8-K
AZZ INC (AZZ)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
April 25, 2023
Date of Report (Date of earliest event reported)
AZZ Inc.
(Exact name of Registrant as specified in its charter)
| Texas | 1-12777 | 75-0948250 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification No.) |
One Museum Place, Suite 500
3100 West 7th Street
Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
(817) 810-0095
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock | AZZ | New York Stock Exchange |
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On April 25, 2023, AZZ Inc. ("AZZ") issued a press release reporting AZZ’s fourth quarter financial results for the period ended February 28, 2023. A copy of this press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The information in this Item 2.02 (including Exhibit 99.1) is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. Nor shall the information in this Current Report be incorporated by reference in any other filing with the U.S. Securities and Exchange Commission made by AZZ, whether made before or after the date hereof, unless specifically identified therein as being incorporated therein by reference in such filing.
Item 7.01 Regulation FD Disclosure.
On April 25, 2023, AZZ also posted an investor presentation to its website at https://www.azz.com/investor-relations. A copy of the investor presentation is attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information in this Item 7.01 (including Exhibit 99.2) is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. Nor shall the information in this Current Report be incorporated by reference in any other filing with the U.S. Securities and Exchange Commission made by AZZ, whether made before or after the date hereof, unless specifically identified there as being incorporated therein by reference in such filing.
Item 9.01 Financial Statements and Exhibits.
The following exhibits are filed as part of this report.
| Exhibit | Description |
|---|---|
| 99.1 | Press release, reporting financial results for the fourth quarter of fiscal yearexhibit991fy23q4earningsre.htm2023,endedexhibit991fy23q4earningsre.htmFebruary 28, 2023. |
| 99.2 | Investor Presentation, datedearningsdeckfy2023q4andf.htmApril 25, 2023. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AZZ Inc. | |||
|---|---|---|---|
| Date: | April 25, 2023 | By: | /s/ Philip A. Schlom |
| Philip A. Schlom <br>Chief Financial Officer |
Document
AZZ Inc. Reports Fourth Quarter and Fiscal Year 2023 Full Year Results
Achieves Record Full Year Results from Continuing Operations:
Sales $1.32 billion; Adjusted EPS $3.48(1), Adjusted EBITDA $267 million or 20.2% of Sales
Reaffirming Fiscal 2024 Full Year Guidance
April 25, 2023 - FORT WORTH, TX - AZZ Inc. (NYSE: AZZ), the leading independent provider of hot-dip galvanizing and coil coating solutions, today issued its audited consolidated financial statements contained in the Company's Fiscal Year 2023 Annual Report on Form 10-K for the year ended February 28, 2023.
Fiscal Year 2023 Results from Continuing Operations:
◦Sales of $1,323.6 million, up 20.5% on a comparable basis
◦Strong segment performance with Metal Coatings sales up 21.2% and Precoat Metals up 19.9% on a comparable basis
◦GAAP Diluted EPS of $2.33; Adjusted EPS of $3.48(1)
◦Adjusted EBITDA $267.4 million or 20.2% of sales
◦Adjusted EBITDA margin for Metal Coatings 29.7% and Precoat Metals 17.4%, which included seasonally weak quarters for Precoat
(1) Adjusted diluted EPS from continuing operations includes $2.6 million of equity in earnings from the AIS joint venture.
Fourth Quarter 2023 Results from Continuing Operations:
◦Sales of $336.5 million, up 16.0% on a comparable basis
◦Metal Coatings sales up 14.8% and Precoat Metals, on a comparable basis, up 17.0%
◦GAAP Diluted EPS of $0.15, and Adjusted EPS of $0.30 after giving effect to higher interest expense and an effective tax rate of 34.8%
◦Adjusted EBITDA $57.2 million or 17.0% of sales
◦Segment Adjusted EBITDA margins: Metal Coatings 27.0%; Precoat Metals 13.8%
Tom Ferguson, President and Chief Executive Officer of AZZ, commented, "Fiscal year 2023 was a transformational year and represents AZZ's 36th consecutive year of profitability from continuing operations. We are pleased with our sales growth of 20.5%, including strong results at Metal Coatings and results in line with expectations for Precoat. For the year, our Metal Coatings segment delivered record sales of $637.0 million, and 29.7% adjusted EBITDA margin, while Precoat Metals delivered sales results of $686.7 million and 17.4% adjusted EBITDA margin during the 42 weeks as part of AZZ. We are improving production efficiencies and have implemented pricing actions to offset inflation at Precoat Metals and expect to show progress throughout fiscal 2024."
"I want to thank our entire AZZ team for tremendous performance in fiscal 2023, a truly transformational year in our company history. I am confident that 2024 will result in value creation as we capitalize on strong demand within construction, utility, container and renewables end markets from our leading market positions," concluded Ferguson.
Segment Performance
Full Year 2023 Metal Coatings
Strong sales of $637.0 million, up 21.2% from prior year. Improved sales were driven by value pricing initiatives, the impact of fully integrated prior acquisitions, and an increase in volume for hot-dip galvanizing driven by continued strength within the renewables, utility, OEM, and non-residential construction markets.
Adjusted EBITDA of $188.9 million was up 18.7% versus the prior year. Adjusted EBITDA margin of 29.7% was within our previously stated range of 25%-30%, and declined 60 basis points due to higher inflation, partially offset by increased price.
Full Year 2023 Precoat Metals
Sales were $686.7 million, primarily driven by value pricing initiatives and stable volumes from construction and container markets.
