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Apogee Enterprises, Inc. (NASDAQ: APOG) Q3 2023 earnings name dated Dec. 22, 2022
Company Members:
Jeff Huebschen — Vice President, Investor Relations and Communications
Ty R. Silberhorn — Chief Government Officer
Mark Augdahl — Interim Chief Monetary Officer
Analysts:
Chris Moore — CJS Securities — Analyst
Eric Stine — Craig-Hallum — Analyst
Brent Thielman — D.A. Davidson — Analyst
Julio Romero — Sidoti and Firm — Analyst
Presentation:
Operator
Good day, and thanks for standing by. Welcome to the Apogee Enterprises Fiscal 2023 Thrid Quarter Earnings Convention Name. [Operator Instructions] Please be suggested that at present’s convention is being recorded.
I’d now like handy the convention over to our speaker at present, Jeff Huebsche. Please go forward.
Jeff Huebschen — Vice President, Investor Relations and Communications
Thanks. Good morning, everybody, and welcome to Apogee Enterprises fiscal 2023 third quarter earnings name. With me at present are Ty Silberhorn, Apogees Chief Government Officer; and Mark Augdahl, Interim Chief Monetary Officer.
I’d wish to remind everybody that there are slides to accompany at present’s remarks. These can be found within the Investor Relations part of Apogee’s web site. Throughout this name, we are going to reference sure non-GAAP monetary measures. Descriptions of those measures and a reconciliation to the closest GAAP measures are offered within the earnings launch and slide deck we issued this morning.
As a reminder, the prior yr outcomes for Architectural Framing Programs and Companies segments have been recast to replicate the transfer of the Sotawall enterprise from framing into companies. Professional-forma section outcomes reflecting this transformation are included in our earnings slide deck. I’d additionally wish to remind everybody that our name will comprise forward-looking statements. These replicate managements expectations based mostly on at the moment obtainable data. Precise outcomes could differ materially. Extra details about elements that would have an effect on Apogee’s enterprise and monetary outcomes could be present in at present’s press launch and SEC filings.
And with that, I’ll flip the decision over to you, Ty.
Ty R. Silberhorn — Chief Government Officer
Thanks, Jeff. Good morning to everybody becoming a member of us on-line. That is one other nice quarter for Apogee with double-digit income development, vital margin enlargement, and powerful money movement. I’m very happy with the workforce’s execution this quarter and the progress that they’ve delivered this fiscal yr. This morning, I’ll focus on the highlights from the quarter, how our technique is driving sustainable enhancements in our enterprise and the alternatives we see for additional features, then I’ll flip it over to Mark for extra particulars on the quarter and our outlook, earlier than we take your questions.
Let’s begin with our third quarter highlights that are on Web page 4 in our presentation. Income was up 10% this quarter. This was led by framing techniques, which has posted double-digit development every quarter this fiscal yr. It was additionally encouraging to see stable income development within the Glass section. As a reminder, it’s been over a yr since we introduced the closure of our Statesboro and Velocity areas, and we’re beginning to see the early advantages from our mix-shift to extra premium merchandise in glass. Total, working margin got here in at 9.4%. This was up greater than 300 foundation factors in comparison with adjusted working margin in final yr’s third quarter.
Within the yr since our Investor Day, we’ve made large progress towards our aim of delivering annual working margins better than 10%. Just like the previous few quarters, margin features have been pushed by successfully managing the stability of pricing relative to larger working prices, improved operational execution and productiveness features, and [Technical Issues] financial savings from final yr’s restructuring actions.
With the sturdy top-line development and margin enlargement, adjusted earnings per share have been up 70%, coming in at $1.7. This was one other document for adjusted EPS, beating the earlier document that we set final quarter. We’re additionally happy with our money movement, as we generated $54 million money from operations. This was a powerful end result following the softer-than-normal money movement within the first half of the fiscal yr. We nonetheless have work forward of us to enhance our working capital, however the third quarter was very encouraging, and we anticipate additional progress in This fall.
