Apogee Enterprises Inc (APOG) 2024 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the First Quarter 2024 Apogee Enterprises Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

美好的一天，感謝您的支持。歡迎參加 Apogee Enterprises 2024 年第一季度收益電話會議。 （操作員指示）請注意，今天的會議正在錄製中。

I would now like to hand the conference over to your speaker today, Jeff Huebschen, Vice President of Investor Relations. Please go ahead.

現在我想將會議交給今天的發言人、投資者關係副總裁 Jeff Huebschen。請繼續。

Thank you, Liz. Good morning, and welcome to Apogee Enterprises Fiscal 2024 First Quarter Earnings Call. With me today are Ty Silberhorn, Apogee's Chief Executive Officer; and Matt Osberg, Chief Financial Officer.

謝謝你，莉茲。早上好，歡迎參加 Apogee Enterprises 2024 財年第一季度收益電話會議。今天與我在一起的有 Apogee 首席執行官 Ty Silberhorn；和首席財務官馬特·奧斯伯格。

I'd like to remind everyone that there are slides to accompany today's remarks. These are available in the Investor Relations section of Apogee's website. During this call, we will reference certain non-GAAP financial measures. Definitions of these measures and a reconciliation to the nearest GAAP measures are provided in the earnings release and slide deck we issued this morning.

我想提醒大家，今天的講話附有幻燈片。這些信息可在 Apogee 網站的投資者關係部分找到。在本次電話會議中，我們將參考某些非公認會計準則財務指標。我們今天早上發布的收益報告和幻燈片中提供了這些措施的定義以及與最接近的公認會計準則措施的調節。

I'd also like to remind everyone that our call will contain forward-looking statements. These reflect management's expectations based on currently available information. Actual results may differ materially. More information about factors that could affect Apogee's business and financial results can be found in today's press release and in our SEC filings.

我還想提醒大家，我們的電話會議將包含前瞻性陳述。這些反映了管理層基於當前可用信息的預期。實際結果可能存在重大差異。有關可能影響 Apogee 業務和財務業績的因素的更多信息，請參閱今天的新聞稿和我們向 SEC 提交的文件。

And with that, I'll turn the call over to you, Ty.

這樣，我會把電話轉給你，Ty。

Thank you, Jeff. Good morning, everyone. Well, Apogee's team delivered yet another strong quarter. Our strategy and strengthening operational execution continue to drive results. This morning, I'll cover highlights from the quarter, how our strategy is driving sustainable improvements in our business and our progress on this year's priorities. Then I'll turn it over to Matt for more details on the quarter and our outlook.

謝謝你，傑夫。大家，早安。嗯，Apogee 的團隊又交付了一個強勁的季度。我們的戰略和加強運營執行繼續推動成果。今天早上，我將介紹本季度的亮點、我們的戰略如何推動業務的可持續改進以及我們在今年優先事項上取得的進展。然後我會將其交給馬特，了解有關本季度和我們前景的更多詳細信息。

The first quarter was a solid start to our fiscal year, continuing the positive trends we've established over the past several quarters. We delivered top and bottom line (technical difficulty) sustained operating margins at 9.3% and had a strong cash flow quarter with cash from operations significantly higher than last year's first quarter. These improved financials are underpinned by the strengthening operational execution across our businesses. We are successfully managing the things that we can control. We're driving sustainable [product] improvements through the Apogee Management System. We're maintaining a strong focus on cost management. We're improving key processes and [systems] across the company, and we're bringing more rigor and focus to how we are managing the business.

第一季度是我們財年的良好開端，延續了我們在過去幾個季度建立的積極趨勢。我們實現了頂線和底線（技術難度），營業利潤率維持在 9.3%，季度現金流強勁，運營現金顯著高於去年第一季度。這些財務狀況的改善得益於我們各業務部門運營執行力的加強。我們正在成功地管理我們可以控制的事情。我們正在通過 Apogee 管理系統推動可持續的[產品]改進。我們始終高度重視成本管理。我們正在改進整個公司的關鍵流程和[系統]，並且我們正在更加嚴格和專注地管理業務。

Looking at the segments, our (technical difficulty) Architectural Glass. Our glass team continued their (technical difficulty) consecutive sequential (technical difficulty) more to say about the transformation of our Glass business in a moment. (technical difficulty) and Large-Scale Optical also had solid quarters with strong execution, [offset] inflation and improved sales mix as we continue to emphasize differentiated product offerings.

從各個部分來看，我們的（技術難度）建築玻璃。我們的玻璃團隊繼續他們的（技術難度）連續的順序（技術難度）更多地講了我們玻璃業務的轉型。 （技術難度）和大型光學業務也憑藉強勁的執行力、[抵消]通貨膨脹和改善的銷售組合，實現了穩健的季度業績，因為我們繼續強調差異化的產品供應。

Results in Architectural Services came in below our expectations (technical difficulty) through a transition to better position the business for long-term growth and manage lower-than-expected profitability (technical difficulty). We remain confident in our potential of the business. Our Harmon brand is a recognized leader in its industry with a strong market position and broad set of capabilities.

通過轉型以更好地定位業務以實現長期增長並管理低於預期的盈利能力（技術難度），建築服務的業績低於我們的預期（技術難度）。我們對我們的業務潛力仍然充滿信心。我們的 Harmon 品牌是業內公認的領導者，擁有強大的市場地位和廣泛的能力。

As a reminder, in recent years, Services has outperformed its market, and we're confident we will see improved performance as we move through this fiscal year. Even with the softer-than-expected results in Services, the first quarter was a strong start to our fiscal year, with our Glass business outperforming the market due to their shift to premium and their continued operational execution. We are well positioned to build on our success from this quarter and (technical difficulty) our full year earnings outlook.

