Apogee Enterprises, Inc.

Welcome to the Q4 2023 Apigee Enterprises Incorporated 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 the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Hepchen, Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, everyone, and welcome to Apogee Enterprises Fiscal 2023 Fourth Quarter Earnings Call. With me today are Ty Silberhorn, Apogee's Chief Executive Officer, and Mark Ogdahl, Interim Financial Officer. I'd like to remind everyone that there are slides to accompany today's remarks, and 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 and slide deck that we issued this morning. 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. And with that, I'll turn the call over to you, Ty.

Thanks, Jeff. Well, the fourth quarter was a solid finish to a terrific year for Apogee. We continued to improve execution across the company And we built momentum executing our strategy, leading to a record full year revenue and earnings per share. I'd like to congratulate the entire Apigee team for these terrific results. This morning, I'll touch on the highlights from the quarter and the year, how our strategy is driving sustainable improvements in our business, and our priorities as we continue to execute that strategy in fiscal 24. Then I'll turn it over to Mark for more details on the quarter and our outlook. Overall, results in our fourth quarter were largely as expected. We continued to have solid operational execution, effectively managing price and costs. As we expected, Holiday shutdowns and normal seasonality impacted sales volume, especially in framing systems. Architectural glass delivered another quarter of impressive progress, with operating margin exceeding 11%. Results were softer than expected in architectural services as we continued to work through the soda wall integration and the improvement of that business. Finally, cash flow in the quarter was very strong, bringing full-year cash from operations above last year's level. These strong fourth quarter results continued the positive trends established throughout fiscal 23. By executing our strategy, we have made sustainable improvements in our business. As a reminder, An overview of our strategy is shown on page four of today's presentation. This year, we made great progress advancing each pillar of our strategy. Some of the highlights are listed on page five. We advanced our lean and continuous improvement initiatives, which significant productivity gains, especially in architectural glass. We improved our overall approach to pricing, and we maintained a strong focus on cost management. Together, these allowed us to more than offset the continued impact of inflation. We worked to increase our mix of differentiated products and services. In architectural glass, we continued to shift our selling strategies toward premium, higher value-added products. In framing systems, we rationalized offerings moving away from lower margin products. And in large-scale optical, we continued to emphasize our highest performing differentiated products. To support the second pillar of our strategy, active portfolio management, we've strengthened our M&A capabilities, improving our selection and execution processes for future acquisitions. We also made significant progress with integrating SOTAWALL into architectural services. Finally, we improved our talent development programs, which is a key enabler for all three pillars of our strategy. This work was evident in our financial results for the year. Full year revenue grew 10% to a record $1.44 billion. Adjusted operating income increased more than 50% compared to last year. And adjusted earnings grew 60% to a record $3.98 per share. Full year results in framing systems and architectural glass were particularly impressive. At our investor day, we acknowledged that these two segments were underperforming their potential. Most of our focus the past six quarters has been to better position framing and glass for long-term success. Page six shows the margin progression for both segments. Framing margins improved by 530 basis points compared to last year, and glass improved by 600 basis points. Both segments are now performing within their targeted margin ranges, and we expect continued strong performance in fiscal 24 and beyond. At our investor day in November of 2021, we also established three-year financial targets for return on invested capital, operating margin, and revenue growth. We are