- Earnings call transcript Q2 2023

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Operator

Good day and welcome to the AZZ Inc.

Second Quarter Fiscal Year 2023 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, this event is being recorded. to Partners. conference like Dorame to now Lytham of would turn over the Joe I ahead. go Please

Joe Dorame

Thanks, Betsy. the and XXXX. review fiscal Good morning XXXX AZZ's today joining year financial to us results August for ended second of thank quarter XX, you for

slide the Communications Ferguson, Executive and prepared the latest of Schlom, are a IR. for Officer; Nark, Senior questions. AZZ's remarks, Tom and Please today's presentation note, Financial which will be After today's at Officer; open the can David today is we Vice call call, Philip call Joining for Investor Chief there Relations Chief earnings azz.com. presentation President, found on page under Marketing, releases conclusion

and markets, metal services transmission products the in generation by the markets, offered markets Commission, by XX, and XX-K everyone changes statements electrical call the with filed during made involve Securities of including and to for company, the time Except Litigation certain by demand the but fact, the are detailed are management team and Before in ended meaning conference uncertainties, and Securities markets. within include, this the statements statements Form to uncertainties I that begin historical documents we report power the remind Act forward-looking prepared by annual XXXX. customer from demand the AZZ the to time with constitute conference of remarks, on the for coatings Exchange forward-looking response year AZZ of fiscal and call risks Reform risks of Private which statements to the distribution contain of this would including some February and Those limited not industrial XXXX. like may

the which labor costs, supply implement in employees foreign chain the used in coating opportunities; stability gas, of and the galvanizing are adequate strategies. of prices costs, availability and Additional and domestic; natural process; conditions growth exchange vendor company's increases rates, and process; that and changes coil customer-requested shipment; political economic zinc financing to hot-dip acquisition currency material the delays and including management raw AZZ various serves, markets delays, experienced in of

In new addition, that the statements as give impacted hereof, the prove Tom and forward-looking AZZ These obligation AZZ's of statements assumes update of adversely information, AZZ. events Ferguson, COVID-XX information as potentially by can to any ongoing could company to no otherwise. its that the no be or call be Executive date statements, pandemic. The of on over and a such Chief Officer turn forward-looking are customers operations me let assurance to whether out of With the result future will way, based correct. Tom?

Tom Ferguson

quarter Precoat commitment results XXXX to opportunity the delever to Coatings to I’m Joe. further Metal have share the progress actions and business, our earnings the fiscal combined to become of we of this as predominantly Thanks, the Welcome have a metal well AZZ's full taken quarter coatings first Metals company. as segments. The you us excited strategic call. morning. on joining made our for second Thank to

XXX Avail Group, had I second of sales involved income all I completed to over and success for customers AIS to take we new the have to results AZZ out as let Infrastructure improved segment, divestiture and however, September thank the of net million with do, and to rebranded total venture also folks’ If have I recognize the part another finishing want year. of AIS with thank we discontinued employees would on had Solutions. would operating a ops, another for sales of just Fernweh about XXX as to million the quarter take XX. million business on joint all the care prior has stake Solutions the nice which AIS not of taken the everyone for of with focus Before of me wish Infrastructure in quarter. significantly continuing XX a moment a of been majority which the in

their while very our as of quarter results Next, busy into by record segments. to to to sales, Precoat we record quarter positions November both a achieving pleased Metals the highlighted say now strong level I'm strong and leading sales continuing XXXX with truly metal committed dive had of results, that as we with part Metal as focused AZZ completed company segment quarterly coatings Coatings is of in AZZ in first back our profitability. post market also We profitability. a full

collected as used reporting and operations. most are the to proceeds of closed the sale end quarter, discontinued Loan We the the immediately AIS, the XXX balance to B of million in XXX reduce with infrastructure After remaining used facility. of segment million credit the Term the debt revolving the we solutions reduce

into of B swap floating million fixed about a XXX against more rate remaining later. Philip to speak interest entered we Term the Additionally, to for will rising this hedge Loan debt. rates,