提醒一下，近年來，服務業的表現優於市場，我們有信心在本財年中看到業績的改善。儘管服務業的業績弱於預期，但第一季度仍然是我們財年的強勁開局，我們的玻璃業務由於向高端業務的轉變以及持續的運營執行而跑贏了市場。我們處於有利位置，可以在本季度的成功和（技術難度）全年盈利前景的基礎上再接再厲。

Our improved performance continues to be driven by our 3-pillar strategy referenced on Slide 5 in our presentation. The performance of Architectural Glass over the past 2 years is a great case study of our strategy at work.

我們的業績改進繼續受到我們演示文稿中幻燈片 5 中引用的三支柱戰略的推動。過去兩年建築玻璃的表現是我們戰略實施的一個很好的案例研究。

Page 6 highlights the Glass segment's transformation. Operating under the Viracon brand, our Glass business has long been an industry leader. We have a reputation for quality and service, deep relationships with customers and influencers and a wide range of capabilities, including proprietary products. Even with those strengths, the Glass segment had underperformed its potential. Through our strategy work, we identified 2 imperatives for change. We needed to build a more competitive cost structure, sustaining it with productivity, and we needed to shift our focus to the premium segment of the market that recognizes the value we provide. The team has achieved tremendous success in both areas.

第 6 頁重點介紹了玻璃領域的轉型。我們的玻璃業務以 Viracon 品牌運營，長期以來一直處於行業領先地位。我們在質量和服務方面享有盛譽，與客戶和影響者有著深厚的關係，並且擁有廣泛的能力，包括專有產品。即使有這些優勢，玻璃領域的表現仍未能發揮其潛力。通過我們的戰略工作，我們確定了變革的兩個必要條件。我們需要建立更具競爭力的成本結構，並通過生產力來維持它，並且我們需要將重點轉移到認可我們提供的價值的高端市場領域。該團隊在這兩個領域都取得了巨大的成功。

We've driven sustainable productivity improvements through the deployment of the Apogee Management System, our approach to lean and continuous improvement. Additionally, our facility rationalization reduced our overall cost structure without impacting our ability to serve customers in our target markets. We repositioned the business as a leader in premium solutions, and we align the entire organization to better serve this market. This included changes to our sales organization, leveraging innovation and partnerships to deepen our product offerings and driving improvements in quality, service and delivery to outperform customer expectations.

我們通過部署 Apogee 管理系統推動了可持續的生產力提高，這是我們精益和持續改進的方法。此外，我們的設施合理化降低了我們的整體成本結構，但沒有影響我們為目標市場的客戶提供服務的能力。我們將業務重新定位為優質解決方案的領導者，並調整整個組織以更好地服務於這個市場。這包括對我們的銷售組織進行變革，利用創新和合作夥伴關係來深化我們的產品供應，並推動質量、服務和交付的改進，以超越客戶的期望。

This shift in market focus has led to a more favorable sales mix, improved pricing for the value we offer our customers and new growth opportunities. The progress with our strategy is evident in our financial results. The team has delivered impressive margin gains and positioned the business now as an economic leader.

市場重點的轉變帶來了更有利的銷售組合、提高了我們為客戶提供的價值的定價以及新的增長機會。我們的戰略進展在我們的財務業績中顯而易見。該團隊實現了令人印象深刻的利潤增長，並將該業務定位為經濟領導者。

Based on this progress, we are increasing our target margin range for Glass as shown on Slide 7. Our new target margin range is 10% to 15% on a full year basis compared to our previous range of 7% to 10%. It's very encouraging that this quarter, 3 of our 4 business segments delivered margin above the target ranges we set at our Investor Day, especially given that we are still early in our AMS journey.

基於這一進展，我們正在提高玻璃的目標利潤率範圍，如幻燈片 7 所示。我們新的全年目標利潤率範圍為 10% 至 15%，而之前的範圍為 7% 至 10%。令人鼓舞的是，本季度我們 4 個業務部門中的 3 個業務部門的利潤率高於我們在投資者日設定的目標範圍，特別是考慮到我們仍處於 AMS 旅程的早期階段。

As we move through fiscal 2024, our strategic framework positions us for further progress toward our financial targets and positions us to outperform throughout the market cycle. While overall nonresidential construction activity remains healthy today, there are reasons for a somewhat cautious view of the market as we move forward. Higher interest rates along with overall economic uncertainty may impact construction activity for at least some period. However, through our team's efforts, we are transforming Apogee into a higher performing, more resilient company. I'm confident that we will drive further performance gains as the year progresses.

隨著 2024 財年的到來，我們的戰略框架使我們能夠進一步實現我們的財務目標，並使我們能夠在整個市場週期中表現出色。雖然目前整體非住宅建築活動仍然健康，但隨著我們的發展，我們有理由對市場持謹慎態度。較高的利率以及整體經濟的不確定性可能會至少在一段時間內影響建築活動。然而，通過我們團隊的努力，我們正在將 Apogee 轉變為一家績效更高、更有彈性的公司。我相信，隨著時間的推移，我們將進一步推動業績增長。

Page 8 outlines our priorities for the fiscal year, which we introduced last quarter, and this is where we will continue to focus for the remainder of the year. Our entire team is aligned on driving further progress to advance our strategy and to deliver continued performance.