These sturdy outcomes proceed the tendencies from the primary half of the fiscal yr. By way of executing our technique, we’ve made sustainable enhancements in our enterprise. As a reminder, an summary of our three-pillar technique is proven on Web page 5 of our presentation. We started implementing this technique within the late summer time of 2021. Since then, our workforce has made large progress [Technical Issues] we’re constructing a results-driven tradition targeted on enhancing operational execution and offering distinctive worth for our clients. We made basic enhancements to our price construction, particularly in framing techniques and glass. We’ve established renewed vitality round productiveness by way of our lean initiatives. We strengthened our deal with differentiated services and products and we’ve improved our strategy to managing the stability between our prices and pricing, whereas staying aggressive within the market. Most significantly, we’re constructing the capabilities to allow sustained worthwhile development within the years forward.
These initiatives embrace revitalizing our expertise improvement packages, driving course of standardization throughout the enterprise, and strengthening our M&A capabilities. By way of all these efforts, we’re remodeling Apogee right into a higher-performing, extra resilient firm. Since launching our new technique final yr, we’ve raised the bar on margins and earnings, establishing a brand new baseline of efficiency as proven on Web page 6 of the presentation.
With this stronger basis, we’re enthusiastic about Apogee is future. We’ve already made vital progress towards the monetary objectives we set throughout our Investor Day final yr. And I’m assured that we’ll drive additional development within the quarters forward. We’re nonetheless within the early phases of our journey with lean and the event of the Apogee administration system. And these efforts have the potential to nonetheless drive significant productiveness features for the following few years.
We’re nonetheless early in our efforts to shift our gross sales combine. We’re pivoting in the direction of extra differentiated services and products that help our aim of turning into an financial chief. Over time, this shift ought to result in a extra resilient enterprise mannequin with sustainable alternatives for worthwhile development. We’re additionally pursuing a number of different essential alternatives to drive natural development. These embrace investments to scale and develop the Companies section, capability investments to allow development in large-scale optical, and geographic enlargement in each Framing Programs and Architectural Companies.
Lastly, our sturdy stability sheet and money. Money movement supplies the flexibleness for value-creating capital deployment. We’re stepping up investments in higher-return capital initiatives. We’re constructing a pipeline of M&A candidates, together with the processes and workforce that we might want to consider and combine any potential acquisitions. We may even proceed to return capital to shareholders by way of a rising dividend and opportunistic share repurchases. And we’re dedicated to sustaining a powerful monetary place. We’ve nice momentum as we wrap up fiscal ’23 and sit up for the following fiscal yr and if markets ought to soften. And I’m extra assured than ever in our workforce and the route of our technique.
With that, let me flip the decision over to Mark for extra particulars on the quarter and our steering.
Mark Augdahl — Interim Chief Monetary Officer
Thanks, Ty, and good morning all. Q3 was one other sturdy quarter for Apogee because the execution of our technique proceed to drive improved margins and efficiency. Let me present extra particulars beginning with the consolidated outcomes on Web page 7 of our presentation. Third quarter income grew 10% to $368 million. Just like the blast — just like the previous two quarters, development was primarily pushed by inflation-related pricing in framing techniques. The Glass section additionally had double-digit development.
Working revenue elevated to $34.8 million and working margin improved to 9.4%. This was 310 foundation factors larger than the adjusted margin of 6.3% final yr. We’ve now had 4 consecutive quarters with adjusted working margin better than 8%, placing us effectively on our technique to our margin goal of better than [Technical Issues]
Wanting on the non-operating strains of the revenue assertion, curiosity expense elevated [Technical Issues] This was pushed by a mix of upper common debt stability and better rates of interest. The tax price within the quarter was 24.8%, in-line with our anticipated long-term common price. Our diluted share rely was 22.3 million, down 12% from final yr as a consequence of our share repurchases over the previous yr. Placing all of it collectively, earnings grew to a $1.7 per share — diluted share, up 70% in comparison with final yr’s adjusted earnings per share.
Let’s transfer on to section outcomes on Slide 8, beginning with architectural framing techniques. Framing had one other very sturdy quarter [Technical Issues] This was primarily pushed by pricing actions taken to offset inflation of uncooked supplies, labor and different working prices. Working revenue was $22.1 million. This was framings third straight quarter with working revenue over $20 million and margins improved to 13.4%, up almost 500 foundation factors in comparison with final yr. Within the first half of the fiscal yr, framing margins benefited by $5 million from the volatility in aluminum pricing and the timing of stock flows. As we anticipated, that profit didn’t repeat this quarter and we don’t anticipate it to repeat subsequent yr. Framing Programs additionally benefited from an insurance coverage settlement acquired this quarter, which elevated margins by about 30 foundation factors.
