Q1 2025 AZZ Inc Earnings Call

Speaker Change: © BF-WATCH TV 2021 © BF-WATCH TV 2021

Speaker Change: [inaudible]

Speaker Change: Good day and welcome to the AZZ Incorporated First Quarter 2025 Earnings Conference Call and Webcast.

Speaker Change: All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Speaker Change: To ask a question, you may press star then 1 on your touchtone phone. And to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Ms. Sandy Martin of Three Part Advisors. Please go ahead, ma'am.

Operator: Good day, and welcome to the AZZ Incorporated First Quarter 2025 Earnings Conference Call in webcasts. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero.

Operator: Good day, and welcome to the AZZ Incorporated First Quarter 2025 Earnings Conference Call and Webcast. All participants will be in a listen-only mode.

Operator: Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. And to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Ms. Sandy Martin of Three Part Advisors. Please go ahead, ma'am.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. And to withdraw your question, please press star, then two.

Sandra J. Martin: Thank you, operator. Good morning and thank you for joining us today to review AZZ's financial results for the fiscal 2025 first quarter, which ended May 31, 2024.

Operator: Please note this event is being recorded.

Speaker Change: Joining the call are Tom Ferguson, President and Chief Executive Officer, Jason Crawford, Chief Financial Officer, and David Nark, Senior Vice President of Marketing, Communications, and Investor Relations Officer.

Sandy Martin: I would now like to turn the conference over to Miss Sandy Martin, a three-part adviser. Please go ahead, ma'am.

Sandy Martin: Thank you, operator. Good morning, and thank you for joining us today to review AZZ financial results for the fiscal 2025 first quarter, which ended May 31, 2024. Joining call are Tom Ferguson, President and Chief Executive Officer, Jason Crawford, Chief Financial Officer, and David Nark, Senior Vice President of Marketing, Communications, and Investor Relations Officer.

Sandra J. Martin: Thank you, operator. Good morning, and thank you for joining us today to review AZZ's financial results for the fiscal 2025 first quarter, which ended May 31, 2024. Joining the call are Tom Ferguson, President and Chief Executive Officer, Jason Crawford, Chief Financial Officer, and David Nark, Senior Vice President of Marketing, Communications, and Investor Relations. After today's prepared remarks, we will open the call for questions. Please note the live webcast for today's call can be found at www.azz.com slash investor dash events.

Speaker Change: After today's prepared remarks, we will open the call for questions. Please note the live webcast for today's call can be found at www.azz.com slash investor dash events.

Speaker Change: Before we begin, I want to remind everyone that our discussion today will include forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Sandy Martin: After today's prepared remarks, we will open the call for questions. Please note the live webcast for today's call can be found at www.azz.com/investor-events.

Speaker Change: By their nature, forward-looking statements are...

Speaker Change: Uncertain and outside of the company's control. Except for actual results, our comments containing forward-looking statements may involve risk and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10-K for the fiscal year.

Sandy Martin: Before we begin, I want to remind everyone that our discussion today will include forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. By their nature, forward-looking statements are uncertain and outside of the company's control, except for actual results. Our comments containing forward-looking statements may involve risks and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10-K for the fiscal year. These statements are not guarantees of future performance; therefore, undue reliance should not be placed upon them.

Sandra J. Martin: Before we begin, I want to remind everyone that our discussion today will include forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. By their nature, forward-looking statements are uncertain and outside of the company's control. Except for actual results, our comments containing forward-looking statements may involve risk and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10-K for the fiscal year.

Sandra J. Martin: These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. However, actual results could differ materially. In addition, today's call will discuss non-GAAP financial measures. Non-GAAP financial measures should be considered supplemental to, not a substitute for, GAAP financial measures. We refer to the reconciliation from GAAP to non-GAAP in today's earnings press release. I would now like to turn the call over to Tom Ferguson. Thank you, Sandy. Good morning.

Speaker Change: These statements are not guarantees of future performance. Therefore, undue reliance should not be placed upon them. Actual results could differ materially from these expectations.