第 8 頁概述了我們上季度介紹的本財年的優先事項，這也是我們在今年剩餘時間內將繼續關注的重點。我們的整個團隊一致致力於推動進一步進展，以推進我們的戰略並提供持續的績效。

Now I'd like to introduce Matt Osberg. Matt joined us in late April, and I'm very excited to have him as part of the team. He brings terrific experiences and perspectives, and he's established a strong record of creating value throughout his career.

現在我想介紹一下馬特·奧斯伯格。馬特於四月底加入我們，我很高興他成為團隊的一員。他帶來了豐富的經驗和觀點，並在整個職業生涯中建立了創造價值的良好記錄。

Let me turn it over to Matt to provide more details on the quarter and our outlook.

讓我將其轉交給馬特，以提供有關本季度和我們的前景的更多詳細信息。

Thanks, Ty, and good morning, everyone. I'm very excited to be part of the Apogee team and the opportunities we have as a company to continue to drive shareholder value. I look forward to speaking with many of you in the coming quarters.

謝謝，泰，大家早上好。我很高興能成為 Apogee 團隊的一員，也很高興我們作為一家公司有機會繼續推動股東價值。我期待在接下來的幾個季度與你們中的許多人交談。

Before I review the results for the first quarter and our updated fiscal '24 outlook, I want to take the chance to recognize Mark Augdahl for the work he did in the interim CFO role. Mark did a fantastic job leading the company through a time of transition, and he has been extremely valuable to me as I have onboarded with the company. Great job, Mark, and thank you.

在回顧第一季度的業績和更新後的 24 財年展望之前，我想藉此機會表彰 Mark Augdahl 在擔任臨時首席財務官期間所做的工作。馬克在帶領公司度過轉型期方面表現出色，在我加入公司時，他對我來說非常有價值。幹得好，馬克，謝謝你。

Now turning to our results for the quarter. The first quarter was a strong start to our fiscal year, building on the momentum established last year. Consolidated net sales grew 1.4% to $361.7 million. The increased sales were primarily driven by strong growth in Glass, which was up 27.5% compared to the prior year. As expected, this was partly offset by a net sales decline of 13.5% in Services (technical difficulty) 14% in the first quarter of fiscal '23. Consolidated operating income increased 1.7%, primarily driven by strong sales and margin improvement in Glass. The Glass segment's operating margin was 17%, over a 10 percentage point improvement compared to the first quarter of last quarter and reflects the impact not only of higher volume, but also benefits from pricing and mix as we execute our strategic shift to emphasize premium high-performance products. This result also demonstrates the significant operational progress that has been made with our initial deployment of AMS.

現在轉向我們本季度的業績。在去年建立的勢頭基礎上，第一季度是我們財年的強勁開局。綜合淨銷售額增長 1.4%，達到 3.617 億美元。銷售額的增長主要是由玻璃業務的強勁增長推動的，與上一年相比增長了 27.5%。正如預期的那樣，這被 23 財年第一季度服務業（技術難度）14% 的淨銷售額下降 13.5% 所部分抵消。綜合營業收入增長 1.7%，主要受到玻璃業務強勁銷售和利潤率改善的推動。玻璃部門的營業利潤率為 17%，與上季度第一季度相比提高了 10 個百分點以上，這不僅反映了產量增加的影響，而且還反映了我們執行戰略轉變以強調高溢價時定價和產品組合的好處- 高性能產品。這一結果還表明我們在 AMS 的初始部署中取得了重大的運營進展。

At a consolidated level, the Glass margin improvement was offset primarily by segment margin declines in Framing and Services. As a reminder, in the first quarter of last year, Framing had an approximately $4 million benefit related to the timing of pricing actions and inventory flows. Last spring, as aluminum prices spiked, we were able to realize the benefit of higher selling prices as we work through lower cost aluminum inventory. Setting aside this benefit, the Framing operating margin this quarter was roughly in line with the prior year.

在綜合層面上，玻璃利潤率的改善主要被框架和服務部門利潤率的下降所抵消。提醒一下，去年第一季度，Framing 因定價行動和庫存流動的時間安排獲得了約 400 萬美元的收益。去年春天，隨著鋁價飆升，我們通過降低鋁庫存成本，實現了銷售價格上漲的好處。撇開這一收益不談，本季度的 Framing 營業利潤率與上年大致持平。

Services had an operating loss of $0.6 million primarily due to lower estimated profitability levels on a select number of projects that are nearing completion, the impact of lower project volume and approximately $1 million of severance costs as we continue to execute our strategic transition in the Services business. As Ty mentioned, we remain confident in the Service's long-term potential and expect the operating margin -- operating performance trend to improve as the year goes on.

服務部門的運營虧損為 60 萬美元，主要是由於一些即將完成的項目的預計盈利水平較低、項目數量減少的影響以及我們繼續執行服務部門的戰略轉型而產生的約 100 萬美元的遣散費商業。正如 Ty 提到的，我們對該服務的長期潛力仍然充滿信心，並預計營業利潤率——經營業績趨勢將隨著時間的推移而改善。

Diluted EPS grew 5% to $1.05, primarily driven by higher operating income, a lower effective tax rate and a lower diluted share count, which reflects the benefit of our share repurchase activity. This was partially offset by higher interest expense primarily due to higher interest rates. Our tax rate in the quarter was 25%, roughly in line with our long-term rate assumption (technical difficulty).

