Q4 2021 Apogee Enterprises Inc Earnings Call

Thank you for Honda. Good morning and welcome to apogee Enterprises fiscal 2021 fourth-quarter earnings call with me today are tied silberhorn apogee chief executive officer. And she Gupta Chief Financial Officer. I'd like to remind everyone that there are slides to a company is today to accompany today's remarks which are available in the investor relations suck apogee 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 measures wage is provided in the earnings release we issued this morning, which is available on our website. I also like to remind everyone that our call will contain forward-looking statements rejecting Management's expectations, which are based on currently available information actual results. May differ materially more information about factors that could affect apogee birth.

And financial results can be found in our SEC filings. And with that. I'll turn the call over to you type. Thank you Jeff and thanks everyone for joining us this morning. It's great to be with you in a burning cause apogee CEO and I'd like to thank the apogee board for putting their trust in me to lead this company. I'd also like to thank my predecessor Joe pushes for his leadership of apogee over the past decade as we wish him all the best.

Well, it's been a busy first three months for me as you might expect I spend time getting to know the business and building relationships with our team gaining a deeper understanding of our markets and customer and assessing the opportunities and challenges in front of us. I've learned a lot about the company these past 90 days not the least of which is the knowledge and passion our team has for this business off we have work to do but apogee has tremendous long-term potential and an opportunity to build on its 70-plus year history.

No prior to joining apogee. I led several businesses through strategic realignments and reshaping while also finding ways to deliver performance improvements in the near-term has given me invaluable experience and I've also developed a passion for shaping long-term sustainable growth strategies while also driving stronger operational execution off. This is what led me to apogee. I saw a company with a decades-long successful track record of transforming it's business as Market shift.

and I saw the

Opportunity to help reset the overall growth strategy to build the next chapter in the company's history. I see significant potential for apogee to grow in the future while also deliver improved returns as we move ahead. So I'm very excited to collaborate with apogee is leadership team and our employees to build that future together one that delivers for our customers shareholders and employees as we position for stronger more profitable and sustainable growth.

Let's now turn to our results for fiscal year 2021 which are summarized on page four of our presentation.

There's no question. This was a challenging year for our business and for the broader non-residential construction industry. However, apogee steam Rose to the challenge protecting the health and safety of our employees was a focus from the outset of the pandemic and remains our number one priority. We adapted our business operation so we could continue to serve customers while keeping our employees safe. We paid down debt and strengthened our financial position giving us more flexibility going forward and we took short-term cost actions starting the long-term work to improve our overall cost structure which allowed us to deliver solid earnings and cash flow despite significant Revenue declines.

I want to acknowledge the efforts of all our employees and helping the company managed through the past year. We intend to build on that Foundation of work as we start our new fiscal year.

Now looking ahead to fiscal 22 the data suggests that non-residential construction has entered a down cycle. It's unclear at this point how long this will last and what the rebound will look like. Although it's likely to be different than past Cycles, especially in a post COVID-19 environment. What I can tell you is that we will not be content to just whether through this downturn in Period of uncertainty. We are using it as we have the pandemic as a catalyst to make bigger and accelerated changes to transform the company positioning us for Iraq or future

Against that backdrop. Let me discuss our priorities for the new fiscal year which are outlined on page five of our presentation.

Building on the work. We began in fiscal 21, we will continue to drive near-term cost and operational improvements that protect our bottom line while also taking actions to strengthen the company that long-term position for growth this begins with a focus on our people. We will continue to prioritize workplace health and safety and will emphasize tap management and development critical enablers to everything else. We hope to accomplish

Next we're working to drive stronger operational execution with a higher level of rigor and urgency on a vital few set of priorities. This will have some near-term impact but larger long-term benefits enabling us to drive higher Returns on invested Capital even if revenues do now do not bounce back quickly and strengthening leverage when they do come back.

3rd

We will accelerate our efforts to transform the Enterprise. This means continuing to build out a more competitive cost structure challenging ourselves to rethink how we can better manage off and drive to lower costs of goods sold through efficiencies cost out and stronger portfolio management will also begin to make foundational Investments to strengthen core processing systems and develop new digital and back-office capabilities. This is critical work to enable our future transformation sustain the games. We make in margin Improvement and make us a more effective acquirer in the future.

