AZZ - Earnings call 3 2024

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Operator

Good morning, and welcome to the AZZ Inc., Third Quarter 2024 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Sandy Martin of Three Part Advisors. Please go ahead.

Sandra Martin

operator. you, Thank thank AZZ's and quarter, joining today us ended Good results you for review financial XX, third the to November morning, XXXX. for fiscal which XXXX

today which Please Officer; and the we call, Nark, Chief for call be Joining and President Marketing, President will note call David at www.azz.com/investor- webcast Tom today's Investor today's Schlom, Financial Philip open Relations. Senior and After the the found Chief live Executive are can of Officer; questions. Communications Vice for Ferguson, remarks, prepared events.

today remind Private Before the statements include I Act safe want we under Litigation Securities begin, everyone to that made XXXX. the our discussion of will harbor Reform of provisions forward-looking

Except the involve with for Securities XX-K statements including the to results, Therefore, on containing fiscal differ their forward-looking placed future should of not and from are filed undue Exchange expectations. comments the risks by upon actual These statements, performance. AZZ outside uncertain reliance Form these results not for Forward-looking by control. and statements nature, our may materially some are could in documents time Actual guarantees be are detailed Commission, company's of uncertainties, time which annual them. report and of from year. the

from the financial Ferguson. today's financial like to GAAP measures. be non-GAAP addition, to to In to would press call now call measures measures a will to over Tom release. non-GAAP today's substitute for earnings We reconciliation measures. should and the financial Non-GAAP GAAP discuss turn included Tom? considered I you not a in supplement refer

Thomas Ferguson

AZZ's full third and year covering results. our review provide coil financial galvanizing thank and line passing and results the and outlook by our North will highlights I customers you for the conclude coated on our the sheet. is Today, over before with quarter to questions. in our AZZ's scale and morning, efforts balance and I'll leveraging our Good end leader fiscal sustainability joining better for Sandy. discuss Dave by presentation AZZ expertise. Philip and us opening to to solutions, commentary you, covering it will markets, Then for industry detailed before market serve company start excellence to America's footprint quarter XXXX strategic Thank our

Our this been our effective these that leadership report and and performed ongoing am our the plan to exceptionally company, a strength to to excellence. provide has strong ability well are the teams, Collectively, valuable, segments have our attributes contribute focused strategic differentiated third the on execution to year, through These talented customers. and pleased of results to testament quarter. solutions operational commitment to I services

quarter to led quarter for sacrificing per of of EBITDA our third Coatings XX% the by profitability we last to million, pleased pricing to quarter, by We X.X% million our effectively the $X.XX secure earnings year. and value report sales for organically results. adjusted am continue We share million, versus without adjusted $XX I for and grew the from during prior quarter sales $XXX up $XXX to to discipline. Turning quarter that and strong for X.X% share to $XX versus were the continued up increased in with market XX% cash Metals a operations This ago. quarter Total improved to Metal million. year grew quarter. Momentum year's the from Precoat million, X.X%. up grew sales $XXX also

this best-in-class dedication ongoing and sales, Precoat and flow Coatings service each were profitability XX.X% As the a segment. customer both the result, Metal XX% led and our to improved significant increased In to for for within during quarter, operations for and EBITDA stated targeted cash Metals enhancements margins delivering ranges short, quarter.

which technologies, sets continue We operational to from us enhance the competition. apart and develop our

real-time Our digital XX and facilities, tracking system. is platforms focused in Precoatâ€™s facilities provides provides to technology on inventory company's along service. ERP to XX highly throughout project to customers' outstanding tracks AZZ's Similarly, order real-time proprietary service, as These teams differentiated our It or Coatings our system, advanced connects galvanizing provider galvanizing access with scheduling. the providing visibility allow DGS, AZZ America. position and North to Metal that customers superior customer close a excellent

deploy As capital moment, balance we are the continue to Philip plan discuss strengthening more and carefully. in a will sheet to

the reduce facility going We self-fund debt, ratio to term and have Missouri, our sale which a loan Precoat decision with to improve interest reinforce our to and Washington, revolver Metals in re-price continues leverage worked lower of leaseback. greenfield diligently to our costs, instead