Turning to architectural companies. Income was down 3% on barely lower-volume. Fairly margins got here in at 5.9%. The section’s margins stay under final yr’s degree, primarily pushed by decrease profitability on legacy Sotawall initiatives. Margins have been additionally impacted by prices associated to investments we’re making to allow future development in scale and companies. This primarily entails hiring and growing expertise to develop our capability. Regardless of the year-over-year decline, happy with the sequential margin pattern in companies. Third quarter margin was 80 foundation factors higher than Q2, and we anticipate additional sequential enchancment within the fourth quarter.
Companies backlog did decline this quarter following a big step-up final quarter as [Technical Issues] companies orders and backlog can have vital variability from one quarter to the following, as it’s sometimes pushed by a small variety of massive orders. Backlog [Technical Issues] sturdy at $741 million, which is above the year-ago degree of $722 million.
In architectural glass, the workforce proceed to make terrific progress in its strategic shift. Income grew 10% to $81.5 million. This was pushed by improved pricing and product combine and displays our strategic shift away from pure quantity in the direction of extra premium merchandise. Working margin continued to pattern larger, reaching 9.1%. Adjusted working margins in glass have now improved sequentially for 5 consecutive quarters. Margins benefited from pricing that offset inflation, the improved gross sales combine and productiveness features from our lean program.
Massive scale optical continued to ship regular efficiency. Income was down barely, primarily pushed by decrease retail volumes. Working revenue was up $1.1 million within the quarter, with working margins of 26.7%. This was primarily pushed by decrease working prices and elevated productiveness. As a reminder, in final yr’s third quarter, LSO had lower-than-normal profitability, primarily from larger freight prices. This quarter, LSO had $500,000 profit from a property tax adjustment.
Lastly, I’ll point out a few issues on the company prices — for company prices, which elevated by $1 million within the quarter. This was primarily as a consequence of larger medical insurance prices as we’ve seen these steadily improve over the previous yr. This can seemingly stay a headwind within the upcoming quarters.
Let’s flip to money movement and the stability sheet on Web page 9. Within the thrid quarter, we had $54 million of money movement from operations. This was an enchancment from the earlier two quarters which have been impacted by elevated working capital necessities. We are actually strongly money movement constructive for the yr and we anticipate continued stable money movement within the fourth quarter. 12 months-to-date, we’ve had $18 million of capital expenditures. We plan to proceed to ramp up capital spending within the fourth quarter. This consists of investments to develop capability in our larger margin companies, eEnhance productiveness by way of automation, and deploy improved techniques to higher help our enterprise. We proceed to anticipate full yr capex of roughly $40 million, relying on timing and execution of some bigger initiatives. Aside from capex, our main use of money within the quarter was debt — was debt discount. We paid down $47 million of debt within the quarter. This places our leverage effectively under our focused degree of 1.5 of EBITDA.
Let me wrap up by discussing our outlook, which is discovered on Web page 10. Based mostly on year-to-date outcomes and our anticipated vary of outcomes for the fourth quarter, we’re narrowing our full yr earnings steering to a spread of $3.90 to $4.05 per share. On the midpoint, that’s 60% development over final yr’s adjusted EPS. We now anticipate full yr income development of roughly 10%.
Within the fourth quarter, we do anticipate a step again from our income and earnings run price over the previous three quarters. A few of that is pushed by our regular seasonality in our enterprise, the winter slowdown in connectivity primarily impacts our Framing Programs, which is probably the most worthwhile of our Architectural segments. This yr, we’re planning an prolonged upkeep shutdowns at a number of amenities in Framing and Massive Scale Optical segments. This can negatively impression income and profitability within the fourth quarter.
We additionally anticipate curiosity expense in healthcare prices to stay headwinds within the fourth quarter. Even with these headwinds, we anticipate to shut out the fiscal [Technical Issues] with plenty of constructive momentum in our enterprise. We’re positioned to drive continued progress towards our monetary objectives within the yr forward.
