Earnings call transcript: Apogee beats Q2 2026 forecasts, stock dips

Apogee Enterprises Inc. reported its second-quarter earnings for fiscal year 2026, revealing stronger-than-expected financial results. The company posted an earnings per share (EPS) of $0.98, surpassing the forecast of $0.84, representing a 16.67% surprise. Revenue also exceeded expectations, reaching $358.2 million against the forecasted $351.7 million. According to InvestingPro analysis, the company appears undervalued at current levels, with three analysts recently revising earnings estimates upward. The stock experienced a slight decline, with a premarket drop of 1.79% to $40.70. Notably, Apogee has maintained dividend payments for 52 consecutive years, demonstrating remarkable financial stability.

Key Takeaways

• Apogee’s Q2 EPS of $0.98 beats forecast by 16.67%.
• Revenue increased by 4.6% year-over-year to $358.2 million.
• Stock price fell 1.79% in premarket trading despite strong earnings.
• Tariffs impacted EPS by $0.35-$0.45, affecting margins.
• Company maintains strong cash flow and leverage ratio.

Company Performance

Apogee Enterprises demonstrated robust performance in Q2 2026, with net sales growing by 4.6% compared to the same period last year. The company’s focus on strategic growth initiatives, including the acquisition of UW Solutions, has bolstered its Performance Services segment. However, challenges such as increased aluminum prices and tariff impacts have pressured margins.

Financial Highlights

• Revenue: $358.2 million, up 4.6% year-over-year
• Earnings per share: $0.98, surpassing the forecast of $0.84
• Adjusted EBITDA Margin: 12.4%, a decrease from previous periods
• Operating cash flow: $57.1 million
• Consolidated leverage ratio: 1.5

Earnings vs. Forecast

Apogee’s actual EPS of $0.98 exceeded expectations by 16.67%, while revenue surprised by 1.85% above forecasts. This marks a significant achievement for the company, especially amid a challenging competitive environment in the glass and metals segments.

Market Reaction

Despite the positive earnings surprise, Apogee’s stock fell by 1.79% in premarket trading, reaching $40.70. This movement could be attributed to broader market trends or investor concerns over ongoing tariff impacts and rising aluminum costs.

Outlook & Guidance

Looking ahead, Apogee anticipates year-over-year growth in net sales and adjusted EPS for the second half of fiscal 2026. The company projects full-year net sales between $1.39 billion and $1.42 billion, with adjusted EPS ranging from $3.60 to $3.90. Apogee remains focused on M&A opportunities and automation solutions to drive future growth.

Executive Commentary

CEO Ty Silberhorn emphasized, "While the macro creates challenges near term, we remain focused on executing our strategy, investing to strengthen the company." CFO Matt Osberg added, "We’re trying to maximize EBITDA dollars... balancing cost, price, and volume."

Risks and Challenges

• Tariff impacts: Expected to affect EPS by $0.35-$0.45.
• Aluminum price increases: Spot prices rose by 20% in Q2.
• Competitive pressures: Particularly in the glass and metals segments.
• Market softness: Notably in construction and engineering sectors.
• Margin preservation: Balancing pricing and volume to maintain margins.

Q&A

During the earnings call, analysts inquired about the growth drivers for Performance Services, which is being fueled by a recovery in retail distribution. The services backlog grew by 16% to $792 million, indicating strong demand. Additionally, the Northeast market showed signs of improvement, which could support future growth.

Full transcript - Apogee Enterprises Inc (APOG) Q2 2026:

Conference Operator: Today, and thank you for standing by. Welcome to Apogee Enterprises’ second quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. As a reminder, this conference is being recorded for replay purposes. I will now turn the conference over to Jeremy Stephan, Vice President, Investor Relations and Communications, to begin. Jeremy, please go ahead.

