please go next, sir.

Thank you, Joelle. Good morning and welcome to Apogee Enterprises Fiscal 2021 Second Quarter Earnings Call. With me today are Joe Pushis, Apogee's Chief Executive Officer, and Nishit Gupta, Chief Financial Officer. I'd like to remind everyone that there are slides to accompany today's remarks, which are available in the Investor Relations section of Apogee's website. During this call, we will reference certain non-GAAP financial measures. Definitions of these non-GAAP measures and a reconciliation to the nearest GAAP measures is provided in earnings release we issued this morning, which is also available on our website. I'd like to remind everyone that our call will contain forward-looking statements reflecting management's expectations, which are based on currently available information. Actual results may differ materially. More information about factors that could affect Apogee's business and financial results can be found in our SEC filings. And with that, I'll turn the call over to you, Joe.

Okay, thank you, Jeff, and good morning, everyone. Thanks for joining the call today. I'm very, very proud of our team for the results we delivered this quarter. On our last earnings call, I said we expected second quarter sales and operating income to increase in each and every one of our four segments relative to the first quarter, and that is exactly what we delivered. We achieved adjusted earnings of 73 cents a share in the second quarter, rebounding nicely from the 15 cents per share in the first quarter and well above prior year. The decisive actions we've taken In response to COVID, I've stabilized our business and driven strong earnings and cash flow despite a still challenging operating environment. This morning, I will review highlights from the quarter and discuss the trends we are seeing in the business and how we are positioned for the future. I'll then turn it over in the sheet for additional details on the results, our financial condition, and our outlook. After that, I'll take your questions, of course. So let's talk about the second quarter. Start with the highlights. First, we saw continued headwinds from COVID and economic conditions, which caused year-over-year revenue declines in three of our four segments. But margins and earnings rebounded strongly compared to the first quarter as our team did an impressive job of managing and controlling. Our cost savings are tracking ahead of expectations. The sheet will provide more details on this when he remarks. Additionally, we had very strong execution across all four of our segments with improved factory productivity, particularly in architectural glass. And we are seeing orders begin to ramp up at our velocity small projects glass business. Our large-scale optical segment came back stronger than expected, returning to profitability in the quarter. Recall that in the first quarter, the LSO segment was essentially shut down for the entire month of April and May, as nearly all our retail customers were closed due to COVID and government regulations, and our factories were closed until late July, two-thirds of the way into the second quarter. Going into this shutdown, we built inventory and maintained close contact with our customers. Thank you for joining us. A particularly significant improvement from the first quarter when we were at only 30% of the comparable prior year. The strong recovery is a testament to the resilience of our team and the reputation of the brand and product in the marketplace. My hats off to our large theological team. Architectural services continues to achieve premier performance. Not only did we see solid sequential growth, The segment also delivered double-digit year-over-year growth on both the top and bottom lines. Over the past year, services have had great success winning new business and building a record backlog. We had a step function change in backlog growing from around $500 million last year to approximately $700 million in the first quarter of this year. We are now executing projects in our backlogs. with visibility out more than two years. Our services business is arguably the leader in the industry, and even as current market conditions have softened, we still have a strong pipeline of opportunities to win additional projects in the coming quarters. In architectural framing systems and architectural glass, we saw impact from the current disruptions in our end markets. These two segments saw many project delays and schedule changes which impacted revenue. Both segments did a terrific job managing their costs and execution in a quarter, which helped offset the volume reduction. Finally, our team did a particularly extraordinary job of managing working capital and cash flow. Year-to-date, cash from operations is up more than 375%. We've generated more cash in the first half of fiscal 21 than we did in all of last year, with year-to-date free cash flow at $71 million and operating cash flow at over $85 million. With continued economic uncertainty, we are taking a conservative approach to capital deployment, focused on paying down debt and building liquidity. Over the past 12 months, We have reduced our total debt by $105 million. As we move through the rest of the fiscal year, we will seek to further strengthen our financial position to provide dry powder so that we can invest to accelerate growth going into an economic recovery. So overall, it was a very strong quarter and we're pleased with the results given the current economic environment in the United States. Regarding the market conditions and outlooks, even as we are successfully managing what we can control, the economic and end market conditions are clearly top of mind for all of us. Let me share a few perspectives on what we are seeing. First, in all cases, projects in our backlog and pipeline are moving forward, although we are seeing some projects progressing slower than expected, particularly due to several large cities like Boston, New York, and San Francisco, to name a few, which shut down temporarily all construction due to government regulations. All of these cities are back up and running again. Forward indicators like employment growth, the Architectural Billing Index, and the Dodge Momentum Index have rebounded from the April lows but are still well below pre-pandemic levels. It is obvious the U.S. is in an economic downturn. It's just unclear at this point how long or how severe. We are preparing for this decline by maintaining our focus on cost, execution, and cash flow. Pre-COVID, the fundamentals in our end markets were very healthy, with strong demand for new constructions and no signs of overbuilding. So we are optimistic that we will see a brief downturn followed by the return to end market growth sometime next fiscal year or calendar year 2022. Regardless of what lies ahead for our end markets, Apogee is a much stronger and more resilient company today than when we entered the last recession. Over the past several years, we've pursued a purposeful strategy to diversify our business mix We've reduced our concentration in high-rise buildings, moving to a more balanced customer often with broader exposure to segments of the market which are historically less volatile. This includes our recent expansion into small projects for architectural glass and our growing renovation business. Let me emphasize a very critical point here regarding our transition. When I joined Apogee in fiscal 2012, our glass segment under the Viracon brand was over 50% of our total company revenues. Of that, 60% of their revenues went toward monumental office towers. We define that roughly as buildings greater than 20 stories. Today, Viracon, our glass segment, is approximately 22% of our revenues. and only 20% of that is in this monumental category. This is a very important transition that will bode well for our future of being less dependent on these towers. We have pursued a growth strategy which included geographic expansion and new product innovation and today we have a portfolio of market leading brands and innovative products that are well positioned to take advantage of a market rebound. As we move forward, I'm challenging my team to continue to drive innovation and keep Apogee at the forefront of our industry and unlock new growth opportunities. We have significantly improved productivity in our operations. We've invested in factory automation and built a continued improvement culture through all of Apogee via our lean enterprise system, which has taken root in our company and is contributing to our recent factory improvement across all our segments. Over the past few quarters, we've driven sustainable cost reductions through our procurement program and other projects. We are developing a pipeline of further initiatives to drive more productivity gains in all aspects of our business from selling, general administration, overhead functions, supply chain, and manufacturing COGS. Nishit will put some numbers for this discussion in a few moments. Finally, we've maintained a very healthy financial position with modest debt, strong cash flow, and improved financial flexibility. Putting it all together, I'm confident Apogee has the strength to navigate this uncertain economic environment, and we are taking the right steps to position the company to emerge stronger when the economy turns. With that, let me turn it over to Nasheed to provide more details on the quarter and our outlook. and I'll be back to take your questions after the sheet. Thank you.