Adjusted EBITDA of $119.7 million or 17.4% of sales, in line with expectations. As previously stated, higher than normal customer inventories and inflationary pressures resulted in productivity, efficiency, and cost headwinds. We have specific plans in place to address production inefficiencies and are encouraged by the results to date.
Fourth Quarter 2023 Metal Coatings
Sales increased 14.8% to $149.4 million and adjusted EBITDA increased 1.3% to $40.3 million versus the comparable quarter in fiscal 2022. Sales were primarily driven by increased volume and value-pricing initiatives. Segment EBITDA margin decreased to 27.0% of sales, or 360 basis points lower than the comparable prior year fourth quarter EBITDA margin. The decline in EBITDA margin was a result of higher zinc costs.
Fourth Quarter 2023 Precoat Metals
Sales increased to $187.1 million and adjusted EBITDA of $25.9 million or 13.8% of sales, on seasonally lower volume and inflationary pressures.
Balance Sheet, Liquidity and Capital Allocation
The Company generated fiscal 2023 operating cash flow of $91.4 million through solid earnings and prudent management of working capital. At the end of the fourth quarter, net leverage was 3.5x LTM EBITDA, which improved approximately 0.7x in the nine months since closing the Precoat Metals acquisition. Consistent with the capital allocation strategy, the Company paid down debt of $237.5 million and returned cash to shareholders through cash dividend payments totaling $22.7 million. Capital expenditures were $57.1 million during the year. Fiscal 2024 capital expenditures are expected to be approximately $80 million, which includes cash outlays planned this year for AZZ's new coil coating plant scheduled to be operational by summer fiscal year 2025.
Financial Outlook - Reaffirming Full Fiscal Year Guidance(2)
Management is reaffirming the fiscal year 2024 guidance with annual sales guidance range of $1.40 billion to $1.55 billion, adjusted EBITDA range of $300-$325 million and adjusted earnings per diluted share of $3.85-$4.35. Full year guidance reflects strong performance within our segments, a seasonally higher first quarter, higher interest expense, dividends on our Preferred Stock, and the impact of an annualized effective tax rate of approximately 24%.
This reflects our best estimates given current market conditions, existing execution on our current backlog, and does not include the impact of future acquisitions or divestitures, related expenditures, or any federal regulatory changes that may emerge.
(2) Fiscal Year 2024 guidance excludes equity in earnings on the investment in the AIS JV.
Conference Call Details
AZZ Inc. will conduct a live conference call with Tom Ferguson, Chief Executive Officer, and Philip Schlom, Chief Financial Officer to discuss financial results for the fourth quarter and fiscal year 2023 tomorrow, April 26, 2023, at 11:00 A.M. ET. Interested parties can access the conference call by dialing (844) 855-9499 or (412) 317-5497
(international). A webcast of the call will be available on the Company’s Investor Relations page at http://www.azz.com/investor-relations.
A replay of the call will be available at (877) 344-7529 or (412) 317-0088 (international), replay access code: 8060817, through May 3, 2023, or by visiting http://www.azz.com/investor-relations for the next 90 days.
There will be a slide presentation accompanying today’s event. The Company’s slide presentation for the call will be available on the Investor Relations page at http://www.azz.com/investor-relations.
About AZZ Inc.
AZZ Inc. is the leading independent provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets. Collectively, our business segments provide sustainable, unmatched metal coating solutions that enhance the longevity and appearance of buildings, products and infrastructure that are essential to everyday life.
Safe Harbor Statement
Certain statements herein about our expectations of future events or results constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as “may,” ”could,” “should,” “expects,” “plans,” “will,” “might,” “would,” “projects,” “currently,” “intends,” “outlook,” “forecasts,” “targets,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Such forward-looking statements are based on currently available competitive, financial, and economic data and management’s views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Forward-looking statements speak only as of the date they are made and are subject to risks that could cause them to differ materially from actual results. Certain factors could affect the outcome of the matters described herein. This press release may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our products and services, including demand by the construction markets, industrial markets, and the metal coatings markets. We could also experience additional increases in labor costs, components and raw materials, including zinc and natural gas, which are used in our hot-dip galvanizing process; supply-chain vendor delays; customer requested delays of our products or services; delays in additional acquisition opportunities; currency exchange rates; an increase in our debt leverage and/or interest rates on our debt, of which a significant portion is tied to variable interest rates; availability of experienced management and employees to implement AZZ’s growth strategy; a downturn in market conditions in any industry relating to the products we inventory or sell or the services that we provide; economic volatility, including a prolonged economic downturn or macroeconomic conditions such as inflation or changes in the political stability in the United States and other foreign markets in which we operate; acts of war or terrorism inside the United States or abroad; and other changes in economic and financial conditions. AZZ has provided additional information regarding risks associated with the business, in Part I, Item 1A. Risk Factors, in AZZ’s Annual Report on Form 10-K for the fiscal year ended February 28, 2023, and other filings with the Securities and Exchange Commission (“SEC”), available for viewing on AZZ’s website at www.azz.com and on the SEC’s website at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. These statements are based on information as of the date hereof and AZZ assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
Company Contact:
David Nark, Senior Vice President of Marketing, Communications and Investor Relations
AZZ Inc.