Jeremy Stephan, Vice President, Investor Relations and Communications, Apogee Enterprises: Thank you. Good morning and welcome to Apogee Enterprises’ fiscal 2026 second quarter earnings call. On the call today are Ty Silberhorn, Apogee’s Chief Executive Officer, and Matt Osberg, our Chief Financial Officer. During this call, the team will reference certain non-GAAP financial measures. Definitions of these measures and a reconciliation to the various GAAP measures are provided in the earnings release and slide deck, which are available in the Investor Relations section of our website. As a reminder, today’s call will contain forward-looking statements. These reflect management expectations based on currently available information. Actual results may differ materially from those expressed today. More information about factors that could affect Apogee’s business and financial results can be found in our press release and in the company’s SEC filings. With that, I’ll turn the call over to Ty.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Thanks, Jeremy. Good morning, everyone. Our team delivered solid second quarter results with sequential improvements in sales and adjusted EPS in what continued to be a dynamic operating environment. Our teams remained focused on what is in our control while leveraging strategic actions to reduce the impacts from tariffs during the quarter. Net sales improved by almost 5%, primarily driven by both inorganic and organic growth in Performance Services. Architectural Services recorded another quarter of net sales growth and sequentially grew their backlog by over $100 million. Glass performed as expected on both the top and bottom line, with margins normalizing within our long-term range. Metals showed significant sequential top and bottom line improvement as our tariff-driven price increases went into full effect. However, we did see volume falter as those prices took full effect, resulting in their sales and EBITDA being below our expectations for Q2.

Finally, cash flow in the quarter was an area of strength and a testament to our ability to generate cash in a dynamic macroeconomic environment. Looking ahead to the remainder of the fiscal year, we are updating our outlook for both net sales and adjusted EPS to reflect developments since last quarter. First, we are lowering expectations for glass volume and price as the competitive environment has not improved. While bid activity for our glass business remains up versus last year, price pressures are impacting their ability to secure volumes without giving up significant margin. Second, we are seeing higher aluminum costs that will put more pressure on pricing and volume in Metals. As they work to maximize EBITDA dollars, volume, and market share, we expect their margins to drop, particularly in Q3, from their Q2 results.

While we are disappointed that these changes have impacted our guide for the year, we remain positioned to drive year-over-year net sales and adjusted EPS growth in the second half of the fiscal year. This will primarily be driven by growth in Performance Services, which has been consistently strong, and we continue to see upside for that business long term. As we navigate the complexity of our current macroeconomic environment, we are also building a stronger Apogee for the future, and I’d like to highlight some examples that we believe are enhancing our ability to deliver sustained long-term value for shareholders. Our leadership bench is strong, as demonstrated by the recent changes for metals and services. UW Solutions continues to be on track to deliver the expected financial and synergy targets, in addition to expanding our reach and broadening our product offerings.

Our tariff mitigation efforts and Project Fortify II actions illustrate the strength and agility of our organization as we address a challenging macro environment. AMS continues to drive productivity improvements across our manufacturing footprint. Finally, our strong cash flow and balance sheet provide us with significant flexibility to continue to be active on M&A opportunities while managing through the current market dynamics. We remain focused on acquisitions that fit our strategic and financial objectives, ones that will add differentiated products, leverage our core capabilities, provide accretive margin and growth rates while expanding our geographic reach. With that, I’ll turn it over to Matt.

Matt Osberg, Chief Financial Officer, Apogee Enterprises: Thanks, Ty, and good morning, everyone. First, I’ll begin with a review of the results for the second quarter and then follow with commentary on our outlook for the rest of fiscal 2026. Beginning with our consolidated results, net sales increased 4.6% to $358.2 million, primarily driven by $24.9 million of inorganic sales from the acquisition of UW Solutions. This was partially offset by lower price and volume in glass and a less favorable mix in metals. Adjusted EBITDA margin decreased to 12.4%. The decrease was primarily driven by lower price and volume, unfavorable mix, and higher material, tariff, and health insurance costs, partially offset by lower incentive compensation expense. Adjusted diluted EPS declined to $0.98, primarily driven by lower adjusted EBITDA and higher interest expense. Turning to our segment results, metals net sales declined slightly, primarily reflecting a less favorable mix, partially offset by higher volume and price.

Adjusted EBITDA margin decreased to 14.8%, primarily driven by a less favorable mix and higher aluminum and tariff costs, partially offset by lower incentive compensation expense. Our services segment delivered its sixth consecutive quarter of year-over-year net sales growth, with sales increasing 2.5%, primarily due to higher volume. Adjusted EBITDA margin decreased to 5%, mostly driven by project mix, partially offset by lower short-term incentive compensation costs. Additionally, backlog for services sequentially grew 16% to $792 million. For the glass segment, as expected, net sales declined and adjusted EBITDA margin moderated from the elevated levels in Q2 last year, primarily due to reduced volume and price from lower end-market demand, partially offset by lower short-term incentive compensation expense. Performance Services net sales increased, driven by the inorganic sales contribution from the acquisition of UW Solutions and strong organic growth of 18.6%, primarily from improved retail channel distribution.

