Earnings Call Transcript - APOG Q3 2021

Operator, Operator

Ladies and gentlemen, thank you for standing by and welcome to Apogee's Fiscal 2021 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. I would now like to hand the conference to your speaker today, Jeff Huebschen. Please go ahead, sir.

Jeff Huebschen, Speaker

Thank you, Joelle. Good morning, and welcome to Apogee Enterprises fiscal 2021 third quarter earnings call. With me today are Joe Puishys, Apogee's Chief Executive Officer; and Nisheet Gupta, Chief Financial Officer. I'd like to remind everyone that there are slides to accompany today's remarks, which 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 non-GAAP measures and a reconciliation to the nearest GAAP measures is provided in the earnings release we issued this morning, which is also available on our website. I'd like to remind everyone that our call will contain forward-looking statements reflecting management's expectations, which are 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 our SEC filings. With that, I'll turn the call over to you, Joe.

Joe Puishys, CEO

Thank you, Jeff, and thanks to everyone for joining us this morning. I’m proud of our team and happy to share our strong results this quarter. We achieved earnings growth and robust cash flow despite the challenging conditions in the non-residential construction market. Our results reflect the strength and resilience of our company and team, along with the measures we’ve implemented to cut costs. This morning, I’ll highlight some key points from the quarter, discuss business trends, and explain how we’re positioned for the future. After that, Nisheet will provide additional details on our results, financial condition, and outlook. Then, I’ll be happy to answer your questions. Let me start with the quarter’s highlights. This quarter was similar to the second quarter, showing growth in earnings per share and strong cash flow despite lower sales volumes. COVID-19 and market conditions continue to significantly affect our business. We’re experiencing project delays, and the Architectural Billing Index reported a score of 46 this week, which has been in the mid to upper 40s for several months, indicating a slight month-to-month decline. The overall activity in architectural end markets has continued to slow, and COVID-19 has impacted our workforce, adding stress for our organization and management team. However, we’ve learned to operate very effectively in this environment. I want to commend the entire Apogee team for focusing on our goals and effectively managing these challenges while delivering for our customers. The decisive actions we took earlier this year in response to COVID-19 have stabilized our business and led to strong operating results over the last two quarters. Our primary focus continues to be the health and safety of our workforce while taking care of our customers. Our team has successfully adapted in this environment. The protocols we’ve implemented are effective, ensuring a safe work setting for our employees while enabling us to deliver the high-quality products and services our customers expect from Apogee. We’ve also concentrated on execution by carefully managing our cost structure, which has improved our results, including higher operating margins and effective working capital management. Delivery metrics such as on-time and complete quality have never been better. A year ago, we announced our procurement savings initiative and our efforts to drive synergies in our Framing Systems segment, and I’m pleased with the progress we've made in both areas. This quarter, we launched a company-wide initiative aimed at reducing our fixed costs, targeting savings of $10 million to $20 million, with substantial long-term opportunities expected beyond this. The performance of Architectural Services stood out again this quarter. This segment achieved double-digit growth in both revenue and profitability, with operating margins improving to an impressive 11.2% due to strong project execution and our disciplined project selection process. Over the past two years, we have successfully won new business and built a record backlog to support us during downturns. In fiscal 2020, for instance, we secured more than $500 million in awards, demonstrating our capability to sustain business in the future. Orders in this segment can be inconsistent and slowed this quarter due to conditions in our end markets, but I remain confident in the long-term trajectory of our service segment. Our current backlog supports the business in the short term, and we continue to pursue additional projects actively. Our services segment remains an industry leader, well-positioned to thrive when construction markets improve. Another highlight this quarter was our Large-Scale Optical segment, which rebounded strongly from COVID-related shutdowns. This segment experienced year-over-year revenue growth and returned to its usual strong operating margins exceeding 25%. Remarkably, revenue in the LSO segment increased sequentially by 50% compared to the second quarter, showcasing our team’s efforts and the demand for our brand and products. However, both the Architectural Framing Systems and Architectural Glass segments felt more pressure from current market conditions, experiencing project delays and schedule changes which affected revenue. They managed costs effectively this quarter, which helped offset the decreased volume, and made progress on strategic initiatives aimed at future growth and improved profitability. Additionally, we have taken steps to strengthen our financial position, enhance liquidity, and provide the resources to drive long-term value. Year-to-date cash flow from operations has more than doubled compared to last year, achieving over $100 million in free cash flow, which is a record for us. We also completed the sale-leaseback of one of our properties, generating an additional $24 million in cash flow, and we extended the maturity of our long-term loan, eliminating any significant near-term debt maturities. With this financial strength, we resumed share repurchases during the quarter, which Nisheet will also discuss. Looking ahead, we plan to increase investments in high-return capital projects to facilitate accelerated growth as architectural end markets recover. Nisheet will provide details on our fourth-quarter outlook. Longer-term, I’m confident in Apogee’s position for the future. While we will face uncertainties in the upcoming quarters, the non-residential construction markets are currently weak. Forward indicators, including employment growth, the Architectural Billing Index, and construction starts, have improved but still lag behind pre-pandemic levels. However, I am encouraged by recent advancements in vaccines and treatments and am optimistic that they will help us return to a sense of normalcy in the coming year, allowing our end markets to recover from previous strong conditions. Before COVID-19, our end markets were robust, with strong demand for new construction, minimal signs of overbuilding, high tenant occupancy, and readily available financing. We entered this crisis on strong market fundamentals, which I believe sets us up well for a post-COVID future. Regardless of what challenges lie ahead for our economy and industry, Apogee is in a much stronger position and is a more resilient company today than we were during the last recession. We demonstrate our resilience during the pandemic while laying a solid foundation for future growth. We maintain strong brands and leading market positions, enhance execution across the company, and are aggressively working to optimize our cost structure and productivity. We encourage innovation across our operations and anticipate promising growth in all our segments. We continue to maintain a strong financial position, a hallmark of our company. I’m confident in Apogee’s strength to navigate through this uncertain environment and heed our strategy for long-term success. Now, I’ll turn it over to Nisheet for more details on the quarter and our outlook, and I’ll return with additional comments before we take questions.