(817) 810-0095
www.azz.com
Investor Contact:
Sandy Martin / Phillip Kupper
Three Part Advisors
(214) 616-2207
www.threepa.com
---Financial tables on the following page---
| AZZ Inc. | ||||||||
|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Statements of Income | ||||||||
| (dollars in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Three Months ended February 28, | Year Ended February 28, | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| Sales | $ | 336,504 | $ | 130,140 | $ | 1,323,649 | $ | 525,598 |
| Cost of sales | 275,251 | 93,873 | 1,027,706 | 379,445 | ||||
| Gross margin | 61,253 | 36,267 | 295,943 | 146,153 | ||||
| Selling, general and administrative | 25,058 | 19,233 | 122,305 | 66,934 | ||||
| Operating income (loss) | 36,195 | 17,034 | 173,638 | 79,219 | ||||
| Interest expense | 27,061 | 1,345 | 88,800 | 6,363 | ||||
| Equity in (earnings) loss of unconsolidated subsidiaries | (1,591) | — | (2,597) | |||||
| Other (income) expense, net | (658) | (69) | (1,240) | (175) | ||||
| Income from continuing operations before income taxes | 11,383 | 15,758 | 88,675 | 73,031 | ||||
| Income tax expense (benefit) | 3,956 | 4,436 | 22,336 | 23,214 | ||||
| Net income from continuing operations | 7,427 | 11,322 | 66,339 | 49,817 | ||||
| Income (loss) from discontinued operations, net of tax | (4,356) | 10,301 | 12,770 | 34,205 | ||||
| Loss on disposal of discontinued operations, net of tax | (2,010) | — | (132,083) | — | ||||
| Net income (loss) from discontinued operations | (6,366) | 10,301 | (119,313) | 34,205 | ||||
| Net income (loss) | 1,061 | 21,623 | (52,974) | 84,022 | ||||
| Dividends on preferred stock | (3,600) | — | (8,240) | |||||
| Net income (loss) available to common shareholders | $ | (2,539) | $ | 21,623 | $ | (61,214) | $ | 84,022 |
| Basic earnings (loss) per share | ||||||||
| Earnings (loss) per common share from continuing operations | $ | 0.15 | $ | 0.46 | $ | 2.34 | $ | 2.00 |
| Earnings (loss) per common share from discontinued operations | $ | (0.26) | $ | 0.42 | $ | (4.81) | $ | 1.38 |
| Earnings (loss) per common share | $ | (0.10) | $ | 0.88 | $ | (2.47) | $ | 3.38 |
| Diluted earnings (loss) per share | ||||||||
| Earnings (loss) per common share from continuing operations | $ | 0.15 | $ | 0.45 | $ | 2.33 | $ | 1.99 |
| Earnings (loss) per common share from discontinued operations | $ | (0.25) | $ | 0.41 | $ | (4.78) | $ | 1.36 |
| Earnings (loss) per common share | $ | (0.10) | $ | 0.87 | $ | (2.45) | $ | 3.35 |
| Diluted weighted average shares outstanding | 25,013 | 24,918 | 24,978 | 25,077 | ||||
| AZZ Inc. | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Segment Reporting | ||||||||
| (dollars in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months ended February 28, | Year Ended February 28, | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| (In thousands) | (In thousands) | |||||||
| Sales: | ||||||||
| Metal Coatings | $ | 149,415 | $ | 130,140 | $ | 636,982 | $ | 525,598 |
| Precoat Metals | 187,089 | — | 686,667 | — | ||||
| Total sales | $ | 336,504 | $ | 130,140 | $ | 1,323,649 | $ | 525,598 |
| Adjusted EBITDA(1) | ||||||||
| Metal Coatings | $ | 40,311 | $ | 39,803 | $ | 188,909 | $ | 159,211 |
| Precoat Metals | 25,904 | — | 119,708 | — | ||||
| Total Segment Adjusted EBITDA | $ | 66,215 | $ | 39,803 | $ | 308,617 | $ | 159,211 |
| (1) See the Non-GAAP disclosure section below for a reconciliation between the various measures calculated in accordance with GAAP to the Adjusted Earnings Measures. | ||||||||
| AZZ Inc. | ||||||||
| --- | --- | --- | --- | --- | ||||
| Condensed Consolidated Balance Sheets | ||||||||
| (dollars in thousands) | ||||||||
| (unaudited) | ||||||||
| February 28, 2023 | February 28, 2022 | |||||||
| Assets: | ||||||||
| Current assets | $ | 417,416 | $ | 184,869 | ||||
| Property, plant and equipment, net | 498,503 | 193,358 | ||||||
| Other assets, net | 1,305,560 | 246,924 | ||||||
| Assets of discontinued operations | — | 507,876 | ||||||
| Total assets | $ | 2,221,479 | $ | 1,133,027 | ||||
| Liabilities and Shareholders’ Equity: | ||||||||
| Current liabilities | $ | 187,240 | $ | 62,248 | ||||
| Long-term debt, net | 1,058,120 | 226,484 | ||||||
| Other liabilities | 122,659 | 64,440 | ||||||
| Liabilities of discontinued operations | — | 112,490 | ||||||
| Shareholders' Equity | 853,460 | 667,365 | ||||||
| Total liabilities and shareholders' equity | $ | 2,221,479 | $ | 1,133,027 | ||||
| AZZ Inc. | ||||||||
| --- | --- | --- | --- | --- | ||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (dollars in thousands) | ||||||||
| (unaudited) | ||||||||
| Year Ended | ||||||||
| February 28,<br>2023 | February 28,<br>2022 | |||||||
| Net cash provided by operating activities of continuing operations | $ | 91,430 | $ | 60,598 | ||||
| Net cash used in investing activities of continuing operations | (1,228,921) | (82,143) | ||||||
| Net cash provided by financing activities of continuing operations | 1,027,335 | 912 | ||||||
| Cash provided by discontinued operations | 97,389 | 20,720 | ||||||
| Effect of exchange rate changes on cash | 505 | 158 | ||||||
| Net increase (decrease) in cash and cash equivalents | (12,262) | 245 | ||||||
| Cash and cash equivalents at beginning of period | 15,082 | 14,837 | ||||||
| Less: Cash and cash equivalents from discontinued operations at end of year | — | (3,000) | ||||||
| Cash and cash equivalents from continuing operations at end of period | $ | 2,820 | $ | 12,082 |
AZZ Inc.
