AZZ - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the AZZ, Inc.

Third Quarter Fiscal Year 2020 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today’s event is being recorded.

to conference like Dorame. to now would turn over the Joe I proceed. Please

Joe Dorame

Inc. quarter morning Thank November the to AZZ today you XX, financial the and of you Sarah. Good XXXX. thank for XXXX fiscal of year joining us results for ended third review

Please Officer; After will On call session. the Relations today’s slide a today’s remarks, at we Executive Information conclusion the a Company Paul call Fehlman, question-and-answer www.azz.com. Tom Ferguson, under are, page be of there the Mr. Mr. Chief open presentation for which the Financial call, Investor Chief found representing is and note, Financial Officer. prepared AZZ’s on for can

conference team forward-looking Securities Litigation Before meaning prepared remind for I’d of February that fact, we filed Private certain with to this statements of with forward-looking Exchange of ended this and the the XX-K in of Act Annual like remarks, the on for Securities year are Commission, by the conference Form from call AZZ statements which uncertainties, fiscal the documents within AZZ of historical during the Report and XXXX. the statements time-to-time constitute risks involve the statements Except detailed including XX, XXXX. begin management Reform everyone, made call may contain by some

currency the various customer employees galvanizing and and power markets. AZZ demand hot-dip foreign zinc and availability costs markets political opportunities; of stability strategies. exchange the response the the metal domestic, conditions which demand gas, Those and economic rates; adequate and risks by used Company’s raw and and are markets, the Prices natural growth uncertainties management markets, services of Company include, delays acquisition financing implement and the process, experienced and serves, material limited and to, to distribution products and including markets to shipments; by but in customer electrical that the of are coatings requested including changes changes industrial not offered transmission the in in generation

such be no will date give to as information, of as statements can assumes to of statements statements forward-looking are assurance future prove AZZ forward-looking events Company result any and whether These obligation The no hereof that new or otherwise. a update based on the information correct.

With that call said, to Tom Tom? the Officer let Chief of Mr. me Executive turn Ferguson, AZZ.

Thomas Ferguson

third Thank quarter joining earnings our fiscal Thank XXXX you, call. Welcome Joe. you this year to morning. us for

performance strategic in We are result as a pleased implementing continued year successfully groups growth fiscal strong initiatives. our of with XXXX business the direct our of

growth quarter business growth XX% revenue generated both Operating with the strong XX.X% by segments. income XX% net in year. performance third margins and overall We versus improved prior to

Chinese a to Our turnaround energy fall segment strong high season, experienced shipping voltage bus orders. continued

improved operational for margins. energy focusing good team of job a on execution Our did

Our million bookings enclosures, $XXX third voltage electrical year-over-year, XX% solutions, up welding market driven bus. were in and quarter high the improving in by of conditions domestic

We $XXX build continue third XX% year. the segment on of strong the increase quarter bookings versus energy last of momentum in million, positive with an to

and petrochemical solar experienced and and growth from revenue resulting Group, includes which acquisitions volumes continued earlier year, Technologies of Segment coating The completed powder markets now most this the plants. We Metal improved plating our regions. from increased experienced across Coatings our contribution in Surface demand the eight in

XX% versus up over year. over $XX.X year. increased revenue XX% able metal coating of third we million basis, were The consolidated to and operating operating quarter to versus $XX.X a last prior million was drive income On income up XX% of segment,

Technologies, our the due to operates kettles cost emphasis from Operating which contribution This the compared by our from offset at on XX% flowing the and XXXX. in to fiscal pricing was improvement, zinc operational Surface to through margin a somewhat margins third value increased contribution XX.X% of level. currently year quarter lower lower growing improvement impact

continues efficiencies implemented The our in operational team DGS, as galvanizing North plants. which System Galvanizing XX Digital Coatings is industry remain galvanizing improved America throughout of be with plants. all leader We to usage the Metal of our

in be come. We're coating Galvanized businesses, our -- our growing us to This powder gaining our in pleased meaningful new Technology the performance confidence positive traction yield Rebar. and years Surface that will investments gives plating, to financial

the good Overall, XX% our increase energy over segment $XX.X million, prior with leverage of growth. an year, operating great of had on quarter a XX% very revenue demonstrating income

electrical Our customer to and service. continues focus improving energy on operational platform segment’s execution

to their upstream tubular due of production some our are and last businesses particularly seeing products While markets lighting electrical reduced enclosures activity. compared business year, improving demand slower are electrical for to

the booked high we voltage nice quarter, order for bus. a During domestic

demand with particularly domestically especially reduced the us are on our pleased Europe, and specialty Canada for both have in welding and in as nuclear market. positioned participate Brazil, solutions our U.S. We dependence investments these and to opportunities the internationally,

help and will teams our differentiation maintain Our well, the performing upgraded markets. is opportunities, earning which new in extremely are us Welding us downstream our Technology large