We are believe that creation our by solutions. strategy, and through value we highly accelerate creation We sustainability. AZZ's focused relentlessly in investing executing and value our sustainable will continually our ensure on people long-term

been transformation has catalyst run flow. months strategic Our the XX over rate significantly cash a last for EBITDA and generating higher

business our over Philip. value inorganic and growth, we differentiated it shareholders. both leveraging to to as through highly our We for customers long-term create value that, proposition will to turn I'll organic scale our continue With

Philip Schlom

you Thanks, numbers results continuing operations. our are third participating Tom. from thank our today and for in referenced Good morning, All quarter update.

sales last Tom third of up sales increased X.X%. Coating on ago and As X.X% Precoat XXXX of from we mentioned, sales third million year reported X.X% sales year $XXX.X quarter. million to fiscal in by compared year's and Metal $XXX.X higher quarter a Total

assets amortization, reclassification accounting million to XX.X% included legal of Third related gross improvement in to and margin quarter. point Metal general sales $XX.X a $X.X million zinc quarter prior intangible was outstanding compared Selling, same long Coatings XXX-basis a a dispute were accrual $XX.X the gross $XX.X expenses partially was the commercial third year and customer. profit labor costs. overhead sales million administrative lower corporate result in in costs The which quarter, a XX.X% with to increased offset by an or million of of of and or

$XX.X August. third of X.X% fiscal the sales adjusted quarter quarter million $XX.X for third would sales X.X% have repeated was million, Excluding $XX.X $XX the the compared our which will moment, effect mostly loan debt accrual, or of million the discuss XXXX SG&A a in quarter reflects the year. to million year, We been quarter favorably quarter I expense or third reported Income prior driven AVAIL with the or the XX.X% million in Interest effective an legal The In of of term third tax year. our XX.X% million to recent repricing year. tax outstanding point or prior EBITDA expenses favorable $XX.X the EBITDA related $X.X the quarter. our prior compared of in that rate the were the to to of was of XX.X% adjusted was XX.X% and This year in the was in prior both expense improvement venture by due efficiencies current for of the by compared recognizing in impacted in operational tax million lower differences repricing $XX sales third of last of improved in sales mix not to segments. joint primarily revolver. quarter and margin basis of XXX-basis compared

expect in XX.X%. was in longer-term expected million net third $XX.X with effective for We Adjusted the up XX% $XX.X year, tax to remain quarter the XX%, be around rate the income fiscal range. the prior to tax compared rate XXXX million full to year

in above preferred As prior the $X.XX the earnings the the quarter, reported diluted are Tom diluted XX.X% year million adjusted shares shares are mentioned, in quarter. the shares, outstanding added the preferred for for the to dilutive $X.XX for weighted X full adjusted convertible current average of per Since back Under dividends earnings convertible shares. a earnings of EPS. our XX.X the same share the of in was months and the approximately preferred computation company's assumption are conversion quarter

financial our to balance sheet. Turning position and

maintenance expenditures operations $XXX.X of months strong $XXX flow million and double cash and performance working from EBITDA near The including a For and on is the gross and we completion, we was are typical with to greenfield and safety, construction beginning to on scheduled than in about installed year equipment cash on more from new Free is from $XX.X spending receive from the of construction expenditures under computed focus to reduction. our million, Missouri. months plant the sales be capital million. of million improved as upcoming higher in X as and we dollars related flow coil first for $XX free months. year, first Capital building less well ago X benefited and margins, operations segment based Washington, cash improved generated the were cash coating capital the

provide we Our remains progress updates target, on construction to quarter. each continue will progress and

of fiscal new heavier year next for install continue facility forecast year fiscal XXXX XXXX XXXX I'm for approximately and we operational expenditure Our as will million $XX to capital be ready is plant full first including $XXX $XXX sorry, through the are quarter expected later spending million-- and capital testing full projection, our our receive, million, year expenditure year. the

further Through previously targeted by million. X quarters, of within reduced debt debt we debt $XX our During million down $XX estimate to the our $XXX third reduction quarter, $XX communicated million. the we million of paid first

