Q2 2021 Apogee Enterprises Inc Earnings Call
Thank you for standing by.
Welcome to the Apogee enterprises second quarter 2021 conference call.
This time, all participants are not listen only mode. After the.
After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone if you acquire any partnerships and please press star zero.
I would now like to hand, the conference your speaker today, Jeff. It's Ben Please go ahead Sir.
Thank you <unk> good morning, and welcome to Apogee Enterprises fiscal 2021 second quarter earnings call with me today are Joe Porsche Apogee, Chief Executive Officer, and the sheet Group 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 Apogees website.
During this call we will reference certain non-GAAP financial measures definitions of these non-GAAP measures and a reconciliation to the nearest GAAP measure 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 managements expectations.
Which are based on currently available information actual.
Actual results may differ materially more information about factors that could affect apogees business and financial results can be found in our SEC filings and with.
And with that I'll call I'll turn the call over to you John.
Okay. Thank you, Jeff and good morning, everyone. Thanks for joining the call today.
I'm very very proud of our team for the results we delivered this quarter.
On our last earnings call I said, we expected second quarter sales and operating income increased in each and every one of our four segments.
Relative to the first quarter and that is exactly what we deliver.
We achieved adjusted earnings of 73 cents a share in the second quarter rebounding nicely from the 15 cents per share in the first quarter.
And well above back above prior year.
The decisive actions we've taken in response to cultivate and stabilized our business and driven strong earnings and cash flow. Despite a still challenging operating environment.
This morning, I will review highlights from the quarter.
And discuss the trends, we're seeing in the business and how we are positioned for the future.
I'll then turn it over in the sheet for addition.
Additional details on the results or financial condition and our outlook.
After that I will take your questions of course.
So, let's talk about second quarter and start with the highlights first we saw continued headwinds from Cowen and economic conditions, which caused the year over year revenue declines in three of our four segments.
Margins and earnings rebounded strongly compared to the first quarter as our team did an impressive job of managing.
Control.
Our cost savings are tracking ahead of expectations machine.
She will provide more details on this when he remarks.
Additionally, we had very strong execution across all four of our segments with improved factory productivity, particularly in architectural glass and.
And we're seeing orders begin to ramp up at our velocity small projects glass business.
Our large scale optical segment came back stronger than expected returning to profitability in the quarter.
Recall that in the first quarter. The L.S.O. segment was essentially shut down for the entire month of April and May as.
As nearly all our retail customers were closed due to cope with it.
In government regulations, and our factories were closed until late July two thirds of the way into the second quarter go.
Going into the shutdown, we built inventory and maintain close contact with our customers. So that when the government's allow retailers to reopen we were ready late in the second quarter nearly all the large scale optical retail and independent customers reopened and our.
And our order volume steadily increased through the quarter in late July we resumed normal operations at our two factories restarting without any hiccups.
Revenue for the quarter came in at 81% of the prior year level.
Particularly significant improvement from the first quarter, when we read only 30% of the comparable prior year.
The strong recovery is a testament to the resilience of our team and the reputation of the brand and product in the marketplace My hats off to our large scale optical team.
Architectural services continues to achieve Premier performance not only did we see solid sequential growth. The segment also delivered double digit year over year growth on both the top and bottom lines.
Over the past year services has had great success in winning new business and building a record backlog.
We had a step function change in backlog growing from around 500 million last year to approximately 700 million in the first quarter. This year. We are now executing projects in our backlog with visibility out more than two years.
Our services business is arguably the leader in the industry and we even even as.
Even as current market conditions have softened, we still have a strong pipeline of opportunities to win additional projects in the coming quarters.
In architectural framing systems and architectural glass, we saw an impact from the current disruptions in our end markets.
These two segments saw many project delays and schedule changes, which impacted revenue both segments did a terrific job managing their costs.
And execution in the quarter, which helped offset the volume reduction.
Finally, our team did a particularly extraordinary job of managing working capital and cash flow year to date cash from operations is up more than 75, 375% Weve.
We've generated more cash in the first half of fiscal 21 than we did in all of last year with year to date free cash flow at $71 million in operating cash flow at over $85 million.
With continued economic uncertainty, we are taking a conservative approach to capital deployment focused on paying down debt and building liquidity over.