Finally, we will embark on a new Enterprise strategy to position the company for long-term sustainable growth.

Will utilize Market insights inform how we shift resources and capital across our businesses focusing on products services and end markets where we can bring more differentiation value better margins and grow faster than the market. Our goal will be to generate improve return on investment, which means we must deliver stronger profit dollars off and be more efficient in how we use our capital.

To drive this home internally. We are shifting the focus and measurement for our leadership team to delivering stronger Returns on invested Capital long-term and ebitda growth in the near-term. Now, I know you want to hear the specific details of what this new strategy will look like and so does the rest of the apogee team?

At this point we are still very early in the process. This is an important effort and we will be thorough and thoughtful to make sure we get it right. It's likely going to take much of this calendar year to fully build out, but we will provide updates in the coming quarters.

I'm excited about the coming year and the long-term opportunities. We have ahead of us and apogee's entire leadership team is focused on building a more successful future for our company. Our customers name, please and shareholders.

Now, let me turn it over to the sheet to provide comments on the quarter and our fiscal year 22 Outlook.

Thanks die and good morning everyone. I would like to comment about the opportunities. We see ahead for a company. I'm excited to work together with tie rod and the rest of the apple juice leadership team and employees as we continue to transform apogee is business and strengthen our company's position.

Let me start with Consolidated results which are on page six of our earnings presentation.

Total revenue was down 8% compared to last year's fourth-quarter. The revenue drivers were similar to what we saw the past two quarters with softness in non-residential construction markets and project delays impacting architectural framing systems and architecture glass partially offset by growth in architectural services, which is supported by its significant backlog.

Trading margin in the quarter included charges for impairment and restructuring during the fourth quarter. We performed our annual impairment tests on Goodwill and intangible assets the sustained deadline on non-residential construction activity and weaker Outlook in our end Market. Let us to recognize a non-cash pre-tax impairment charge of 70 million dollars in architectural framing systems. We also had four point nine million dollars of restructuring charges in the quarter which were primarily related to facility consolidation and fixed cost reductions in framing systems.

While we continue to believe in the long-term potential of framing systems leading indicators such as architectural billing index and Dodge momentum index suggest a more challenging near-term Outlook page which led to the impairment and restructuring decisions.

Framing systems made considerable progress during the year in optimizing its construction and taking steps towards a more integrated operating model. This will remain a focus in fiscal 22,000 as you position the segment for long-term growth and improved profitability.

Excluding these charges adjusted operating margin was 7.1% 190 basis point Improvement compared to last year's fourth quarter as our savings initiatives and improve execution offset the impact of low Revenue. I want to thank the entire apogee team for their efforts to deliver these profitability improvements despite the continued challenges too long to Kuwait and our end markets.

It just a bit improved 36.2 million compared to twenty nine point nine million dollars in the last year's fourth-quarter a game reflecting the favorable impact of a short and long-term cost actions and improved execution which offset the impact of lower Revenue.

Net interest expense was one point five million dollars lower than last year's fourth-quarter due to loaded balance and favorable one-time settlement or dilute Share account decreased to twenty six million reflecting our share repurchases or the past year.

Putting it all together. We had a gap loss of 1.65 dollars per share in the quarter excluding the impact of impairment in restructuring adjusted EPS grew by 26 per month to $0.63 per diluted share.

Now turning the segment results on slide seven.

Architectural framing systems continue to see lower or the volume but it's short lead-time products as well as customer-driven project delays, which led to a 14% Revenue decline in a quarter and it's 70% decline for the full year.

Fourth quarter adjusted operating margin was 2.7% 140 basis points better than last year's fourth-quarter as contractions and improved execution offset the lower volumes.

framing system

Is backlog increased slightly to 411 million dollars reflecting project events in the longer lead-time parts of framing systems as well as slower-than-expected conversion of backlog into Revenue due to a project delays.