X.Xx and reduce ratio our or to to noted, of management to performance leverage achieving Tom net operational lower. target As us strong capital working focused debt our to allowed closer X.Xx

rate of a loan $XXX fixed month. to to most credit B the basis SOFR repricing XXX also adjustment rate addition XXX we successfully our senior and last basis SOFR XX our also all of second fiscal effective leveraged we base spend from across interest quarter secured plus year, The our remove term during pricing revolver able repricing In recent current our plus were reduced our tiers the existing to of points, million margin points. repriced

costs. to going costs credit balance a the to facility of interest plan benefit of We interest facility the loan see our revolving between minimize term and will and maturity forward lower borrowings through

our XXXX. We and and have in to our positive ability leverage. no flows plans debt support debt while maturities continuing sheet of to remain balance our cash strengthen and until generate reduce confident growth We

debt, X-year reminder, we are half a September variable arrangement the a in rate of roughly and XXXX. fixes swap arrangement that expires in As

we the During A or months our shareholders as priority. no paid dividends the holders. $XX.X year-to-date year, quarter reduction dividends share the We repurchases during common preferred million made our $XX.X of top of Series cash and million paid of to to first X be to fiscal continues also debt

current I XXXX. year primarily subsidiaries the increased compared to AVAIL for see $X.X reserve not near-term to an from turning JV, our on provide the quarter due X over liquidated quarter equity to the month into prior and compared our a third earnings only to large want they is during equity million of earnings quarter. earnings in a one, in unconsolidated The do to year year $X.X for matters. earnings to higher of release Before to Number damages it of increase update fourth in expect the David, had months million and high project or levels and fiscal quarter. X quarter a prior the on current We X this

strategic the S-X our to Lastly, a out that morning, filed is a housekeeping future sessions Commission this universal for with shelf business determined and earlier the universal planning funding company. our prudent over this of size. like a we good turn Form that, year, registration self-registration the Exchange as to and a Securities Dave. annual I'd registration options earlier call both that company will provide to Coming statement the With

David Nark

you, Thank Good everyone. morning, Philip.

on nationwide whom our utilize in over our expansion footprint throughout America. market-leading both organic plan are leverage network to growing of trusted covered, customers. many combination is inorganic positions a segments. growth Tom As blue-chip includes customers, to We AZZ's X,XXX and strategic partnership built base plan large of of long-standing business within a our North

recently their Additionally, sometimes than this services. team's strategy, is customer technologies, highway bridge refers important and superior value paint distribution and Metal Precoat expertise, projects. pricing. sales our other and convert in selling, which intentional our technical highly as ability continue inside to trends, coupled service companies improve solutions captive a needs. with AZZ cut as benefited attract costs well growth conversion as transmission growth better quarter and to performance outsource retain our Metals Secular deep the the and to volumes deverticalization ] has companies. decide this sales aluminum mix for [ for on based to coding to we from as market, are lines growing to and strength or from including role continued continue area customer-centric Precoat Tom Coatings customers conversions specialized and trended plastics

the Microchip infrastructure in to We of transmission be and spending, seeing continued distribution expect work are and continue strong to coming plants. data on including centers evidence months and

our Acts, and which to in We results see long-term positively continue infrastructure tailwinds AIIJA with we CHIPS to to projects impact secular expect calendar associated tied the XXXX.

projects. Although we the U.S. renewables these weakened, across strength markets end solar pockets have for seeing regional recently and are of

although softer returning. in residential Appliances perform strength agriculture. HVAC well to business construction markets demand construction warehousing, Finally, transportation, with this year and and has manufacturing continues seen are and Nonresidential our end in

expectations optimistic aluminum seeing transition are the the also as throughout And from the container aluminum. in positive mentioned, for by We manufacturing and North and I long-term to we to movement steel gradual re-shoring plastics the are America. pre-painted category

teams on that, turn Our share Metal make customers. Metals as it to progress Tom. and well to Precoat projects like I'd hot to over continue as back key coil pre-painted and Coatings gains with dip market With galvanizing

Thomas Ferguson

Thanks, Dave.