Adjusted EBITDA margin increased, primarily driven by favorable price and volume. Turning to cash flow in the balance sheet, as Ty mentioned, we generated strong cash flow in the second quarter, with net cash provided by operating activities of $57.1 million compared to $58.7 million in the prior year. On a year-to-date basis, cash from operating activities was $37.3 million compared to $64.1 million a year ago due to lower operating cash flow in the first quarter. Our balance sheet remains strong with a consolidated leverage ratio of 1.5, no near-term debt maturities, and significant capital available for future deployment. Turning now to our outlook for fiscal 2026, as Ty noted, we are updating our outlook for both net sales and adjusted diluted EPS. We now expect net sales in the range of $1.39 billion to $1.42 billion and adjusted diluted EPS in the range of $3.60 to $3.90.

This outlook includes an estimated EPS impact from tariffs of $0.35 to $0.45. Our updated outlook assumes an adjusted effective tax rate of approximately 27% and capital expenditures in the range of $35 million to $40 million. During the second quarter, the One Big Beautiful Bill Act was passed. We expect that this bill will not have a material impact on our effective tax rate but will provide a cash tax benefit that will primarily impact fiscal 2026 with a smaller impact on fiscal 2027. Looking at the cadence of the year, as expected, we delivered sequential improvement on our financial results from Q1 to Q2. For the second half of the year, we expect year-over-year net sales and adjusted diluted EPS growth, primarily driven by Performance Services.

Additionally, we expect net sales to be generally evenly distributed between Q3 and Q4, and we expect Q3 adjusted diluted EPS to be similar to Q2 and then sequentially improve in Q4. Despite our solid performance in the second quarter, we are lowering our outlook for the second half of the year. This is primarily driven by increased pressure on volume and price in glass and an expectation of higher aluminum costs that will further challenge pricing and volume in metals. For glass, in our previous outlook, we expected a sequential improvement in both sales and EBITDA in the second half of the year as compared to the first half of the year. We are now expecting second half glass results to be more in line with first half results.

We see a highly competitive market putting pressure on price, and our glass team is working to maximize EBITDA dollar contribution while protecting their premium margins. For metals, during the first quarter, we saw aluminum prices subside, only to increase on average by approximately 20% during the second quarter, and we are incorporating the expectation of higher aluminum costs in our outlook for the remainder of the year. This impact is more pronounced in our longer lead time products, where we have less ability to raise prices to match current cost trends. For our shorter lead time items, we are also expecting increased pricing pressure in the second half of the year, with competitors seemingly less likely to raise prices. This is putting more pressure on volume and margins as we work to maximize margin dollars in a more competitive pricing environment.

We also experienced higher than expected health insurance costs in the second quarter and are forecasting that trend to continue for the second half of the year, which is a new headwind in our outlook as compared to last quarter. Despite the macroeconomic challenges, I’m pleased with the momentum generated through the first half of the year and our outlook for year-over-year growth in the second half of the year. Additionally, our strong cash flow generation and healthy balance sheet position the company well for sustained future success. With that, I’ll turn it back over to Ty for some concluding remarks.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Thanks, Matt. The first half of our fiscal 2026 has been challenging, and I’m very proud of the work the team has done, navigating challenges and further positioning the company to drive long-term shareholder value. As we look ahead to the second half of the fiscal year, despite macroeconomic headwinds, we are positioned to drive year-over-year net sales and adjusted diluted EPS growth in the second half. While metals and glass face challenges on volume and price, both businesses are in stronger positions than they were the last downturn. For example, even with sales for glass being down significantly year-over-year, we expect that they will finish the year in the mid-teens for EBITDA versus mid-single-digit margins the last downturn. We continue efforts to build our M&A pipeline to add strategic capabilities to enable long-term growth.

In closing, while the macro creates challenges near term, we remain focused on executing our strategy, investing to strengthen the company, and building a more resilient portfolio that delivers higher growth and higher margins. With that, we will now open the call to questions.

Conference Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brent Thielman from D.A. Davidson & Co.

Brent Thielman, Analyst, D.A. Davidson & Co.: Hey, thanks. Good morning.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Good morning, Brent.