Just how year up we're date, XX% and income year. revenue our net XX.X% overall versus was to to up recap prior doing ,

Our Galvanizing plant the Metal five of Coatings Technology addition segment has and one Surface completed four acquisitions resulting plants. in

both Year-to-date, our XX% organic year, and versus XX% metal and prior coatings driven income revenue operating up inorganic is up by growth.

year, income China driven solutions voltage and revenue is XX% operating growth high versus and up by projects. bus at welding segment’s energy prior Our up XX%

focus operational AZZ’s to and core continue excellence. will strengths of customer We productivity, on service,

$X,XXX XXXX the per of $X.XX per forward, range we're previously annual $X.XX of guidance our share million. to issued sales to in of earnings range the share, fiscal and million in diluted Looking maintaining $X,XXX

Paul turn I'll to that, over with And Fehlman. it Paul?

Paul Fehlman

Tom. Thanks,

a XX.X% increase $X.XX million, XXXX, XX.X% prior $XX $X.XX, greater was year to $X.X XXXX. or prior For third third than quarter quarter. than $XXX.X of EPS in XXXX quarter the fiscal of million diluted Reported third net compared the year million an revenue reported $XX.X Net increase, fiscal quarter. of or year of rose to the million, the for year fiscal greater third XX.X% we quarter income third of

XXXX XX.X% in margins on from primarily to $XX.X XX.X% a fiscal year, for grew from XX.X% gross prior Metal quarter $XX.X on year to representing the Coating Third the profit basis, increase. year-over-year Operating margin a in current million XXXX year segment. strong million in the performance QX fiscal improved

of prior EBITDA XX.X% basis fiscal of compared XXXX. XXX margins to the for fiscal compared increased in year. third increased XXXX XX.X% QX the quarter Operating X.X% points to million to $XX.X year

increase year-to-date of the greater for year-to-date through revenue year third XXXX same XX.X% $XX.X fiscal than we period or net XXXX. in results, As million, our quarter of the $XXX.X million a fiscal reported

which was greater of rose Reported Net income fiscal $X.XX the for in same year-to-date in million, in was $XX.X $XX.X fiscal the compared XXXX. same EPS increase quarter to of $X.XX period fiscal XXXX. or XXXX XX% XX.X% diluted an the of than third to period million,

improved $XX.X current margins XX.X% while profit basis a increase. million to from year-over-year for Year-to-date the in to XX.X% increased the operating XX.X% fiscal compared prior on X.X% fiscal in margins XX year-to-date year in the basis year. prior points million XXXX the year, $XX.X to XXX grew gross Operating from XX.X% representing of

slightly compared cash million as operations of year-to-date, result the year-to-date. For the income XX flow net capital $XX higher a from higher to working by offset grew in year, prior by fiscal

the quarter opportunities invest like profitably continued part is seek Metal to to and business with We’ll year. a operating to more continue expected Metal accretive grow segment offerings. to this to to in Coating now third We these of be one the segment in continue the our the as acquisition Coatings

As deploying organic giving and still back for you spend also see, we're to can still are capital shareholders. capital

that, turn I'll Tom? With Tom. it back to

Thomas Ferguson

solutions company, range throughout on are In to Metal productivity closing, Paul. market our the in to margins our new for We products to generating efficiency XX% developing markets. we margins improving energy getting continuing innovative remain focused Coatings and above operating and to XX%. and XX% served adapt our Thanks, to the committed opportunities

to will operating the Technologies continue will galvanizing EBITDA. We and margins, and for XX% businesses than XX% acquisitions look generate greater that XX% acquire arena Surface in to

disciplined We have vetting opportunities experience finishing process space. and deep with a leadership have a built core the surface team in for