Architectural Glass Revenue was eighty two million compared to ninety eight million dollars in the last year's fourth-quarter like framing systems. Revenue was impacted by project delays wage war or the volume adjusted operating margin was 4.4% fifty basis point Improvement compared to last year with improved Factory productivity in our hours of operations helping to offset the impact of lower volumes.

Architectural services continued its strong performance delivering double-digit top and bottom line growth Revenue increased 12% to eighty two million dollars each segment successfully executed the projects in a substantial backlog.

Services operating income grew 26% to 10.7 billion dollars and margin improved to 30.1% a hundred fifty basis point Improvement compared to last year driven by volume down and continued strong project execution.

Services backlog at the end of the fourth quarter was $571 compared to 597 million dollars in the last quarter as a reminder our services business had considerable success over the past two years building a record backlog as we entered fiscal 21 Services is now executing this backlog which led to growth and improved profitability this year off the difficult in Market environment or Services business is a recognized leader in its industry and we are confident. We will win our share of new projects in in in a down Market.

This is what we saw in the fourth quarter as we booked $52 of new orders longer-term. We are focused on further strengthening our capabilities. So this business can continue to define a solid financial performance.

Large-scale Optical has fully recovered from its COVID-19 related shut down early in the fiscal year returning to its usual levels of sales and profitability revenue and basically flat compared to the prior at twenty two million dollars with impressive operating margins of 28.1% margins were down compared to an exceptionally strong 33% alarm for quarter. You do higher manufacturing costs and increase these expense calling the sale and leaseback transaction. We completed in the last quarter.

There were some moving pieces in the carpet and other line on an adjusted basis corporate cost for 1.8 million lower than last year primarily due to lower advisory and legal expenses wage.

I would like to provide some more details about apogee saving initiatives which are on page eight of our presentation. We achieved our goal of more than forty million dollars of cost Savings in fiscal 2018, which helps us do margins and earnings despite. The revenue decline roughly half of the savings were tied to Temporary cost actions. We took in response to Kuwait. All of those contracts are reversed and will not repeat in the next fiscal year.

No.

Part of savings came from procurement initiatives and efforts to improve framing Systems Construction, err these savings are all sustainable. We will build on this progress and expect to deliver approximately $20 of incremental Savings in fiscal 22 offsetting the reversal of temporary code related cost actions.

The restructuring actions we took this quarter will help enable these cost reductions.

We also began work to achieve additional 10 to 20 million dollars a fixed cost savings that we identified in the third quarter. We expect some limited benefit of these actions in fiscal damage to the balance of these savings coming in fiscal 23.

A continued effort to build in both competitive structure will be a key element of a strategy going forward to track our progress. We expect to see the benefits of contractions contribute to increase our own non-profit dollars and improve Returns on invested Capital going forward. These are the key metrics that we will be using to measure our progress.

Turning to slide 9 the fourth quarter camp and exceptionally strong gear for cash flow. We generated Record courier cash from operations up 32% compared to last year. I need your VIN by working Capital Management Fuller Capital expenditures were twenty-six million dollars down considerably from fifty 1 million in the fiscal year 20 reflecting or decisions earlier in the week to scale back Capital spending in response to the uncertainty caused by code.

With increased cash from operations and reduce Cafe. We achieved record free cash flow of $116 more than double last year's level.

We use this cash will strengthen your balance sheet. We paid down $57 of debt during the year. We also increase the cash and cash equivalents to $47. Bring your net debt to less than 1 times adjusted a bit. This compares to a net of evidence ratio of one point five times at the end of last fiscal year.

The also return 52.5 million dollars of cash to shareholders through dividends and share repurchases during the year. We repurchased 1.2 million shares of first off. I need the fourth quarter of an ounce is 7% increase in our dividend.

We ended the fiscal year in a very strong financial position with reduced leverage. No significant debt maturities until 2024 and no outstanding borrowings in our two hundred thirty-five million Revolt this provides flexibility to invest in our business and continue to return cash to our shareholders.

Finally, I would like to comment on a outlook for fiscal 22, which is on page ten of her presentation.

When they see continued uncertainty in in markets, we wanted to provide some guidance for new fiscal year. We expect earnings in the range of 2. $10 to 2.35 per month.