稀釋後每股收益增長 5%，達到 1.05 美元，主要是由於營業收入增加、有效稅率降低和稀釋後股票數量減少，這反映了我們股票回購活動的好處。這被主要由於利率上升導致的利息支出增加部分抵消。我們本季度的稅率為 25%，大致符合我們的長期稅率假設（技術難度）。

Turning to our cash flow and the balance sheet. We generated $21.3 million (technical difficulty), an improvement of $52 million over the first quarter of last year. This was primarily driven by improved (technical difficulty). First quarter of last year had unfavorable working capital impacts related to sales growth and inflation. (technical difficulty) is typically our lowest quarter for cash flow (technical difficulty) capital expenditures of $7.4 million in the first quarter, primarily relating to investments to expand capacity in our higher-margin businesses, enhance productivity through automation and deploy improved systems to better support our business. We also returned over $10 million in cash to shareholders through dividends and (technical difficulty). Balance sheet remains very strong with net leverage ratio (technical difficulty) onetime trailing 12-month EBITDA and no significant debt maturities until 2027.

轉向我們的現金流和資產負債表。我們創造了 2130 萬美元（技術難度），比去年第一季度增加了 5200 萬美元。這主要是由改進（技術難度）驅動的。去年第一季度銷售增長和通貨膨脹對營運資本產生了不利影響。 （技術難度）通常是我們現金流最低的季度（技術難度）第一季度的資本支出為 740 萬美元，主要與擴大利潤率較高業務的產能、通過自動化提高生產力以及部署改進的系統以更好地進行投資有關。支持我們的業務。我們還通過股息和（技術難度）向股東返還了超過 1000 萬美元的現金。資產負債表仍然非常強勁，淨槓桿率（技術難度）一度落後於 12 個月的 EBITDA，並且在 2027 年之前沒有重大債務到期。

Looking at backlog trends for the quarter. Backlog Framing was $221 million compared to $243 million in the fourth quarter of last year. Several factors are impacting Framing backlog. First, we've improved service levels for our short lead time products. So we are converting backlog into sales more quickly. Second, as a part of our strategic shift, we continue to move away from lower margin sales that we would have pursued in the past. Finally, we continue to see choppiness in bidding and award activity. Services finished the quarter with $709 million in backlog. This was a slight sequential decline compared to the fourth quarter of last year, but 4% higher than the first quarter of prior year.

查看本季度的積壓趨勢。積壓框架為 2.21 億美元，而去年第四季度為 2.43 億美元。有幾個因素正在影響框架積壓。首先，我們提高了短交貨期產品的服務水平。因此，我們正在更快地將積壓訂單轉化為銷售量。其次，作為我們戰略轉變的一部分，我們繼續擺脫過去追求的低利潤銷售。最後，我們繼續看到投標和授標活動的波動。本季度服務業積壓訂單金額為 7.09 億美元。與去年第四季度相比略有下降，但比去年第一季度高出 4%。

Turning to our updated fiscal year outlook. We are pleased to be able to increase our full year diluted EPS outlook to a range of $4.15 to $4.45, primarily reflecting our strong first quarter results and an improved outlook for our second quarter. This updated outlook implies growth at the bottom of the range of approximately 4% and EPS growth at the top of the range of approximately 12% compared to last year's EPS of $3.98 (sic) [$3.90]. Our outlook includes our continued expectation of net sales for the year to be flat to slightly down, reflecting lower volumes in Services and Framing partially offset by growth in Glass.

轉向我們更新的財政年度展望。我們很高興能夠將全年攤薄後每股收益預期上調至 4.15 美元至 4.45 美元，這主要反映了我們強勁的第一季度業績和改善的第二季度前景。與去年的每股收益 3.98 美元（原文如此）[3.90 美元]相比，更新後的展望意味著該範圍底部的增長約為 4%，每股收益增長約為該範圍頂部的 12%。我們的展望包括我們對今年淨銷售額持平或略有下降的持續預期，反映出服務和框架銷量的下降被玻璃的增長部分抵消。

Also, our outlook range contemplates the latest market forecast, which point to a potential slowdown in nonresidential construction in the second half of our fiscal year. Despite our sales outlook, we expect to drive EPS growth through expanded operating margins. Although the 17% operating margin in Glass this quarter is likely not sustainable for the full year, we are increasing our margin expectations for Glass to be in the 10% to 15% range for the year, which is well above last year's level. Services margins should improve as we move through the year, but are expected to fall short of their 7% to 9% target range. Although Framing margins are projected to decline compared to prior year, we expect margins near the top of its 9% to 12% range.

此外，我們的展望範圍考慮了最新的市場預測，該預測表明我們財年下半年非住宅建設可能放緩。儘管我們的銷售前景不佳，但我們預計將通過擴大營業利潤率來推動每股收益增長。儘管 Glass 本季度 17% 的營業利潤率可能無法持續到全年，但我們將 Glass 的全年利潤率預期提高到 10% 至 15% 範圍內，遠高​​於去年的水平。隨著今年的進展，服務利潤率應該會有所改善，但預計將低於 7% 至 9% 的目標範圍。儘管與去年相比，Framing 利潤率預計會下降，但我們預計利潤率將接近 9% 至 12% 範圍的上限。

Finally, we expect LSO margins to be slightly down compared to last year. We continue to expect an average tax rate of approximately 24.5% and full year capital expenditures of $50 million to $60 million. We also expect both operating and free cash flow growth for the year. As a reminder, fiscal '24 is a 53-week year with an extra week of operations in the fourth quarter. For the full year, the extra week will add approximately 2 percentage points of growth to revenue.