Non-GAAP Disclosure
Adjusted Earnings, Adjusted Earnings Per Share and Adjusted EBITDA
In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”), we provided adjusted earnings and adjusted earnings per share, (collectively, the “Adjusted Earnings Measures”), which are non-GAAP measures. Management believes that the presentation of these measures provides investors with greater transparency when comparing operating results across a broad spectrum of companies, which provides a more complete understanding of our financial performance, competitive position and prospects for future capital investment and debt reduction. Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted earnings and adjusted earnings per share, to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.
Management also provides Adjusted EBITDA, which is a non-GAAP measure. Management defines Adjusted EBITDA as earnings excluding depreciation, amortization, interest, provision for income taxes and acquisition and transaction-related expenses. Management believes Adjusted EBITDA is used by investors to analyze operating performance and evaluate the Company's ability to incur and service debt and its capacity for making capital expenditures in the future. Adjusted EBITDA is also useful to investors to help assess the Company's estimated enterprise value. In addition, management believes that the adjustments shown below are useful to investors in order to allow them to compare the Company's financial results during the periods shown without the effect of each of these adjustments.
Management provides non-GAAP financial measures for informational purposes and to enhance understanding of the Company’s GAAP consolidated financial statements. Readers should consider these measures in addition to, but not instead of or superior to, the Company's financial statements prepared in accordance with GAAP. These non-GAAP financial measures may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
The following tables provides a reconciliation for the three and twelve months ended February 28, 2023 and 2022 between the various measures calculated in accordance with GAAP to the Adjusted Earnings Measures, which are shown net of tax (dollars in thousands, except per share data):
| Year Ended | |||||||
|---|---|---|---|---|---|---|---|
| February 28, 2023 | |||||||
| Per<br><br>Diluted Share(1) | Amount | Per<br><br>Diluted Share(1) | |||||
| Net income from continuing operations | 7,427 | $ | 66,339 | ||||
| Less: Series A Preferred Stock dividends | (8,240) | ||||||
| Net income (loss) from continuing operations available to common shareholders | $ | 0.15 | 58,099 | $ | 2.33 | ||
| Adjustments: | |||||||
| Acquisition and transaction-related expenditures(2) | — | 15,320 | 0.61 | ||||
| Amortization of intangible assets | 0.20 | 22,613 | 0.91 | ||||
| Subtotal | 0.20 | 37,933 | 1.51 | ||||
| Tax impact(3) | (0.05) | (9,104) | (0.36) | ||||
| Total adjustments | 0.15 | 28,829 | 1.15 | ||||
| Adjusted earnings and adjusted earnings per share from continuing operations(4) | 7,625 | $ | 0.30 | $ | 86,928 | $ | 3.48 |
| (1) Earnings per share amounts included in the table above may not sum due to rounding differences. | |||||||
| (2) Includes Corporate expenses related to the Precoat Metals acquisition, as well as the divestiture of AZZ Infrastructure Solutions business into the AIS JV. | |||||||
| (3) The non-GAAP effective tax rates for the three months ended February 28, 2023 and full year fiscal 2023 were 24.0% and 24.0%, respectively. | |||||||
| (4) Adjusted earnings from continuing operations includes 1.6 million and 2.6 million of equity in earnings for the three months ended February 28, 2023 and full year fiscal 2023, respectively. |
All values are in US Dollars.