Nisheet Gupta, CFO

Thanks, Joe, and good morning, everyone. Let me start with our consolidated results, which are on Page 5 of our earnings presentation. Total revenue was $314 million, down 7% from last year's third quarter, primarily reflecting continued project delays and market-related volume declines in Architectural Framing Systems and Architectural Glass. This was partially offset by year-over-year growth in our other two segments. Operating margin was 15.9%. This included a $19 million gain on the sale and leaseback transaction we completed during the quarter, and $1.4 million of COVID-related costs. Excluding these two items, adjusted operating margin was 10.1%, a nice improvement over 6.4% in last year's third quarter despite the lower volume. The improved margin was primarily driven by our cost-saving efforts, improved execution, and the benefit from a tax credit related to prior investments in our Architectural Glass segment. Adjusted EBITDA improved to $44.5 million, compared to $33.7 million in last year's third quarter, reflecting the improved margins, which offset the impact of lower revenue. Net interest expense was $1.5 million, down from $2 million last year due to both lower debt balances and lower borrowing costs. The tax rate of 23.5% was roughly in line with last year's 23.2% and we reduced our diluted share count to 26.2 million reflecting share repurchases during the quarter. Putting it all together, adjusted earnings grew to $0.90 per share up from $0.57 per share in the prior year quarter. Now turning to segment results on Page 6. Architectural Framing Systems revenue of $137 million was down 17% from the prior year driven by a combination of project delays and lower order volumes. Despite this revenue decline, Framing Systems operating income improved to $7.2 million, with an operating margin of 5.3%, compared to 3.8% in last year’s third quarter. Framing System backlog increased slightly to $408 million from $404 million last quarter. Architectural Glass revenue was $85 million compared to $89 million in the last year’s third quarter. Like Framing Systems, revenue was impacted by project delays and lower order volume. Architectural Glass had operating income of $10.8 million, which included $7.4 million from new market tax credits. As a reminder, Apogee has participated in this federal tax credit program to support our expansion and capital investments. This is an excellent program that incentivizes private investments in local economies. Private investors provide funding for these projects as loans in exchange for tax credits. Then, at the end of the seven-year transaction period, the loans are forgiven and the proceeds are recognized as earnings. As outlined in our previous SEC filings, we have entered into three similar transactions and expect to recognize the income from those transactions in future years. We will look forward to further opportunities to invest in similar programs to support our local economies. Architectural Services outlined its strong performance, with revenue growing 11% to $77 million as the segment executed projects from a substantial backlog. Services operating income grew 31% to $8.6 million and margins improved to 11.2%, compared to 9.5% last year, primarily driven by strong project execution. Services backlog decreased to $597 million, compared to $665 million last year, and roughly in line with $607 million backlog level a year ago. Page 7 of our earnings presentation shows our backlog trend over the past several years. While backlog decreased this quarter, it is still at historically high levels, which provides good visibility over the next two years. And the services segment continues to pursue a pipeline of new project opportunities. Coming on to Large-Scale Optical, we continued the strong performance of sequential recovery with revenue increasing by 50% compared to the second quarter. On a year-over-year basis, revenue grew 4%. LSO sales have rebounded faster than we expected as its retail customers have reopened. The strong third quarter revenue reflects a lot of hard work from our LSO team and the demand for our products in the marketplace. Third quarter revenue also benefited from a sales incentive program that we ran during the quarter and favorable timing of customer orders. LSO turned to a more normal level of profitability in this quarter with adjusted operating income of $6.8 million in line with last year's third quarter. Adjusted operating margin was 