最後，我們預計 LSO 利潤率將比去年略有下降。我們仍然預計平均稅率約為 24.5%，全年資本支出為 5000 萬至 6000 萬美元。我們還預計今年的運營現金流和自由現金流都會增長。提醒一下，24 財年為期 53 週，第四季度額外運營一周。對於全年而言，額外的一周將使收入增長約 2 個百分點。

In closing, I am pleased with our first quarter performance and ability to raise our outlook for the year. Advancing our strategic objectives is driving improved profitability even in a year with sales growth headwinds. This improved profitability will position us to better outperform throughout the market cycle. Additionally, our strong cash flow and low leverage position are enabling us to deploy capital to invest in our business and return cash to shareholders through dividends and share repurchases.

最後，我對我們第一季度的業績以及提高今年前景的能力感到滿意。即使在銷售增長遇到阻力的一年中，推進我們的戰略目標也能提高盈利能力。盈利能力的提高將使我們在整個市場週期中表現更好。此外，我們強勁的現金流和低杠桿狀況使我們能夠部署資本投資於我們的業務，並通過股息和股票回購向股東返還現金。

We also continue to look for accretive acquisition opportunities that would accelerate our growth and profitability. I'm glad to be part of the Apogee organization and excited to contribute to the work the team is doing to drive value for all our stakeholders.

我們還繼續尋找可加速我們增長和盈利的增值收購機會。我很高興成為 Apogee 組織的一員，並很高興能為團隊為所有利益相關者創造價值所做的工作做出貢獻。

With that, I'll turn it back over to Ty for some concluding remarks.

至此，我將把它轉回給 Ty 進行一些總結性發言。

Thanks, Matt. To wrap up, I want to reiterate how proud I am of the team for delivering another strong quarter and a great start to our fiscal year. We continue to make progress advancing our strategy and improving operational execution. I'm particularly happy with the performance of our Glass segment and our increased long-term outlook for that business. Through our team's efforts across all of Apogee, we are well positioned to continue our progress in the coming quarters.

謝謝，馬特。最後，我想重申，我對團隊再次實現強勁的季度業績和財年的良好開端感到非常自豪。我們繼續在推進戰略和提高運營執行方面取得進展。我對我們玻璃部門的表現以及我們對該業務長期前景的增長感到特別滿意。通過我們整個 Apogee 團隊的努力，我們已做好準備在未來幾個季度繼續取得進展。

With that, we are ready to take your questions.

這樣，我們就準備好回答您的問題了。

(Operator Instructions) Our first question comes from the line of Chris Moore with CJS Securities.

（操作員說明）我們的第一個問題來自 CJS 證券的 Chris Moore。

The line is cutting in a little bit, but hopefully you can hear me.

線路有點中斷，但希望你能聽到我的聲音。

We hear you, Chris.

我們聽到你的聲音，克里斯。

All right. Terrific. Yes, maybe we could just start with Glass. Obviously, revenue and margins way above what we were expecting, the highest Glass revenue since, I think, Q4 '20. I get that kind of the better mix and pricing, but you also, Ty, talked about more growth opportunities. And maybe you could just expand on that a little bit.

好的。了不起。是的，也許我們可以從 Glass 開始。顯然，收入和利潤率遠高於我們的預期，我認為這是自 20 年第四季度以來最高的 Glass 收入。我得到了更好的組合和定價，但泰，你也談到了更多的增長機會。也許你可以稍微擴展一下。

Well, I think as we've repositioned that business, Chris, with that focus on the premium side of the market, it's gotten that business back to really focusing on where they can differentiate from a competitive standpoint. So if you look at it from a top end volume level, there's volume growth, obviously, in that, but what it's allowing them to do is sell higher value-added product offerings, which, obviously, as a result of that, they're able to command a higher price per square foot for those products, and they see the opportunity to build on that throughout the rest of the year.

克里斯，我認為，當我們重新定位該業務時，重點關注市場的高端市場，這讓該業務重新真正專注於他們可以從競爭的角度實現差異化的地方。因此，如果你從高端銷量水平來看，顯然銷量有所增長，但它允許他們做的是銷售更高附加值的產品，顯然，因此，他們'他們能夠為這些產品爭取更高的每平方英尺價格，並且他們看到了在今年剩餘時間內在此基礎上繼續發展的機會。

So they're getting a benefit of a volume lift as they focused in on parts of the market where that story holds up better from a differentiation standpoint, and they're able to sell things at a higher price as well as sell things with additional higher value-add propositions in those product offerings for them to not only get the price accordingly, but also that helps us with our margin performance.

因此，他們從銷量提升中受益，因為他們專注於市場的某些部分，從差異化的角度來看，這些故事更能體現他們的優勢，他們能夠以更高的價格出售商品，也能夠以額外的價格出售商品。在這些產品中提出更高的附加值主張，不僅可以讓他們獲得相應的價格，還可以幫助我們提高利潤率。

Layering on top of that, from a productivity standpoint, the team has done exceptionally well. And if you'll recall, we said, as we closed out last year, it's going to be harder to take the big giant steps forward on the productivity side to drive that margin, and we would need to see the mix shift come through. We're seeing that mix shift coming through, and that looks good as we look out for the rest of the year.

除此之外，從生產力的角度來看，團隊做得非常好。如果你還記得的話，我們說過，正如我們去年結束時所說，在生產力方面採取重大步驟來提高利潤率將變得更加困難，我們需要看到混合轉變的實現。我們看到這種混合轉變正在發生，從我們對今年剩餘時間的展望來看，這看起來不錯。

Got it. No, that's helpful. So I mean, how do you think about the total addressable market in Glass currently versus maybe a couple of years ago. Is it significantly smaller and you're just getting to get a bigger share of it? Or just any thoughts there?