This range is based on several assumptions. We expect another down here for non-residential construction Market in North America, which is mainly felt in architecture class and the short lifetime parts of framing systems architectural services is positioned for growth and fiscal 22 executing on projects from its backlog and we assume large-scale Optical we returned to pre-crisis levels of demand.

We will continue to improve our cost structure and strengthen execution. However, the lower demand in architectural framing systems in class will put pressure and operating margins particularly in the glass, which has a relatively higher fixed cost base. I would like to remind everyone that architecture glass benefit from a seven point four million New Market tax credit in fiscal twenty one, which will not repeat in the new fiscal year. We will also expect some raw material cost inflation primarily in Framing and glass segments. We will work to minimize the impact of these cost increases on our business office.

As I mentioned we plan to make investments during the year to better position the company for the future. This includes spending or Enterprise strategy project as well as systems and tools to improve Core Business processes. We expect seven to ten million dollars of operating costs to these initiatives and fiscal 22, which is included in a full year guidance range.

We are planning for Capital expenditures of of approximately $4,500 which will include approximately seven million of capital for the transformation investment as well as normal maintenance spending.

Well, we're not providing quarterly guidance. We expect earnings to flow through the year similar to what we have seen in the past years with first-quarter typically having the lowest revenue and earnings of the Year where the compounded by continued softness in a in Market.

As a reminder there is always some variability in our quarter-to-quarter results-driven by timing of projects and orders.

I'm proud of our team and the results. We have delivered in fourth-quarter and full-year. We made significant progress lowering our costs and driving improved execution across our business. We enjoy the New Year in a strong financial position following a record cash flow in fiscal 21. I look forward to working together with Ty and the rest of her leadership team to build on this progress and faith in the company for more success in the future.

With that, I'll turn it back over to time for some concluding remarks. Thankfully she has team performed well in fiscal 21 responding to a very challenging for our business and the industry. We overcame the impacts of covet and difficult and market conditions to deliver adjusted earnings growth and record cash flow due in large part to our team efforts to aggressively manage costs and improve execution. We also took important steps to strengthen our balance sheet ensuring we have the resources to manage through the current situation of significant financial flexibility going forward.

Looking ahead.

Build on the work. We begin in fiscal 21 accelerating our efforts to transform the company while driving stronger execution to deliver near term results importantly this month include work to develop a new Enterprise strategy to better position apogee for sustainable growth and higher returns. I look forward to sharing more details on our progress in the coming Quarters off with that. We will open it up for your questions. Thank you, ladies and gentlemen, as a reminder to ask the question you will need to press * then 1 on your phone to withdraw your question, press the pound key again. That's star one to ask the question. Please stand by while be compiled the key on a roster.

Our first question comes from Milan of Chris more with c j s Securities Alanis open. Hey, good morning guys. Thanks for taking a few questions for you real good morning. My name is truck. Good morning. Trying to understand just a little bit better how the different areas of apogee line up with the the nonresi cycle. So service is obviously fairly strong at this point in time, you know glass and then shortly. Framing or or softer. Does that imply that services will likely lag a bit odd when the framing and glass to pick up?

Yeah, I would say that projects in the backlog right now in our pipeline are generally moving forward, you know, the services business has built a really strong backlog and they're working that backlog down right now. So the work that they did previously is put them in a very strong position for fiscal 22 and then some of the shorter cycle time businesses that we see with respect to Glass and framing are feeling more of those immediate impacts on the cycle and the downturn that started early last year.

Got it, and and in terms of of the the glass and the shorter lead time, will they specifically on the shorter lead time framing? Is it likely that they thought would be you know out front with with the recovery, or is there also some lag likely there?

Yeah, so there's definitely a lack coming in shortly time projects and businesses. Also, we continue to see pressure in all of our businesses. It's it's easier to have visibility Crest on the shorter lead time projects, but we see n Market pressure continuing on both shortly time and log lead time projects. Got it. Yeah. I was just trying to understand a you know, kind of obviously now that you're the shorter lead time stuff is definitely being impact that is trying to look at a little bit further in terms of of that and and and glass I mean glasses Oracle e has has lagged the cycle, correct? Cuz that that's the you know, the last thing that goes into the buildings.