care and to On businesses in our active record and loss transaction sale their businesses of generated depreciation, million supply Coatings we but about ongoing segment generated almost of Creek reported income DAAM which XXX the tubing of and continue the AIS, impact basis AIS. AIS margins and the growth posting acquisitions expenses, team of versus of Precoat and loss let's It quarter. on adjusted well addition AZZ of me on the adjustments their generated divestiture, is our care Net the their the pleasure of of on of EPS disruptions income and operational the real of history. great year. $X.XX And and XX% XXX $XX another increase basis the is operate Galvanizing did congratulate quarter. increase and were on to sale to Steel segment supply and Philip down a great of an safe, the the will a million, Coatings So, is continue Metals the which benefit We EPS the over entire Most details safely customers. they the These generated these people from and operating organic over a is one-time amortization with managed the from Operating sales of another taking highest Metal basis, delays XX%. million still XX% talk an customers, shortages chain impact while year-over-year. related the into included excluding prior of of outstanding an gives a was XXX were non-cash adjusted consolidated provided insurance businesses. performance shortages, later. results. through million, of sale chain the due XXX labor Metal get basis, of XX% took and kept million, but on We settlements. markets labor results Despite on million drive their EBITDA to which estate have X.X which

So normalized been have would margins just over XX%.

basis would chain disruptions have points other the by AZZ income as faced and X also been of generated QX, XX.X%, labor previously. kettles $XX and impacted million about million in we continue are margins but and we of see with experiencing shortages. depreciation million. of into sales progress amortization, XX%, or cost rising to supply XXX our accounting, purchase due zinc and price some impact Precoat Operating We operating demand $XXX noted but joined momentum of to preliminary solid were as have from

is One Precoat is for than customers and customers, experiencing but levels, million blessing safety coils their productivity shipments, is well of and and due presents steel a increased bodes of challenges to stocks normal efficiencies. much generated inventory EBITDA publicized Precoat almost of supply curse. aluminum XX which Precoat Volume disruptions solid key services to the provides XX.X%. both who or a for higher warehousing well but chain

pleased a that, minimal and are into the Philip team Precoat I'll turn We detail. in to settled over With AZZ to how further great discuss it results been cultural with has our disruption Philip? with fit.

Philip Schlom

Tom. Thanks,

First, employees and large in professionals require our efforts their this and they significant finance I'd coordination our like to global support and for effort. year's and especially as divestitures acquisitions thank

Operating and classified infrastructure from held [XX.X comments, million] sale periods. income operations. at discontinued from million XXX.X Combined at on operations continuing consolidated of operations, in XXX operations [ph] our which solutions sales quarter his as noted was quarter earnings discontinued requires million. the XX had and were segment the XX.X%, year-to-date continuing to I this as million and Tom of noted, at will we EBITDA, the discuss as basis. results those Tom on reported the us As for end a separate our of as our for assets we focus segment primarily

discontinued of Metals profit Solutions operations quarter exceeded from and $XXX.X We continuing quarter Sales the by million. segment second included now Second million XXX.X compared XXX.X XXX reported sales sales gross in quarter million. gross from AZZ continuing quarter Sale of sales of of million. were Infrastructure excluded year. Precoat operations prior the first of profit full in XX.X million, the prior same year generated operations with

points was year and the prior basis Our gross XXX the for lower overall. Coatings included the Metal as than quarter, the prior margin year XX% reflected segment

operating lower XX million the points prior the operations While the XX.X% Operating current quarter, basis during compared margin Operating XX.X%. profit from quarter the margin year. continuing XX with Precoat, higher quarter has profile. the from a of in margins second year prior which XX.X sales for slightly year was includes above million, of was the current