well on our way to reaching each of these objectives, as reflected on page seven. ROIC in fiscal 23 reached 13.8%, exceeding our goal of greater than 12. In fact, all four segments were above 12% ROIC, a first for the company in many years. Operating margin improved to 8.7%. great progress toward our 10% plus target after just one year of our three-year plan. And our revenue growth surpassed the growth rate in non-residential construction. This was an especially strong result as we moved away from some lower margin volume as part of fiscal 22 restructuring and new strategic direction we set for the company. As we move into fiscal 2024, our strategic framework remains well positioned to drive further progress toward our financial targets. We will do this even in a challenging market environment. While lower, inflation will remain an issue for the foreseeable future. We expect continued tight labor markets and higher interest rates combined with overall economic uncertainty will likely impact construction activity at some level. However, through our team's efforts, we are transforming Apogee into a higher-performing, more resilient company, and I'm confident that we will drive further performance gains in the year ahead. Page 8 outlines our priorities for the new fiscal year, and let me go into more detail on two of these. starting with the Apogee Management System, or AMS, on page nine. We first introduced AMS at our investor day. We view this as a multi-year effort to build an operating framework with supporting tools that define how we run our business. AMS is based on the principles of lean and continuous improvement. These have been a part of Apigee's culture for several years, but the program needed to be reinvigorated. We started small, focusing heavily on just one part of our business, architectural glass. And we brought in key talent from other world-class manufacturing companies to support our efforts. Our goal was to move quickly to generate near-term improvements to the bottom line. We experimented and learned, making changes that delivered real results. From there, we began to broaden our approach deeper into the organization. In fiscal 24, we will continue to expand the scope of AMS. We will move beyond the initial deployment in Glass, going deeper into other parts of the company. And we will expand our toolkit beyond the foundation of Lean. We've challenged the organization to build pipelines of projects designed to drive continued productivity improvements. Through the deployment of AMS, we see the potential to drive meaningful productivity gains and continued margin improvement for the next several years. And this muscle will strengthen our ability to achieve synergies with future acquisitions. which is the next priority area I'd like to discuss, outlined on page 10. We see M&A as an important part of our growth strategy going forward. To generate value from acquisitions, we needed to strengthen our foundation. We accomplished much of this work the past year and will continue to build our capabilities in fiscal 24. We've added key talent, defined a clear strategy, and established a disciplined approach for screening and evaluating potential target companies. From this work, our team has developed a pipeline of opportunities and a plan for proactive engagement. Importantly, we have also developed a detailed approach to integration. In any deal, we will leverage Apigee's core capabilities to drive value from synergies. The chart on page 10 outlines some characteristics we will look for in potential deals. We will seek acquisitions that support our strategy of becoming an economic leader. This means adding differentiated solutions that either strengthen our existing core business or help us expand into attractive adjacencies and further diversify our construction project mix. We will also apply a rigorous financial lens to potential deals to ensure acquisitions are accretive to our long-term financial performance. As we focus on our priorities for the new year, I'm confident we will advance our strategy and move closer to achieving our 10% margin goal while sustaining our ROIC and growth objectives. We are proud of the progress we made over the past year. But we know our work is not done. Our entire team is aligned to become the economic leader in our target markets and drive continued performance gains. With that, let me turn the call over to Mark for more details on the quarter and our guidance.