Over the past 12 months, we have reduced our total debt by $105 million.
As we move through the rest of the fiscal year, we will seek to further strengthen our financial position to provide dry powder. So that we can invest to accelerate growth going into an economic recovery.
So overall it was very strong quarter and we're pleased with the results given the current economic environment in the United States regarding the market conditions and outlook.
Even as we are successfully managing what we can control the economic and end market conditions are clearly top of mind for all of US Let me share a few perspectives on what we are seeing first in all cases projects in our backlog.
And pipeline are moving forward, although we are seeing some projects progressing slower than expected, particularly due to several large cities like Boston, New York and San Francisco to name, a few which shut down.
Temporarily all construction due to government regulations or.
All of these cities are back up and running again.
Forward indicators like employment growth the architectural billing index and the Dodge momentum index have rebounded from the April lows, but are still well below pre pandemic levels. It is obvious that you asked is in an economic downturn. It's just unclear at this point, how long or how severe.
We are preparing for this decline by maintaining our focus on cost execution and cash flow free cash.
Pre cove it the fundamentals in our end markets were very healthy with strong demand for new constructions and no signs of overbuilt over building. So we are optimistic that we will see a brief downturn followed by the return to end market growth sometime next fiscal year or calendar year 2022.
Regardless of what lies ahead for our end markets apogee is a much stronger and more resilient company today than we when we entered the last recession over.
Over the past several years, we pursued a purposeful strategy to diversify our business mix and expand our customer offerings.
We've reduced our concentration in high rise buildings moving to a more balanced customer often with broader exposure to segments of the market, which are historically less volatile this in.
This includes our recent expansion into small projects for architectural glass and our growing renovation business.
Let me emphasize a very critical point here regarding our transition.
When I joined apogee in fiscal 2012, our glass segment under the buyer kind brand was over 50% of our total company revenues.
Of that 60% six zero percent of their revenues went towards monumental office towers, we define that roughly as buildings greater than 20 stories.
Today by Rick on our glass segment is approximately 22% of our revenue and only 20% of that is in this monumental category. This is a very important transition that will bode well for our future of being less dependent on these towers.
We have pursued a growth strategy, which included geographic expansion and new product innovation and today, we have a portfolio of market, leading brands and innovative products that are well positioned to take.
To take advantage of a market rebound as we move forward I'm challenged my team to Kindred continue to drive innovation and keep apogee at the forefront of our industry and unlock new growth opportunities.
We have significantly improved productivity in our operations, we've invested in factory automation and built the continued improvement culture through all of apogee via our lean enterprise system, which has taken root in our company and is contributing to our recent factory improvement.
Segments over the past few quarters, we've driven sustainable cost reductions through our procurement program and other projects we are.
We are developing a pipeline of further initiatives to drive more productivity gain in off that aspects of our business from selling general administration overhead functions supply chain and manufacturing cost machine will put some numbers to this discussion in a few moments finally, we maintain a very healthy.
Financial position with modest debt strong cash flow and improved financial flexibility, putting it all together I'm confident apogee at the strength to navigate this uncertain economic environment and we're taking the right steps to position the company to emerge stronger when the economy turns with that let me turn it off.
Over to mushy to provide more details on the quarter and our outlook and then I'll be back to take your questions. After new sheet. Thank you.
Thanks, Joe and good morning, everyone.
Let me start with a consolidated reserves for the quarter, which on basics of earnings presentation.
Total revenue was 390 million down 11% from last years second quarter.
The continued growth and market related volume declines.
Operating margin was 7.2% and adjusted operating margin came in at 8% above the 7.7% in last year's second quarter as a cost savings and improved productivity offset the impact of lower volumes.
Adjusted reserves in the quarter excluded 1.2 million of corporate related expenses, and 1 billion of costs related to a past acquisition and acquired projects.
For details can be found in the non-GAAP reconciliation tables in our earnings release.
Adjusted EBITDA was 38.2 million compared with $39.2 million in last year's second quarter, reflecting the improved margin, which largely offset the impact of lower revenue.
Net interest expense was 1.3 million down significantly from 2.6 billion last year due to both lower debt balances and lower borrowing costs.
The tax rate of 23.7% was roughly in line with last year's level of 24% and our diluted share count was 26.5 million lower than 26.7 million last year due to a share repurchases over the past year.