26.8%. Now, I would like to provide an update on our cost-saving initiatives, which are outlined on Page 8 of our presentation. We are on track to achieve the targets we outlined last quarter. With more than $40 million savings in the current fiscal year, we've made progress on our procurement savings initiative and Framing Systems integration efforts, which together will constitute more than $20 million of cost savings this year, all of which are sustainable. We expect these initiatives will provide approximately $40 million of annual runway savings when fully implemented. The temporary cost actions we announced in response to COVID have contributed more than $20 million in savings year-to-date. During the third quarter, we began to reverse most of these temporary cost actions and we will see little benefit from these savings in the fourth quarter. These savings will not be in our run rate for the next fiscal year. During the quarter, as Joe mentioned, we launched an additional effort to reduce our fixed cost base with an initial target of $10 million to $20 million of annual savings by end of FY '23. During the third quarter, we absorbed roughly $600,000 of restructuring costs related to this initiative and expect additional restructuring costs in the fourth quarter. As we move forward, we will evaluate opportunities to accelerate our cost transformation by making additional investments in our back office functions. The overall goal of these initiatives is to give Apogee a more flexible and efficient cost structure. Turning to Slide 9. Our cash flow and balance sheet remain strong. Year-to-date, we have generated $121 million of cash flow from operations, more than double the $54 million at this point last year, primarily driven by strong working capital management. We had less than $3 million of capital expenditures in the third quarter, bringing our year-to-date total to $17 million as compared to $41 million at this point last year. Earlier in the year with significant uncertainty from COVID, we decided to scale back our capital spending plans. With strong cash flow and balance sheet improvements we achieved in the past two quarters, we intend to ramp up capital spending going forward to support higher return investment opportunities. As Joe mentioned, we took two other important actions during the quarter to strengthen our financial position, the sale and leaseback transaction which generated $24 million of cash and the long-term debt extension. At the end of the third quarter, our total debt stood at $168 million and we have over $55 million of cash on our balance sheet for net debt of $130 million, which is less than 1 time our trailing 12-month adjusted EBITDA. It is notable that our primary $235 million revolving credit facility is completely undrawn which together with our cash balance puts the company in a very strong liquidity position. With the strength of our financial position, we decided to resume share buybacks during the quarter and repurchased 621,000 shares for $16 million. Before I wrap up, I would like to provide a few comments on our outlook. As you've seen in our press release, we decided not to provide financial guidance again this quarter, given the continued uncertainty in our architectural end markets. With that said, let me provide some detail on the trends we're seeing as we move forward into the fourth quarter. We expect continued project delays and soft conditions in our architectural markets, which will negatively impact revenue in Framing Systems and Architectural Glass. In both segments, some projects have moved out of the fourth quarter into next year. Also, without the benefit of the new market tax rate in the fourth quarter, operating income in the Architectural Glass will likely be much lower than the third quarter. On the cost front, we will continue to closely manage our costs and project execution. But keep in mind that the temporary cost actions we took in response to COVID were mostly reversed in the third quarter and will have limited impact in the fourth quarter. To wrap up, we delivered another strong quarter despite the headwinds that continue to impact our business. I am particularly pleased with the continued progress in driving sustainable operating improvements and cost savings across the business. In addition, our strong cash flow, low debt, and significant liquidity gives us tremendous flexibility to drive long-term shareholder value. With that, I will turn the call back over to Joe.

