Apogee Enterprises, Inc. (Nasdaq: APOG) reported its fiscal 2025 third-quarter results, showcasing a mixed performance across its business segments. The company recorded net sales of $341 million, a slight increase of 0.5% from the previous year. This growth was primarily driven by the acquisition of UW Solutions, which contributed $8.8 million in sales.
Apogee Faced Challenges with Operating Income in Q3
Despite the increase in sales, Apogee faced challenges with its operating income, which fell to $28.6 million, representing a decrease of 24% from the previous year. The operating margin also declined from 11.1% to 8.4%. The company’s diluted earnings per share (EPS) stood at $0.96, a decrease from $1.23 in the prior year. However, the adjusted diluted EPS was reported at $1.19, slightly surpassing the adjusted figure of $1.23 from the previous year.
The decline in earnings was attributed to lower operating income and increased expenses related to acquisitions and restructuring activities. Apogee’s year-to-date cash flow from operations was $95 million, reflecting a decrease from the previous year’s $129.3 million due to higher working capital requirements. Segment-wise, the Architectural Services division showed positive momentum with a 10.8% increase in net sales, driven by a favorable project mix and increased volume. In contrast, the Architectural Glass segment experienced a significant decline in net sales by 22.8%, largely due to reduced volume and lower market demand.
The Large-Scale Optical segment saw a notable sales increase of 27.6%, bolstered by the UW Solutions acquisition, though it faced lower organic volume and margin dilution from the acquisition.
Apogee’s performance in the third quarter fell short of market expectations in some areas but exceeded in others. The reported diluted EPS of $0.96 was below the expected $1.11, indicating a shortfall in profitability. However, the adjusted diluted EPS of $1.19 exceeded expectations, suggesting that the company’s core operations performed better when excluding one-time costs.
Revenue came in at $341 million, surpassing the anticipated $330.62 million, driven by inorganic growth from the UW Solutions acquisition and strength in the Architectural Services segment. The company’s operating margin of 8.4% was a decline from the previous year’s 11.1%, reflecting challenges in cost management and unfavorable sales leverage due to lower volumes.
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Apogee Expects Full Year Net Sales to Decline by ~5%
Looking ahead, Apogee Enterprises guided the remainder of fiscal 2025, expecting full-year net sales to decline by approximately 5%. This projection includes an anticipated $30 million contribution from the UW Solutions acquisition and considers lower-than-expected volume in the fourth quarter.
The company also highlighted the impact of fiscal 2025 reverting to a 52-week year, which is expected to contribute to a 2% decline in sales, alongside the effects of Project Fortify, aimed at eliminating lower-margin offerings. Apogee anticipates its full-year adjusted diluted EPS to be at the lower end of its guidance range of $4.90 to $5.20. This includes the expected dilution from the UW Solutions acquisition and lower fourth-quarter volumes.
The company remains focused on achieving cost savings through Project Fortify, with an estimated $16 million to $17 million in pre-tax charges and annualized savings of $13 million to $14 million. Apogee expects to realize 60% of these savings in fiscal 2025, with the remainder in fiscal 2026.
Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