知道了。不，這很有幫助。所以我的意思是，與幾年前相比，您如何看待當前 Glass 的總體潛在市場。它是否明顯變小了，而你卻獲得了更大的份額？或者只是有什麼想法？

Well, I think from a broader market perspective, non-resi construction continues to hold up. I mean, obviously, there's talk and there's concerns about how that plays out is calendar '23 closes out and we get into calendar '24. And when we work through our strategic plan, we didn't want the teams to talk about their market opportunity by going down smaller and smaller and defining smaller pieces of the market. We actually wanted them to continue to look at the broad market, but then point their energy and efforts to where they could capture the most value.

嗯，我認為從更廣泛的市場角度來看，非稀土建築繼續保持堅挺。我的意思是，很明顯，有人在討論，也有人擔心 23 號日曆結束後我們將進入 24 號日曆，情況會如何發展。當我們制定戰略計劃時，我們不希望團隊通過越來越小並定義更小的市場來談論他們的市場機會。我們實際上希望他們繼續關注廣闊的市場，然後將他們的精力和努力投入到可以獲取最大價值的領域。

So we would still define it as we're playing in that larger, broader market from a Glass glazing opportunity. However, we're being much more focused and selective about what we go after. So we've got solid growth, top, as well as volume growth this quarter. They're positioned to do that in terms of the volume growth and top line growth through the year. And I would say they're outperforming the market on from a growth perspective right now, but they're doing it in a segment of the market where we can capture the value.

因此，我們仍然會定義它，因為我們正在通過玻璃窗機會參與更大、更廣泛的市場。然而，我們對我們追求的目標更加專注和選擇性。因此，本季度我們的銷量和銷量均實現了穩健增長。他們有能力在全年的銷量增長和營收增長方面做到這一點。我想說，從增長的角度來看，他們目前的表現優於市場，但他們是在我們可以獲取價值的細分市場中這樣做的。

Got it. That's very helpful. Maybe just one last one for me on the challenges on Services. So you called out the impact of lower estimated profitability on certain projects. And I think that the comment was most of those will be running off in fiscal '24? Is that a fair way to look at it?

知道了。這非常有幫助。也許這只是我關於服務挑戰的最後一篇。因此，您指出了較低的預計盈利能力對某些項目的影響。我認為評論中的大部分內容將在 24 財年消失？這是一個公平的看待它的方式嗎？

Yes. Remember, we had -- it was a combination of 2 things. So Sotawall has been integrated into that business now. So everything is operating under the Harmon brand. We knew our fiscal '24 was going to be a challenge because these are jobs won in calendar '20 and '21. So there was lower volume available to win on top of margins were squeezed, then layer in some of the Sotawall projects that we are running through this fiscal year, those get behind us. And then a few of those Harmon jobs that we had in Q4 and we had a handful in Q1, we've had to take some write-downs on those projects, just with how they're performing. And because those were won in calendar '20 and '21, they were already tied on margins. So as we looked at the quarter, it performed, I would say, a little worse than we expected. But remember, Services kind of their Q1 is their low point. They go up from there. So we do see that, that we do have confidence that trend will occur, that will see improvements in Q2 and then as we move forward through the year.

是的。請記住，我們有——這是兩件事的結合。 Sotawall 現在已經整合到該業務中。所以一切都在 Harmon 品牌下運營。我們知道 24 財年將是一個挑戰，因為這些工作是在 20 和 21 日曆年贏得的。因此，在利潤受到擠壓的情況下，可贏得的銷量較低，然後再加上我們本財年正在運行的一些 Sotawall 項目，這些項目都落後了。然後，我們在第四季度有一些 Harmon 工作，在第一季度也有一些工作，我們不得不對這些項目進行一些減記，只是根據它們的表現。由於這兩場比賽是在 20 賽季和 21 賽季中獲勝的，所以他們已經在比分上打成平手。因此，當我們審視本季度時，我想說，它的表現比我們預期的要差一些。但請記住，第一季度的服務是他們的低點。他們從那裡上去。因此，我們確實看到，我們確實有信心這種趨勢將會出現，第二季度將會有所改善，然後隨著我們在今年的前進，情況將會有所改善。

Our next question comes from the line of Eric Stine with Craig-Hallum.

我們的下一個問題來自埃里克·斯坦與克雷格·哈勒姆的對話。

Matt, can you hear me? My line's breaking up. I guess I'll go a little bit more high level here. Maybe obviously, execution, especially in Glass has been great. But when you think about what the market looks like, as you mentioned, some uncertainty here, second half of this year and into next year. I mean, what do you see as the biggest headwind? I mean, is it -- and maybe it's a combination of all of them, but interest rates, lending standards, I'd love your thoughts on kind of the shift, the work-from-home shift, which seems like it's going to stay in place. I mean just how do you kind of judge all of those factors as you look forward?

馬特，你能聽到我說話嗎？我的線路斷了我想我會在這裡講得更高一點。也許很明顯，執行力，尤其是在 Glass 中的執行力非常出色。但當你思考市場的情況時，正如你提到的，今年下半年和明年存在一些不確定性。我的意思是，您認為最大的阻力是什麼？我的意思是，是嗎？也許是所有這些因素的結合，但是利率、貸款標準，我想听聽你對這種轉變的想法，在家工作的轉變，這似乎會留在原地。我的意思是，當你展望未來時，你如何判斷所有這些因素？

Well, Eric, I would say as we've looked out at that, it's the same that you're hearing in the broader market discussions. I think interest rates as well as lending is going to have some impact on non-resi construction. How that plays out or exactly when that occurs, I mean we continue to see choppiness. We've had a few quarters in a row now where we just see a lot of choppiness in bid, in award activity. So that's why as we've looked at this and said, hey, we're rolling up our guidance for the year, but we're still trying to be cautious about the back half, and that's reflected in our guidance.