Putting it all together.
Adjusted earnings of 70 cents per share up from 72 cents per share in the prior year quarter noted.
Notably adjusted earnings were more than four times. The 15 cents, we delivered in the first quarter, which demonstrate the success, we have had and stabilizing our business in response to code and the economic situation and in driving the sustainable operating improvements across our businesses.
Now turning to segment results on slide seven.
Architectural framing systems revenue was 152 million was down 18% from prior year, driven by a combination of project delays and lower order volumes.
Framing systems operating income was $11.7 million with an operating margin of 7.6% compared to 8.3% in last year's second quarter, reflecting lower revenue, which was partially offset by cost reduction actions and improved execution in our factories.
Framing systems backlog decreased slightly to 404 million from $422 million last.
Last year.
We continued to win New awards and have a pipeline of opportunities ahead of us but year to date order flow. In this segment is running about 20% below last year's level.
Architectural glass revenue was 57 million down 30% from last year's second quarter like payment system revenue was impacted by government related project delays and lower on order one.
The segment had operating income of $5 million and operating margin of 5.7% compared to income of $6.4 million and margin of 6.5% in prior year, reflecting lower volume, which was offset by strong performance in our factories and good cost management.
Architectural glass profitability rebounded nicely sequentially returning to profitability after recording an operating loss in the first quarter.
Going on to architectural services.
Darren obviously, so this is done in another strong quarter revenue growing 20% to $74 million as a segment executed projects from its not regard backlog.
Services operating income grew 65% to $6.6 million and margins improved 8.9% compared to 6.5% last year, driven by strong project execution and cost management.
Services backlog decreased to $665 million compared to a record level of $685 million.
Last quarter, but remain 32% higher than a year ago.
As Joe mentioned large.
Large scale optical so as strong sequential recovery with revenue more than doubling compared to the first quarter on a year over year basis revenue was down 19% compared to last quarter.
And then so return to profitability this quarter with operating income of $2.1 million and a margin of 12.7% what was still below last year's 22.3% margin due to negative leverage on the lower volume, partially offset by cost reductions.
I would like to provide an update on our cost saving initiative, which is on page nine in our presentation we had.
We are tracking ahead of the targets the outlined last quarter and now expect around $50 million of savings in the current fiscal year.
Through the first quarters, we are.
We achieved nearly $25 million of saving product combination of and procurement initiatives.
Creation improvements in framing systems and temporary cost reductions in response to quoted.
For the second half of the fiscal year.
And Scott we plan to start reversing some of these temporary cost reductions, which will be slight headwind.
At the same time, we will exit rate savings from procurement as well as savings from consolidation in framing segment.
Looking beyond the current year, we see structured run rate savings of around $40 million. We will continue to challenge our teams to identify and capture additional opportunities to improve productivity and permanently reduce our cost structure.
Turning to slide 10.
Cash flow and balance sheet remains strong year to date, we have generated $85 million the cash flow from operations.
Up significantly from 18 million in last year's first have primarily driven by strong working capital management Big Kudos to our team.
In all of our businesses and managing our working capital.
Capital expenditures in the second quarter declined to $5.6 billion, putting us at $14 million year to date as we have restricted government spending only essential capital projects.
We expect capital spending in the second half and remain below the prior year level, Although we will evaluate investments in high return growth and productivity initiatives.
Our focus for capital deployment in the quarter was debt reduction, we paid down $43 million of that thing on the entire balance on a primary you on the credit facility in the second half of the fiscal year, we expect to build on cash balance, which would further strengthen our liquidity and went through.
Dry powder for potential investments to drive productivity and accelerate growth.
During the quarter. We also made our dividend payment of $4.9 million and we remain committed to dividends as part of our capital allocation strategy.
Before I wrap up I would like to provide a few comments on our outlook for the remainder of the fiscal year, which are summarized on page 11 of our presentation.
At this point given the continued economic uncertainty caused by Cohen, we've decided not to provide detailed financial guidance.
As Joe mentioned, we're seeing some signs of stabilization in our end markets, but considerable risk and uncertainty remain.
Architectural segments, we expect to see continued project delays and soft market conditions.
Large scale optical business.
Patients will likely continue to improve but we expect volumes to remain below the last year's level as the impact of Goldman continue to mute the recovery in retail.