Brent Thielman, Analyst, D.A. Davidson & Co.: Yeah, guys, I guess maybe just the first question focused on Performance Services. Could you sort of expand on the organic growth that you saw through the quarter? How much might be related to internal initiatives around distribution relative to just sort of market growth behind that? I’d be curious around the organic growth profile in that segment.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Yeah, Brent, it’s a great question. If you look at kind of UW Solutions, the old Large-Scale Optical, that core part of the business, that’s where we saw probably the strongest growth within the portfolio. It was really, if you remember last year, they did lose some distribution. Think of it as shelf space at some of the retail outlets. They’ve regained that, and they’ve also picked up momentum at adding some additional products. They’re also leveraging some cross-selling opportunities for overlapping customers between the UW Solutions business and the original core old Large-Scale Optical business. That’s giving them some momentum in that space. Within UW, while it’s tracking as expected, we’re seeing the flooring side of that portfolio actually outperform, and we do expect that to continue based on awards and order rates.

Brent Thielman, Analyst, D.A. Davidson & Co.: Ty, maybe just following on that, what’s moving the needle on the flooring side of that business?

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: I’d say a couple of things. There remains demand for that product as manufacturing and distribution centers, warehouses look to bring more automation in. That product’s best value proposition is when a distribution center is going to put in AGVs, automated guided vehicles, robotics to move inventories around. We are seeing a push there. We are actually seeing a pull of that product into Europe based on a large global e-commerce retailer that has had tremendous success with that product and is actually asking us to pull that business into Europe as they build out some additional distribution centers and retrofit existing ones with mezzanines. Those are things that are not only feeding that business right now, but give us confidence that that’s going to continue over the next few quarters.

Brent Thielman, Analyst, D.A. Davidson & Co.: Yep. On the services backlog uptick here in the second quarter, maybe sort of a similar question, Ty, is this indicative of maybe some different outreach by the business into new markets? Is it reflective of market conditions? Maybe you could just expand on that increase in backlog quarter over quarter.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Yeah, it’s a combination of both. I would tell you what drove the largest portion of that backlog growth were projects in the Northeast. That part of the country has been relatively soft for a couple of years. As we alluded in the last call, we were seeing a pickup in bid activity. The Northeast was an area where we saw that picking up materially in terms of activity. The good news is that team’s been able to bring some of those projects across the finish line. The work that the team has done to expand out west continues as well. The work that they have done to put sales office and teams on the ground in the Western United States is also helping them continue to build out that backlog and take share.

That business, when we look at that result in the quarter, while it is a signal maybe some positive things are coming, I think it’s a testament to what the team has done in this environment to take share in what still is a relatively soft market.

Brent Thielman, Analyst, D.A. Davidson & Co.: Okay, that’s great. I’ll leave it there and pass it on. Thank you.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Thanks, Brent.

Conference Operator: Thank you. One moment for our next question. Our next question comes from the line of Julio Romero from Sidoti & Company.

Julio Romero, Analyst, Sidoti & Company: Thanks. Hey, good morning, Ty, Matt, and Jeremy. On the glass segment, the lowered expectations for glass in the second half, I guess you’re tempering the sales guy there. It sounds like the competitive environment has gotten a bit tougher. Do you still kind of expect to post margins in the targeted EBITDA margin range for the next two quarters? Secondly, you know, what’s your sense of how long the softness should or could persist?

Matt Osberg, Chief Financial Officer, Apogee Enterprises: Yeah, Julio, good question. As Ty and I have talked about, the glass segment and just more broadly about how we think about our long-term margin ranges, I think we said in years that we’ve got more top-line challenges, you look to the bottom end of that range, and years where you got some tailwinds, you look for the top end of that range. I think this is a great example of even though they’ve got some headwinds on the top line, as Ty said, we’re expecting mid-teens. Yeah, I would say that’s expecting mid-teens for the year and for the next couple of quarters. I think that’s a testament to the shift to premium strategy and what we’ve been able to build in that business and just the quality of the business that we have.