Excluding XX.X%. Precoat margins XX% quarterly have the to X.X in effect million of and purchase increased respectively, accounting, of million X.X depreciation and business would operating increases expense Precoat the amortization from our

acquisition We the profit expect Precoat going impact to the Precoat the segment from to depreciation operating forward. amortization the continue resulting and quarterly in

million, XXXX. million adjusted prior was fiscal EBITDA of an year. Second a current second XX.X XXXX XX.X quarter above year the reported quarter fiscal the was compared million to XXX.X in quarter million, year the XX.X basis, negative On EBITDA

just intend loss date X.X million prior to quarter. the to related reflected compared XXX.X a the Year earnings we AIS year-to-date XX.X% prior Precoat. business was improvement announced $X.XX, second year million, with balance purchase sheet by cash to valuation XX sales was received ops XX.X on in million, than B, the related our of date, were estimated to taken EPS, utilize and quarter reduce We reflects of operations capital and in XX% to date operations loss our excluding with provided Term a million by XXX% million continues We We loss, to funded XX year closing prior Year the amount interest year. funds on Cash was $X.XX, from a the the on to $XXX.X in of primarily cash million. flows XXXX reduce attributable months loss million. cash net capital of the significantly financing was to from tax buyer. utilized the a operations EPS on of fiscal date due revolving increased of the quarter facility to Infrastructure year. six million year's million year, diluted costs required discontinued was XXXX the continuing million share over the XX% the Loan our on last Adjusted increased working borrowings. was immediately reflecting received the overall of million of sale which same months credit segment. company diluted operation amount activities conditions. second financing last through facility XXX the apply company's Metals week, XX.X from against by X.XXX Fiscal up in on discontinued with half six was in year and to same XXX.X divestiture, statement working basis year net committed first in to Solutions XX. in first was X.X true the regard due million paid that the August, continuing last the estimated Our sales of billion the Earlier of used XX.X for than to allocation. per The further acquisition Year-to-date finalized $X.XX lower on we cash of higher consummation million XX year JV from by Precoat XXX to increase the billion, nearly the focus the capital. the May last on XX.X debt the the X.Xx the including continued million, quarter recently stronger equity and and compared to our XXX XXX date during the Cash million primarily on of Separately, the XX.X credit a ended activities higher earnings. these our of cash reported of sale to or revolving to with transactions provided outstanding The remainder was finalized year acquisition, the million. Precoat in investing on borrowings

During investments related XX.X capital on the acquisition spent quarter, continuing to Capital recent discontinued we operations expenditures million operations. Precoat X.X totaled full X million in million the and second for on quarter. our

to delays due witnessed We disruptions. delivery continue projects reprioritize we chain supply have as to

shares XX.X invest on between we invested to We million in date current to quarters. the million year we and in during did While XX CapEx, million fiscal capital expect not repurchase XX the year.

declaration focus We for [indiscernible] to announced on a Last at we path our $X.XX. continued continue reduction. Friday, our glide debt of dividend

we debt we quarter, and X.Xx down paid During to from deleveraged the leverage leverage. X.Xx second

we our at our meeting a reflected of A Series as million, end our shareholder equity convertible XXX on as preferred into X, exchanged a of notes to in convertible August of compared being receipt stock, debt reflected Following QX. the component the now at annual Blackstone X% approval

recently million about we entered Term will rate and Lastly, of a rate of yield existing basis swap and The debt. swap [ph]. a XX% X.X%, interest reduce into [XX floating agreement B exposure. [ph] points lower] X.XXX% debt a [has] of fixed three-year swap SOFR-based Loan to a our roughly hedge This XXX

reducing which outstanding and we strategic continue to earnings. on focus and accretive future will projects, be to invest continue leverage believe We and debt in

I'll that, his it comments. with back for Now to turn Tom closing

Tom Ferguson

Philip. Thanks,

The normally stable is share taking our offerings. our is there and year. expanding of service continues existing markets although some prices Coatings, LME to is labor Metal customers able much kettles some focused be normal experiencing their conditions challenges. transportation, are logistics including the to cover costing to continues pass to on offering of some supply seeing production face inventory offset able has levels generally Zinc and active with there our majority will logistics growth. this the but been through but alternatives and steel profitable coil stability, labor, for. to customers increases is aluminum significantly focus to the be PVDF, price delays inventories. we continued customer-owned posing cost, in provide higher chain continues Fabrication to its continue available, to rise activity continues to that shortages of in challenges. been market which some and Pain For dropped to solid, continue on Zinc team than and increases have remain team while warehousing, inflation. have the and They're Precoat inflationary