Overall, we expect the dynamic in the rest of the fiscal year will be similar to what we saw in second quarter, but freshen pressure on our top line offset by continued focus on cost management and productivity.
Well, we are not providing full financial guidance, we do expect revenue and earnings in the second half of the fiscal year will be higher than the first half.
To wrap up our team delivered impressive performance this quarter stabilizing our business and rebounding strongly from the first quarter in the near term. We are preparing for continued economic uncertainty maintaining our focus in cost execution and cash flow.
Looking to the long term, we will continue to drive sustainable operating improvements across our business to position our company for growth and improved profitability in the future with.
With that.
On the call back over to Joe all right. Thanks machine.
I closed by once again, recognizing the entire apogee family for what we've accomplished together over the last six months, our employees have truly gone above and beyond to help our company deal with the impact of Covidien and economic turmoil, we've made significant changes to our business to prioritize the health and safety of our team and to ensure.
So that we can continue to operate and meet our customer needs I am, particularly proud to be part of the apogee team looking ahead, the environment remains uncertain, but I'm optimistic about apogees direction for both the second half of the fiscal year, which will improve over the first half and for the long term.
Over the past several years, we have successfully executed a strategy to build a stronger more resilient company are.
Our substantial backlog and strong financial condition together with our talented team gives us the resources to continue to manage through the current situation.
We will continue to push ourselves to drive better performance in our current business and develop new opportunities for growth I look forward to sharing more details with you in the coming quarter.
Okay today, the Big day, I announced my retirement from apogee at the end of February 2021.
10 years at the helm I'll be 63 years old.
We built a new management team that has a terrific combination of experienced fenestration industry executives and new leaders with fresh eyes and ideas.
We've launched aggressive cost and growth initiatives to substantially lower our cost base and grow.
We dealt with some problem projects and they are now behind us.
And we've added some very new strong leaders to our board of directors.
I wanted to see this through its now my time until February I will bleed company blood.
With that I'd like to open up for your questions.
Joel if you could open up for questions. Please.
Thank you.
To ask a question your need to press star one on your telephone to withdraw your question press upon key.
Please standby will be compiled the Q and a roster.
Our first question comes from Chris Moore with CJS Securities. Your line is now open.
Hey, good morning, guys, Joe Congratulations certainly earned it.
Thanks, Chris sure.
Yes, maybe just start with with LSW. So just trying to get a sense in terms of of looking at Q2.
I would say some of that is probably a little bit of of catch up just trying to get a feel for whether the second half of the year.
We'll be.
A more normal compared to what you've seen historically or or how much visibility you have there.
Yeah, Chris. Thanks, So first off I don't really attribute to Q2 to catch up.
Good news is the products, we sell are in demand right now as you're well aware people queued up in home.
Home products.
Everything from carpet flooring to arts and.
Trinkets and trash so to speak and.
And people wanting to re frame art that's in their house people that a lot of time to look at what's in their home and I expect strong demand in that business going forward plus they're launching new products.
At a pretty good clip in that business. We did ramp up 85% are retailers came online late in the quarter a lot of our pickup came from our independent.
Distributors and for the fourth.
For the what we call the independent channel and we expect our retailers have a strong Q3, we're not projecting to get back to a 100% this year, but.
But we will continue to ramp up and improve so we feel very very good about that business and as you saw a mid teens operating margins.
In a quarter, where our factories were down for.
Two thirds of the quarter is extremely impressive. So we obviously have some upside in L.S.. So I think the demand is a repetitive and we feel we feel.
We feel we'll continue to recover in the second half.
Got it Thats helpful. You know Chris.
Chris I I am obligated point out obviously, we don't expect the United States to go into another shutdown sure but that business is.
Clearly dependent it doesn't fall into the critical infrastructure category that are architectural segments did that we're allowed to at least keep running mostly we don't.
We don't expect any shutdown of retail in the United States again, but.
We'd be dependent on that we feel really good about that business led by a terrific team.
Got it maybe just jump over to the framing let me for me back down slightly year over year, but not not terrible can you provide maybe some more details there are there certain taste certain areas certain types of business that that or.
Our stronger or have more visibility at this point in time.
I listen half half the framing systems businesses are longer lead time larger project category.