Thanks, Ty. Good morning, everyone. We closed out our fiscal year with a solid fourth quarter. continuing the positive momentum we've built throughout the year. Let me provide more details, starting with the consolidated results found on page 11. As Ty mentioned, the quarter played out largely as we expected. We had solid execution across most of the business, while pricing remained strong, allowing us to more than offset inflation. Seasonality in our extended holiday negatively impacted volume and revenue. Total revenue grew 5% to $344 million in the quarter. Like the past few quarters, growth was primarily driven by inflation-related pricing and framing systems. The glass segment also had double-digit growth, primarily from pricing and improved product mix. This was partially offset by lower revenue in architectural services. Adjusted operating income and margins decreased compared to the prior year. This was primarily driven by lower margins in the architectural services segment, along with higher corporate expense from increased insurance and compensation costs. These were nearly offset by strong margin performance in framing systems and glass. Interest expense remained a headwind, up $1.2 million compared to last year's fourth quarter. This was primarily driven by higher interest rates. The tax rate in the quarter was lower than our statutory rate, primarily due to tax benefits related to the worthless stock deduction we took earlier in the year. We excluded this 1.1 million tax benefit from our adjusted earnings. Our diluted share count was 22.3 million, down 8% from last year, due to our share repurchases earlier in the year. At the bottom line, adjusted earnings were 86 cents per share, down slightly from 91 cents in last year's fourth quarter. Our full year results are shown on page 12. As Ty mentioned, we achieved record full year revenue and earnings per share. While growth was driven by framing systems, all four segments increased their revenue for the year. I'd also like to note that large-scale optical achieved another year of record sales. Full-year adjusted operating income increased by 52% and margins improved by 240 basis points, driven by strong gains in both framing systems and glass. We are particularly happy with our improved return on invested capital. This was up 570 basis points to 13.8%. and above our 12 percent target. Let's move to segment results on slide 13, starting with framing systems. Framing had another solid quarter. Revenue grew 13 percent, primarily driven by pricing actions taken to offset inflation, along with a more favorable sales mix. Operating income increased to 15.6 million, and margins improved to 10.5 percent. Up 370 basis points compared to last year. Turning now to architectural services. Revenue was down 14% reflecting lower volume due to timing of projects in our backlog. Operating margin decreased to 3.7%. This was primarily driven by lower profitability on legacy soda wall projects. We have made great progress to integrate SodaWall into our services segment. We've retired the SodaWall brand and the entire segment now operates under the Harmon brand and business model. We are no longer pursuing the type of work that SodaWall competed for in the past. And going forward, we see significant opportunity to improve overall profitability in the services segment. Looking at orders and backlog, services finished the year with $727 million in backlog. This was down slightly compared to the third quarter, but well above last year's level, reflecting solid order intake during the year and positioning us well for fiscal 2024. In architectural glass, the team continued to make terrific progress. Revenue grew 12% to $81 million. This was driven by improved pricing and mix and reflects our continuing strategic shift towards more premium products. Operating margin continued to trend higher, reaching 11.7%. Adjusted operating margins in glass have now improved sequentially for six consecutive quarters. Finally, large-scale optical continued to deliver steady performance. Revenue grew 3%, primarily due to improved pricing, and operating income was down slightly due to increased operating costs. Let's turn to the cash flow and the balance sheet found on page 14. We had another very strong quarter with 52 million of cash flow from operations. This pushed full-year cash from operations to 103 million, which was slightly above last year's level. We were especially happy with cash flow performance given the significant use of cash in the first quarter due to increased working capital related to inflation. We ramped up capital spending in the fourth quarter, bringing full year CapEx to 45 million. This included investments to expand capacity in our higher margin businesses, enhance productivity through automation, and deploy improved systems to better support our business. Other than CapEx, our primary use of cash in the quarter was used for debt reduction. We paid down $34 million of debt in the quarter. This puts our net leverage below one times adjusted EBITDA. In addition to CapEx and debt reduction, we also continue to return cash to shareholders. During the quarter, we increased our dividend by 9% for the full year and returned $94 million to shareholders through share buybacks and dividends. We want to reiterate our commitment to a balanced capital deployment strategy shown on page 15. We plan to continue to invest to support our strategy. In fiscal 24, we expect capital spending of $50 to $60 million in addition to evaluating potential acquisitions. We will also continue to return cash to shareholders while maintaining a strong balance sheet. This balanced approach to capital deployment is supported by our continued strong cash flow from operations. Let me wrap up by discussing our outlook, which is found on page 16. We expect full-year earnings per share in the range of $3.90 to $4.25. I would like to point out that fiscal 24 will be a 53-week year, meaning we will have an extra week of operations in the fourth quarter. For the full year, the extra week will add approximately 2% of revenue, which will flow through the income statement accordingly. Including the extra week of operations, we expect full-year revenue to be flat to slightly declining. This is primarily due to lower volume in architectural services, due to timing of product flow, and as we wrap up some legacy soda wall projects. Also, based on the latest market forecasts, we are being cautious about potential slowdown in non-residential construction in the second half of our fiscal year. This could impact volumes, especially in our short cycle framing business. Even with flat to declining revenue, we expect continued margin improvements. This will be primarily driven by further productivity gains as we deploy AMS across the broader spectrum of the company. I'd also like to remind everyone that in the first half of fiscal 23, framing systems had a $5 million benefit due to the volatility of aluminum costs and the timing of inventory flows. This benefit will not repeat in fiscal 24. and will be a year-over-year headwind for framing systems, especially in the first quarter. We expect interest expense to continue at a run rate similar to the past two quarters, driven by higher rates, and we expect to return to our long-term average tax rate of approximately 24.5%. With that, I'll turn it back over to Ty for some concluding remarks.