With that, I’ll flip it again over to Ty for some concluding remarks.
Ty R. Silberhorn — Chief Government Officer
Thanks, Mark. To wrap up, our workforce continues the profitable execution of our technique, delivering sustainable monetary outcomes. We’re remodeling Apogee right into a higher-performing, extra resilient firm, which is demonstrated by our monetary outcomes over the previous yr. We’ve raised the bar for each margin and earnings efficiency with year-to-date adjusted working margins enhancing by 350 foundation factors, and year-to-date adjusted EPS up almost 100%. Even with the numerous progress, we’re assured that we’ve extra runway forward of us to drive additional progress towards assembly and exceeding our monetary objectives within the years forward. Let me shut by congratulating your complete Apogee workforce on their continued success and wishing everybody an gratifying vacation season.
With that, we’re able to take your questions.
Questions and Solutions:
Operator
Actually. [Operator Instructions] And our first query will come from Chris Moore of CJS Securities. Your line is open.
Chris Moore — CJS Securities — Analyst
Good morning, guys. Congratulations on a — truly an awesome three quarters however nice Q3. Possibly simply begin with the income development there. So 10% development in Q3. Are you able to simply sort of a tough break up between worth and quantity there?
Mark Augdahl — Interim Chief Monetary Officer
Yeah. That is Mark. The expansion truly this quarter was primarily, actually, all pushed by worth as a result of our quantity was truly down barely. So primarily it was worth. However keep in mind in glass and AFS, we’ve stepped away from some worthwhile, some unprofitable work or much less worthwhile work, and people are the first drivers of our quantity shortfall.
Chris Moore — CJS Securities — Analyst
Acquired it. That’s useful. When it comes to the companies backlog down a bit bit sequentially, that may soar round as you talked about. Throughout Q2, I do know you had challenge wins and transportation and healthcare. Simply questioning if there have been any sort of sub-segments which can be driving present enterprise and likewise simply sort of the pricing of those new contracts? How would you characterize them?
Ty R. Silberhorn — Chief Government Officer
Yeah, Chris. That is Ty. I’d take a look at it, once more there’s choppiness as you notice your self and we’ve commented that that’s been sort of a theme all year long. So having a powerful couple of months adopted by a weak month or two. On this case that sort of piled up and ended up being a down quarter from a backlog perspective. We proceed to have the workforce’s deal with diversifying inside that backlog. So we made a major step-change in sort of the discount of the publicity to workplace in that backlog final quarter. The workforce continues to work to diversify that blend as we go ahead. As a result of we didn’t have a elevate in backlog, I’d say that, that blend hasn’t materially modified from what we talked to you in our Q2.
Chris Moore — CJS Securities — Analyst
Acquired it. That’s useful. Recognize it. And final one from me, simply when it comes to the working margin development that you just’re seeing. Assuming fiscal ’23 someplace in that 19% vary. Simply ’24, even when markets sort of soften a bit bit additional, do you continue to anticipate any enchancment in working margin in ’24 versus ’23?
Ty R. Silberhorn — Chief Government Officer
Yeah, it’s an awesome query. And naturally, we’re not prepared to speak about fiscal ’24. However as I alluded to in my feedback, we’ve made sustainable enhancements in our execution and the way we’re driving productiveness throughout the group. Costs benefactor, however that worth can be pushed by us specializing in larger worth product choices and services and products the place we will present the differentiation and the worth to our buyer base. In order we step into fiscal ’24, we nonetheless see plenty of runway to proceed that work. I’d nonetheless put our lean efforts within the very early phases. Glass has most likely made the most important step-change and possibly will get more durable for them to drive a major step up in margins by way of these lean and productiveness efforts. However in our framing enterprise, whereas they did get some one-time advantages, we don’t anticipate to repeat that roughly $5 million in Q1 and Q2 on stock valuations. There’s plenty of alternative there to drive vital productiveness to offset that and put us in a very good place even in a comfortable market.
Chris Moore — CJS Securities — Analyst
That may be very useful. I’ll go away it there. Thanks, guys.
Ty R. Silberhorn — Chief Government Officer
Thanks, Chris.
Operator
One second. Our subsequent query will come from Eric Stine of Craig-Hallum. Your line is open.
