[Management View]
Net sales increased by 4.6% YoY to $358.2 million, driven by inorganic growth from the UW Solutions acquisition. Adjusted EBITDA margin decreased to 12.4% due to lower pricing and volumes, unfavorable mix, and higher costs. Adjusted diluted EPS was $0.98, down from last year. The company remains focused on strategic actions to mitigate tariff impacts and leverage growth in Performance Surfaces.

[Outlook]
Net sales for FY2026 are projected at $1.39 billion to $1.42 billion, with adjusted diluted EPS guidance of $3.60 to $3.90. The company expects continued pressure from aluminum costs and competitive pricing in the glass segment. Capital expenditures are forecasted at $35 million to $40 million, with an adjusted effective tax rate of 27%.

[Financial Performance]
- Net Sales: $358.2 million, up 4.6% YoY
- Adjusted EBITDA Margin: 12.4%, down due to higher costs and lower pricing/volumes
- Adjusted Diluted EPS: $0.98, down from last year
- Metals Segment Sales: Slight decline YoY, adjusted EBITDA margin at 14.8%
- Architectural Services Sales: Up 2.5% YoY, adjusted EBITDA margin at 5%
- Services Backlog: Grew 16% sequentially to $792 million
- Glass Segment: Sales declined, EBITDA margin within long-term range
- Performance Surfaces: 18.6% organic growth, adjusted EBITDA margin increased

[Q&A Highlights]
Question 1: Could you expand on the organic growth in Performance Services? How much is related to internal initiatives versus market growth?
Answer: The strongest growth was in the core part of the business, driven by regained retail shelf space and cross-selling opportunities. The flooring side of UW Solutions outperformed, driven by demand for automation in distribution centers and expansion into Europe.

Question 2: What is driving the increase in the services backlog?
Answer: The largest portion of backlog growth came from projects in the Northeast, which had been relatively soft for a couple of years. Expansion efforts in the Western United States also contributed to the backlog growth.

Question 3: Do you expect to maintain targeted EBITDA margins in the Glass segment despite the competitive environment?
Answer: Yes, the company expects mid-teens EBITDA margins for the next two quarters and the year, driven by the shift to premium strategy and careful management of pricing pressures.

Question 4: How much of the lowered guidance for metals is based on cost pressure versus competitive pressure?
Answer: The pressure is mainly from higher aluminum costs. The company is balancing cost, price, and volume to maximize EBITDA dollars, with higher aluminum costs expected to persist in the second half of the year.

Question 5: What is the mix of flooring in the UW Solutions portfolio?
Answer: Flooring now represents more than half of the UW Solutions portfolio, up from "a little less than half" at the time of acquisition, driven by significant double-digit growth rates.

Question 6: Have you seen any shift towards smaller or nontraditional engineering-only projects?
Answer: Yes, particularly in the glass business, where the company is expanding its reach to pick up margin volume dollars. These projects tend to be less complex and open to smaller regional players, putting some price pressure on winning jobs.

Question 7: What is the realistic downside for FY2026 if market softness continues and there is no additional tariff relief?
Answer: The range of $3.60 to $3.90 for adjusted diluted EPS factors in current expectations. Continued upward cost pressure on aluminum could impact this range. The company is taking proactive cost actions to offset potential pressures.

Question 8: How should we model the tax rate for the rest of the year?
Answer: The tax rate is expected to be close to 27% in Q3 and dip slightly in Q4, ending the year at approximately 27%.

Question 9: How sensitive is the Performance Surfaces segment to a potential slowdown or inventory correction?
Answer: Any slowdown is likely to impact Q4 or Q1, with the retail side of the business targeting upper middle-class and upper-income households, which are less susceptible to spending declines.

[Sentiment Analysis]
Analysts expressed concerns about competitive pressures and cost inflation, particularly in the glass and metals segments. Management maintained a cautious but optimistic tone, emphasizing strategic actions and long-term growth potential.

[Quarterly Comparison]
| Metric | Q2 FY2026 | Q2 FY2025 |
|----------------------------|-----------|-----------|
| Net Sales | $358.2M | $342.5M |
| Adjusted EBITDA Margin | 12.4% | 14.0% |
| Adjusted Diluted EPS | $0.98 | $1.10 |
| Metals Segment Sales | Declined | Increased |
| Architectural Services Sales| +2.5% | +3.0% |
| Services Backlog | $792M | $683M |
| Glass Segment Sales | Declined | Increased |
| Performance Surfaces Growth| +18.6% | +15.0% |

[Risks and Concerns]
- Competitive price pressures in the glass segment
- Higher aluminum costs impacting metals margins
- Increased health insurance costs
- Potential for continued macroeconomic headwinds

[Final Takeaway]
Apogee's Q2 FY2026 results reflect the challenges of competitive pressures and cost inflation, particularly in the glass and metals segments. While the company has revised its full-year guidance downward, it remains focused on strategic actions to mitigate these impacts and leverage growth opportunities in Performance Surfaces. The balance sheet remains strong, supporting continued M&A activity and long-term growth potential.