Thanks, Mark. Before I wrap up, I'd like to extend my gratitude to Mark for all of his outstanding work over the past few quarters as our interim CFO. As you may have seen, we recently named a new chief financial officer, Matt Osberg, who will join the company later this month. Mark will support Matt during this transition and will continue to provide valuable leadership to our finance organization and to the architectural glass segment. Our executive team is grateful for your leadership, Mark. As we wrap our fiscal 23, I want to also recognize our broader teams. I'm exceptionally proud of them and everything we've accomplished together this fiscal year. They are responsible for transforming Apigee into a higher performing, more resilient company. We've improved our operational execution made significant productivity gains, built a more competitive cost structure, and we've established a stronger foundation to drive long-term profitable growth. We have significant momentum toward achieving our financial targets, and we delivered record revenue and earnings per share. Looking ahead to fiscal 24, we expect to drive continued progress by executing our strategy positioning the company to create peak value for all of our stakeholders for many years to come. With that, we are ready to take your questions.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. The first question comes from Chris Moore with CGS Securities. Your line is now open.

Hey, good morning, guys. Thanks for taking a couple questions. Good morning, Chris. Good morning. Yeah, maybe just start with the 24 guide. So revenue flat to slightly down. Do you expect volume growth in any of the segments?

Well, as you know, we don't give specific guidance to segments. I think as we looked at this, and we have commented on this earlier, we did expect, and it's playing out that way, that services would have a revenue and volume decline. And that's being driven by the fact that they're now executing jobs that were won in calendar 2020 and calendar 2021, which was the trough, if you will, from the last downturn. So that's really the big driver we look at from a volume and revenue perspective of the declines. As we look at the other segments, we've got short cycle business and framing that it's hard to predict right now. But as we look at the others, we look to flattish to growth.

Yeah, I was going to just maybe comment. Essentially, the volume reduction at Harman, or excuse me, at our services segment will be really offset primarily with

pricing and mix opportunities within glass and the framing systems it's pretty much flattish volume is what we're expecting in the other in the other segments got it very helpful and the EPS side that range 390 to 425 is that a function of revenue or is there are there other things necessary to for you to get to the you know to that high end

Well, I think as we look at that, one, continued favorable pricing environment, that's one thing that would help ensure that we could get to that higher end. And that's especially important for framing, which was a big driver from our profit improvement in fiscal 23. We do expect to continue with strong progress and productivity through our AMS deployment. And that not only helps us manage any headwinds that might come up, but that also could help push us to that higher end. And then we are expecting a continued favorable mix shift, primarily in glass. So glass has been really focused on driving this shift to higher value-added product offerings, the premium side of the market, if you will. So even if unit volumes out the door are flattish. we do expect a higher per square foot selling price on those products. And that will help us not only from a revenue perspective, but that'll help drive profitability and get us into the higher end of that range as well.

And then maybe just one other comment. Obviously, we'll need the market to kind of continue to bounce along at its current levels. If market deteriorates faster than what we expect, obviously, we would be drifting towards the lower end. But market conditions at at least at the current levels.

Got it. Maybe just one more from you. So aluminum's down significantly since April 22. Can you just walk through the pricing mechanisms and how that impacts 24 versus 23?