Eric Stine — Craig-Hallum — Analyst
Good morning, everybody. Thanks for taking the questions.
Ty R. Silberhorn — Chief Government Officer
Good morning, Eric.
Eric Stine — Craig-Hallum — Analyst
So simply curious. I do know you could have the slide the place you’re speaking a couple of new baseline that you just’ve established on, it’s roughly $0.90 1 / 4 previously and that is beneath earlier administration. There had been a goal or ideas of what can this enterprise do whatever the cycle. And so I feel, clearly well timed, given that you just seeing a bit little bit of softening. I imply, is there any method that you consider what that new baseline is past the place we’re at the moment however on condition that your early in plenty of your initiatives? For those who look out a few years, do you could have form of a considered what that new baseline may be no matter the place issues are within the cycle?
Ty R. Silberhorn — Chief Government Officer
Yeah, Eric, it’s an awesome query. I suppose, I’d begin with what we laid out at Investor Day. So our first step is to get the corporate to better than 10%. EBIT as a complete. And clearly we’re monitoring to that this yr, and we haven’t seen any vital quantity elevate within the work that we’ve accomplished to get to this 9% vary. In order we go ahead, I feel we proceed to carry out. Assume we’ve undoubtedly raised the extent when it comes to — if there may be softness out there. We haven’t set a quantity, however we don’t see a much bigger depth. For those who return to these ranges that we guided throughout the section’s. So framing could be the large one and that’s outperforming this yr. We had guided to 9% to 12%. They’re truly working forward of that. I feel it’s real looking that barring a major fall off out there that may drive volumes considerably down, that we’re most likely going to see them now hovering up the upper finish of that vary as we transfer forward. That lifted their baseline backside efficiency, if you’ll, even in a down yr. In order that 9% to 12% for instance. 9% is in a very comfortable yr. We really feel like we’ve received sufficient controls in managing our working prices that even in a cloth — materials down yr that we must always be capable of preserve to, at worst case that 9%. So I feel as we’re entering into fiscal ’24 and as we begin to have a look at our steering for that, we’ll take an analysis of the place the market the place we predict the market goes to play out after which as we glance throughout the companies, how we see these ranges performing in fiscal ’24 and sooner or later most likely must revisit these long-term objectives that we laid out a yr in the past.
Eric Stine — Craig-Hallum — Analyst
Acquired it. No, that’s useful. After which possibly final one from me, simply clearly not able to name particular ranges for fiscal ’24. However previously you’ve talked about sort of visibility past backlog, bids and course of, awards, not but booked, and so on. So simply ideas on possibly the boldness that provides you heading into fiscal ’24?
Ty R. Silberhorn — Chief Government Officer
Effectively. One, we’d begin with — we referenced FMI as one of many corporations that we checked out forecast, and we talked about eager to outperform the market and utilizing that as a base. They’ve had a revision simply within the final month or so. They’re nonetheless calling for development in calander ’23 of about 4% in non-resi. That’s the majority of our fiscal ’24 would fall into calendar ’23, so we see that as a constructive. We proceed to see choppiness in bid exercise and award exercise. In order that’s one thing that we’ll proceed to watch as a result of for us that may be a number one indicator of — yeah the market does appear like it’s nonetheless poised for development as we go into subsequent calendar yr or are we begin to see some alerts that possibly softening. Proper now we don’t have any information that may argue in opposition to that projection by FMI. I imply, it seems to us simply given the backlog that have been built-up and the exercise that was began previously yr that we’re most likely going to nonetheless see development, actually on a greenback and possibly even on a quantity foundation, however actually on a greenback foundation that non-resi building goes to see development in calendar ’23.
Eric Stine — Craig-Hallum — Analyst
Okay. Thanks.
Operator
One second. And our subsequent query will come from Brent Thielman of D.A. Davidson. Your line is open.
Brent Thielman — D.A. Davidson — Analyst
Hey, thanks. Good morning. Hey, Ty, the strategic shift within the glass enterprise has been an enormous focus because you got here in and it seems prefer it’s paying-off. I’m simply within the high quality of labor that you just’re including. How have buoyant is that sort of new targeted market when it comes to exercise? And possibly simply what’s the value deal as you’ve taken this initiative on on this section by way of the outcomes over the previous few quarters?