Contributing the backlog it tend to be lumpy just like our services segment is lumpy, which that segment has been kinda on a tear for the last few years.
But I expect the framing systems will continue to be lumpy on that path.
The shorter lead time businesses certainly saw.
Delays and push out that schedules I think there's an opportunity for us to grow that backlog with some of the.
Wins were chasing down right now.
So I I wouldn't over read into the modest backlog reduction in the quarter a couple of our longer lead time businesses chewed up backlog is were waiting to put some new projects into backlog.
Not a substantial issue for us at this time.
Got it and last from me just on the on the small glass it sounds like it's it's going quite well can you provide a little more detail there.
Yeah listen I mentioned.
Yes.
The world wants to put a dagger wouldn't stake in the heart of office I think thats a completely invalid clearly tall office tower is people are concerned right now.
Folks like you investors and analysts like you often work and large towers in cities and haven't been in the office in six months office segment is not dead we've re.
We've removed removed and will substantially lowered our dependent on towers I expect to see an increase in demand in smaller building smaller remote offices, maybe rather than in Manhattan, and people will be in west Chester or Jersey city, but.
But people are coming back you saw the news this week JP Morgan and Goldman are beginning to open their offices I look in my office, we've got more people here, we're managing it appropriately given dispensing and things, but I think office sector segment will return.
I think we'll see stronger growth in the smaller office buildings and Thats, what our velocity small projects business is all about.
We're winning share we produce at amazing product and we've been waiting for this business to take walk and we're starting to see that I believe we will break the breakeven point here soon and that will be a.
Profit contributor for us in.
In fiscal year fiscal 22.
I expected received that point for the end of this fiscal year. So we are we.
We've added capacity to that factory, meaning ship and.
Feel this is a very successful move we've made and just to add one more thing creates we have doubled our revenue and that velocity business business in quarter two versus quarter. One. So we are in the right track there.
And the decision to potentially add another facility is probably a year or so away at this stage.
Yeah, I I won't get into my future plans on that on this on this call Chris sorry Sal.
Sounds good thanks, guys I, just say unhappy with what we've done so far.
But could try Chris.
That's right.
Back in line right. Thank you Sir thank you.
Thank you. Our next question comes from Exxon with Craig Hallum. Your line is now open.
Morning, everyone.
Fair, Thanks, and congrats Joe.
It's exciting.
Thank you since I mean, a lot of the questions that I have.
I have on the velocity initiative.
Sounds like not not to be shared on this call.
But I'm just curious can you talk about the margins on that compared to.
The rest of the glass business.
Given the given the level of automation, but also just that it's a different set of shorter lead times convert.
Versus the other parts of that business.
Sure listen, it's not a lower margin product, it's actually slightly higher margin our cost basis is lower our automation is a very very very high automation in that business. It does have the overhead of the start up.
Some depreciation and but at full run rate or you know and I don't mean running 24 hours a day three shifts but at normal run rate a couple of shifts of production five days a week the margins will be accretive.
To the overall glass segment, it's a good margin business got it.
Got it Thats helpful and maybe maybe just turn to the retrofit business.
Maybe an update on where that stands I know you've long had that a $100 million goal and just curious as you think about that business in the context of the current environment where.
Maybe maybe that's an area that people look at.
Now just given some uncertainty related to coven and the economy. I mean is that an area that you think potentially sees an uptick.
Given the current environment.
I think it adds even more amazing upside now than it did when I launched it several years ago, we are above 50 million on our way to 100.
The industry pause frankly, right now Eric most buildings moved their attention to the inside of the building spacing floor layouts.
Directional settings for floors, just like we have in our company Reconfiguring cubicles to ensure spacing due to covance.
It will when we get out from under co bid the real growth is going to calm as as businesses try to attract talent into perhaps older offices that are outside the metropolitan cities up people will want to go into nice buildings, we believe the.
Curtain wall and window renovation focus that exists will ramp up so I believe the future is actually brighter.
There is strong potential for the focus on sustainability and green.
The investment community and the folks that are tracking companies are putting pressure on management.
For sustainability and green as you're well aware and I think I think the opportunities even stronger and will be stronger after we get out from our co would I would say this summer we've seen a pauses people totally focused on the inside a building I think that will change here in the coming two quarters, Okay got it.
Maybe last one it won't be for machine.