That's right glass is usually lagged the cyclist.

We got Services, which is a longest lead-time. Let's say on cycle then we have the class and then we have some parts of framing segment which are also longer a cycle and then we have some businesses just short much shorter in framing segment. Got it on the the cost savings side. So it sounds like there's an additional, you know ten to twelve million that you're targeting on the sg&a five of that happens in twenty-two. So that's a, you know, kind of somewhere between five and fifteen million additional cost savings and 23,000 will additional investment be required in $23 to make that happen.

We are continuously evaluating the Investments needed right now. We know we're going to be investing in fiscal twenty two of the seven to ten million dollars. You mentioned we evaluate the benefits and it turns off and make decisions on 23 due course of time.

Got it on the last one for me. Maybe just talk a little bit more about the impact of raw material inflation near-term. Sure. So we we have a strong procurement organization process. We had mentioned previously. We we did a lot of work in fiscal twenty the results of those that procurement work is visible in a in our past savings chart and slide age that work will continue in fiscal 22. We do have some headwinds in certain raw materials as you rightly pointed out. We are working to offset those with different categories in our program buckets. We have a lot of spending on direct and indirect Beyond those pressured categories and raw material will continue to focus on them and we'll continue to offset these pressures. I have to say that we will see continued raw material pressure during the fiscal twenty-two and our teams are working hard to offset those

All right. I appreciate it. I'll jump back in line. Thanks, Chris.

Thank you. Thank you. Our next question comes from the line of Eric Stine with great Harlem. The line is open morning everyone.

Behr evening. Hey, so just want to kind of come back to the 1st or the previous questions. Just you know, it makes sense and in fiscal 22 months, you know, the cautious stance given that I mean that really reflects the bookings environment over the last 12 months since the pandemic started but you know, I guess in light of starting to suck. I mean it's really early but like the February biy showing expansion for the first time in a year and some hiring Trends starting to turn positive a little bit, you know, maybe anything you can talk about just beyond the near-term. I mean are there reasons for optimism as you look to physical twenty-three, you know, just how do you think of the business in that context?

Yeah, this is Ty. You know, I would say we're seeing some of those positive signs in those forward leading indicators those look like they bottomed last spring and we're starting to see some of that positivity come through and you know, this is a long lead time cycle business. So some of that is pointing to some positivity as we look into fiscal twenty-three years, but the nearer term what we're seeing right now, especially in our Framing and glass segment is that continued pressure from the projects that got slowed or or stalled during COVID-19 and as we entered into that down Cyclone, you know, again, we're using this down cycle has the opportunity to drive change in how we're going to transform the business. We've got it we built a good foundation and fiscal twenty one month and I think the team really stepped into that and saw some things that we could do to execute better as we go forward. So we're going to use this opportunity to build on that and put ourselves in a much stronger position.

Vision as the market start to rebound

So we can deliver a stronger profit dollars and be more efficient and how we use our Capital going forward. Yep understood, you know, maybe just sticking with that. I know this has been a question apogee over the years but the services business clearly is the well in addition to LSL but but services in architectural has been quite good. I mean any thoughts on what the right growth rate is for that I know that's a business that can be substantially larger, but you also, you know want to stick to your your margin Targets in that sort of thing. So, I mean maybe just some longer-term whether it's you know physical 23 or just even beyond that where you think service is can go

Yeah, I would say, you know, we mentioned we're working on building that new Enterprise growth strategy and certainly as we work through this will be looking at all Park their portfolio in identifying where we see the best long-term opportunities for not just Revenue growth, but delivering margin and profit dollars and higher return on investment. So that certainly will be a lens that will be looking through as we work through this strategy project over the next few months. Okay, and then maybe last name for me just on on velocity maybe I mean, I know we're still a curly just a few Corners in but you know, maybe thoughts on that as you look at that for the first time here of the last like two three months, you know where you see that now maybe how it's performing now, you know where you see that whether it's at its current size or whether its expansion going forward. Yeah. I can tell you that the ramp-up can log.

