Apogee Enterprises, Inc.

Good day and thank you for standing by. Welcome to the Apogee Enterprise Fiscal 2023 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your host today, Jeff Hibschen. Please go ahead.

Thank you, Michelle. Good morning, everyone, and welcome to Apogee Enterprises' fiscal 2023 first 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 gap measures are provided in the earnings release we issued this morning. As a reminder, beginning this quarter, the soda wall business is included in the architectural service movement moving from architectural framing systems. Our earnings presentation includes a table with pro forma segment results for the prior year that reflect this change. I'd also 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. With that, I'll turn the call over to you, Ty.

Thank you, Jeff. Thanks, everyone, for joining us this morning. This was a strong quarter for Apogee, an encouraging start to our fiscal year. I am extremely proud of the progress that our team is making as we execute our strategy. This morning, I will discuss the highlights from the quarter, how our strategy is driving our improved results, what we're seeing in our end markets, and our outlook for the rest of the year. Then the sheet will provide more details on the quarter and the increase in our full-year guidance. After that, we'll take your questions. Let's start with the highlights from the quarter on page four in our presentation. We achieved very strong top and bottom line growth this quarter. Revenue grew 9 percent to $357 million. Operating margins improved significantly to 9.3 percent. And earnings more than doubled to $1 a share. These strong results were led by our framing systems business. Framing delivered 19% revenue growth and nearly tripled operating income compared to the prior year. We also achieved strong profitability growth in architectural glass. Glass operating income more than doubled and margins improved to 6.8% up from 2.6 percent last year. A key part of this success was effectively managing costs and pricing, especially in framing systems. Last quarter, we said we expected inflation to remain a challenge in fiscal 23, but that we were improving on our ability to mitigate its impact. That's exactly what played out this quarter. Inflation was a $22 million year-over-year headwind in the quarter. Costs for commodities like aluminum, energy, and freight all reached historically high levels with significant volatility. But we were able to more than offset this through pricing, cost actions, and the early benefits of a better product mix in both our framing and glass segments. We also achieved improved productivity and yields through our lean efforts. This was especially evident in the glass segment, and we are now expanding our lean efforts within framing systems. As a reminder, the framework for our enterprise strategy is shown on page five of our presentation. The first pillar of our strategy is to become the economic leader in our target markets. Our initial focus has been to improve the performance of framing systems and architectural glass. These two segments had been underperforming their potential. Last year, we began to execute several actions to improve the competitive position and operational execution in framing and glass. We completed restructuring actions designed to enable a more competitive cost structure. bring a stronger focus to differentiated products and services where we provide the most value for customers and better position them for future profitable growth. We also took action to improve execution in both segments via a revitalized lean program. We still have a lot of work to do to fully capitalize on the opportunities in these areas. But this quarter demonstrates the progress that we are making. We are strengthening execution. We are improving our ability to manage costs and pricing. And we are driving productivity gains. Last year, we also established target margin ranges for each of our segments. We saw framing systems with the potential to achieve 9 to 12 percent margins. and 7 to 10 percent margins in architectural glass. The glass segment is approaching that range, delivering 6.8 percent margin this quarter. Framing systems exceeded their target range in the first quarter. This was driven by the operating improvements that I discussed, along with the benefits from the timing of pricing actions and inventory flows as we manage through unprecedented volatility in aluminum prices. Nishit will provide more details on this during his remarks. Framing's 14.5 percent margin this quarter is likely not sustainable in the near term, but we are clearly driving improved performance that should keep framing margins within our target range for this fiscal year. Page six in our presentation outlines this year's priorities as we continue to execute our strategy. Those items highlighted in the bold text are areas where our efforts visibly impacted our first quarter results. In addition to lean and pricing, we also made investments to strengthen our M&A capabilities and investments in our services segment to fully integrate SOTOWOG. We invested in our people, launching new talent development programs. We continued to work on standardizing processes, and we leveraged our transformation management office to strengthen core systems and drive our corporate initiatives. These will remain our focus areas as we move through the rest of the fiscal year. Let me move on to some comments on the overall market and our outlook for the year. First, the challenges we faced over the past several quarters from inflation and supply chain disruptions show no signs of abating. We expect these will remain headwinds throughout the year. We continue to see significant cost pressure and volatility in aluminum, glass, freight, energy, and other categories. Accordingly, we will continue to focus on cost management, productivity, and pricing. I'd like to recognize our team once again for managing through this challenging situation while doing their best to minimize the impact on our customers. We are closely monitoring how inflation, rising interest rates, and overall economic conditions might impact demand in our end markets. However, most metrics continue to point to a favorable outlook for non-residential construction. Forward indicators like the Architectural Billing Index and New Construction Starts have been positive for the past 16 months. This suggests the industry is building a solid pipeline of projects that has the potential to drive market growth. This was reflected in what we saw in our own business this quarter. Our backlog increased, and we saw solid order and bidding activity across our architectural elements. While overall non-residential construction has not returned to pandemic levels, we are seeing good demand for premium office projects. This plays to the strengths of our services and glass segments. We are also seeing a shift in the overall market with more demand for institutional projects like healthcare, education, and transportation centers. Our teams are capitalizing on this shift as our backlog mix is increasing for these project types. Other factors also support a favorable outlook for construction. These include federal government investments in infrastructure and long-term trends toward more energy-efficient buildings. We will continue to closely monitor the market and economic conditions. At this point, we still expect full-year revenue growth primarily driven by framing systems. We also expect to deliver meaningful year-over-year margin expansion. This will continue to be driven by the improved performance in framing systems and glass. Based on that, we are increasing our guidance for full-year earnings per share by about 20% at the midpoint of our range. With that, let me turn it over to Nishit to provide more details on the quarter as well as our guidance.