Sure I guess, a little over a quarter in and.
At Apogee just curious what you see I mean, I know you're talking about.
Cost cuts ahead us ahead of schedule and that you have up to the target in the near term, but as you look at it long term I mean, where are some of the areas that.
You with some fresh eyes see.
As the opportunity for apogee.
Yes, so eric that their opportunities everywhere and we've just started right. So if you think about the cost structure. There is one let's say, it's caught and CNN structure, which with which we are looking at very carefully now. This is a industry that goes through a cycle then you're not prepared to flex that are causing the way we are.
You should be looking at how we can look at it as soon as structure to flex their so more as the cycle goes through so we will see some significant actions coming from our side in the coming quarters around or as Gennius structure as a company. That's one leg. The second is the Cogs and Thats another big area, where.
But to plug are done the work with procurement and that's already showing up in our piano. The second is non procurement related costs, which is a pretty large portion also because we will be focusing on that substantially in the coming six six months and Joe and I have talked about certain plans on the cost that we will lay out.
In the coming months without a few so I see significant opportunity and improving our cost structure. While we go through the headwinds in the next six months to 18 months in this industry.
Okay. Thanks, a lot.
Thanks there.
Thank you. Our next question comes from Brent Thielman with DHL.
Your line is now open.
Great. Thanks, Good morning, Joe Congrats as well not to be proud of here over the last decade.
Thanks Brent.
A question on the services segment, you're putting up solid margins I'm wondering.
Some of these additional precautions to keep people safe.
Still having effect in effect on productivity and therefore margin site and be hard for me to imagine a year ago you for so that's in terms of building that into the bid.
No we're not seeing any we're not seeing impact and for.
And from Colby on the segment as far as productivity is concerned yes.
Backing up in the factories, and we are fully up and running and most of those loans. So we don't see any impact right now on coal.
Kind of looking like nominal even though volumes in our normal if you're but your question was around the services segment itself.
Correct.
Yeah, no, we're not seeing productivity issues.
You know when cobot first hit the construction so some construction sites.
Yes, a little bit of productivity headwinds the only a few people in a construction elevator going outside of the building.
But it's back to normal now we're good nothing to call out.
Okay, and then so the $1.3 million cobot related adjustment is that predominantly for the glass business, then and just as productivity issues you had with the outbreak.
Half of that would be for the glass business and half of that is for other businesses.
The glass segments by far where we have the largest number of of employees. So it it but that is most everyone back to work. We did have in Q1, we had a substantial number of people quarantined.
Through social side.
Contact tracing.
And that has come down substantially in Q2 and today we are.
We're close to normal operations as far as people out of the building.
But that's all.
Yes.
Okay and Joe in any of your businesses.
Are you seeing any competition starting to make we'll call it sort of distress decisions at the bid table just trying to fill the copper.
Sort of any price set a concern for the future or has it been pretty rational.
I think it's been pretty rational in general I am sure My segment leaders could call out.
You know the occasional drunken disorderly bid action, but I.
I I would say it's been.
What I would call normal there's always the project, where somebody must be bidding to the wrong spec and you think they've drunken disorderly, but no nothing beyond what we're used to.
Okay, all right good good to hear that stand between Ohio.
That's it for me. Thank you guys. Thanks Brent.
Thank you.
Next question comes from.
And company your line is now open.
Hey, good morning, everybody.
Hey, good morning will.
First off Joe Congrats on the retirement.
And your success and lessening as a cyclicality over your tenure.
Thank you.
I guess my first question is just on the cost savings initiatives. The 50 million savings you expect this year, so that would be roughly a 60 40 split between permanent reductions in temporary.
I would say.
More than half and half half is related to the coordinated response and cost actions and half is in procurement as well as in.
This consolidation to the savings.
Okay.
Lumber has been something thats risen pretty meaningfully year to date can you maybe discuss the effects of of lumber on on your glass business I know your user there and maybe.
Maybe the timing of when that it's your PML.
Yeah lumber, we've absorbed a lumber increases overall, our procurement costs have been reduced based on the effort. The apogee wide effort, we did last year, bringing in an outside firm to help us.
The new Chief procurement officer that joined our company at the beginning of this calendar year. So we are absorbing the modest increases in lumber you're absolutely correct. We are a big user a lumber for shipping our product we.