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

Sandy Martin: Actual results could differ materially from these expectations.

Sandy Martin: In addition, today's call will discuss non-GAAP financial measures. Non-GAAP financial measures should be considered supplemental to, not a substitute for GAAP financial measures. We refer to the reconciliation from gap to non-gap in today's earnings press release.

Thomas E. Ferguson: Thank you, Sandy.

Thomas E. Ferguson: Good morning, and thank you for joining us today.

Thomas E. Ferguson: I will discuss the first quarter results and cover our outlook for the rest of the year. Jason Crawford, our newly appointed CFO , will walk through our detailed financial results, and David Nark will provide an industry update on our end markets.

Thomas E. Ferguson: Then we'll open it up for some questions. Our first quarter results met the higher end of our expectations, and we are very pleased with the performance and emphasis on execution in both segments.

Sandy Martin: I would now like to turn the call over to Tom Ferguson. Thank you, Sandy.

Tom Ferguson: Good morning, and thank you for joining us today. I will discuss the first quarter results and cover our outlet for the rest of the year. Jason Crawford, our newly appointed CFO, will walk through our detailed financial results, and David Nark will provide an industry update on our end markets.

Thomas E. Ferguson: Good morning, and thank you for joining us today. I will discuss the first quarter results and cover our outlook for the rest of the year. Jason Crawford, our newly appointed CFO, will walk through our detailed financial results, and David Nark will provide an industry update on our end market. Then we'll open it up for some questions.

Jason Crawford: We reported record quarterly revenue of 413 million dollars, improved segment profitability, and expanded EBITDA in both dollars and in terms of margins.

Tom Ferguson: Then we'll open it up for some questions. Our first quarter results met the higher end of our expectations, and we are very pleased with the performance and emphasis on execution in both segments. We reported record quarterly revenue of $413 million, improved segment profitability, and expanded EBITDA in both dollars and in terms of margins. Our results generated significant cash flow from operations for the first three months of 2005. The top line revenue grouse by folks. 0.7% versus the prior year, and pre-code mental sales increase for the prior year. and the first quarter we benefited from strength in a number of our end markets, including construction, bridge and highway, transmission and distribution, and renewables.

Thomas E. Ferguson: Our first quarter results met the higher end of our expectations, and we are very pleased with the performance and emphasis on execution in both sectors. We reported record quarterly revenue of $413 million, improved segment profitability, and expanded EBITDA in both dollars and in terms of margin. Our results generated significant cash flow from operations for the first three months. Top Line Revenue Growth by Focus. 0.7% versus the prior year, and pre-cut metal sales increased over the prior year for both sexes.

Jason Crawford: Our results generated significant cash flow from operations for the first three months.

Jason Crawford: Bye.

Jason Crawford: and Topline Revenue Growth by Fogarty.

Jason Crawford: .7% versus the prior year, and pre-Covid metal sales increased.

Jason Crawford: Both segments.

Jason Crawford: In the first quarter, we benefited from strength in a number of our end markets including construction, bridge and highway, transmission and distribution, and renewables. Non-financial project spending for both public and private projects is now tracking higher than pre-pandemic levels.

Jason Crawford: This year, we have not only

Jason Crawford: public sector construction, which demonstrates a

Thomas E. Ferguson: In the first quarter, we benefited from strength in a number of our end markets, including construction, bridge and highway, transmission and distribution, and renewables. Non-prudential project spending for both public and private projects is now tracking higher than pre-pandemic levels. This year, we have not..., in Public Sector Construction, which demonstrates a sizeable gap that David will cover, and commercial construction continuing to be interest rates. The shift residential construction project.

Speaker Change: and Manufacturing that David will cover.

Tom Ferguson: Not a potential project spending for both public and private projects is now tracking higher than pre-pandemic levels. This year, we have not been in public sector construction, which demonstrates a size of energy and manufacturing that David will cover, private spending and commercial construction continuing to be part of the interest rates, the shift of residential construction projects. Continuing with our first quarter results, metal coatings EBITDA margin grew to 30.9%, exceeding the prior year and slightly ahead of our target margin range of 25 to 30%. Due to both end-zinc productivity improvement. Preco metals EBITDA margin of 20.2% was also meaningful, as we have noted before that any reasonable uptick in volume helps drive margins above the 20% mark, and towards the upper end of our communicated range of 17 to 22%.