Ty R. Silberhorn — Chief Government Officer
Yeah. Good morning, Brent. That’s an awesome query. That is actually the primary quarter the place we began to see a few of the combine shift beginning to add to the revenue efficiency. I feel that’s nonetheless a possibility as we go into fiscal ’24 for glass. The majority of the earnings and margin enhancements that you just’ve seen this yr to date in glass has been by way of the productiveness efforts and sustaining price financial savings advantages that we had took a yr in the past. In order we step into F ’24, we’re seeing good bid quote exercise, we’re seeing good award exercise that’s pointing to that blend shift being a tailwind for the enterprise. And we’re not there — from a glass standpoint, we’re excited about seeing that shift happen, so we’re not asking them to drive significant quantity development. We’ll take the constructive quantity, however we need to proceed to see that margin carry out by promoting these higher-value merchandise. And what that can result in is an larger common promoting worth per sq. foot, as a result of they’re promoting the next worth product on the finish of the day. So we began to see the early indicators of that and we really feel fairly good as we take a look at what they’re beginning to construct of their award backlog now.
Brent Thielman — D.A. Davidson — Analyst
Hey, Ty, is there a method for us to consider by way of what you executed within the quarter, what what proportion was the upper worth form of product versus, possibly nonetheless sort of the decrease worth stuff you’re sort of labored by way of the enterprise?
Ty R. Silberhorn — Chief Government Officer
Effectively. I’d say that simply as I commented earlier, I wouldn’t break that out per se. However the level being that a lot of the margin achieve you’ve seen in glass year-to-date is sort of solely restructuring price financial savings profit and productiveness by way of lean efforts in our [Indecipherable] facility that’s paying dividends. So I feel as we step into F ’24, I feel it’s going to be more durable for them to make the sort of step up change that they had in margin to productiveness. In order we begin to enter F ’24, any sort of margin enchancment might be extra so going to be attributed to that blend shift.
Brent Thielman — D.A. Davidson — Analyst
Yeah. Okay, useful. As and when — when do you anticipate exiting a few of the lower-margin Sotawall initiatives? After which whenever you take a look at the combo of enterprise being added to the backlog and companies, which I assume plenty of that will get executed sort of subsequent yr, does the profile of that have been sort of help a return to that form of high-single-digit annual margin within the section?
Ty R. Silberhorn — Chief Government Officer
Effectively, I feel there’s two parts in there with respect to Sotawall. So one, for those who take a look at the combination work that we’re doing on Sotawall, we consider that we’ll proceed to see some productiveness and efficiencies features do this integration, which is effectively underway within the bulk of that will probably be behind us, actually as we get by way of Q1 and into Q2 of subsequent yr. From a margin degradation perspective, do not forget that our Harmon model inside companies, plenty of the roles being executed this yr and no less than early — early onset of our subsequent fiscal yr the place jobs that [Technical Issues] the very depths of the COVID pandemic when enterprise actually began to sluggish and fall off. In order they have been successful that enterprise, there was actually margin strain. So we anticipated the Harmon core enterprise to have some margin challenges on this fiscal yr and a bit bit into our fiscal ’24. So I feel it’s a mix of these two issues that you just’re seeing present up, Sotawall being the larger — the larger drag.
As we transfer ahead, I feel we’re wanting that we must always see continued enchancment within the margin total, getting again up into that high-single-digit. We’ll must see how we do from a productiveness and effectivity standpoint, however we’re wanting now at sort of the roles that they’re successful, which can be beginning to — would truly run by way of fiscal ’25 into fiscal ’26, and there we’re beginning to see a few of that margin enchancment come again as a result of there may be — there was sturdy demand over the previous 12 months as they’ve gone by way of that bid exercise.
Brent Thielman — D.A. Davidson — Analyst
Okay, only one final one on — again on framing. It seems like aluminum costs have form of been reaccelerating right here just lately. Simply curious the market has been form of receptive to your capacity to push that by way of, go that on?