live employees, to people companies sustainability we is XXXX, partners most on these One of who aspects based work. part on of X,XXX to were ESG right responsible efforts. for recognized communities rewarding the our the and with AZZ opportunity strive of and where do list recently the a talented incredibly most weeks company-wide We America's being our customers, work and over thing

this longevity of are and provide was appearance are AZZ enhance metal to solutions and everyday sustainable life. products the We second unmatched buildings grateful the business that coating among essential our list that that companies. infrastructure this named segments Collectively, is of year prestigious

services synonymous solutions Our and are sustainability. with

that have in outlook availability the our to both site critical project Regarding year ago. a in February, business fabrication Dave improved our continue and in markets quarter, fourth turnover backlogs employee Labor discussed. from just ending customers

shifts, to whether are execute growth paint our adjust our initiatives micro or We demand or zinc initiatives capital well and other to continue when on and to due macroeconomic impacts. of inventories working positioned now

the be the to this installed mentioned, completed our begun We about Missouri substantially construction opportunity the in Philip aluminum coating remain facility arrive growth of in As progressing. creates. building The equipment greenfield coil excited is facility. investment is has and and

fourth stronger year. a compared anticipate to QX continue to last We quarter

ability demonstrated Our drive Metal Coatings service their and efficiencies teams sustain and have levels. to with quality and margins Precoat operational superior

million our up narrowing to capital this guidance be And fiscal Washington, and $X.XX $XXX are $XXX of related guidance somewhat to EBITDA adjusted guidance We EPS Missouri and which billion of million, XXXX plant. $X.XX includes $XXX $X.XX. million sales for to $X.XX year are revising estimated expenditures to fiscal about of the million, to XXXX greenfield our adjusted million $XX

revolving fiscal we joint offset with our reprice from ran for in interest able significantly New Although interest that We business to higher incremental provide equity our have X. minority interest groups. earnings down and debt in the weeks our a rates increased our than begins March AVAIL and and the impact we Year and planned, pay venture this focused XXXX guidance year operating performance to few expense from year debt, were plan EPS term the and

every shared talented As our profitability want highly team always, I thank who AZZ's growth, hard-working execute operational to vision and improvements and of day.

teamwork respect, people Our can really culture successes. mission accountability, acronym our where behavioral trust in an integrity, for are AZZ's create to shape core is a values future grow continue is sustainability. and Traits that matter. traits to value and These

up for Now the call open operator, questions. please

Operator

[Operator Instructions].

from first comes Riley question Securities. Lucas B. of Our Pipes

Lucas Pipes

first the My on is question leverage.

Is prior a of within to target Or do think stands leverage outlined lower still stone's that desire leverage You're what throw than there you your today? beyond previously of had you reduce Xx. Xx?

Thomas Ferguson

Xx long-term I target. to think is X.Xx our

talk the and had debt through great other hoped down we've had just even to due to focused able than on get going, things to year. more week meeting been pay performance going a initiatives the stay capital We're CapEx our where Board about through have that focusing get this of quarter working to teams, little year capital do the of for we some our first on bit. approved, strategies our that. budgets quarter up So we've coming we'll next approved and like quicker deployment We and or fourth next of a

So is do. right think pay got year. focus can We our continuing debt this now, some we down still that we've to

trying artificially, any not to but now. pipeline. say, X.XXx have towards not the X.Xx, really acquisitions in do that We we're I'd So right drive

opportunities So next it as investments I'd first. delay have moment. at we But Board need that for until some like with we don't year, at as look our cash we that discuss a the to

Lucas Pipes

up Is the ask the up? million full at fiscal of fiscal to on conservative fourth low a 'XX versus I for flat year-to-date to how then to sales. here? high would the frame you, quarter, look the when sales at fourth range. come And like year take about the you target, at But lower your want side, roughly look I guidance end What for would performance really end? $XXX increased low XXX that that it end in end, the Or of the

Thomas Ferguson

that end. feel chasing either than track much why very is much which So We're not is high guess the it's business price I sensitivity good. range. end We're better going aggressively that. a not there. low think probably out to There right the now. so I is some on I tracking We're over to

the powder us, So and business price from the our folks keep below after. we're and to good want go on customers focus our that's of to trying let to attractive keep that chasing levels dry business care we taking

discipline, we definitely to. why But range. maintaining any So to getting the have is we're below yes, would we're shot what say at that going XXX which set we is

