- Revenue: Declined 8% year-over-year, primarily due to lower volumes in Framing Systems and Architectural Glass.
- Adjusted Operating Margin: Improved by 350 basis points to 12.8%, the highest in the company's history.
- Adjusted Diluted EPS: Grew 37% to $1.44, driven by higher adjusted operating income and lower interest expense.
- Framing Systems Net Sales: Declined 19%, primarily due to lower volumes and strategic shift away from lower margin products.
- Framing Systems Adjusted Operating Margin: Increased 240 basis points to 14.5%.
- Architectural Glass Net Sales: Declined 11%, primarily due to lower volume.
- Architectural Glass Operating Margin: Improved by 270 basis points to 19.7%.
- Architectural Services Net Sales: Grew 11%, driven by a favorable mix of projects and increased volume.
- Architectural Services Backlog: Ended the quarter at $867 million, up 7% from last quarter and 22% year-over-year.
- Large-Scale Optical (LSO) Net Sales: Declined 6%, primarily due to lower volume in the retail channel.
- LSO Operating Margin: Declined 170 basis points to 22.9%.
- Cash from Operations: $5.5 million, down from $21.3 million in the previous year's first quarter.
- Share Repurchases: $15.1 million.
- Capital Expenditures: $7.2 million.
- Net Leverage Ratio: 0.2 times trailing 12-months adjusted EBITDA.
- Full Year Net Sales Outlook: Expected to decline 4% to 7%.
- Full Year Adjusted Operating Margin Outlook: Expected to improve compared to fiscal '24.
- Full Year Adjusted Diluted EPS Outlook: Increased to a range of $4.65 to $5.
- Effective Tax Rate: Approximately 24.5%.
- Full Year Capital Expenditures: $40 million to $50 million.
Release Date: June 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved significant adjusted operating margin expansion to 12.8%, the highest in the company's 75-year history.
- Adjusted diluted EPS grew 37% to $1.44, driven by higher adjusted operating income and lower interest expense.
- Architectural Services delivered double-digit sales growth and significant margin expansion.
- Strong backlog growth in Services, ending the quarter at $867 million, a 22% increase year-over-year.
- Successful implementation of Project Fortify, leading to improved cost structure and productivity gains.
Negative Points
- Net sales declined by 8%, driven primarily by lower volumes in Framing Systems and Architectural Glass.
- Framing Systems and Glass segments experienced revenue declines of 19% and 11%, respectively.
- Expect continued headwinds in some construction market verticals, including office and commercial sectors.
- Anticipated lower sales levels due to softness in end markets and actions of Project Fortify.
- Cash from operations decreased to $5.5 million from $21.3 million in the previous year's first quarter.
Q & A Highlights
Q: Can you discuss the uplift in backlog for the services segment and what factors contributed to this growth?
A: The backlog growth did not include any office projects, highlighting our diversification efforts. We are seeing softness in the market, but we believe we are gaining share, particularly in the West. This has put some pressure on margins, but we expect continued margin improvement, aiming for the 7% to 9% target range.
Q: Given the strong profitability in the services segment, how do you see margins trending for the rest of the year?
A: We expect margins to improve sequentially throughout the year. The strong start in Q1 was slightly ahead of expectations, and we are building a strong pipeline for fiscal '26.
Q: The glass segment showed impressive profitability. Do you expect this to continue?
A: We anticipate margins will moderate throughout the year due to pricing pressure and softening end market demand. While Q1 exceeded expectations, we foresee margins aligning closer to the top end of the 10% to 15% range.
Q: How do you expect framing margins to trend sequentially?
A: Similar to glass, we expect framing margins to decline sequentially due to softening end markets and pricing pressure.
Q: Can you quantify the cost savings realized in the framing segment related to Project Fortify?
A: The savings are in line with our expectations. We have not quantified it specifically, but the actions taken in Q4 and early Q1 are yielding the anticipated savings.
Q: Can you provide an update on the growth plans for the framing business, particularly geographically?
A: We are in the early stages of expanding west of the Rockies, focusing on collecting market data and hiring sales coverage. This will help us make informed decisions on potential organic and inorganic investments over the next year or two.
Q: How do you view the market environment now compared to three months ago?
A: Our view has not changed dramatically. We anticipated softness in the second half, and recent data points affirm this. We expect volume declines and pricing pressure, particularly in the glass segment.
Q: When might we see the benefits of expanding into adjacency markets in Large-Scale Optical (LSO)?
A: We are already seeing some revenue from new applications like acrylic-based electrostatic substrates. While consumer softness may impact top-line growth, we expect these new applications to contribute positively in fiscal '26.
Q: Can you discuss the impact of lower material costs on margins, particularly in the framing and glass segments?
A: We see some favorability in material costs, particularly in framing, which is factored into our updated outlook. However, the impact on glass is less significant.
Q: What are your capital expenditure plans for the rest of the year?
A: We expect capital expenditures to be in the range of $40 million to $50 million, consistent with our prior year and in line with our expectations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