Ty R. Silberhorn — Chief Government Officer
Yeah, we’ve been very aggressive, however on the identical time ensuring that we’re staying aggressive from a worth standpoint. So in lots of instances we have been truly main the market and making worth changes based mostly on these excessive prices. To our information, it seems that a lot of the competitors has accomplished the identical or comparable additional time. So we really feel that we’re in a very good place now and we’ve modified our pricing mannequin and our capacity to flex extra rapidly, particularly on the short-cycle enterprise. That places us in a very good place to have the ability to handle this. That stated, we additionally need to keep aggressive. We need to guarantee that we’re — we’re successful enterprise and that we’re targeted to drive quantity inside framing, notably in our storefront and ending enterprise, which has some good margin profile that we need to guarantee that they’re persevering with to develop. So I feel we’re in a great spot and don’t see any main challenges proper now and the way we’re managing that.
Brent Thielman — D.A. Davidson — Analyst
Okay. Thanks, guys. I’ll go it on.
Ty R. Silberhorn — Chief Government Officer
Thanks, Brent.
Operator
[Operator Instructions] Our subsequent query will come from Julio Romero of Sidoti and Firm. Your line is open.
Julio Romero — Sidoti and Firm — Analyst
For those who may speak concerning the massive Scale Optical section. I do know the third quarter can all the time be tough when it comes to gross sales lumpiness. Did you possibly see any lumpiness by some means within the quarter that may lead you to have both a stronger or weaker fourth quarter relative to possibly your expectations three months in the past?
Ty R. Silberhorn — Chief Government Officer
Effectively, I feel the one factor. Good morning, Julio. It’s, Ty. The one factor I’d remind is as Mark highlighted, they did see a profit from a tax rebate from a property tax restoration. In order that affected their revenue for certain within the quarter, and clearly that’s not going to repeat. They have an inclination to see a bit bit softer This fall as a result of as you could have vacation demand. That’s normally pulling in late Q2 and a piece of our Q3. So we anticipate that we naturally are going to see a bit little bit of softness from a income perspective in that enterprise.
The opposite factor I’d spotlight is simply given how they’ve carried out by way of the yr and we’re making some capital investments there, we additionally anticipate in This fall that we’re going to take some longer downtime, that’s in our plan, at one in all their core amenities for upkeep. I feel on the previous couple of years we’ve accomplished sort of three to 5 days and never simply in LSO, we’ve received a few different websites that we’re seeking to do seven to 10 days of upkeep downtime, sort of profiting from the place we’re sitting proper now and the way we’ve recovered from an total service degree perspective. In order that’s going to impression them a bit bit, each from a income and a margin perspective in This fall.
Julio Romero — Sidoti and Firm — Analyst
Okay. That’s useful. For those who may speak concerning the Framing section a bit bit and the way the window and wall portion carried out and possibly simply speak concerning the runway for margin enchancment going ahead throughout the Window and Wall portion of the section to the extent which you could?
Ty R. Silberhorn — Chief Government Officer
Yeah, so. I imply, clearly, we don’t give any monetary particulars on the enterprise items under the section degree. I’ll say that inside window and wall, there — that is likely one of the areas that we’ve walked from some much less worthwhile product choices. So that they’ve seen some year-over-year damaging quantity with respect to that. After we take a look at framing as a complete, even storefront and ending which is performing effectively and at or above our margin expectations. In each of these companies, we truly see some vital alternatives with our lean initiatives to drive productiveness and efficiencies within the amenities. Most likely a much bigger upside alternative to assist enhance margins in our window and wall. However we additionally see a few of that chance inside storefront and ending. That’s useful, particularly to attempt to offset a few of these onetime features that they had within the first quarter and a part of the second quarter of this yr.
Julio Romero — Sidoti and Firm — Analyst
Nice. Thanks for taking the questions and completely happy holidays.
Ty R. Silberhorn — Chief Government Officer
Similar to you. Thanks, Julio.
Operator
And I’m exhibiting no additional questions. I’d now like to show the decision again to Ty Silberhorn for closing remarks.
Jeff Huebschen — Vice President, Investor Relations and Communications
Effectively. Thanks once more for becoming a member of us at present. I need to remind everybody that we’ll be again in a number of months to wrap up our fiscal ’24, in our This fall earnings name and provide you with our outlook for fiscal ’24. Till then, benefit from the holidays, and I want everybody a Joyful New 12 months.
Operator
[Operator Closing Remarks]
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