Lucas Pipes

growth opportunities will on or and then, construction your those and markets that have course, a side few in anticipate infrastructure? inorganic next trends your a heading chips big And you a I then it be think outlined for weeks Science prepared to the that But you in trending example, your year-on-year? when comes of of guidance appreciate Act, slowdown And year, remarks. into follow-up. seeing quick you're you or higher key issue Or still organic fiscal in do terms the would so. you

flavor to bit a fiscal potentially anticipate bit what get a little to next as trying more tracking of where little just you might in positive year? versus softness would your be a So

David Nark

Dave. Lucas, this is

we to you'll see think signs. there, I continue see positive what

Our quite of utility some time. Metal a steel projects, highway Coatings business for in galvanizing solar and plants and bridge lot particular and T&D for new is chip some

we So to continue. think that's going

We result sides also those and the our on energy on is of infrastructure that transition critical to for house, the think spending demand solutions government focused impact in particularly both multiyear initiatives. going of

So the macro. good about pretty we feel

Thomas Ferguson

as initiatives organic well is add think I'd has the and probably I both construction Well, that Precoat bottomed. in as think on growth in residential side, their I

to okay. construction hopefully, So Commercial is starts up. looking trend that

feel of I about And really, into so is, the pretty Metals, for up, come And it, good really volumes to we pretty particularly pick get year. through early once part as start part the we good quickly flow the as some as itself. Precoat bottom, nice get those on off -- we outperforming which improvement have should we're XX% said we're to speak, time, happens the next we XX% to where volume, market on But down it to year. be, the so market which tracking depending to still, because is last we're we

not have that. I built We say -- shouldn't well,

course, good out. we our pricing want aggressive guidance have to and value our discipline. these about next discussions of all how continue year and not And be are that put to that maintain We on be maintain how focus we

just fuzzier first I outlook, and fiscal good the So I as then of little feel about 'XX. it pretty year into part the look gets a the

Operator

question & next Company. comes from of John The Franzreb Sidoti

John Franzreb

XXXX? guidance actually for fiscal to still curious started in JV guidance. excluding you Congratulations that whether the to I'm forward Are good the with like on you've include quarter. I'd very outlook? start a income

Philip Schlom

will On in as guidance. forward, XXXX guidance, that go we our the we include

but fourth the included results the QX, no the For guidance. through quarter we've quarters, X realized

Thomas Ferguson

month calendar we're a of arrears, John, is and issue our year. No, on part X they're in

better first is coming have meeting we'll for year board where up get of them too, soon, how a feel So the part looking. calendar we fairly actually their a with

John Franzreb

us just the No, last especially look I'm and your ahead? update outlook, premiums that variable supplies being year a XXXX are assume done. for the with I zinc in does the changes renegotiations with curious, curious. And year? how negotiations such the now for Can any pricing with you

Thomas Ferguson

have Yes, the premiums come down.

negotiations and kick we've So the the completed yes, off through year those. gone

secure, we yard feel to some able we feel good. the adjust we've why more which One, is supply So on been inventories. of is

that's the $X.XX. premiums So is thing. one good down, Two think, are about I

kettles, course, to flow to that's as that the So upside of our rest LME. through and is tied starts

John Franzreb

on this Or available is some quarter. the regarding where do low-hanging pricing curve? realized gone? stand pricing And last be Precoat, had still had quarter, the realization there Is to You fruit we there? you some

Thomas Ferguson

Yes.

focus that I on think some when customers of of pursue pricing, of that and margin part long-standing both of two, terms and attractive terms on in it value is we're opportunities the generated to about we talking be tend the we in those projects. mix

at say compared I'd mid-innings on to where So we're Metal Coatings side. we're the the in probably

feel some we're topic room. their and business highly So that there's really, discussions on really on still Coating focused now. like they're good team, having growing we profitably,

John Franzreb

one question, into get queue. back I'll And last

Regarding should early start timing â€˜XX the facility, we start-up about of everything in that booked we the 'XX? revenue immaterial? will revenue Or the thinking anticipate be is that Washington as or costs recognition and

Philip Schlom

revenue that's it this booked be At will immaterial. point,

We have will we out And the schedule FDA to have continue the plant get then finish there. testing. that on we laid to