the price we joint new And the do estimate not working equity to the AZZ new settles want income Solutions in. are guidance purchase much will recently attempt strong since transactions, Metal not is team generating results. still overcoming operating issuing from them and to full-year meeting So organization while Infrastructure we venture for Avail challenges completed the like accounting Coatings, Precoat Precoat. to the as Due market analytics be we

the lower the Coatings, half quarter than the be segments for being quarter, first markets. to second than to fourth impact is Metal construction and due on will AZZ somewhat the with and the tend second, quarter third stronger the both with As the Precoat’s winter weakest

variable both have their cycles. being quickly. to be to proven of about cost due shed previous resilient Additionally, is can historically cost they very recessionary so during This XX%

today's pure actions taken started I in play want to the where call. America. Finally, leader to necessary North become end a I AZZ coatings has metal

coatings leader is Metal on the pre positioning as positions and and both Precoat in post-fabrication Coatings, both our AZZ focus market expanding Our in metal markets. AZZ leading Metals, a AZZ

onboarding be and Our Precoat down on Metals paying focus to debt. short-term seamlessly continues

open rate for reduce we dividend. that, reduced interest positions, our leverage well quite deliver to our With a future. value continuing believe while built are strong and we'll leading risk, I we and pay quickly market attempted and more positioned to focused to have the stronger, with our shareholders up a generation, resilient have We to into company well questions. it cash

Operator

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

John Franzreb

things taking had summer in the months? you Good its of the pointed how much the like morning, Precoat. a start quantify the thanks seasonality guys, to in with out off kind quarter of relative fiscal in your historically last and out for of kind drop to Precoat’s you fourth one peak, Can of I'd questions. revenue about revenue

Tom Ferguson

think the but it being fourth the the as it’s generally that I in I'd wrestle we're price trying third a XX%, falls of down it, probably off to couple the bit, with increases changed and second with half has, a quarter of little slowest. winter things around quarter from XX% kind unusual trails in paint then because mix of that say kind and

John Franzreb

Got price either increases you increases, gotten it. in or have Precoat AMC? regarding And any the price pushback on

Tom Ferguson

battle, I think when our pressures. the they’d if folks, all our always you a customers inflationary experiencing sales say, it's ask are but same

So, two the labor paint, feedstocks, has by versus to between going transportation, utilities, up. continues being market up, we've down, mentioned considerably offset spot everything is going been Zinc but LME from just transportation, as that premiums only energy, difference which go up the

a through and pass difference, and that's is we feedstock the zinc So, we separately markup just with that. so generally a of paint price whereas the

John Franzreb

could And it. more in. if it I one Got sneak just

You They negative. or to bit in going clearer? little a both mean kind of customers, positive what's which see a market or for mentioned production me immediately is maybe would a manages in resistant it say, just, dynamics Does like the inventories you shutdowns, steel kind anything I walk don't and it's, Precoat shutdowns any on the that? through can its of that steel the kind and that of temporary

Tom Ferguson

machinist that's processed. like stuff and things palettes why one of a sitting me there That's be those to interesting Yes. with to of it's

probably XX%, carry I'd normally than XXX,XXX carrying, we carrying more we're XX% we're that. say tons So, and

by sitting that to but the And varies warehouses plant, the five waiting or processed. so Basically, our stability. backlog, abnormality. the be it most for gives that's speak, So months got us we in part, to four

while varies when to between aluminum how yes, terms it processed. lot So delayed it that and is much in – of is a and steel suppliers. And of could going get is much from gets domestic processed, be it imported how it's

that like going because primary it I painted, we get why and our that's to we it's business. fact that's the is know say So there

hand, we've On the of other an lot awful it. got

and things forklifts get little logistics So, of to around [ph] bit it's and a and around trying [trainees] stored. moved

So there. good hand, on incremental it But it's to the the cost. have other that's

John Franzreb

a into Thanks I'll it. take Got Tom. lot, it back queue.