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| February 28, 2022 | February 28, 2022 | |||||||
| Amount | Per<br><br>Diluted Share(1) | Amount | Per<br><br>Diluted Share(1) | |||||
| Net income (loss) from continuing operations available to common shareholders | 11,322 | $ | 0.45 | 49,817 | $ | 1.99 | ||
| Adjustments: | ||||||||
| Acquisition and transaction-related expenditures(2) | 1,554 | 0.06 | 1,554 | 0.06 | ||||
| Amortization of intangible assets | 1,662 | 0.07 | 6,658 | 0.27 | ||||
| Subtotal | 3,216 | 0.13 | 8,212 | 0.33 | ||||
| Tax impact(3) | (708) | (0.03) | (1,881) | (0.08) | ||||
| Total adjustments | 2,508 | 0.10 | 6,331 | 0.25 | ||||
| Adjusted earnings and adjusted earnings per share from continuing operations | $ | 13,830 | $ | 0.56 | $ | 56,148 | $ | 2.24 |
| (1) Earnings per share amounts included in the table above may not sum due to rounding differences. | ||||||||
| (2) Includes Corporate expenses related to the Precoat Metals acquisition. | ||||||||
| (3) The non-GAAP effective tax rate for the three months ended February 28, 2022 and full year fiscal 2022 were 22.0% and 22.9%, respectively. |
Adjusted EBITDA from Continuing Operations
| Three Months ended February 28, | Year Ended February 28, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||
| Net income from continuing operations | $ | 7,427 | $ | 11,322 | $ | 66,339 | $ | 49,817 |
| Interest expense | 27,061 | 1,345 | 88,800 | 6,363 | ||||
| Income tax expense | 3,956 | 4,436 | 22,336 | 23,214 | ||||
| Depreciation and amortization | 18,777 | 8,252 | 74,590 | 32,081 | ||||
| Acquisition and transaction-related expenditures | — | 1,554 | 15,320 | 1,554 | ||||
| Adjusted EBITDA from continuing operations | $ | 57,221 | $ | 26,909 | $ | 267,385 | $ | 113,029 |
Adjusted EBITDA from Continuing Operations by Segment
| Three Months ended February 28, | Year Ended February 28, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||
| Metal Coatings | ||||||||
| Operating income | $ | 32,141 | $ | 31,960 | $ | 155,954 | $ | 128,758 |
| Depreciation and amortization expense | 8,170 | 7,843 | 32,955 | 30,453 | ||||
| Adjusted EBITDA | $ | 40,311 | $ | 39,803 | $ | 188,909 | $ | 159,211 |
| Precoat Metals | ||||||||
| Operating income | $ | 15,595 | $ | — | $ | 79,509 | $ | — |
| Depreciation and amortization expense | 10,309 | — | 40,199 | — | ||||
| Adjusted EBITDA | $ | 25,904 | $ | — | $ | 119,708 | $ | — |
| Corporate | ||||||||
| Operating income | $ | (11,541) | $ | (14,926) | $ | (61,825) | $ | (49,539) |
| Consolidated operating income | $ | 36,195 | $ | 17,034 | $ | 173,638 | $ | 79,219 |
10
earningsdeckfy2023q4andf
AZZ Inc. Q4 and Full Year FY2023 Earnings Release Presentation April 26, 2023
Q4 and Full Year FY2023 Earnings Presentation Disclaimers Cautionary Statements Regarding Forward Looking Statements — Certain statements herein about our expectations of future events or results constitute forward- looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as "may," "could," "should," "expects," "plans," "will," "might," "projects," "currently," "intends," "outlook," "forecasts," "targets," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Such forward-looking statements are based on currently available competitive, financial and economic data and management’s views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Forward-looking statements speak only as of the date they are made and are subject to risks that could cause them to differ materially from actual results. Certain factors could affect the outcome of the matters described herein. This presentation may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our products and services, including demand by the construction markets, the industrial markets and the metal coatings markets. We could also experience additional increases in labor costs, components, and raw materials including zinc and natural gas, which are used in our hot-dip galvanizing process; supply-chain vendor delays; customer requested delays of our products or services; delays in additional acquisition opportunities; currency exchange rates; an increase in our debt leverage and/or interest rates on our debt, of which a significant portion is tied to variable interest rates; availability of experienced management and employees to implement AZZ’s growth strategy; a downturn in market conditions in any industry relating to the products we inventory or sell or the services that we provide; economic volatility, including a prolonged economic downturn or macroeconomic conditions such as inflation or changes in the political stability in the United States and other foreign markets in which we operate; acts of war or terrorism inside the United States or abroad; and other changes in economic and financial conditions. The Company has provided additional information regarding risks associated with the business in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2023, and other filings with the Securities and Exchange Commission ("SEC"), available for viewing on the Company’s website at www.azz.com and on the SEC’s website at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward- looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. These statements are based on information as of the date hereof and AZZ assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Non-GAAP – Regulation G Disclosures — In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), AZZ has provided Adjusted EBITDA, which is a non-GAAP measures. Management believes that the presentation of these measures provides investors with a greater transparency comparison of operating results across a broad spectrum of companies, which provides a more complete understanding of AZZ’s financial performance, competitive position and prospects for the future. Management also believes that investors regularly rely on non-GAAP financial measures, such as Adjusted EBITDA, to assess operating performance and that such measures may highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. 2