XXXX confidence fiscal our beyond. quarter The outlook to in continued performance build for third year and

development on we'll ensure making more more in acquisition, regard. have growth We've our environmental we have talent our And talent training information the our to we the be investors necessary and plans. to significantly increased this also in to invested available emphasis sustain sustainability. Additionally, retention, heavily

executing reducing our on growing focus domestic Metal market growing organically, our on program. solutions focus opportunities enclosure Coatings welding businesses our nuclear well to on while U.S. is as acquisition aggressive as In to on the our electrical internationally. in and and Strategically, exposure gear will continue we emphasis switch the increasing energy,

And now, we open for questions. it up will

Operator

[Operator & go with Franzreb John first Instructions] question from Company. Please Our ahead. comes Sidoti

John Franzreb

doing? How morning, and Paul. Good you Tom are

Thomas Ferguson

John. morning, Good

Paul Fehlman

John, hi.

John Franzreb

and project Could China. high remind guess of bus of I that to duration with the in I the me voltage want you kind [Indiscernible]? the start business how

Thomas Ferguson

but there. you Yes, voltage phone, John They over in on I answer a to bus are got high China. asked, think several what years. of some interference kind spread we’re We it’s orders of you couple loosing actually your

we know, then providing we've and We So next for of fiscal we'll chunk that support of next have left that good into year. beyond will a go shipped that it still you backlog. some year, still fiscal the even be

opportunities. in did book we're order, course, which nice looking our some book a to facility. help hopefully then also, and Medway And I So us mentioned, more to tends of we we domestic as

John Franzreb

revenue, switching much Coatings over is Technology I total? And Metal interference. total it, quarterly percentage Got Surface how either on a the And of apologize or basis for to side, the

Thomas Ferguson

some of acquisitions It's just we quarter completed sub completed X%. probably or part into and is X% X% XX%. range, It's in the maybe And that the in the we've quarter. some coming

a between -- we next going have forward having are to growing basis, go as XX% to those On they So, it's somewhere be impact forward. annual will still year. going X% an

John Franzreb

question. what but it only next? got help kind for Tom. this should Tax And into there us last we jumping year been you right, out of on All Can rate’s expect one around. not

Thomas Ferguson

Right.

for the third to return the the provision this tax So is quarter return. adjustment a here --

of going is the call, it were year, to the that XX% to leave normal year. drove which kind In moved. a the late a we for we're it for cycle -- hasn't up the tax That's about XX% in occurrence and just year it's any So bit. that for last where

the So under in you second were quarter.

over But that to XX the You're the expect for in we XX John. quarter. a little third year still year, full bit the third over in

John Franzreb

back into it. Got guys. I'll Thanks, queue. get

Thomas Ferguson

All right.

Operator

go Please Noelle comes ahead. Stifel. with next Our from question Dilts

Noelle Dilts

quarter. and on good Hi. a morning. Thanks good Congrats

Thomas Ferguson

Good morning.

Noelle Dilts

Morning.

So I profile bit moving that Metal you're comment just margin a was on thinking you about how Coatings the forward. hoping little could

Surface how of profile off, give as to investments start and little think we a roll to sense and you fiscal a to know, bit those year? about us next making rebar and in think they'll head kind Technologies margin fourth quarter think so into the You you're of galvanized the how when about of that the Thanks.

Thomas Ferguson

vast majority it's XX%, And as the still talked been for in we've, is holding know, of, of about Galvanizing it, range the galvanizing. Noelle. Yes, segment. you the XX%

As we these to immediately But bit over time. we're XX% here longer. Galvanizing, on us those tremendous operational to surface be technology takes capability little have still doing to bear it acquisition, we're acquisitions, bring an unlike near a where targeting

bring I and above and the so to So up looking those over get closer think to margins then things we're XX. XX% time for up,

still So is relatively technology -- in but segment. the piece the fourth small of the surface quarter, a

while So, to to I -- to margins to you Paul, going if close a be they're will likely the think want little don't third I know that. probably add quarters. be relatively

Paul Fehlman

had in out were as there some We Tom Noelle, third well pretty pointed earlier they've they -- been too. involved costs in quarter. performing the his discussion Yes.