Can use to progress slowly due to the market conditions and certainly the February weather event in in Texas didn't help with respect to that. It's still not at the break-even levels that we were aiming for and we're continuing to see some operational challenges as those volumes still stay below our initial targets. What I will tell you is we've learned a lot about that business and the operation itself over the last several months and we're going to use those learnings to further assess how this business can be successful going forward longer-term. That'll be part of that evaluation as we go through our strategic planning process as well. And sure we've got the right resources and investment to support that or other parts of the business as we move ahead.

Got it. Thanks a lot.

Thank you.

Our next question comes from the line of Brent Salman.

Davidson Elan is open great. Thank you. Good morning and welcome. Look forward to working with you. Thank you. Thank you. Good morning. I know a lot more to come on the Strategic front, you know the over the coming quarters and calendar year, but would love to you know, bapji to sort of embarked on this page of of focusing on for the non Monumental projects moving down-market a little bit and love to get just your perspective on that strategy, you know from a bigger picture level. Is it the same strategy does it need to be accelerated any any comments around that?

Well, that's certainly going to be part of.

That effort is we're building out that strategy. So, you know, we're we're in a very strong position as we entered this down cycle. There's been a lot of good work in the team built on that in throughout 1521. So as we go through the strategic planning process will be looking at all parts of the business and identifying the what makes the most sense given that it's likely some unless it's, you know are shifting due to the down cycle certainly in a post COVID-19.

Okay, and may on the services front talk about the quality of work entering backlog shifts and types of services or projects you're doing I know the backlogs down but you're sucking up a lot of work. It looks like let me get your perspective. They're just that the bidding environment.

Yeah over the past few years, you know, we built a record backlog in the services business and it's really been a step-function change from approximately five hundred million in fiscal nineteen to nearly seven million at the beginning of fiscal twenty one. So they're executing that backlog now and that drove growth and margin expansion in fiscal 21, just like as we look at the General market new project activity has slowed but the Q4 was was sequentially stronger than Q3 and that business has really carved out of a very solid position in the industry and and more confident that they'll continue to win. Our fair share of project towards even in this market downturn.

Okay, and a labor constraints and increasing challenge in that business.

So in general this in the shade in general, the the market is is constrained in all parts of a business with with regards to labor. We have been able to find the right off of labor pools and most of our construction sites. We we do see challenges with the labor but it's not something which is Unser mountable. They might be some Pockets where we have to work up to get Workforce in I I do not see that uh, a team in Services segment has done a fabulous job on Project Excellence as a call ahead and and that means off all the resources much ahead with the stronger person. So I don't see that as a challenge for us.

Yeah, and I think you know there's a yeah, this is Ty. There's a union labor component there and we've got a really strong relationship with the unions in that business and also has a she commented impressed with what I've seen with that team and what they've built around process and that has allowed them, you know to grow that business effectively in improve their margins due to that process work off. So people are still a very important component of that business, but they strengthen their execution around some really great processes and how they not just manage projects after they win them. But even they target the projects they go after

right and

And she talked about some of the inflationary pressures. I assume that you know, aluminum glass maybe maybe some other elements to that, you know the market and if are you in a position to pass that through the coming quarters.

Yeah, great question. So we have a short lead-time and long lead-time projects. Right? So for the shorter lead-times we use a procurement organization to continuously challenging cost and offset those pressures for longer lead-time projects. We definitely have an opportunity to pass on the cost to our customers as we continue to bed and revise the concept is based on the latest cost available. So I see uh, a very good kind of mix here and we are able to offset most of the cost challenges in in the next one years.

Okay, and in the past that you guys have provided a composition of backlog of Revenue by market segment, you know office mentality multi-family. Can you provide that off today?

Well, we we we look at our kind of high-rise midsize and low-rise buildings and we have been focusing on diversifying our portfolio as as we have mentioned earlier. We had not seen continuous kind of reaction in in in demand for high-rise, especially in the new world. We are let's say a majority of our business still has a commercial phone to it and we are continuing to look at our Enterprise strategy to see how we can evolve towards a more Diversified portfolio going forward. Yeah, I would add to that the team has done a nice job of starting to diverse society that mix that's something that we actually are working to amplify that effort. And again, the the strategy is going to inform how we redirect some of that effort to to look at that ass go forward and assess the future of the market.