Q4 and Full Year FY2023 Earnings Presentation Fiscal Year 2023 Company Highlights Full Year Sales $1.32 billion(1) Metal Coatings Segment $637.0M +21.2% vs. FY2022 Precoat Metals Segment(2) $686.7M Key Accomplishments in the Year +19.9% vs. Comparable FY2022 • Completed strategic acquisition of Precoat and divestiture of a majority stake in AIS • Sales, EBITDA and earnings per share, for continuing operations, all in line with prior guidance • Strong sales at Metal Coatings and sales in line with expectations at Precoat • Debt reduction of $237.5 million, resulting in net leverage of 3.5x LTM Adjusted EBITDA at end of Q4 (1) Reflects sales from Continuing Operations for FY2023 (2) Reflects 42 weeks of sales from 5/13/2022 acquisition date 3
Q4 and Full Year FY2023 Earnings Presentation Sales Net Income(2) Diluted EPS(3) Fiscal Year 2023 Summary – Continuing Operations Results(1) +151.8% • Solid performance across both segments driven by value-pricing initiatives and higher volume • Sales up 20.5% on a comparable basis • Strong operational performance, partially offset by higher interest, depreciation and amortization and transaction-related expenses +33.2% / (a) +54.8% +17.1% / (a) +55.4% In millions $, except percentages and per share amounts Adjusted EBITDA +136.6% •Results reflect the strong performance of the business and the acquisition of Precoat Metals (a) Non-GAAP measure. See slides 24 and 25 for reconciliation of GAAP to Non-GAAP (1) Sales reflect approximately 42 weeks for Precoat Metals following 5/13/2022 acquisition date (2) Adjusted net income is compared to adjusted net income of $56.1 million for FY22 (3) Adjusted diluted EPS is compared to adjusted diluted EPS of $2.24 for FY22 •YTD adjusted EPS from continuing operations includes $1.15 of EPS add-backs, net of $(0.36) tax adjustment $525.6 $1,323.6 FY2022 FY2023 $113.0 $267.4 FY2022 FY2023 $49.8 $66.3 $86.9 FY2022 FY2023 FY2023(a) $1.99 $2.33 $3.48 FY2022 FY2023 FY2023(a) 4
Q4 and Full Year FY2023 Earnings Presentation Fiscal Year 2023 Segment Results – Metal Coatings Segment • Strong total segment sales growth driven by increased volume, price realization and the impact of fully integrated prior acquisitions • Operating margin of 24.5% for the full year was impacted by higher zinc costs, partially offset by value pricing and mix • Maintained industry leading customer responsiveness and productivity through continued investment in our Digital Galvanizing System (DGS) In millions $, except percentages Sales +21.2% Operating Income +21.1%Key Statistics FY2022 Sales Organic Acquisitions FY2023 Sales $525.6 $637.0 $24.8 $86.6 AZZ Metal Coating Segment (AMC) Summary: Adjusted EBITDA(1) +18.7% 24.5% 21.2% (1) Non-GAAP measure. See slides 24 and 25 for reconciliation of GAAP to Non-GAAP $525.6 $637.0 FY2022 FY2023 $128.8 $156.0 FY2022 FY2023 24.5% 4.5 $159.2 $188.9 FY2022 FY2023 30.3% 29.7% 5
Q4 and Full Year FY2023 Earnings Presentation Fiscal Year 2023 Segment Results – Precoat Metals(1) • Sales up 19.9% on a comparable basis • Adjusted EBITDA of $119.7 million in line with management’s expectations • Specific plans in place to address production inefficiencies and we are encouraged by results to date • Price increases have been implemented to offset inflationary pressures In millions $, except percentages Key Statistics AZZ Precoat Metals Segment (APM) Summary: Sales Adjusted EBITDA(2) FY2022 Sales Organic Acquisitions $0.0 $686.7 $686.7 $0.0 16.0% (1) Segment results reflect approximately 42 weeks for Precoat Metals following 5/13/2022 acquisition date (2) Non-GAAP measure. See slides 24 and 25 for reconciliation of GAAP to Non-GAAP FY2023 Sales $686.7 FY2023 $79.5 FY2023 $119.7 FY2023 11.6% 6 17.4% Operating Income
Q4 and Full Year FY2023 Earnings Presentation Q4 FY2023 Continuing Operations Results Three Months ended February 28, 2023 2022 Change vs. Prior Year(1) Sales $ 336.5 $ 130.1 +158.6% Gross Profit $ 61.3 $ 36.3 +68.9% Gross Margin 18.2 % 27.9 % (970)bps Operating Profit $ 36.2 $ 17.0 +112.5% Operating Margin(2) 10.8 % 13.1 % (230)bps Adjusted EBITDA(3) $ 57.2 $ 26.9 +112.6% Adjusted EBITDA Margin 17.0 % 20.7 % (370)bps Adjusted Net Income(3) $ 7.6 $ 13.8 (44.9)% Adjusted Diluted Earnings Per Share(3) $ 0.30 $ 0.56 (46.4)% Diluted Shares Outstanding 25,013 24,918 0.4% (1) Quarter results reflect acquisition of Precoat Metals on 5/13/2022 and divestiture of controlling interest in AIS on 9/30/2022 (2) Excluding acquisition and transaction-related expenses of $1.6 million, operating margin would have been 14.3% for fiscal 2022 (3) Non-GAAP measure. See slides 24 and 25 for reconciliation of GAAP to Non-GAAP 7 In millions $, except percentages and per share amounts