Joe Puishys, CEO

Alright. Thank you, Nisheet. Well, this will be my last earnings call with Apogee. I look forward to welcoming Apogee's next CEO as soon as that person is announced. But I want to thank all of you on the call, all of Apogee's shareholders, and my team for support over these years. I am quite proud of what the Apogee team has accomplished over the last decade, and I'm confident this company has a bright future ahead of it. My confidence is bolstered by the team I will leave behind. From the boardroom to the shop floor, we had added talent at all levels of the company. I want to close by thanking every member of the Apogee team, past and present, for what you've done to support me, and more importantly, the company. Thank you. Joelle, if you could open up the call for questions, please?

Operator, Operator

Thank you. Our first question comes from Chris Moore with CJS Securities. Your line is now open.

Chris Moore, Analyst

So, it looks like on the framing backlog, was up a little bit sequentially, down a little bit year-over-year. Can you maybe talk about the framing orders for Q3 a little bit?

Joe Puishys, CEO

You're correct. It was an average quarter. It is a mix of shorter and longer lead time businesses. It's where we're seeing the biggest impact from the soft market conditions. The order volume is down about 20%. It's been improving, but it's down 20% year-to-date. It does have a solid backlog in the longer lead time parts of Framing Systems, but we certainly need to book some additional project wins in the remainder of the year. It's pretty healthy considering the COVID environment in my opinion. We are pleased with a slight increase sequentially.

Chris Moore, Analyst

Thank you. I’m trying to get a clearer understanding of the geographic strengths and weaknesses, as there seems to be significant disparity. While recognizing that the ABI is just one indicator, it showed a decline in November, with the Midwest actually improving compared to a very weak Northeast. Can you discuss the Q3 results in relation to that ABI geographic breakdown? Were they aligned?

Joe Puishys, CEO

Yes, the ABI is divided into two categories: regionally and by segment. It's important to understand how the ABI is calculated. It surveys architects with a simple question about whether their billings have increased or decreased compared to the previous month. If an equal number report higher and lower billings, the index will be at 50. It doesn't account for the degree of change, so even if one reports a 10% increase and another a 1% decrease, the index remains at 50. It serves as an indicator to be monitored over time. In the last downturn, over a decade ago, the ABI was in the 30s for an extended period, which doesn’t worry me too much. Currently, it has been hovering in the mid to upper 40s, and I expect it to rebound as the end markets were stable at the start. Most CEOs, including myself, believe in working from the office rather than from home. Regarding regional breakdowns, the Midwest performed the strongest, slightly over 50, while the Northeast fell below 40. The Midwest is a significant area for us. In terms of sectors, multifamily residential was the strongest, particularly due to our recent acquisitions, with EFCO performing well in that area, although traditionally we haven't been strong there. Institutional work, primarily government, has been the weakest sector. However, I believe private institutional healthcare will continue to recover, and we have a solid presence there. We also need the office sector to bounce back, and I believe it will as people return to the workplace. Project inquiries are above 50, a positive indicator, yet we need more decisive actions. We're seeing potential readiness, we just need to take the next steps. I hope that clarifies things, Chris.