Operator

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

Noelle Dilts

Thanks. Hi. Coatings about business. the, legacy looking the third seems stronger and It or just as second Metal the I it I'm like whether on was just is into the XXXXs, in guess, I it early inconsistent at quarter seems fairly quarter. back XX/XX. than not to back

of So, you into bit is, which proxy I you hoping your more pretty year. to, the was just I speak terms you pounds of you Could could that for sort a expectations the in Obviously, a volume. for half the second quarter little metal think had back nice in growth processed. dig of

speak the some you key third on, your could about the So, kind coatings fourth year? how half touch metal Thanks. just relative volume you you're key strength also to the back in thinking could markets quarter, market expectations in the the drivers, if and of of in the and of

Tom Ferguson

Noelle. can strong. third be question, Yes. quarter – Coatings good relatively tends Metal to That's a

to seeing course our be I we've the that and – high to of to to year. and catching cost which our able then what's but headwinds tend gotten starts the our they us we our of are [Technical What of been prices towards going of over in costs is is in kettles, balanced across in and think up that kettles in – for levels, our up remain with to quarters. probably more what's flip are kettles our so that rising maintain Difficulty] So, service end now terms zinc the their

have are be to volumes be solid to quarter solid through going impact. some look So, and will generally, we while the the margin third

of at So, the fall they've to half. as some that into to we the XX% not been, point more but they what that range margin consistently about and return income we've they're side we said to dramatically do get XX% that we're would second off operating talking that anticipate going

Noelle Dilts

Okay.

So to that's [ph]. in the [XXXX XXXX]

sort of So thinking. what that's you're

Okay.

Tom Ferguson

falling Yes. get slowed brought you activity for people the manifest We're obviously, while The a opportunities, remained tends do off And solid construction talking that some to docks terms up do have take sadly to of continuing about itself. Yes. back in to the [Indiscernible] but recreation, cliff. out Two, part. hurricanes, then markets, not in. well. of most things their for that the

that So, but coming anything? that away, activity we got and that and [ph], [Indiscernible] transportation, gone is things of it. spend seeing T&D? [bridge have slowed summer infrastructure] like highway to up normal we're trailers, has more still

Philip Schlom

T&D is still strong.

Tom Ferguson

T&D Yes, is strong. still

the of and the most is ag markets solid. the recreation pretty outside of So, some of

Noelle Dilts

kind Okay. cost both in more could factors you're particular, a some thinking of in be And the net-net, Metals, time on that like how talk comments in Coatings these demand downturn, but penetration about at emphasize Precoat because impacted, know, You of the economic markets weaker variable. volume of patterns Precoated about, environment? can environment? for driving about have thoughts us resilient piece you just how of some the being Could you weaker economic of of guess, Precoat how of you're it and Metal concluding cost sort that I trend seems XX% generally that a are then, you talked the might sort you about being pretty increased thinking same but in give

Tom Ferguson

because happen spend going the continuing up I I'll to to utility that David spend we're and the well we then into Metal And Coatings the to has come so renewables Metal to talk side. to can infrastructure Precoat is the Coatings, stuff, see traditional think continue because I as side the market. continue there's speak mean, and Yes, are just still. catch to behind then

that while it's environment, going to may recessionary more stop. a in even slow, So, not

residential construction the industrial of discretionary the recreational construction their And stuff. becomes industrial – more of so, – some we part

stuff it's of So, the – in the to pretty we that resilient that's tends I what be part say we it. like why all

don't want our of stuff to that to I pretty facilities hours we a resilient. of to like tends yes, lot absorb So, tends any the in remain don't our say, customers. But

off run XX%, we can we then South much to in of So, we're how the going Arizona, bring it's to more that's labor around Midwest, X%, absorb Colorado. ships Nevada, and situated the fall bear. X%, which you just we going be of Midwest, number and Upper terms look to tend country, the usually And as to in of course out towards

are tend from So, population to be areas a in growing still that standpoint.

still construction. infrastructure, So, David? need still need

David Nark

Precoat their sector they in warehousing that spots the as of On within the have you have the a there, and market a continue general Noelle, market side, them construction couple which sector been bright particular biggest know manufacturing well. the holding broader up really to been serve and markets, within for construction

and So, we then a the I think seasonal trends. course we'll of continue recessionary focus about Tom mentioned slowdown as in call look to see as and there

Metal expect we at The thing on as through point that and investor we're again, cycle. do at slide both how deck business Precoat in recessionary have our talks held out AZZ I other cycle. and about too that last another we up that businesses the that's is as Coatings indication that that, well And to a perform enter you and looking we how our that some type them as at investors into gives think look of to look what

Noelle Dilts

you. Thank Okay.