Q4 and Full Year FY2023 Earnings Presentation Fiscal Year 2023 Continuing Operations Results Year Ended February 28, 2023 2022 Change vs. Prior Year(1) Sales $ 1,323.6 $ 525.6 +151.8% Gross Profit $ 295.9 $ 146.2 +102.5% Gross Margin 22.4 % 27.8 % (540)bps Operating Profit $ 173.6 $ 79.2 +119.2% Operating Margin(2) 13.1 % 15.1 % (200)bps Adjusted EBITDA(3) $ 267.4 $ 113.0 +136.6% Adjusted EBITDA Margin 20.2 % 21.5 % (130)bps Adjusted Net Income(3) $ 86.9 $ 56.1 +54.8% Adjusted Diluted Earnings Per Share(3) $ 3.48 $ 2.24 +55.4% Diluted Shares Outstanding 24,978 25,077 (0.4)% (1) Full year results reflects acquisition of Precoat Metals on 5/13/2022 (approximately 42 weeks) and the divestiture of controlling interest in AIS on 9/30/2022 (2) Excluding acquisition and transaction-related expenses of $15.3 million (fiscal 2023) and $1.6 million (fiscal 2022), operating margin would have been 14.3% and 15.4%, respectively (3) Non-GAAP measure. See slides 24 and 25 for reconciliation of GAAP to Non-GAAP 8 In millions $, except percentages and per share amounts
Q4 and Full Year FY2023 Earnings Presentation YTD FY2023 AZZ Cash Flow Highlights – Continuing Operations Year Ended February 28, 2023 2022 Net Cash Provided by Operating Activities $ 91.4 $ 60.6 Less: Capital Expenditures $ (57.1) $ (23.6) Free Cash Flow(1) $ 34.3 $ 37.0 Net Income from continuing operations $ 66.3 $ 49.8 Free Cash Flow / Net Income 51.7 % 74.3 % Acquisition of Subsidiaries, net of cash acquired $ 1,282.7 $ 61.2 Payment of Dividends on Common and Series A Preferred Stock(2) $ 22.7 $ 16.9 Share Repurchases $ — $ 30.8 (1) Free Cash Flow is a Non-GAAP measure that is reconciled to the GAAP measure (free cash flow defined as Net cash provided by operations, less capital expenditures) (2) Payment of dividends includes $16.9 million for common shares and $5.8 million for Series A Preferred Shares 9 In millions $, except percentages
Q4 and Full Year FY2023 Earnings Presentation Our Capital Allocation Priorities High ROIC Investments • Organic growth • Strategic customer partnerships • Productivity Reduce Leverage • 3.0x leverage target Acquisitions • Opportunistic, highly accretive bolt-on acquisitions Return Capital • Committed to sustaining dividends 10
Q4 and Full Year FY2023 Earnings Presentation Rapid Deleveraging Profile • Total debt repayment of $237.5 million in FY2023 • Net leverage 3.5X at the end of Q4 FY2023 represents 0.7X improvement since closing the Precoat transaction • No debt maturities until 2027 • Strong cash flow generation supports deleveraging • Tax benefits of Precoat acquisition reduces cash tax outlays Long-Term Target Range 2.5x-3.0x > 3/4 turn reduction in net leverage since close 4.25x 3.5x 3.0x 11
Q1 Outlook And Financial Guidance 12
Q4 and Full Year FY2023 Earnings Presentation 13 ü Metal Coatings Segment • Sequential improvement over Q4, driven by Bridge and Highway, Utility Transmission and Distribution, and Solar, inclusive of infrastructure spending • Fabrication activity remains solid, with many customers noting robust backlog ü Precoat Metals Segment • Commercial construction, container and data center volume remain robust • Customer inventories have normalized based on management actions • Volume and pricing actions expected to recover margins ü Corporate • Continue to monitor cash flow, customer credit, expenses and ensure prudent capital deployment Q1 FY2024 Outlook
Q4 and Full Year FY2023 Earnings Presentation 14 FY2024 Guidance - Continuing Operations Adjusted EPS(1) Sales $3.85 - $4.35 $1,400 - $1,550m Sales Adjusted EBITDA $300 - $325m Adjusted EBITDA Adjusted EPS (1) Adjusted earnings and earnings per share includes after-tax add-back of amortization of acquisition-related intangibles Reaffirming Previously Issued Guidance
Q4 and Full Year FY2023 Earnings Presentation North America’s leading independent hot-dip galvanizing and coil coating company with #1 positions in both markets Value-added tolling business model protects margins, limits metal commodity exposure, and minimizes NWC intensity Diversified and resilient end markets with secular growth tailwinds Irreplaceable footprint provides cost advantages and enables service capabilities to customers Best-in-class margins, returns and free cash flow Mission-driven culture with experienced leadership with track record of execution success Investment Thesis 15
Q&A 16
Appendix 17
Q4 and Full Year FY2023 Earnings Presentation Q4 FY2023 Company Highlights Q4 Fiscal 2023 Sales $337 million(1) Metal Coatings Segment $149.4M +14.8% vs. Q4 FY2022 Precoat Metals Segment $187.1M Key Accomplishments in the Quarter +17.0% vs. Comparable Q4 • Metal Coatings and Precoat Metals sales up, on a comparable basis, in our seasonally slowest quarter • Precoat Metals has improved production efficiencies associated with customer-owned inventory (1) Reflects Sales from Continuing Operations 18
Q4 and Full Year FY2023 Earnings Presentation Sales Net Income(1) Diluted EPS(2) Q4 Fiscal Year 2023 Summary – Continuing Operations Results +158.6% • Solid fourth quarter sales performance across both segments driven by value-pricing initiatives and higher volume •Adjusted Net Income from continuing operations Q4 FY2023 reflects impact of non-cash add- backs •Q4 adjusted EPS from continuing operations includes $0.15 of EPS add-backs (34.4)% / (a) (44.9)% (66.7)% / (a) (46.4)% In millions $, except percentages and per share amounts Adjusted EBITDA +112.6% • Flow through from higher sales, particularly AMC (a) Non-GAAP measure. See slides 24 and 25 for reconciliation of GAAP to Non-GAAP (1) Adjusted net income is compared to adjusted net income of $13.8 million for FY22 (2) Adjusted diluted EPS is compared to adjusted diluted EPS of $0.56 for FY22 $130.1 $336.5 FY2022 FY2023 $0.45 $0.15 $0.30 FY2022 FY2023 FY2023(a) $26.9 $57.2 FY2022 FY2023 $11.3 $7.4 $7.6 FY2022 FY2023 FY2023(a) 19