So as but be may testing point. finish 'XX, some that, the the we immaterial facility. associated calendar we'll with revenues There this in at low it's start construction

John Franzreb

again. Congratulations

Operator

come Adam & from Co. And Davis question will Instructions]. next of Thompson Thalhimer [Operator our

Adam Thalhimer

on we bit a one income of in in start at every like the AVAIL million should Quick point where maybe JV. baking just Are quarter, $X the the something range? little we

Thomas Ferguson

as performing able They're books. and we're we'll they've into hopefully, some stabilized through think include full then all Yes, They out XXXX specific feel guidance I from to to we their more some completed then as both that it. out went be good guidance. a in our completed give September the expect year. what the well. 'XX. point. their and real around qualitatively we at Board give color transaction fiscal They're We and put quantitatively I meeting. about And that AVAIL. and put It's has Board but meeting and will And color, got we've coincidentally, accounting opening

in looking quarter. able to And you of I'll to each so be that have some am include I forward

Adam Thalhimer

And I then was curious and QX, referenced if continues mix Philip, both a that in into just you think segments, was that in I favorable what QX.

Philip Schlom

is When really issues, continue production will to you at that And servicing our the had we last our the think improving look a quarter year, different into we supply issues, lot mix fourth of fourth chain quarter with. the into it The I we're and related last first products customers spent quarter. QX year, that. the

think the we've over you'll in I see the QX change that improved efficiencies operational QX really that of these businesses.

Adam Thalhimer

Lastly, additional are debt down in you pay anticipating guys QX?

Thomas Ferguson

We should have in down some QX. pay additional debt

Although a be will there littleâ€”

Adam Thalhimer

I flow. slower for itâ€™s But quarter think a seasonally cash

Adam Thalhimer

But slower I seasonally for quarter think a flow. itâ€™s cash

Philip Schlom

the it's arriving. through seasonally QX in reduction in X million then [indiscernible] we Yes, have and debt slower, well done QX funding were of the got to and first the in are really we further and that on reduce hopeful quarters, and focused more with QX. But we've that project equipment $XX trying

Operator

Capital. of comes Braatz question Jon City Kansas next The from

Jonathan Braatz

price, you you my I the one if any of the in selling XX% interest would is your Tom, right your interest venture? questions opportunity guess, have had at and in

Thomas Ferguson

I'd We it Board. I consider tactically for investment we But some our as strategically it's We to to transaction and an the and they've yes, both But and in Yes, these we to they and investors, that, business. the absolutely. discussions with their people we that team. an opportunity I grow like AVAIL the yes, -- first, like if get that's sold it have over But date there. do improve think yes, investment as hopefully -- got the continue it's us. mind say

Jon Braatz

movement that price sensitivity last out that has was there to And maybe thoughts worse, Any it getting you're also, the that? Tom, mentioned seeing Coating on there. business, Relative in price quarter, Metal sensitivity sounds any where better? been you that getting some

Thomas Ferguson

think volume I since as come the not there's I that think and and changed get is into that because our really as price winter is projects the hit we construction we're months we hasn't slows normal construction worsened and does lot out mix necessarily stuff a that's our of activity. don't of we by And that comments. the with customers. call which it to pieces shifts what's mix move do of want months we of and just the when have the the Quite a sure alienate last more not I profitable it just always one lower business down -- infrastructure in more that frankly, boil But of off way. to things priced I'm slowed down move winter sense what hasn't are sensitivity. that. of off that bad slower the feeling and we fall little to much say some happens and business, down, see price We so let's

have and following I price mix. and to the price say we're our holding points carefully our So multipliers very then

the the of and We holidays. volumes, have worsening any through coming seen seen haven't not we signs, really any of worsening just but we're

nice probably hit And a Our as New they're off for them. rechange all days hopefully, was rejuvenated folks the few we actually which Year. had

Operator

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

Thomas Ferguson

look for a you few you results your Thank Thank XXXX and you, fiscal really all year operator. in quarter issuing guidance. on fourth our forward I time full to updating and months today.

your So time. you for thank

Operator

you The and concluded. attending has now conference may today's disconnect. for now Thank presentation, you

AZZ (AZZ) 10 Jan 242024 Q3 Earnings call transcript