Tom Ferguson

Thanks.

Operator

go comes Capital. with Next Kansas from City Please question ahead. Braatz John

John Braatz

market. believe that had XX% Precoat. sort to was impact an you question on I some market? down, they market it are shut I like a back to seeing maybe and of they homebuilding has end the David, thought on exposure residential

David Nark

– residential is in XX% collectively you overall group see. the of the the some John. construction within anticipated. it's that construction impact We're about seeing what exposure yes, the about there's of side, business on had general. it And kind construction, overall We And within we market

John Braatz

terms down I Philip, to debt additional your – balance some raises and what billion, $X back mean that this of stand you Fed time? where rates, we And to back but at I your going to paid think sheet. time? okay. we at – you're some the up go about around in your debt down and cost are now talking all-in it's Obviously, of the with obviously Assuming, on Okay, swap when this about debt do

Philip Schlom

is the half, [ph] is debt of running at [X.X] about that's million XXX [X.X] on Yes, [ph]. the hedged about and balance that running

win that. if as We and see protected of some we're on further increase piece. floating portion increase, rates So, a may that on

John Braatz

Okay. Did protected? half you about is say

Philip Schlom

billion] sitting Yes, we've entered XXX just into got about the and we under on have sitting rate swap floating [ph] – today. billion] about million for – we've [X.X a [X.X [ph] on books

John Braatz

Okay. All right. much. very All right. Thank you

Philip Schlom

Thanks, John.

Operator

ahead. Instructions] comes from with Gabelli next go Brett [Operator The Kearney question Funds. Please

Brett Kearney

how Hi, strategic the for momentum clarifying guys. Congrats you and this a results on the continued thank solid were quarter on combined basis. company

Tom Ferguson

you. Thank

Brett Kearney

going with together early guys curious, of are [ph] Tom, you're it's doing have more the AZZ, you days, team on are gotten and well have in seeing as terms uncovering team at as you Question the what forward? ideas pollinate] of point, those of at I to, you kind as the kind best know opportunities and Precoat [cross practices I this some Kurt had, guys but side Precoat of

Tom Ferguson

opportunities. able been sales perspective, to to get I get sales out then their all plans to different and I've Precoat say interesting. One to couple have our of see and well. teams also it's sales think I'd really a events we of Yes, along from some that a the go of opportunity

both large presence of talking across customers increase either upside both more potential use the galvanizing and see metal] them that [ph], sides. we to so, some And finding ways and [pre-painted just our to with work

talk do quantified haven't the or business aware opportunities that until that have currently. as those yet, may the about side not customers may And even existed not large side, few but our we with there's one of been We may but a recently. some other quite of other that

to what customers we're So, outreach and folks identifying sure benefits Precoat kind and folks those brings I sales that's of that Metal understand but our understand hot of making have Coatings [ph]. [bear] our to almost what still seamless, is dip the that we think working galvanizing on opportunities and

material. are that you From excited of our to best this tends – we're is, is, share We opportunity leveraging we and we practices. the think because growth So, opportunities overlap. we those EHS and I future which operating standpoint, really furnaces fact an and know, ovens about with kind we handle to – deal look at network just

So, we move stuff.

I issues other's on that. still able work visit in up weeks to those of and doing the meetings think some we'll now really plants continue several each got days. the early set of been next over We've that we're to teed we've

Board has going originally that quantifying from this significant to on so to a but Our and we teed growth especially requested and it be going than I cataloging customer more up what and perspective. start it's we effort, think get we're

So, and and we we about comes how that deal speak handling, our pretty much the when the excited same fact language with that especially it to we're material processes. coatings,

Brett Kearney

Terrific. Thanks so guys. much

Tom Ferguson

Sure.