Chris Moore, Analyst

That’s very, very helpful. Almost done. Obviously, nobody has a crystal ball. But kind of looking at what the full case would be for the second half of fiscal '22, would it be on the framing side? Would it be the quick turn framing that would likely be the biggest and earliest beneficiary or how should I look at that?

Joe Puishys, CEO

Yes, the shorter lead time businesses and in our Framing Systems, it's got a very healthy mix of small and midsized projects. It does have some dependency on the large buildings, less than the other sectors I just mentioned. Glass has moved nicely down in the mid markets. Of course, the launch of our Velocity brand has given us a footprint in the small projects. But the smaller, shorter lead time, two, three weekly time businesses at Velocity and in Framing Systems will recover first. And then the larger projects will follow. I think the second half of the year, next year, it's likely to see end market activity improve, which will bode well for our fiscal ‘23.

Operator, Operator

Thank you. Our next question comes from Brent Thielman with D.A. Davidson. Your line is now open.

Brent Thielman, Analyst

Hey, Joe, on the Dallas Velocity facility, how far are you from being at a level of operating performance you expect from the new asset and do you feel that you can get there even in this sort of environment?

Joe Puishys, CEO

Yes, we're not quite at breakeven yet. I expect this business to contribute positively to our operating results in fiscal '22. Revenues and orders increased again in Q3. While we are still operating at a slight loss, revenues are only slightly lower. A positive sign is that the business has been managing more ramp-up issues than anticipated, and they are overcoming those challenges. I'm pleased to see that demand for the smaller project remains strong. The customer retention rate is impressively high due to the exceptional quality and highly automated factory. I have strong confidence in the long-term outlook. We are dedicated to expanding in this sector as part of our long-term growth and diversification strategy, and I expect this business to become profitable next year.

Brent Thielman, Analyst

And then Nisheet thanks for the details on 4Q. I guess any color on LSO, really nice recovery here? Should we think that business kind of goes back to its normal cadence in the fourth quarter, kind of that post-holidays slowdown or is there some pent-up demand here?

Nisheet Gupta, CFO

Yes. So LSO is definitely coming back to normal. And in these times, as you can imagine, where people are still locked down at home, they want to do things, and they're going out there to these stores and buying things for DIY stuff. And as they go there, they also look at custom framing opportunities. So definitely, it's coming back to normalcy, and we expect that by end of Q4 the business will be back up and running in a normal way, barring any new COVID surprises. There are some, obviously, risks that come with COVID and certain retail markets being shut down. But if that doesn't happen, we should be back up and running as a normal business, similar to FY '20 in year FY '22.

Brent Thielman, Analyst

Okay. And I apologize I missed this, but the new markets tax credit transaction, it sounds like you may see some additional benefits. I mean any sense on the timing of that going forward?

Nisheet Gupta, CFO

Yes. So if you look at our filings that we have done, we have benefits coming from new market tax credit, three more coming up in FY '24 and FY '26. They are about a $12 million additional benefit that will come in those years, and it is 5 projects detailed out in our SEC filings.

Brent Thielman, Analyst

Okay, Joe, I want to return to the framing business. The trend in backlog is significantly different from what you are observing on the top line. I'm curious about what you believe has been the key factor in the end sectors that is leading to the disparity in the trends between the top line and the backlog in framing.