Okay. Thank you for taking my questions. Thank you.

Thank you.

our next question comes

South me your line is open.

Hi, good morning. Thai and Sushi. Good morning. Good morning, Julio.

So so you talked about using the current downturn as a catalyst for Change and you're still crafting your strategic planning process, but was hoping you could speak to you know, one market that is currently shifting Rod that transition of office from high rise to more satellite offices, and maybe if you could speak to the potential solutions that are needed within that space.

Yeah, that's a great question. And and I would start by saying that long-term. We still believe the office is going to be an important part of how work gets done how organizations build strong cultures but it's likely some things are going to change and I would tell you that our view is it's too too early to tell exactly how that will shift. There's a lot of speculation. I'm sure you're reading things. I am and talking to customers in this we talked to other companies as well. So we're monitoring how that's going to shift overtime. This is a long cycle business. So some of those shifts will take a while to really become visible. But that's part of why that Enterprise strategy work is so important because that's going to inform us as we look at how that might change and really looking at different home option pads that it might go down and how we position ourselves to take advantage of whatever that shift is is want to add in terms of the satellite offices the diversification of portfolio that wage

Done already is going to help us play in the mid-size and low-rise buildings. So we believe

If you still have a strong potential to play in the market in the short-term while we Define a long-term strategy.

Got it.

I was hoping to pick your brain on the the overall view of the renovation business. I know in the past talk about opportunities for Geographic expansion within that. I was just hoping to get your view on, you know, big picture your long-term view of the renovation business.

Yeah, I mean, I think that has been a a nice pocket for us and for the business and it's an area that we're still working and driving some Revenue growth in that space off. Like everything else will look at that and is there something we could do different in assessing that in that strategy work and how we see that may be playing out in some of the market shifts that are likely to happen in that postcode invite. Yeah, and if I can add to that this renovation group that we have created in apogee has gotta play in the in the short-term as buildings will be redesigned with regards to our needs and so on B Street. We definitely see a play for us in the renovation Market the Enterprise strategy will help us Define what that play is going to look like.

Okay, maybe just last one here would be the sheet that 20 million of incremental savings that you expect in 22 pistol 22. Could you maybe break out how much of that would be German and how much of that would be on framing systems improvements popping up would be a good estimate for that Julio.

I would say a great journey is going to continue they've done some phenomenal job in fiscal 21 in taking our cost. The impact is going to be reflective in fiscal 2018 and procurement work is going to be challenged a little bit with the raw material cost increases as a headwind, but they are working really hard to offset most of those challenges but roughly half an hour would be a good choice.

Okay, great. Thanks for taking the questions. Thank you. Thanks.

Thank you. Our next question comes from.

Kansas City capital Elan is open good morning. I received and welcome to the apogee time. Thank you. Thank you. Good morning, as well. Looking at your page term priorities is the emphasis going to be in terms of operational changes and operational improvements is is that is the focus going to be on the architectural framing industry for a segment. Excuse me, is is that where you're really going to emphasize and and make some additional changes and so on.

Well, I think again that strategy work is going to help direct that but in general if you look at I would say both Framing and glass the team showed as they stepped into the challenge physical 21, what they could really do when they were faced with that challenge in terms of cost management and even the working Capital Management, you know, which was which is a step change and still able to keep the business office serving customers as we went to do that process. So I'm looking at that as that's an opportunity that we've identified now that we certainly can do more they're specifically in the sg&a past construct as well as our our cogs effort. So looking at building on that foundation and fiscal 21 and continuing to keep that Focus as we go through fiscal 22, and some of that's going to take investment as well. That's part of the transformation investment that nisheet identified in in his comments that we're looking at doing we're putting some investment in as well so that we can sustain some of those improvements dead.

and also give us the

Ability to Target other areas and to drive additional improvements as we move forward. Is there anything specifically you can you can talk about with regards to a vehicle down here in Missouri? Obviously that has been been an issue here for the last couple of years. But how are they doing? What kind of improvement do you see out of ethical hacking and where do you where do you stand in in terms of getting F go back to where it should be.