Operator

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

Bill Baldwin

Good taking and morning thank you my question. for

for of on – the on color Metal the handling. far this what Coatings spending you wanted allocations offer of projects? year we've we had of what kind Just see underway as of the types capital or Precoat similar. of Mostly interestingly for kind insights material as to can and nature Most

think up of and which and XX,XXX Precoat additional that space. [ph] facilities, to than One warehousing just just adding of I [drive feet, it, the Louis an of thru bay] on it the finishing ones square side more expansion a give was bigger debottleneck the probably one at St. was

is finishing project so up. And that just

lead on of get it. think one [forklift] the had capital the spent is those most on is, thing on been The struggling XX So, weeks. that we're deployed the times to capital already I [ph],

over in the Philip? going that's year. [Technical next to year Difficulty] this of some roll What and else, So,

Philip Schlom

kettle maintenance we're That's for ongoing [ph] normal at thing. the of [metal looking Obviously, and processing the big equipment just our facilities, side? on changes, coat]

Tom Ferguson

we of Yes, and a quite got have kettle we think changes a summer I did those through out. few knocked the lot

there, yes, somewhere in the but think, XX going we're good out end the pretty shape there. with of year, into So, I in kettles

So, year. yes, every to XX changes X kettle get you

investing been get things controls, a continuing keeping controls, with up keeping just deployed. and up of to they've the there's in so, that's some – Precoat And on and deployed that, side, been vision lot with that

CapEx being and the call fairly stuff, debottlenecking, Louis biggest So, in inventory, just if care will the St. normal deployed wrapping is for up project that up. you take normal. And to has expansion efficiencies, of improving it but the of some also been the now productivity incremental additional warehousing,

Bill Baldwin

Do you what be have going – your I feel forward CapEx think, right will combined of level for now? now maintenance operation the kind you of

Philip Schlom

Yes [indiscernible] million.

Tom Ferguson

Yes.

Bill Baldwin

or there further Okay. to either investment or productivity opportunities And software Metal productivity Precoat? of Coatings increase and in increased either are operation, or automation whatever for

David Nark

the probably go sorry, is I'm Precoat – guess, Tom, most ahead. I

Tom Ferguson

absolutely. Absolutely. Yes, no,

capabilities I a shape. think between to side, good its standpoint. which expand on the everywhere production from in Metal much part Coatings digital for we've is most and continuing maintenance pretty the the Facilities system, galvanizing implemented are

the on out spin which think expansion nice got then Metal plant Arizona. I that side. things R&D up R&D, stuff ramped some we've in of the we've normal going So, got dip on Pretty the on we've Coatings hot And coming much and galvanizing side.

with but benefits those relatively – out that them. small come we'll of are So, actually big

Precoat productivity, got controls, of we've plants. the open continuing drive slitter improving I invest a one in up throughput, Louis be to think the On to St. advanced that's installed side, ready in

us those to volume, also services provide services So, to incremental adding profitability. give us tend that sales additional but value-add those

normal those next that and we So, start process into annual planning year. there's laying as several get of in our as opportunities for we

in cases, space to lot to just already of of throughput my to million drive and they existing performing more through teams just through high need more. they facility. warehousing $XX care of great another little $XX customers So, doing some on the room to be some facilities, take able to out things good tour there, cases, to a million, their be able $X expand their an And need handle million, in a

So, returns. capital, think at and looking not are invest kinds huge in. amount have nice of And I of things those that we'll opportunities this that to we're the but

Operator

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

Noelle Dilts

is about correctly, the this headwind margins, [ph], back you better? that in little Precoat [range] X million just out the do expect headwind or to Thanks. sort I'm of of into make so, should called the quarter of to within, kind about inventory, sort of get Again, you as obviously, get level margins all a get the we're maybe around Precoat of we in the we think and ongoing sure that quarters, discussed year to February XXXX. a it sense to half again, and trying of think and November EBITDA to about bit the range even how thinking

Tom Ferguson

Yes.

second still EBITDA half in come I in the we think the of the to XX% into year. as lower volumes Precoat the above going the target is the short-term be for

can't of will think and we impact, – hope overcome located to job purchase we to it those headwinds can but face better efficiencies, getting we'll the be better. to the inventory price managing I we would do overcome – overcome the we accounting over working productivity a that

really, see move I – to direction to into next but Precoat. – quarter, definitely efficient quarter we that that into then much the go we end in obviously the I productive hopefully while get plus be first see up in up, to And the pick strong don't and fiscal year. get I we year. right as want X get rectified the new for into as as it's see and And third changing quarter, million and a towards working that the pick of So, the really we that tends year, as we be

Noelle Dilts

Okay.