Speaker Change: private spending and commercial construction continuing to be

Speaker Change: The shift

Speaker Change: Residential Construction Projects.

Speaker Change: Continuing with our first quarter results, Metal Coating's EBITDA margin grew to 30.9 percent, exceeding the prior year, and slightly ahead of our target margin range of 25 to 30 percent, due to both model and zinc productivity improvement.

Speaker Change: Pre-cut metals EBITDA margin of 20.2% was also meaningful as we have noted before that any reasonable uptick in volume helps drive margins above the 20% mark and towards the upper end of our communicated range of 17 to 22 percent.

Thomas E. Ferguson: Continuing with our first quarter results, Metal Coating's EBITDA margin grew to 30.9%, exceeding the prior year and slightly ahead of our target margin range of 25-30%, due to both M&S and Zinc productivity improvements. The pre-cut metals EBITDA margin of 20.2% was also meaningful, as we have noted before that any reasonable uptick in volume helps drive margins above the 20% mark and towards the upper end of our communicated range of 17 to 22%.

Speaker Change: In addition to the solid execution of our operational initiatives in the first quarter, we also completed a public offering of common stock to fully fund the redemption of AZZ Series A convertible preferred stock.

Speaker Change: Jason will discuss this more in a few moments, but the strategic rationale and timing were critical as the redemption premium was set to escalate on May 12th.

Tom Ferguson: In addition to the solid execution of our operational initiatives in the first quarter, we also completed a public offering of common stock to fully fund the redemption of AZZ Series A Convertible Preferred Stock. Jason will discuss this more in a few moments, but the strategic rationale and timing were critical as the redemption premium was set to escalate on May 12. The timing was right, and we were pleased with the efficient execution of this transaction with the support of our capital markets partners. In less than 24 months, we have fully redeemed and retired the mezzanine financing associated with the acquisition of Preco Metals.

Thomas E. Ferguson: In addition to the solid execution of our operational initiatives in the first quarter, we also completed a public offering of common stock to fully fund the redemption of AZZ Series A convertible preferred stock. Jason will discuss this more in a few moments, but the strategic rationale and timing were critical as the redemption premium was set to escalate on May 12.

Speaker Change: The timing was right, and we were pleased with the efficient execution of this transaction with the support of our capital markets partners. In less than 24 months, we have fully redeemed and retired the mezzanine financing associated with the acquisition of pre-cut metals.

Speaker Change: The pre-code acquisition further supported our long-term strategy to improve the return profile and de-risk our business by transforming into a pure play metal coatings company with significant scale, expertise, technology, and a very strong balance sheet.

Thomas E. Ferguson: The timing was right, and we were pleased with the efficient execution of this transaction with the support of our capital markets partners. In less than 24 months, we have fully redeemed and retired the mezzanine financing associated with the acquisition of Preco Medal. The pre-code acquisition further supported our long-term strategy to improve the return profile and de-risk our business by transforming into a pure-play metal coatings company with significant scale, expertise, technology, and a very strong balance sheet.

Speaker Change: This year, we remain focused on our operational and financial objectives.

Tom Ferguson: The Preco acquisition further supported our long-term strategy to improve the return profile and de-risk our business by transforming into a pure play metal coatings company with significant scale, expertise, technology, and a very strong balance sheet.

Speaker Change: I am gratified that our efforts in developing a strong servant-minded leadership team with a solid bench of talent over the last several years have resulted in positive momentum with strong organic growth and profitability improvements in both segments.

Speaker Change: We attribute this success to our team's well-executed strategic action centered on revenue growth, operational excellence, margin enhancements, and working capital improvements, all of which contribute to the generation of free cash flow.