Well, I think, as you know, I mean, a lot of our industry is driven by raw material pricing, right? And that's some of the challenges that we've had if you go back a year and a half ago, and we've improved that pricing model significantly. The industry as a whole generally adjusts prices in response to those changes in the input costs, and that's what we have seen in fiscal 23. Not only were we making changes, but we believe most major competitors have raised prices. As market conditions change, we'll have to adjust our pricing as appropriate. But ultimately, that pricing power and winning work comes down to the value that we're providing. That shift to premium that we're doing in Glass, this selling of higher value-added products and delivering on our service promise, we believe helps give us some strength in our pricing power in the market in fiscal 24 and going forward.

Got it. Appreciate it. I'll leave it there. Thanks, guys. Thanks, Chris.

Please stand by for our next question. The next question comes from Eric Stein with Craig Hallam. Your line is now open.

Good morning, everyone.

Good morning.

Hey, so can we just go back to services a little bit? I know that, Ty, you talked about that this is not necessarily unexpected in terms of thinking about fiscal 24 being down modestly but you've also got higher backlog now i know that you've added soda wall backlog to that you know so just kind of curious how to square those two things um you know is it something where you're seeing the added backlog gets stretched out a little further in terms of time or is the year-over-year increase a lot of that is soda wall

Yeah, I think there's a couple of things. So one, that larger backlog is spread out over time. So I think if you read into that, we look at fiscal 24, we expect revenues to be down. There's a lot of work to still do in fiscal 25, but the strength of that total backlog, you know, points to, you know, some positives as we move forward on that. As we wind down some of the SOTA wall projects, we're in a transition mode with SOTA wall now adopting the Harmon business model. That changes the types of projects that they go after and the model that they use in executing against those projects. So there's some transition period that's happening here in fiscal 24 and as we go into fiscal 25. We do expect, even with that revenue decline, that we will see a margin improvement, not only in margin percentage for services, but likely right now see a path for them to even in that lower revenue. And because of that margin improvement, see the possibility that they can actually improve on profit dollars for the year as well.

Got it. That's helpful color. And then maybe just going back to on the pricing side, I mean, I don't want to put words in your mouth at all, but I mean, it does sound like you have some confidence in the ability to hold price. Um, you know, even if you need to, I guess, in lockstep with the industry, um, or, or normal practices, even if you have to readjust, um, you know, depending on input costs and just curious if, if you would agree with my statement or I guess, or not given your move to higher value add.

Yeah, well maybe there's an agreement in there and maybe I'll just reword it and play it back to you a little bit, Eric. As we look at the market right now, until there is a significant decline in market, we think from an overall market perspective, pricing probably remains relatively stable. Our shift to premium will help us maintain that pricing level. And I think most importantly, we have a different cost structure than we had previously, and we have really strengthened that muscle in our AMS platform, the Apigee Management System. So even as we see potential pricing pressure, we've got confidence, one, from the premium offerings that we're trying to stay focused on as we move forward now, and then our ability to drive productivity, continued productivity in our operations, that that helps offset that to some degree, even if there is some downward price pressure.

Okay, got it. And then maybe last one for me, just on the M&A pipeline, clearly that's been a focus of yours to be ready and that that's an important part of your growth. I mean, maybe just talk about what the pipeline looks like, you know, if things have advanced in that pipeline and just maybe the outlook.

Yeah, we have really been focused on building our capabilities. So we brought some experienced talent into the organization to help us with that process. We have built our integration playbook. We talked about going forward that we would not operate acquisitions, manage acquisitions the way we did in the past with this holding company model, but would look to integrate substantial portions of those businesses and drive cost synergies as a meaningful way to deliver the return and the value derived from that acquisition. So we have done that work. We have built what I believe is a very robust pipeline. And we have been in process and will continue to be in process of evaluating targets in that pipeline. And we expect to be proactive, meaning identifying businesses that we think would be great strategic fits and that we could add value to. And reactive, that sometimes things will come to market, and we certainly will take a look at things that come to market and are part of a formal process.

Okay, thank you.

Please stand by for our next question. Next question comes from Brent. Thielman with DA Davidson. Your line is now open.