Sure. So, you know, we do not comment much on our business unit specifically in earnings release we focus on segments. What I can tell you is that segment has has got efco business within it and they are continuing to make progress as one integrated offering of framing segment. Of course a part of that that business and will continue to drive improvements in that business along with the fs integrated strategy. Okay? Okay. One last question. I think one of the the recurring themes we may be hearing in in the first quarter conference calls our supply chain issues, uh, Beyond just you know cost increases and so on but have you seen any Freight issues or availability afraid availability of of Life of raw material anything like that that's impacted your business.

So we have seen limited disruptions at this point, and and the good news is that we are in North america-centric supply chain, so we don't see that much of an impact coming from Rome is coming from other parts of the world. The market remains tied in terms of supply chain, and we'll continue to evaluate what improvements are needed in supply chain, but I don't see that as a significant challenge for a page at this stage. Sorry good. Thank you very much. Thank you.

Thank you as a reminder ladies and gentlemen to ask the question. You would need to press * then 1 on your telephone.

Our next question comes from the line of bill dezellem with Titan Capital Grille on is open. Thank you. I had a group of questions. First of all, which one of the frame businesses had had the impairments.

Yep. Sure. I can dig that one so that we went through a normal impairment testing exercise at the end of the year. They evaluate all of our businesses as part of an exercise and too busy that stood out for efco and and soda wall where it continued Market pressures. And also the way the business projections are for the next years have led to that environment.

Great, thank you and sheets and then not not to be too negative. But playing off of your your comments about the future downturn or the downturn in the middle of when would you expect the services business to see revenues turn down?

I would say that as you can see from our backlog or backlog and services businesses starting to reduce. We do not do long-term projections or guidance here, but I would see fiscal 23 and 24 to see some pressure as backlog assigned to go down. Now. I'm confident that the team is working really hard and they're booking a lot of orders as you can see in in Portage read the book seven million dollars of order in court afford the book Fifty two million dollars of order. So they are working hard against in markets stream. So to speak and I believe but we will see some Edmonton fiscal 23 and 24 on revenue and I would just add into that bill. That's a business that continues to perform very strong so long, they've got an opportunity here to continue to build out that business and backlog as we go into the fiscal 23, if you even though that's a longer cycle business for us if you would look at the third party data wouldja.

Probably indicate we believe that they are outperforming the market in other words taking share. So that's an opportunity for them to continue on that. So, you know at this stage, I don't know that we can say we would expect a downturn in fiscal 23 wait, we need to give that team time to continue to execute and perform the way they have been.

Great, that's that's helpful. And then relative to Geographic Behavior. Do you see a difference in activity levels or anticipated activity levels in the different regions of the country or is it pretty similar?

Yeah, I would say that overall. We're seeing slowness across the architectural markets in in general. So there's more softness in larger projects. And then that's all project business and framing has shown some more resiliency. And so we'll see how that improves but that's been kind of General across the board as we've seen it.

Thank you. And my last question is given the Dynamics that you see today. What is your expectations on when the the high velocity glass plant can reach Breakeven?

Yeah, it was I commented earlier that that's an area that we're assessing as part of our our strategy work. They've had some continued challenges in getting to the break-even volumes that we've talked about in in past earnings calls. So the the February weather events in Texas is unfortunate is that was affecting people, you know, we have employees. Obviously they're in customers in England as they worked through that that certainly set them back a bit in terms of their volume efforts. So we're assessing that now is as we go forward and more including a Allen's on that as we go through our strategic work up to assess. What is the the most realistic Revenue that we can hit to get to the right cost structure to make sure that that business is successful as we go forward.

Thank you.

Thank you.

I'm not showing any further questions. I will now like to turn the call back over to Thai silver horn.

Well, I'd like to thank everyone for joining us today. I can tell you that. We're very excited about the journey that we're beginning on in this fiscal year, and I look forward to giving you additional updates and our next earnings, Have a great rest of your day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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