Apogee Enterprises, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Apogee Enterprise Fiscal 2022 Third Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star then one on your telephone. If you require any further assistance, please press star then zero. I would now like to turn the conference over to your speaker for today, Jeff Hibson. You may begin.

Thank you, Tawanda. Good morning and welcome to Apogee Enterprises' fiscal 2022 third quarter earnings call. With me today are Ty Silberhorn, 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. These 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 measures and a reconciliation to the nearest GAAP measures are 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. These reflect management's expectations 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 today's press release and in our SEC filings. And with that, I'll turn the call over to you, Ty.

Thanks, Jeff, and thanks, everyone, for joining us this morning. Today, I'll share some highlights from the third quarter and provide an update on how we're executing our new strategy. Following my comments, the sheet will provide more details on the quarter and our full year outlook. Then, of course, we'll be ready to take your questions. Let's start with the third quarter highlights, which are on page four of our slide deck. I'm proud of our team's efforts, which delivered a solid performance this quarter. We continued our positive momentum, delivering margin expansion and adjusted earnings growth compared to last quarter. Margins and adjusted earnings have now improved sequentially each of the past two quarters. This was led by continued strong performance in architectural services. Services revenue reached a record $92 million in the third quarter and continued to deliver strong profitability with 10% operating margin in the quarter. In addition, we won several new project awards during the quarter. continuing to build our project pipeline for the coming years. We are also seeing encouraging progress in our other segments. Large-scale optical continued its recovery with 8% year-over-year growth. In framing systems, we achieved solid year-over-year growth and margin expansion. Through three quarters, framing's adjusted margins have improved by 40 basis points compared to last year. We've reached these gains even as we continue to face significant supply chain and inflation headwinds. The pricing actions we've taken in response to inflation are beginning to offset some of those higher costs. We are also realizing the benefits from our restructuring actions and our relaunch of lean to drive plant productivity. We expect framing will make further margin progress during the fourth quarter. Architectural glass had adjusted operating margin of 3 percent. Now, this is still a long way from what we believe the glass segment can deliver, but it was meaningful progress compared to the second quarter, and we saw solid productivity gains materialize in the final month of the quarter. Turning to cash flow and the balance sheet, our financial position remains very strong. We had $28 million of free cash flow in the quarter. Year-to-date, we have now generated $73 million of free cash flow, which is more than 180% of adjusted net income. With this strong cash flow, we continue to return capital to shareholders, and we improved our already healthy financial position. We achieved these results in what is still a challenging operating environment. COVID continues to impact our broader markets, and like many companies, inflation remains a significant challenge. We have seen meaningful cost increases for freight, aluminum, glass, paint, and other materials used in our operations. We also continue to experience challenges in our supply chain, and in some cases, these disruptions have impacted our service to customers. Throughout the year, we have taken actions to mitigate inflation and the supply chain issues. These actions are beginning to have a positive impact on our results. We continue to focus on improving execution. We're closely managing our controllable costs. We've adjusted our pricing where appropriate. we're working to pull forward the benefits from our restructuring actions as quickly as possible. We expect to make further incremental progress in the fourth quarter. This gives us the confidence to narrow our full-year earnings guidance to the higher end of our previous range. Just three weeks ago, we hosted our Investor Day, and I'd like to thank everyone who attended, either in person or virtually. During that investor day, we outlined our new enterprise strategy to deliver profitable growth and improved return on invested capital. As highlighted in slide five of today's deck, our strategy has three pillars. First, we are working to become the economic leader in our target markets. With clear go-to-market strategies, differentiated offerings, and competitive cost structures, to enable us to be a top margin generator in our target markets. Second, we will actively manage our portfolio to drive higher margin and ROIC performance. We will accomplish this by scaling and expanding our top performing businesses, actively addressing underperformers, and investing to add new differentiated offerings to drive growth. And third, We will strengthen core capabilities and platforms, the foundation of which is building an operating model that will deliver greater efficiencies, more scalability, and enable sustained profitable growth. During the third quarter, we made progress in each of these three pillars. We continue to execute the restructuring and cost actions we announced in August. The realignment of framing systems is nearly complete, moving from what had been six decentralized business units to a more integrated business that better leverages the scale and capabilities of the combined organization. These changes are bringing more clarity to our go-to-market approach and are also enabling improved execution, reduced costs, which in turn will generate higher margins. We are also making progress in architectural glass. At the end of the quarter, we completed the sale of our facility in Statesboro, Georgia. We also wrapped up operations at our Dallas location. All production has been successfully transitioned to our flagship glass facility in Minnesota. We did all of this while maintaining high levels of service and delivery for our customers. These actions position us to pursue our strategy of focusing on premium offerings for glass where we can differentiate and deliver more value for customers. We are also accelerating improvements in glass segments cost structure and driving productivity to improve margins. We're on track to transition our soda wall business from framing systems to the services segment. We expect this will be completed early next fiscal year, and this move will unify our offerings for complex curtain wall projects and will enable improved operational performance for soda wall. We're moving forward with our enterprise transformation efforts, so we have several projects underway to strengthen core processes and systems. This will provide new digital and back office capabilities across several functional areas, allowing us to support the businesses more efficiently. We are beginning to deploy elements of these new systems now, and we expect to make further progress in the coming quarters. Finally, we took important steps to reinvigorate our lean and continuous improvement program. We added a new leader to head those lean efforts, with an initial focus on architectural glass where we are seeing promising early results. In the coming quarters, we will expand our lean toolkit to other parts of the business with our ultimate goal of embedding lean into the culture of how we work and further develop our talent. We are still in the early stages of executing our new strategy. And over the next several quarters, we will continue our strategic pivot, positioning Apogee to create peak value for all stakeholders, driving toward our long-term financial goals. I'm excited about the path we see ahead for Apogee, and I am confident we can achieve the goals that we've set for ourselves. With that, let me turn it over to Nasheed to provide more details on the quarter and our outlook.