Apogee Enterprises, Inc.

Ladies and gentlemen, thank you for standing by. And welcome to Apogee's fiscal 2021 third quarter earnings 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, Jeff Hibson. Please go ahead, sir.

Thank you, Joelle. Good morning and welcome to Apogee Enterprises' fiscal 2021 third 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 websites. 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 the 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. With that, I'll turn the call over to you, Joe.

All right. Thank you, Jeff, and a big thank you to everyone for joining us this morning. I'm very proud of our team and pleased to present our strong results this quarter. We delivered earnings growth and very strong cash flow despite the current operating environment in the non-residential construction market. Our results demonstrate the underlying strength and resilience of our company and team and the countermeasures we have taken to reduce costs. This morning, I will review a few highlights from the quarter and discuss the trends we're seeing in the business and how we're positioned for the future. I'll then turn it over to the sheet for additional details on the results our financial condition, and our outlook. After that, I'll take your questions. Let me start with the highlights from the quarter. Overall, this quarter was nicely similar to the second quarter with earnings per share growth and strong cash flows despite reduced sales volumes. COVID and end market conditions are still having a significant impact on our business. We continue to see some project delays And note that the architectural billing index this week reflected a score of 46. So we've been in the mid to upper 40s for a few months now, which is a modest decline in month to month. The overall pace of activity in our architectural end markets has continued to slow down. And COVID has continued to impact our workforce and added stress for our organization and management team. That said, we have truly learned how to operate extremely efficiently in a COVID environment. I want to commend the entire Apogee team for staying focused and doing a terrific job of managing through this situation while delivering for our customers. These decisive actions we took in response to COVID earlier in the year have stabilized our business and contributed to strong operating results these last two quarters. Our top focus remains to help and safety of our workforce and taking care of our customers. Our team has done an excellent job of adapting in this COVID environment. As I said, the protocols we put in place are working, maintaining a safe work environment for our people while allowing us to provide the high quality products and services our customers expect from Apogee. We have also focused on execution in closely managing our cost structure. These efforts have showed up in our results with higher operating margins and strong working capital management and delivery metrics such as on time and complete and quality, which have never been better. A year ago, we announced our procurement savings initiative in efforts to drive synergies in our framing systems segment. We've made excellent progress on both initiatives, This quarter, we added another leg to our cost savings effort, launching a company-wide initiative to reduce our fixed cost base. We have initially targeted 10 to 20 million of savings from this effort and see significant long-term opportunities beyond that. And you'll hear more on this when the sheet gets on stage. The performance of architectural services was once again a highlight in the quarter. The segment has double-digit growth on both top and bottom line. Operating margins improved to an impressive 11.2%, driven by strong project execution and the fruits of our disciplined project selection process. Over the past two years, Services has had great success in winning new business and building a record backlog to sustain us through downturns. Over the prior five years, fiscal 15 through 19, Harman, our services company, averaged $260 million in annual awards over that five year period. In fiscal 20, last year, we sold two times that with awards over $500 million. And that's what I mean by sustaining us for the coming future. Orders in this segment are always lumpy and slowed this quarter, reflecting conditions in our end markets. However, I remain confident in the service segment long-term trajectory. Our current backlog can't sustain the business in the near term. We maintain a pipeline of opportunities to win additional projects. And our services segment is a leader in the industry well-positioned to excel when construction markets turn for the better. Another highlight in the quarter was large-scale optical, which continued its strong rebound from the COVID-related shutdown earlier this year. Our LSO segment delivered year-over-year revenue growth and returned to its typically strong operating margins above 25%. Impressively, the LSO segment revenue increased sequentially by 50% compared to the second quarter. This strong rebound is a testament to our team and the reputation of and demand for our brand and products in the marketplace. Architectural framing systems and architectural glass again saw more impact from the current situation in the end markets. Both segments had project delays and schedule changes which impacted revenue. They did a great job managing costs in execution this quarter, which helped offset the reduced volume. And importantly, both segments made progress on key strategic initiatives that will position them for future growth and improved profitability. Finally, we continue to take action to strengthen our financial position, increase liquidity, and provide dry powder to drive long-term value. Year to date, cash flow from operations is more than double last year's level. We have generated over $100 million of free cash flow this year to date, which is a record for Apogee. In addition, we completed the sale-leaseback of one of our properties, which brought in an additional $24 million of cash flow. We also extended the maturity of our long-term loan and now have no significant near-term debt maturities. With this financial strength, we resumed share repurchases during the quarter, which Nasheed will touch on as well. Going forward, we also look to increase investment in high-return capital projects to position the company for accelerated growth as architectural end markets recover. Nasheed will provide more details on our outlook for the fourth quarter. Looking longer term, I remain confident our apogee is now positioned for the future. Yes, we will continue to face uncertainty in the coming quarters. Non-resi construction markets are clearly in a lull. Forward indicators like employment growth, architectural billing index, and construction starts have rebounded but remain below pre-pandemic levels. I am encouraged, though, by recent developments with vaccines and drugs to treat this virus. And I'm optimistic that these vaccines will help return to normalcy at some point in the coming year and that our end markets can recover from their previous strong levels. Let me remind everyone that pre-COVID, our end markets were very healthy. There was strong demand for new construction with few signs of overbuilding, great tenant occupancy, and readily available financing. We entered this crisis with strong market fundamentals, which I believe bodes well for a post-COVID future. Regardless of what lies ahead for our economy and our industry, Apogee is in a much stronger position and is a much stronger company today than it was during the last recession. We are proving the resilience of our company during the pandemic while laying a foundation for future growth. We maintain our strong brands with leading market positions. We're improving execution across our company. We're moving aggressively to optimize our cost structure and improve that productivity. We're challenging our operations to drive innovation and see promising growth in all of our segments. and we are maintaining a very strong financial position that has always been a hallmark of this company. I am very confident that Apogee has the strength to navigate through the uncertain environment, and we are taking the right steps to position the company for long-term success. With that, I will now turn it over to the sheet to provide more details on the quarter and our outlook, and I will, before we take questions, I'll return with a few additional comments. Nishi, you have the time.