Joe Puishys, CEO

You mentioned the growing backlog trend. It's a combination of small projects that don't really affect the backlog and our storefront and entrance businesses, which are tied to brand names like Tubelite and Alumicor. These projects have a quick turnaround, making them difficult to predict. There are often delays followed by urgent requests for those orders. However, we can process and deliver within a 2 to 4-week cycle, leading to a fast book-to-bill rate for medium and larger projects that require much longer lead times. We have some curtain wall business in our Wausau and Sotawall entities and a little in EFCO, and those areas are experiencing some delays in project execution. However, we haven't encountered any canceled projects, just postponements. Even though construction sites are operational, many workers are quarantined due to COVID, which slows progress and affects the timing of new projects. Nevertheless, there is still significant pent-up demand, and I believe that after the vaccine rollout, we will see an upswing. The business maintains a substantial and healthy backlog that can support operations, but we need to see improvements in the COVID situation to restore top-line revenue.

Operator, Operator

Our next question comes from Bill Dezellem with Tieton Capital. Your line is now open.

Bill Dezellem, Analyst

I have a couple of questions. First of all, the glass revenues were only down 5%, whereas the framing revenues were down 17%. Would you please kind of help us understand why those two segments had such a wide dispersion of results?

Joe Puishys, CEO

We're observing growth in our Velocity small projects business, which is helping to mitigate the larger decline in our core branded solar business. Additionally, we've seen promising results from our operations in South America, particularly Brazil, where the business has returned to growth and has been performing well. Ten years ago, when I joined, Viracon was experiencing financial losses, but the Brazilian segment was achieving double-digit operating margins. Since then, it faced a significant economic downturn, which was much worse than the previous U.S. crisis. However, that economy is recovering, financing conditions are strong, and these smaller segments have helped balance what could have been a much steeper decline in the market. It's worth noting that our business can be quite variable, so we are satisfied with these outcomes given the circumstances.

Nisheet Gupta, CFO

Yes, I have nothing further to add.

Bill Dezellem, Analyst

Alright. May I dive further into Brazil? Just given how weak that business has been, frankly, it's falling off of our radar. Is that a business that we should be thinking about more front and center?

Joe Puishys, CEO

No. We're pleased with the business. It's run by a good team. We'd like to grow the business. It's a very small and consequential piece of the whole segment. So the answer is no.

Bill Dezellem, Analyst

Okay. Great. Thanks, Joe. And then one additional question, please. Did you see your customers' behavior improve at all well before the recent surge in case counts again?

Joe Puishys, CEO

I'm not quite with you, Bill. Can you expand on customer behavior?

Bill Dezellem, Analyst

Yes. In terms of decision-making, where they were making decisions, starting to have a more favorable mindset, maybe inquiries going up. And then I guess the converse of that question is, as the case count rose here in the last while, did you see them become more conservative with their mindset?

Joe Puishys, CEO

I would generally say yes. I think it reflects what we are observing in the United States. However, the number of people we quarantined due to contact tracing in the third quarter would have severely impacted us in March. We have figured out how to operate in this manner. We haven't reported productivity issues, which indicates we’ve learned, and this is true for a significant portion of the U.S. economy. People have adapted to managing quarantines and reintegrating employees. We have all figured out how to be effective in this new environment. As I mentioned, our on-time delivery, completeness, and first-class quality yields are better than ever. I would say we began to see improvement in end markets over the summer, but the recent downturn with COVID caused many to hesitate. However, I must emphasize that we have not encountered any project cancellations. The only project I can remember that was canceled was for a headquarters of a major cruise line, which occurred early in the crisis and was not unexpected. Other than that, I cannot recall any among the hundreds and thousands of orders we have in backlog.

Bill Dezellem, Analyst

Great. Happy retirement and Merry Christmas.

Joe Puishys, CEO

Thank you very much, and thank you, Bill.

Operator, Operator

Thank you. Our next question comes from Eric Stine with Craig-Hallum. Your line is now open.

Eric Stine, Analyst

So, a few quarters in, I'm interested in your thoughts on whether there is a structural change in the market regarding large offices versus decentralized offices. I know that Velocity is a factor in this. What are some of your overarching thoughts now that some time has passed since everything occurred?