We have good contracts and it's up.
More than covered with all the actions, we're taking and in fact in this quarter is mushy called out we increased.
Our outlook for cost savings from procurement from what we talked about in Q1. So its ragu. It's all in there, but it's it's one of the few items that are providing headwinds, but not not substantial.
Got it and is your velocity business similar user as Biocon was or is.
Bob It's similar yes.
Okay.
[music].
And I guess on Ela, So you did see a nice.
Topline rebound compared to the first quarter.
Can you maybe discuss it maybe an exit rate for homeless always tracking on the topline in August what was it up year over year pretty close to up.
Over here.
I don't have August in front of me, but it was.
It was close to prior year, maybe in that 85% to 90% range of the prior year. It's.
It's a very.
Seasonal business I did mention that are.
Our independent customers. The you know the independent custom framers in the United States.
Came on very strong in the quarter, our retailers will probably be stronger in Q3. So it's just a very lumpy business. When it comes and it's such a small business under $100 million that you know it can be up and down in any given month.
Got it that's helpful.
Let's I'll ask thanks for your time, yes.
Yes, hey, like that it was it was in a it was pretty close to last year in August.
Great. Thank you.
Thanks Julio.
Thank you.
Vendor to ask a question you won't need to press star one on your telephone.
Next question comes from Doug Jhelum Teton Capital. Your line is now open.
Thank you what are you seeing in Vista inch or where are we at in the process of returning to a normal order pattern in terms of behavior of customers could you talk to that please.
Yeah.
It's been about a specific segment or in general across apogee.
It was really looking in gen.
In general.
Well, it's it's different by segment, but where.
Certainly we're you know the economy is is pretty bad I think where projects in backlog and pipeline are moving forward with very few exception.
In our services segment, you know we were operating at historically record levels.
There's clearly some slowing in activity, but we had such little total share a demand in the United States and its a very diversified segment.
We can win and grow even in a down market and we see reasonably good bidding activity, but it's clearly not at pre co would levels yet in glass.
In glass Weve seen project delays, but they're moving forward.
And as we mentioned, we're seeing a ramp up in orders in our small projects business. It's nice to be a new entrant in a segment like we are with the small project glass business, because you're growing no matter, how good or bad the economy is in framing systems.
We're seeing the most impact from soft market conditions.
As you've noted were down about 18% year over year in that segment, but.
But we had improved profitability because of the cost actions, we've taken I think.
We'll probably booked some.
Hopefully increase our backlog in that segment before the years out as we've been working on some nice projects in L.. So we're already seeing customers largely reopened and I expect back to normalcy on inbound orders in that segment by the end of the year. So it's a mixed bag, but until kobin.
Subsides I.
I think we're all in for a big question Mark right now.
Right, you're taking that a step further.
Reference that ongoing project delays.
And yet you also did say in larger cities construction that had been shut down its now reopened some of the.
Stringent FERC rules.
Have been returned to but to date abnormal.
I'm, having trouble reconciling that versus the project delays can you help fill in the blanks there.
Well.
Mike said date, the construction is permitted in almost all locations in most projects in our backlog are moving forward there.
They're just moving slightly slower than expected due to economic caution and the cobot related.
Friction, creating absences at the job site. Some just some minor supply disruptions not ours and this is whats mostly impacted framing systems and glass, but you know as.
You know as every week goes by we're seeing more and more workers back at the construction site in progress in the building goes up the sheet do you want to add anything yes, I just wanted to just add to that to say you know the industries, which are which have not really picked up.
Based on the recovery of the economy for example, the hospitality industry, we have customers.
We're buying things in the hospitality mission those projects are getting delayed similarly, the other industries, where you see they have not picked up and that would then that's where their decisions on buying until things come back none of those projects are you seeing cancellations as such but we are seeing a dealing.
Thank you both.
Thank you Bill.
Thank you I'm not showing any further questions at this time I would now like to turn the call back over to Joe questions for closing remarks, okay.
Okay. Joel. Thank you all right folks I won't torture you anymore I. Thank you all I'll be talking to many of you next week in a couple of conferences that machine, Jeff and I will be participating in and we'll look forward to further connection to many of you. There on this phone and have a safe week and be good. Thank you.
Very good thank you all.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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