We’re also very careful as we’re looking at some of the headwinds that we have to not destroy what we built and to be really selective about how we pursue other volume opportunities to still preserve that margin. I think that it’s definitely looking at that mid to high teens for the next couple of quarters in the year.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Yeah, Julio, I’ll just add in here that as we worked with the team, we talked about last quarter staying on top of the teams in terms of what’s driving their sales pipelines, etc. The bid activity in glass continues to be up year over year, which is a positive sign. The negative that really started to show in the quarter, and we think now is going to continue in the back half, is price pressures from competition. Even though bid activities are seeing some pickup, the aggressiveness of competition to win some of those jobs is putting downward pressure. We worked with the glass team and they’ve been very thoughtful. They’ve done a lot of work to really reposition the premium side of their portfolio.

While they are giving some price to win business with premium products, they are really working to preserve a pricing floor on those product offerings to maintain those margin levels. I guess you could look at it and say, would they have had the potential to maybe step into some more sales? Probably. We also looked at that and said, you’re going to take a pretty hefty margin hit, and they are concerned about kind of resetting at a much lower price rate for those premium products. They’re navigating this, I think, the right way. They want to maximize the EBITDA dollars. They want to win the business that they can, but they don’t want to destroy the two-plus years of work they’ve done to really reposition and build out the premium side of the portfolio.

Julio Romero, Analyst, Sidoti & Company: Got it. Very helpful answer there. It sounds like you’re seeing some similar dynamics within the metal segment, although it sounds like it’s maybe a little bit more cost pressure than maybe competitive pressure there. Can you maybe just speak to how much of the lowered guide for metals in the second half is based on cost pressure versus a decision on your end to maximize EBITDA dollars and share in that segment?

Matt Osberg, Chief Financial Officer, Apogee Enterprises: Yeah, Julio, I would say they’re connected, right? As we saw in the first quarter, we started to see price aluminum costs start to abate a little bit from the rise that they’d been on. During the second quarter, we saw those step up, on average now about 20% compared to the first quarter. You’ve got that element of higher costs. As you look at the right moments to take price, you’re also measuring, okay, how am I going to fare in the market against my competition with those prices? Am I going to be able to maintain volume, right? There’s kind of that triangle of the cost, the price, and the volume that you’re trying to balance out, as we’ve said, to try and maximize our EBITDA dollars. I would say the pressure is mainly coming from the higher aluminum costs.

We’re trying to work through the price and volume impacts of what we want to do in the market, what our competition is doing in the market. I think that pressure is being generated by the higher aluminum costs that we’re experiencing now and we expect for the second half of the year.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Yeah, and I’ll add, let me add into that, Julio, as we looked, it’s a little bit, there’s similarity there with glass, but a little different in that with the price pressure. If you look, you can go out and look at aluminum spot pricing. We saw about a 20% increase from the beginning of our Q2 through the end of the Q2, and that’s stabilized for now, but we’re looking at our outlook and factoring in what we need to do there in terms of price and how it might impact us from margin. Metals, at the same time, as I said in the opening, we did expect them to do better on top and bottom line, and they didn’t. Part of that is our second round of price increase. Remember, there’s a 25% tariff in February, second 25% tariff in June.

That really started to flow through pricing for aluminum on the spot price basis in June, July, and August. As we pushed through that second round of price increases, we saw order volumes starting to take a hit. Here we’re trying to balance holding on to some share, regaining some share from some of the operational challenges, again, trying to maximize EBITDA dollars. With that rise in aluminum and some of the longer lead products that are in that portfolio, they’re going to have to swallow some higher costs in Q3, which is why we expect them to step backwards on margin and have some margin erosion in Q3.

Julio Romero, Analyst, Sidoti & Company: Got it. Very helpful there. The last one, if I could, is just on Performance Services. It sounds like you’re seeing some good momentum within the UW, within both Legacy and UW. Within UW, can you maybe speak to where the mix of flooring stands as a percentage of UW, or maybe give us a sense of how the mix has evolved since UW has been under the Apogee umbrella?

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Yeah, if you recall, when we announced the acquisition, we said it was a little less than half of the portfolio. Given the healthy double-digit growth rates, it’s trending to be comfortably over half of the portfolio, and we think that trend is going to continue over the next several quarters.

Julio Romero, Analyst, Sidoti & Company: Excellent. I’ll pass it on. Thanks very much.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Thanks, Julio.

Brent Thielman, Analyst, D.A. Davidson & Co.: Thanks, Julio.

Conference Operator: Thank you. One moment for our next question. Our next question comes from the line of Gowshi Sri from Singular Research.

Gowshi Sri, Analyst, Singular Research: Good morning, guys. Can you hear me?