Joe Puishys, CEO

I believe that trend will occur. It's still quite early, but I do think remote offices have a strong future, and it's not limited to Velocity. We're not referring to storefront operations; we might be discussing buildings that are 5 to 10 stories tall. We have always operated in that market. Over the past decade, Viracon has become adept at servicing that shorter lead time business, although not as short as the Velocity lead time. I believe this will provide tailwinds for us in our industry. I also do not think we are witnessing the decline of large buildings. One ongoing trend driving large buildings is multifamily housing, which we expect to continue its growth trajectory. With some acquisitions we've made, we are involved in that market, both in glass and in the Framing Systems segment. Therefore, I think that when the economy improves, we will see a return to the office, and I expect a rapid increase. Apogee needs to be ready to manage the next spike more effectively than we did the last one, and that will be the challenge for my successor.

Eric Stine, Analyst

Got it. Well, I'll ask this question, and maybe this will be for whoever takes that role in the future. Regarding the service business, there are clearly some challenges with framing and glass. However, the services have been outstanding. Given how you have executed it, do you think it's possible to consider expanding that? You could grow it significantly, but it may affect margins. Alternatively, you could grow it a bit more, which might hurt margins slightly, but it could help offset the challenges in glass and framing, especially with the uncertainties ahead.

Joe Puishys, CEO

The answer is balanced. Yes, the leader of that segment is a phenomenal leader with an amazing team. We are leveraging our disciplined project selection process and field execution to increase our revenue profile. We need to be cautious as we operate in a very cyclical business that heavily invests in engineers and program managers, which takes time to train and develop. It's important to avoid overrunning the growth curve, which could lead to very compressed margins. They have successfully managed that balance. However, in the last couple of years, the new leader of that segment and I have agreed to broaden our vision for how large that business can become. We are not recklessly pursuing aggressive growth, but we believe we can expand that business while maintaining our margin profile. As evidence of this, they booked over $500 million in orders in fiscal '20, gaining market share and executing flawlessly. This track record helps to smooth out fluctuations during varying order cycles. So, I would say the situation is balanced, but we are considering growing that business.

Eric Stine, Analyst

Okay. Good. And maybe last one for me. Just on the cost reductions. And I know you've kind of laid out which ones are permanent, which ones are temporary. But when I look at the SG&A, for instance, in this quarter, I mean, it was a fantastic number. I’m just curious, I mean, some of the gains, the one-time gains in the quarter, I mean, did that impact the SG&A number? And what is a more reasonable number or range that we should think about on the OpEx line going forward?

Nisheet Gupta, CFO

Yes. There are two major items in SG&A that are contributing to this quarter's strong performance, but these are not sustainable and should not be considered for the next one or two years. The new market tax rate will be implemented according to SEC filings. Additionally, McCook will not materialize, which accounts for roughly $24 million to $20 million in profits, while the new market tax rate adds $7 million. If we exclude these figures and analyze our typical SG&A trends, we anticipate a normal range of approximately $50 million to $53 million per quarter. We are actively working to reduce this figure. As stated, our $10 million to $20 million initiative aims to lower that $50 million figure to around $45 million per quarter by the end of fiscal '23. Therefore, there is more potential for improvement than for decline. Currently, the trend is $50 million, and by the end of FY '23, we expect the run rate to be $45 million.

Eric Stine, Analyst

Got it. Okay. I guess that's it for me. Best of luck, Joe.

Joe Puishys, CEO

Thank you very much. I appreciate that, Eric.

Operator, Operator

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Joe Puishys for closing remarks.

Joe Puishys, CEO

Alright. Thank you, Joelle. Listen, everybody, it's been a pleasure. I want to thank you all for your focus on our company as one of the top 20 shareholders in Apogee, I can assure you, I look forward to the next earnings call. I'll be on the sidelines in the sheet. Jeff and team, I'm looking forward to supporting you, and I'm looking forward to future quarters. I feel terrific about my investment and look forward to seeing you confirm that. So thank you, everybody. Have a wonderful holiday, and let's all look forward to, hopefully, a much better U.S. in 2021. Bless you all. Thank you. Bye-bye.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.