Q4 and Full Year FY2023 Earnings Presentation Q4 Fiscal Year 2023 Segment Results – Metal Coatings Segment • Sales growth during the quarter driven by an increase in galvanizing volumes, price realization and fully integrated prior acquisitions • Operating margin of 21.5% for the quarter, primarily due to peak cost of zinc flowing through the majority of our kettles • Adjusted EBITDA of 27.0% in line with 25%-30% guidance In millions $, except percentages Sales +14.8% Operating Income +0.6% Key Statistics FY2022 Sales Organic Acquisitions FY2023 Sales $130.1 $149.4 $4.8 $14.5 AZZ Metal Coating Segment (AMC) Summary: Adjusted EBITDA(1) +1.3% 24.5% 21.2% (1) Non-GAAP measure. See slides 24 and 25 for reconciliation of GAAP to non-GAAP $130.1 $149.4 FY2022 FY2023 $32.0 $32.1 FY2022 FY2023 24.6% .5 $39.8 $40.3 FY2022 FY2023 30.6% 27.0% 20
Q4 and Full Year FY2023 Earnings Presentation Q4 Fiscal Year 2023 Segment Results – Precoat Metals (acquisition date May 13, 2022) • Sales up 17.0% on a comparable basis • Adjusted EBITDA of $25.9 million in line with management’s seasonal expectations • Specific plans are in place to address production inefficiencies and we are encouraged by the results to date In millions $, except percentages AZZ Precoat Metals Segment (APM) Summary: Operating Income Adjusted EBITDA(1) FY2022 Sales Organic Acquisitions $0.0 $187.1 $187.1 $0.0 (1) Non-GAAP measure. See slides 24 and 25 for reconciliation of GAAP to non-GAAP FY2023 Sales $187.1 FY2023 $15.6 FY2023 $25.9 FY2023 21 Sales 13.8%8.3% Key Statistics
Q4 and Full Year FY2023 Earnings Presentation 22 Fiscal Year 2023 Earnings Per Share (EPS) Walk(1) - Continuing Operations $2.33 $0.61 $0.91 $(0.36) 3.48 Di lut ed EP S, as re po rte d Am or tiz at ion of in ta ng ibl e a sse ts Ac qu isi tio n a nd tr an sa cti on re lat ed ex pe nd itu re s Ta x B en efi t o f a dju stm en ts Di lut ed EP S, as ad jus te d $— $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 (1) Earnings per share amounts included in the chart above may not sum due to rounding differences
Reg “G” Tables 23
Q4 and Full Year FY2023 Earnings Presentation Continuing Operations Non-GAAP Disclosure Three Months ended February 28, Year Ended February 28, 2023 2022 2023 2022 Amount Per Diluted Share(1) Amount Per Diluted Share(1) Amount Per Diluted Share(1) Amount Per Diluted Share(1) Net income from continuing operations $ 7,427 $ — $ 11,322 $ — $ 66,339 $ — $ 49,817 $ — Less: Series A Preferred Stock dividends (3,600) — — — (8,240) — — — Net income (loss) from continuing operations available to common shareholders 3,827 0.15 11,322 0.45 58,099 2.33 49,817 1.99 Net income available to common shareholders and diluted earnings per share from continuing operations 3,827 — 11,322 — 58,099 — 49,817 — Adjustments: Acquisition and transaction related expenditures(2) — — 1,554 0.06 15,320 0.61 1,554 0.06 Amortization of intangible assets 4,998 0.20 1,662 0.07 22,613 0.91 6,658 0.27 Subtotal 4,998 0.20 3,216 0.13 37,933 1.51 8,212 0.33 Tax impact(3) (1,200) (0.05) (708) (0.03) (9,104) (0.36) (1,881) (0.08) Total adjustments 3,798 0.15 2,508 0.10 28,829 1.15 6,331 0.25 Adjusted earnings and adjusted earnings per share from continuing operations(4) $ 7,625 $ 0.30 $ 13,830 $ 0.56 $ 86,928 $ 3.48 $ 56,148 $ 2.24 (1) Earnings per share amounts included in the table above may not sum due to rounding differences. (2) Includes Corporate expenses related to the Precoat Metals acquisition, as well as the divestiture of AZZ Infrastructure Solutions business into the AIS JV. (3) The non-GAAP effective tax rates for the three months ended February 28, 2023 and 2022 were 24.0% and 22.0%, respectfully. The non-GAAP effective tax rates for the full year fiscal 2023 and 2022 were 24.0% and 22.9%, respectively. (4) Adjusted earnings from continuing operations includes $1.6 million and $2.6 million of equity in earnings for the three months ended February 28, 2023 and full year fiscal 2023, respectively. 24
Q4 and Full Year FY2023 Earnings Presentation Non-GAAP Disclosure of Continuing Operations Adjusted EBITDA Three Months Ended Year Ended February 28, February 28, 2023 2022 2023 2022 Net income from continuing operations $ 7,427 $ 11,322 $ 66,339 $ 49,817 Interest expense 27,061 1,345 88,800 6,363 Income tax (benefit) expense 3,956 4,436 22,336 23,214 Depreciation and amortization 18,777 8,252 74,590 32,081 Acquisition and transaction related-expenditures — 1,554 15,320 1,554 Adjusted EBITDA $ 57,221 $ 26,909 $ 267,385 $ 113,029 25
Q4 and Full Year FY2023 Earnings Presentation Non-GAAP Segment Disclosure from Continuing Operations (Metal Coatings and Precoat Metals) Three Months Ended Year Ended February 28, February 28, 2023 2022 2023 2022 Metal Coatings Operating income $ 32,141 $ 31,960 $ 155,954 $ 128,758 Depreciation and amortization expense 8,170 7,843 32,955 30,453 Adjusted EBITDA $ 40,311 $ 39,803 $ 188,909 $ 159,211 Precoat Metals Operating income $ 15,595 $ — $ 79,509 $ — Depreciation and amortization expense 10,309 — 40,199 — Adjusted EBITDA $ 25,904 $ — $ 119,708 $ — Corporate Operating income $ (11,541) $ (14,926) $ (61,825) $ (49,539) Consolidated operating income $ 36,195 $ 17,034 $ 173,638 $ 79,219 26