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Yeah, good morning, Gowshi.

Gowshi Sri, Analyst, Singular Research: Morning.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Good morning. My first question is on the customer shift. Across your businesses, have you seen any shift towards smaller or non-traditional engineering-only projects? If there are any kind of marginal delta differences between those and the historical businesses?

Matt Osberg, Chief Financial Officer, Apogee Enterprises: Yeah, I think you’ve seen that with the increased competition in the market and some of the slower levels of activity, you start to expand the reach and what you want to look at. Particularly, I would say in our glass business, we’re expanding the scope of where we can participate and how we can pick up some margin volume dollars. Definitely looking at it, I think it’s a more competitive environment across the board. As you look at those, typically, they’re lower margin projects. Like we said, we’re trying to create margin dollars. Specifically in our glass business, we’re trying to protect the premium products that we’ve built over the past two and a half years, protect some of the margins there.

It’s a job-by-job evaluation of where we want to participate, but we’re trying to expand our reach to see where we can strategically pick up some volume dollars.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Yeah, I think, as Matt said, Gowshi, it’s really within glass and services. If you looked at their average project size, that has come down in the last 18 months as they work to maximize volume as best they can. They’re going downstream a bit. A lot of those projects, whether it’s glass or curtain wall through Architectural Services, tend to be less complex, which means it opens up to some more of the smaller regional players, and that does put some price pressure to win those jobs.

Gowshi Sri, Analyst, Singular Research: On the downside of the EPS, if there is continued end market softness, maybe slower than expected Fortify realization and no additional tariff relief, what is the realistic downside for FY2026? What could be the levers you could pull to defend that flow?

Matt Osberg, Chief Financial Officer, Apogee Enterprises: Yeah, we’ve put out a range of $3.60 to $3.90. That’s what we’re looking at in terms of our analysis. Some of the big things that can impact that would be continued upward cost pressure on aluminum. We’ve factored into the second half of the year an expectation that aluminum costs basically stay where they are today. If things worsen from there, that can put pressure on it. We’re doing things like within our Project Fortify II, we’re looking at cost actions so that we can be proactive and responsive to what we’re seeing and make sure we’re doing the right things to control costs at a corporate level to offset any of the further pressure we might see.

Gowshi Sri, Analyst, Singular Research: For modeling purposes, on the tax rate reset, I know you’re modeling for 27% for the full year. Was this driven for Q2 to Q2 for the rest of the year? How are we supposed to model or think about the tax rate setup?

Matt Osberg, Chief Financial Officer, Apogee Enterprises: Yeah, I mean, obviously, we had a higher tax rate in Q1. We had a much lower operating income. We guided for 27% for the year. I think that tax rate in Q3 is pretty close to that and then dips down a little bit in Q4, and you end up at close to 27%.

Gowshi Sri, Analyst, Singular Research: On my final question, on the surfaces that we are modeling 25%, 23% adjusted EBITDA margins for multiple quarters now, how sensitive is that segment to a potential slowdown, or is there any inventory correction in the channel partners in the next year?

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: I think if you look at historically, Q2 and Q3 on the retail side is really when the business flows, and we’ve got decent visibility in that business, you know, one or two months out, and we’re a month through our Q3. I think any slowdown, dramatic slowdown that they might see on the retail side of that business is probably a Q4, Q1, and it’s more likely Q1 as folks reset inventories after the holiday season. I think what might drive any shifts in our outlook for that business is probably just more of a mix as opposed to a dramatic falloff on the retail side. Reminder on a large portion of that business, it’s really targeting kind of upper middle class, upper income households, which are a little less susceptible.

I just listened to the spending report on the drive-in, and that part of the consumer market actually spending was holding up. I think the number was about 4%. That’s kind of a positive reflection for how that business might look as we work through the end of our fiscal year.

Gowshi Sri, Analyst, Singular Research: Awesome. That’s all I have. I’ll take the last offline. Thank you, guys.

Matt Osberg, Chief Financial Officer, Apogee Enterprises: Thank you.

Conference Operator: Thank you. At this time, I’m showing no further questions. I would like to turn the conference back over to Ty Silberhorn for closing remarks.

Ty Silberhorn, Chief Executive Officer, Apogee Enterprises: Thanks, Gigi. Thanks for joining our call today. We look forward to updating you on our progress in a few months. Hope everyone has a great weekend.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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