Apogee Enterprises Inc (NASDAQ:APOG) Q2 2021 Earnings Conference Call - Final Transcript

Sep 17, 2020 • 09:00 am ET

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Apogee Enterprises Inc (NASDAQ:APOG) Q2 2021 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] The first question comes from Chris Moore with CJS Securities. Your line is now open.

Analyst
Christopher Paul Moore

Hey, good morning, guys. Joe, congratulations. You've certainly earned it.

Executive
Joseph F. Puishys

Thanks, Chris.

Analyst
Christopher Paul Moore

Sure. Yeah, maybe just start with LSO. Just trying to get a sense in terms of -- looking at Q2, some of that is probably a little bit of catch-up. I'm just trying to get a feel for whether the second half of the year will be kind of more normal compared to what you've seen historically or how much visibility you have there.

Executive
Joseph F. Puishys

Yeah, Chris. Thanks. So first off, I don't really attribute to Q2 the catch-up. The good news is the products we sell are in demand right now, as you're well aware. People cooped up in home, home products, everything from carpet flooring to arts and trinkets and trash, so to speak, and people wanting to reframe art that's in their house. People had a lot of time to look at what's in their home, and I expect strong demand in that business going forward. Plus, they are launching new products at a pretty good clip in that business. We did ramp up to 85%. Our retailers came online late in the quarter. A lot of our pickup came from our independent distributors for the -- for the independent channel, and we expect our retailers to have a strong Q3.

We're not projecting to get back to 100% this year, but we will continue to ramp up and improve. So we feel very, very good about that business. And as you saw a mid-teens operating margins in a quarter where our factories were down for two-thirds of the quarter is extremely impressive. So we obviously have some upside in LSO. I think the demand is repetitive, and we feel -- we feel will continue to recover in the second half.

Analyst
Christopher Paul Moore

Got it. That's helpful.

Executive
Joseph F. Puishys

Yeah, Chris, I'm obligated to point out. Obviously, we don't expect the United States to go into another shutdown.

Analyst
Christopher Paul Moore

Sure.

Executive
Joseph F. Puishys

But that business is clearly dependent. It doesn't fall into the critical infrastructure category that our Architectural segments did that we were allowed to at least keep running mostly. We don't expect any shutdown of retail in the United States again, but we'd be dependent on that. We feel really good about that business led by a terrific team.

Analyst
Christopher Paul Moore

Got it. Maybe I'll just jump over to the Framing. I mean, Framing backlog down slightly year-over-year, but not -- not terrible. Can you provide maybe some more details there? Are there certain areas, certain types of the business that are stronger or have more visibility at this point in time?

Executive
Joseph F. Puishys

Listen, half the Framing Systems businesses are longer lead time, larger project category contributing to backlog. It tends to be lumpy -- just like our Services segment is lumpy, which -- that segment has been kind of on a tear for the last few years. But I expect the Framing Systems will continue to be