Some as expect money the the and businesses with same-ish these spot are in the fourth he think bringing the is see I on one percentages, should but to time about you on, quarter. probably we're

Thomas Ferguson

did of coating the powder be you that. we thing thing for one that plating come some And downtime is late as add fall/winter that Noelle, of the tends the businesses. on into learn season I'll quarter One in kind to these

probably buy better in them to spring would season. time the the So and summer be

those season. -- about down So as was of Paul the in the buying talking of at it that kind costs some in relates to

Noelle Dilts

the how them in of the quarter, into other how thinking also markets helpful. guys talked the you given thinking on verticals XXXX? seeing exhibited of some and curious end-market petrochem strength tax that And particular. what about in uncertainty the of and solar around upon XXXX XXXX the outlook, you're solar you're That's you're Could in some credit. you about and expand Thanks. about the some And

Thomas Ferguson

Yes.

been have I our industrial bridge the generally, markets, relatively that highway, and segment. construction and think, like Metal in solid things Coatings

look have pretty getting into a that other impact other those growing OEM of year. As to us markets it's Surface and good into Technologies, we're some and of the taken start things, next will more going so the into

that about customer base say serves guys specifically market. good Our our I'd around that pretty feel solar. But that's

on what impact for wasn’t credits yet So, then we're that in right customers kind year. look fairly which to now but for robust. optimistic That and we petrochemical, general more that's what it play some have was things of the terms that's see going feeling bridge our like are that kind out, next have, the think outlook to of infrastructure, continued I forecasting wasn't tax we but we'd particularly of about spend and really love is bad. highway, as year, this to And

they're say kind markets So for -- And normal. but I this into next we're and overall in weak, I looking trending say looking are, as already year robust quarter, industrial well say we're general, of our won't solid, they're, I'd won't which so into.

Noelle Dilts

question the comments from turnaround season Any one shaping up Okay, me. spring point? last great. is then at how And on just this

Thomas Ferguson

really Yes, solid. it looks

I some the the deployed, in Some it's of technology very we've been well mentioned that, of received marketplace. and

some some that from there's the So fall going again or, the to are spring. things in continuing, start

spring we're So, really that season good feeling up. coming about

Noelle Dilts

you. thank Great,

Operator

[Operator Instructions]

Please with next from Sidoti & Company. a John question Our go follow is ahead. up Franzreb

John Franzreb

as Noelle's relative strong to full would it? season, the be one basis, coming or, really think turnaround question just spring good this? fall, about up expect how spring off season this you the follow We have we Yes, a than just the season or on should on better on to

Thomas Ferguson

have be up projects mega cautious going be We spring. look don't like don't in we strong. is have this I'm fall. -- teed forward we for little being a we a the had Where to That's to

fall, going really to it's as the last going So strong, better the really, but spring. to quite not be is activity while probably it's good probably than be as as

John Franzreb

assume job is when think duct Chinese domestic be high got, job So it about that you high just duct were? voltage than great. voltage the to a I higher That's perfect. Tom. bus the And business would that fair margin

Thomas Ferguson

Yes, that's assumption. a good

John Franzreb

right. I guys. me All for guess Thanks, that's just Okay. Appreciate.

Operator

ahead. Our Baldwin go next Bill from Baldwin with question Please comes Securities. Anthony

Bill Baldwin

you are AZZ that What differentiating of so welding the you Good in? the that specialty the Thank competencies the competition? morning. differentiate your you. remind you're Tom, could of core are from segment doing again me well in there core what's market competencies

Thomas Ferguson

coker really we’ve Yes, complex drums, the will big largest record, in and track things reactor longest got large the if vessels. you like

to our than really you teams, else vessels when So big the there. references that's get operation, where more into just record, technology, our our our anybody critical that track welding are vastly refinery are better and out

those be are So the world where tends spot. regardless that of sweet in our to

the So what Lincoln equipment welding We equipment, -- customize move then that controls, we your this to and -- it our with have significantly in our done into is, custom. and then technology, we've invest -- standard Miller and take is our we and our it. deploy continued video

equipment customized is our and experience. that in with differentiation So our

Bill Baldwin

for your switchgear for your outlook markets the you. thank comment enclosure could like business. electrical on Okay, the what And you looks and

year so? what there you're out looking next seeing the or know over out You

Thomas Ferguson

three think got market Chattanooga, and outside Millington, I at enclosure the serving in facilities Yes, is Pittsburgh, that Baltimore of which Kansas. we've

not East Midwest that we've [indiscernible] them really the in markets strong, good of I got A those you but we've we're – call the a with. And are agreements, major they're base. and we've call agreements or outfits can purchase got really know, guess are supply So I lot customer Coast. blanket

operations. that just improve at customers. being part Focus presence, being, year. to at we're good looking And we've we're done so where so, And what on pretty of to our solid next that's our