Tom Ferguson

not we're on yes, So without the XX% getting margins.

Noelle Dilts

a on half kind know the ongoing, given strong year? work. some thoughts November pretty back guess you good just I Solutions think the thoughts quarter. then, ownership. And of continue? about Could has transactions you quarter the estimate directionally want Historically, should turnaround Okay. some contributions give Thanks. us of how given the we to few you just but continuing you don't your Infrastructure Are backlog there been I mentioned seeing fall directional, that pretty just looks in Obviously, given

David Nark

Sure. we're and course We XX% of left still owners.

electrical, businesses really pretty them for usually The [First] good. strong was strong. have help a that turnaround and The build our left activity, bodes and well. season was in strong. which were well in Switchgear backlog we Good their some general. international backlog we September fully. – activity, yes, [ph] performing the do numbers was with battery results energy was storage So, activity

ownership, I – are of new some great. the is, [indiscernible] the folks got course, just issue, think you

and So, adjust, a think gets the as also we're natural the which we acclimated so CEO have TSA, we've really as with, and in in way. transition I set a changeover they the deal of good all and kind up service alluding to new comes agreements to

for it's So, think We cost. I'm profit think center it's just sure a they a us.

we'll to and just this are all that quarter, our And as deal months be because we meeting, are just that couple over and board But get these prior get as from backlog a up outlook. great quarter about, on the handle perspective, and operating talked a a had nice cautious these – first I with have things probably want is they we're that dramatic second for year, and all quarter. the better transitionary. an – second So, pure we fourth third set a quarter, of very first improvement into we

Noelle Dilts

Okay. Thank you.

Operator

next comes go Rodgers Westwood. ahead. with Trip Please from question The

Trip Rodgers

disconnect mean, you've And [indiscernible] get obvious, between just it of worked I I we wait and a some on do better with earnings producing of there the year is you your new to – results. those of way Hi, mean, can joint the we the for question, mean the think guidance to your around some congratulations providing be? guidance what to thanks the for I the of those just, you're time. on and quite before I need deal till of results. end looking the the results is guess this uncertainty market we sense a I here mean, to of I your a how comes will the state reaction, a but taking understand for And last my I lot get communication why your question lack is wanted better guidance that. there generate? and answer what at venture,

Tom Ferguson

that's Yes, a better. miss I and it look and One needed that good really in point what going we communicated have I discontinued side. hindsight, think on you was bring ops at and the think to a up to about mean we much our as

we've think some do I to work. got analytic

make] that. at this purchase for The price on yes, work including I say, had is, I transactions, county excuse quarter, been a on We Precoat, got very we've end, been some to hate team on working accounting and and have that's and the but accounting a massive [like an adjustments small AIS had transitioning we've working – [ph] closure it the of a relatively we've the two financial which, obviously over weekend.

that. but work we of the love as our some so, I concurrence our there I to can, out will put analytics as out but to we market EBITDA outlook given and as sales that doing anything I got would we've we to balance be also just or to EBITDA an and the get issue get going put lack to QX, at get don't So, do guidance least off an and think want want that's and there board's particularly comfortable so our to reaction on QX soon don't can [indiscernible], and we it got and as outlook to for soon of we've

are comfortable with The the So meeting the to getting on. analytics just Avail our those the board getting work and having and are the talking need the things done moving partners Solutions outlook. and Fernweh first at pieces we new around Infrastructure about things

that So, those are have. pieces the we moving

Trip Rodgers

Thanks. Okay.

Operator

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

Tom Ferguson

being very much. All right. the communicating the do thank you you to do look very we well Thank communicate. year, Well, that's as next forward results, We the outlook much time call. QX the our for as for on if

Operator

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

disconnect. now You may

AZZ (AZZ) 11 Oct 222023 Q2 Earnings call transcript