嗯，埃里克，我想說，正如我們所關注的那樣，這與您在更廣泛的市場討論中聽到的情況相同。我認為利率和貸款將對非房地產建設產生一些影響。我的意思是，這種情況如何發生，或者俱體何時發生，我們將繼續看到波動。我們已經連續幾個季度看到投標和獎勵活動出現了很大的波動。因此，這就是為什麼我們看到這一點並說，嘿，我們正在上調今年的指導，但我們仍然對下半年保持謹慎，這反映在我們的指導中。

When you look at our shorter cycle business, we've pointed to the fact, we think Framing will now be down on a year-over-year basis from a revenue perspective. There's, I would say, 2 factors to think about for Framing. Number one, last year, they came in building backlog, and that is over 60% business is quick turn. So building backlog for them was actually negative. It means our service levels were dropping and our lead times were pushing out. That was typical for the industry at that point in time.

當你審視我們的較短週期業務時，我們已經指出了這樣一個事實，我們認為從收入角度來看，Framing 現在將同比下降。我想說，對於框架來說，有兩個因素需要考慮。第一，去年，他們積壓了訂單，超過 60% 的業務是快速周轉的。因此，為他們積壓實際上是負面的。這意味著我們的服務水平正在下降，我們的交貨時間也在延長。這對於當時的行業來說是典型的。

So they did have some tougher comps, I would say, on the top line in their Q2 and Q3 because that's when they finally started catching up and starting to work that backlog down. And then we're reflecting that, while we continue to see choppiness, I would say it's gotten a little bit choppier in our visibility there. We think now that, that business will probably be slowing and which is why we've said that we expect it to now have a year-over-year decline in revenues.

所以我想說，他們在第二季度和第三季度的頂線上確實有一些更艱難的比較，因為那時他們終於開始迎頭趕上並開始減少積壓。然後我們反思，雖然我們繼續看到波動，但我想說的是我們那裡的能見度變得有點波動。我們現在認為，該業務可能會放緩，這就是為什麼我們說我們預計現在收入將同比下降。

Got it. And maybe one other thing is seeing more talk of kind of the market, non-res splitting into a little bit from the standpoint of public sector quite strong, lots of investment there for obvious reasons. But private sector, again, challenging for the reasons you just discussed. So maybe thoughts on that dynamic and how that would apply to your backlog. So maybe current state of your backlog mix, that sort of thing.

知道了。也許另一件事是看到更多關於市場類型的討論，從公共部門的角度來看，非資源分裂得相當強勁，出於明顯的原因，那裡有大量投資。但由於您剛才討論的原因，私營部門再次面臨挑戰。因此，也許可以考慮一下這種動態以及如何將其應用於您的積壓工作。所以也許是你的積壓工作的當前狀態，諸如此類的事情。

Yes. Well, so while there was sequential small drop year-over-year, we're still up. And if you look at the Services backlog, it's still very strong, near record highs. We have been working to diversify our mix since we launched our strategic plan 2 years ago, and that is showing up in that backlog. We don't present or share that specific data. I think I've commented a couple of times now in our -- in these quarterly calls. Our percent of office in our backlog, whether you look at our Services business or our Glass business, it's down significantly. That's a reflection, yes, that market is softer, although we do continue to see owner-occupied Class A office space, we still are seeing projects be let and awarded and go given the green light. But that has been an effort to diversify our mix, knowing there's a question over what's the sustainability for office being a driver for non-res construction.

是的。好吧，雖然同比出現連續小幅下降，但我們仍然上漲。如果你看一下服務積壓，你會發現它仍然非常強勁，接近歷史新高。自從兩年前推出戰略計劃以來，我們一直在努力實現產品組合多元化，這也體現在積壓的工作中。我們不會呈現或分享該特定數據。我想我已經在我們的季度電話會議中發表了幾次評論。無論是我們的服務業務還是玻璃業務，我們在積壓訂單中所佔的百分比都大幅下降。是的，這反映了市場疲軟，儘管我們確實繼續看到業主自用的甲級辦公空間，但我們仍然看到項目被出租、授予並獲得批准。但這是我們努力使我們的組合多樣化的努力，因為我們知道辦公室作為非可再生能源建設的驅動力的可持續性存在一個問題。

So the teams have been working to specifically target other areas in health care, institutional, transportation. So airport terminals has been a heavy focus, which has government funding behind it for both Glass and Services, and it is showing up in that backlog mix.

因此，這些團隊一直致力於專門針對醫療保健、機構和交通等其他領域。因此，機場航站樓一直是人們關注的焦點，政府為玻璃和服務提供資金支持，並且它也出現在積壓的訂單中。

Got it. That's helpful. Maybe last one for me, I'll just sneak it in. I know you've talked about kind of taking the portfolio approach on the M&A. And certainly, as you continue to make progress on some of the operational initiatives and feeling more and more confident there, maybe just an update on that process, whether there are some things you feel like you can fill in? Or just how we should think about that?