Switchgear.

the look backlog continue into to a bigger the smaller We've good on really to stuff. that Fulton big the there good. looking of some and the -- of out is year, grow think got going I stuff pretty

think, okay. I little and bit a it's but softer

Bill Baldwin

What the drives that applications market, main are smaller there? switch gear What Tom?

Thomas Ferguson

grade. It's industrial the that the utility stuff instead of

Bill Baldwin

Okay.

Thomas Ferguson

Yes, yes.

So it industrial a off much opportunities, that's, but of of that's we spend. where to broader customer that into get tends set of off drive

Bill Baldwin

the like manufacturing better a need it of just economy, the on We spending there. side sounds

Thomas Ferguson

to little little a but it's this We a into year, doing were need softer. coming pick year, bit this there. do. have good coming up past this We into We

Bill Baldwin

Right.

much there. you Thank what guys are doing with good Okay. and job you

Thomas Ferguson

Alright, Bill. appreciate it,

Operator

is a Noelle with Stifel. follow next up ahead. Our from Dilts question go Please

Noelle Dilts

you just you about thinking with those those businesses comment know, if portfolio you strategic could tubing the are part a from face to I lighting businesses was Thanks. on how wondering new a and operations as continuing our of challenges, standpoint?

Thomas Ferguson

and going Our all the XXXX. XXXX had lighting we business, cycle to back the early probably LEDs to in way converted

look And we processing that, like market get that. so, away food to patch and differentiate the good from application base at the have we've into technology, just to got we oil broadened things good and

So, we outside a good good And pick technology. structure of cost really that. some We've country up the representation expanded -- got the while some and We've operation. about also good that feel opportunities. we've to still got in international

good positioned. looking of feel how terms in about we So, the lighting forward business and we're

And a even while volumes very so, little profitable. bit, they're their off

company side, the of side. heritage in the On our the it's call the it tubing tubing roots

profitable. of We've make team So it's incremental operation. find we big that's find, not if million business. to volume a of really And can or million $X we only nicely $X that a need it piece good in got to

teams. So, of of them, I I where at of I business, both the positioned. we like mean, this them between that they're and like like two look I because the neither operating

And business we patch would tubing uptick so, any oil in benefit nicely. the that

the other, those they're good in So, quite working frankly, operations. I feel profitability in -- drive And both outlook. about to the

Noelle Dilts

switchgear the transmission some seeing And the with galvanizing on with sense. equipment and you're side the on electric and distribution both It comment Okay. then in markets makes you then of what enclosures? quickly, and could

Thomas Ferguson

it's the off forward I'd we to it's -- It's if look on stable, this but broad maybe a base have side. And galvanizing stable customer you as kind really hesitate -- of -- there. -- will. is we to Yes. slightly

So, we're chasing opportunities.

We we On a good is the nice electrical forward on the side, look still it's think the run to enclosures that way. switchgear. there electrical and for and remain side T&D

Noelle Dilts

Great, thank you.

Thomas Ferguson

right. All

Operator

concludes answer for Tom Ferguson turn back would any the question Mr. This like and I remarks. session. conference over to to our closing

Thomas Ferguson

Thank you, Sarah.

a covered grow whatever reminder; as continue just XX% for and of inclusive to everything XX% that scripts the surface we're margins I Metal operating but technologies think to committed most questions, between a We to and just do, couple segment, driving we of the comments. Coatings acquisitions so we our piece.

we're So, and our then is decide not businesses look continuing we of forward. acquisitive. remain as what going core, to are review portfolio to And core, we

informed So continue you make there. to keep we'll as we decisions

very full for participating and in you Thank a you about to call look our year just few the much in and QX. to forward talking months

Operator

The for today's concluded. now has conference attending Thank you presentation.

You may disconnect. now

AZZ (AZZ) 9 Jan 202020 Q3 Earnings call transcript