Hey, thanks. Good morning. Morning, Brent. Morning. Hey, Ty, it sounds like the outlook embeds, you know, some caution just given that the MACRA environment, maybe some forecasts out there that we all can kind of see today. I guess I'd be curious, just given this tightening credit environment, maybe some increasing concerns about commercial construction. What are you seeing in bid quote activities right now? Maybe what are the trends in your shorter lead time businesses tell you about the market today? Any feedback you're sort of seeing and hearing from customers or owners that sort of builds around that more conservative view in the second half?

Yeah, I'm going to sound a bit like a broken record print, but it's continued choppiness. So when we look across our businesses, we continue to see strong bid activity, but we kind of see this one month of really strong activity, kind of a slow down month, followed by what we would typically regard as a normal month of bid activity. So that just, for us, indicates that there's still some uncertainty in the market. Obviously, the leading indicators like ABI point to some softness coming at some point, whether it's towards the end of calendar 23 or as we get into calendar 24, that's what those leading indicators are pointing towards right now. So when we put our guidance together, think about the low end of our guidance, that's really driven, you're correct in saying it's cautionary on our part, just looking at especially our short cycle business, which most of that sits in framing, and then a little bit of the consumer spend in LSO that, you know, that could soften in the second half of our fiscal year, which, you know, it carries into calendar 24. And so that was our thought process when we, you know, put the low end of that guidance range together that we're just trying to be cautious and thoughtful that that is a possibility and we just want to make sure that we're focused and preparing for that should it occur.

Yeah. And, Ty, the services business has always been one that you get a little more extended visibility out of. You're booking things a little further out. It does sound like that continues to happen. I mean, backlog's holding up reasonably well there relative to prior years. Is that a fair statement as you look out into fiscal 25?

Yep, that's a fair statement. You know, that's a reminder. I think we're conservative, you know, versus a lot of other companies in terms of how we what we share in that backlog. So that backlog has a high confidence level. It's things that have been formally awarded or we've got orders on already that we're counting in that. So that also gives us confidence in that the strength of that backlog overall.

OK, I appreciate that. And then, I mean, look, really solid. margin and some glass i mean the initiatives you all put in place seem to be very effective here i guess your your views on sustaining these kind of lower double digit levels in fiscal 2024 for that operating segment um you know any any anomalies in this particular quarter this is this is just what you set out to do

Yeah, this is exactly what we set out to do. Fiscal 23, the driver was really productivity and really strengthening our operations and how we manage costs and driving that. And as we talked about, it would take time for those higher value-added products to start to work through our revenue flow. And so we started to see some of that show up in Q4, and we can see that showing up in Q1 and Q2. probably won't get as big a step gains out of productivity going forward but the good news is we've got the mix now coming in behind that gives us confidence that we're likely to sustain where we're at be at the high end of that you know seven to ten percent range we laid out for glass we're likely going to be at the high end of that as we move forward through fiscal 24 just given what we're seeing for product mix now flowing through okay

And then the somewhat higher levels of capital spending or CapEx for this fiscal year, what are you all focused on kind of beyond the, you know, maintenance levels, CapEx?

Yeah, so I'd say the last couple years, most of that spend was tied to maintenance. We started to increase that spend towards the second half of fiscal 23. on some of those growth investments, strategic investments for the business. Each of our segments are now above 12% return on invested capital. So frankly, from our view, they warrant investment where they can bring a solid growth story and profit delivery story together for us to look at. So we're making some of those investments. We're not going to give guidance into fiscal 25, but I think you're seeing a bit of a bump and a step up here in fiscal 24 related to some capacity investments, some automation investments that not only helps us with cost, but helps us deal with tight labor markets, and then some investments in systems that help us better support our businesses and manage our product mix more effectively from a pricing and a margin perspective. Okay. All right. Thanks, guys. Appreciate it. Thanks, Brent.