知道了。這很有幫助。也許是我的最後一個，我會偷偷地講一下。我知道您已經談到了在併購中採取投資組合方法。當然，隨著您在一些運營舉措上繼續取得進展，並且感覺越來越有信心，也許只是該流程的更新，是否有一些您覺得可以填寫的內容？或者我們應該如何思考這個問題？

Yes. I mean, as we've said, that is part of our growth levers. It will be a meaningful growth lever for us as we move forward. So we want to grow organically, obviously, with the right mix. Inorganic is the way that we will obviously drive accelerated growth. So we put the processes in place. We have the team in place. We have active pipeline from an M&A perspective. So part of that active portfolio management, that is a regular part of our operating rhythm.

是的。我的意思是，正如我們所說，這是我們增長槓桿的一部分。隨著我們的前進，這對我們來說將是一個有意義的增長槓桿。因此，顯然，我們希望通過正確的組合實現有機增長。無機顯然是我們推動加速增長的方式。所以我們把流程落實到位。我們已經有團隊就位了。從併購的角度來看，我們有活躍的管道。因此，積極的投資組合管理的一部分，是我們運營節奏的常規部分。

(Operator Instructions) Our next question comes from Julio Romero with Sidoti.

（操作員說明）我們的下一個問題來自 Julio Romero 和 Sidoti。

Welcome, Matt. I appreciate the segment commentary regarding the outlook. You guys said regarding Glass that 17% is likely not sustainable, but should still end up in that 10% to 15% range for the year. Just can you speak to maybe how the Glass margin trends over the next few quarters? Do you maybe expect more of a stronger margin in the second quarter and then relative -- maybe a glide down sequentially in the third or fourth? Just talk about how that Glass margin should trend.

歡迎，馬特。我很欣賞有關前景的部分評論。你們說，關於 Glass，17% 可能不可持續，但今年最終仍應保持在 10% 到 15% 的範圍內。您能否談談未來幾個季度玻璃利潤率的趨勢？您是否預計第二季度的利潤率會更高，然後相對而言，第三季度或第四季度可能會連續下滑？只需談談 Glass 利潤率的趨勢即可。

Yes. Thanks, Julio. I appreciate the question and happy to be talking to everybody this morning. So as you think about our outlook and just kind of -- I know you asked specifically on Glass, but think about it from kind of the top, right? And we talked about our ability to raise our outlook for the year, primarily based on the performance we had in our first quarter and some of our increased expectations in Q2. So I would say that a lot of that increased confidence in the second quarter is going to be driven by Glass. And so as you think about how that would phase out, I think we've seen probably a high point for the year in the first quarter, but we'll still see, I think, some strength in Q2 and then that continuing to maybe normalize throughout the back half of the year and get into that range that we talked about.

是的。謝謝，胡里奧。我很欣賞這個問題，並且很高興今天早上與大家交談。因此，當您思考我們的前景時，我知道您專門詢問了 Glass，但從高層角度考慮，對嗎？我們討論了我們提高今年前景的能力，主要基於我們第一季度的業績以及我們對第二季度的一些增加的預期。所以我想說，第二季度信心的增強很大程度上將由谷歌眼鏡推動。因此，當您考慮如何逐步淘汰這種情況時，我認為我們可能在第一季度看到了今年的高點，但我認為我們仍然會看到第二季度的一些實力，然後這種情況可能會繼續下去下半年將趨於正常化，並進入我們討論的範圍。

Got it. That's very helpful. And then just thinking about the cash flow in the first quarter was pretty strong. Just talk to the expectations for cash flow for fiscal '24.

知道了。這非常有幫助。然後想想第一季度的現金流就相當強勁了。就談談 24 財年現金流的預期吧。

Yes. You probably heard in my script, we talked about operating cash flow and free cash flow growth for the year. The big improvement we had in Q1 was driven by, I would say, unusual activity in working capital in the first quarter of last year. So we're very pleased to have the improvement that we did in Q1 on its own with a strong cash flow start to the year, and we expect to be able to continue to deliver cash flow throughout the quarters, remember, we said this is usually the lowest cash flow quarter for the year. So you'd expect sequential improvement as we move through the year from where we are in Q1 and getting to a place where we have good cash flow for the year, and we've got growth both in operating and free cash flow for the year.

是的。您可能在我的劇本中聽說過，我們討論了今年的運營現金流和自由現金流增長。我想說，我們第一季度取得的巨大進步是由去年第一季度營運資本異常活動推動的。因此，我們很高興看到我們在第一季度取得的進步，年初的現金流強勁，我們預計能夠在整個季度繼續提供現金流，請記住，我們說過這是通常是一年中現金流量最低的季度。因此，當我們從第一季度的情況轉向今年擁有良好現金流的地方時，您預計會出現連續改善，並且今年的運營現金流和自由現金流均有所增長。

That concludes our question-and-answer session. I'd like to turn the call back to Ty Silberhorn for closing remarks.

我們的問答環節到此結束。我想將電話轉回給泰·西爾伯霍恩 (Ty Silberhorn)，讓其致閉幕詞。

All right. Well, again, I would like to recognize the strong efforts of our team in delivering a great start to the year and our ability to build on that. So we're excited to share that progress with you as we go through the next few quarters. Thanks for joining us today, and I hope everyone has a great weekend.

好的。好吧，我想再次認可我們團隊為今年取得良好開局所付出的巨大努力以及我們在此基礎上再接再厲的能力。因此，我們很高興在接下來的幾個季度中與您分享這一進展。感謝您今天加入我們，希望大家週末愉快。

This concludes today's conference call. Thank you for participating. You may now disconnect.

今天的電話會議到此結束。感謝您的參與。您現在可以斷開連接。