As a reminder, to ask a question, please press star 1-1 on your telephone. Please stand by for our next question. Our next question comes from Julio Romero with Sedoti. Your line is now open. Good morning, Julio.

Thanks, Kay. Good morning. Good morning. I was hoping you could, if we could stay on CapEx, just maybe a little more granularity into what businesses you expanded capacity in with that sizable 27 million CapEx deployment in the fourth quarter.

Well, I would, you know, we avoid giving that detail on businesses, but, you know, I will tell you, we've spoken to before, and I know there's been some stuff in local news, but Large-scale optical, we've made some investment in there. We've talked about wanting them to be able to expand beyond the custom framing art business. They need capacity to be able to do that, and they've got good leads on that market, and it made sense for us to make some of those capacity investments. So that got off the ground, and spending started to ramp up for that investment in Q4. And then probably the other areas, framing, We have made some investments that will help them really strengthen their ability to drive high service levels for the business and then some automation and some equipment upgrades in other parts of the businesses.

Okay, that's very helpful. And then turning back to the glass business, you talked about earlier in the Q&A that you're towards the higher end of the range and you've really had some good success in the glass business with regards to productivity improvements. Um, just as we look at 24, you know, w would there be any upside, uh, to the full year out margins, um, from maybe, you know, volume leverage and mix and less so from, from productivity or, or is the goal really just to kind of maintain the impressive margin performance from fiscal 23?

Well, we made a lot of progress in fiscal 23 with glass. And we would say that that is sustainable from our view, even with flat volumes. What we're seeing now in glass is that shift to premium. So that also helps support those margins. And provided those volumes continue to hold or even grow, then that's upside from a margin perspective for glass. And then I think as we looked at framing, we talked about they've Framing's got tough Q1 comp because that one-time gain, I mean, for that $5 million benefit was in Q1, but they've improved mix. And while we were doing some AMS work within framing, we've really put the full-court press now, like we did in glass, into framing. So that gives us confidence that we're going to be able to hold margins, even if markets should weaken a little bit. We see a path being able to manage that from some of the productivity work that's underway now using AMS within our framing business.

Okay, very good. And then maybe just last one for me. You talked earlier about the progress you've made on the SOTA wall integration into services. As you stand now, I guess, what's the biggest challenge you see going forward with regards to integrating that business as you head into fiscal 24?

Well, I'd say the team's done a really good job of moving the big rocks, if you will, as part of that integration, and then just working to strengthen and clean up execution of the projects that were in flow in that facility in Canada. So that, you know, frankly hit them in Q4 as they finalized some of that work and did some cleanup around those projects. So that ended up being a little bit worse than we had expected, as I commented on before. I think we're at a good foundational base now and we expect that we'll see kind of that normal progression of continued margin improvement from Q1 to Q4. Member services kind of has a low Q1 and then works their way up on how they manage their project flow for the year. So we think they'll be back on track with that and that we will see some margin improvement probably not getting back into the range that we had set for them at our investor day just because they finalized some of those projects that were sold under the Solar Ball brand that ended up being lower margin than we would like to see within our services segment. But as they get those behind us and start to move more fully into the Harmon model, then as we get into fiscal 25, we think we start to get back into that 7% to 9% margin range for services.

Yeah, and maybe if I could just add, you know, services isn't being excluded from AMS as well, and as part of the SOTAWALL integration, you know, AMS is in its infancy, I would say, at SOTAWALL, so there's still an opportunity to improve margins through that as well.

Got it. No, appreciate the call there. Thanks very much for taking the questions, and best of luck in fiscal 24. Thanks, Julio.

I show no further questions at this time. I would now like to turn the conference back to Ty Silverhorn, CEO, for closing remarks.

All right. Well, thanks, everyone, for joining us today. And a big thanks to our team for delivering a record year. And we're confident on our ability to build on this success in fiscal 24. Have a great day, and we'll talk to you in a few months.

This concludes today's conference call. Thank you for participating. You may now disconnect.