Tom Ferguson: This year we remain focused on our operational and financial objectives. I am gratified that our efforts in developing a strong, serving minor leadership team with a solid bench of talent over the last several years have resulted in positive momentum with strong, organic growth and profitability improvements in both segments. We attribute this success to our team's well-executed strategic action centered on revenue growth, operational excellence, margin enhancements, and working capital improvements, all of which contribute to the generation of free cash flow. I am proud of the work and dedication of our teams in both segments and in our corporate headquarters.

Thomas E. Ferguson: This year, we remain focused on our operational and financial performance. I'm gratified that our efforts in developing a strong servant-minded leadership team with a solid bench of talent over the last several years have resulted in positive momentum with strong organic growth and profitability improvements in both sectors. We attribute this success to our team's well-executed strategic actions centered on revenue growth, operational excellence, margin enhancements, and working capital improvements, all of which contribute to the generation of free cash flow.

Speaker Change: I am proud of the work and dedication of our teams in both segments and in our corporate headquarters.

Speaker Change: We also continue to prudently deploy capital this year to high return investments for growth, further debt repayment and cash dividends to common shareholders, while we continue to strengthen the balance sheet.

Speaker Change: We are evaluating a growing list of acquisition candidates, but plan to be judicious as we evaluate leverage, strategic fit, ability to drive synergies, and timing. We reduced debt by $25 million this quarter, and again repriced our term loan in March to lower interest costs.

Thomas E. Ferguson: I am proud of the work and dedication of our teams in both segments and at our corporate headquarters. We will also continue to prudently deploy capital this year to high-return investments for growth, further debt repayment, and cash dividends to common shareholders while we continue to strengthen the balance sheet. We're evaluating a growing list of acquisition candidates but plan to be judicious as we evaluate leverage, strategic fit, ability to drive synergies, and timing. We reduced debt by $25 million this quarter and again repriced our term loan in March to lower interest costs.

Tom Ferguson: We also continue to prudently deploy capital this year to high return investments for growth, further debt repay down, and cash dividends to common shareholders, while we continue to strengthen the balance sheet. We are evaluating a growing list of acquisition candidates but plan to be judicious as we evaluate leveraged strategic fit, ability to drive synergies, and timing. We reduced that by $25 million this quarter and again reprised our term loan in March to lower interest costs.

Speaker Change: A significant company initiative this year is the completion of our new aluminum coil coating facility in Washington, Missouri. We expect to begin equipment testing in the third quarter, with plans to be operational by early in calendar year 2025.

Speaker Change: Our decision to build this facility was evaluated based on a long-term contractual customer commitment that accounts for 75% of the plant's total capacity.

Jason Crawford: A significant company initiative this year is the completion of our new aluminum coil coating facility in Washington, Missouri. We expect to begin equipment testing in the third quarter, with plans to be operational by early in calendar year 2025. Our decision to build this facility was evaluated based on a long-term contractual customer commitment that accounts for 75% of the plant's total capacity. This facility should be well-positioned to respond to the secular shift from plastic to aluminum in the beverage industry, and we are pleased to report that this important project remains on schedule.

Tom Ferguson: A significant company initiative this year is the completion of our new aluminum coil coating facility in Washington, Missouri. We expect to begin equipment testing in the third quarter with plans to be operational by early in calendar year 2020. 5. Our decision to build this facility was evaluated based on a long-term contractual customer commitment that accounts for 75 percent of the plant's total capacity. This facility should be well positioned to respond to the secular shift from plastic to aluminum in the beverage industry. And we are pleased to report that this important project remains on schedule. AZZ is recognized for its number one market position in both of our metal coated segments, with strong and growing economic modes, providing us with a significant competitive edge.

Speaker Change: This facility should be well-positioned to respond to the secular shift from plastic to aluminum in the beverage industry, and we are pleased to report that this important project remains on schedule.

Speaker Change: AZZ is recognized for its number one market position in both of our metal coating segments with strong and growing economic moats, providing us with a significant competitive edge. This business edge is built on our differentiated, highly sustainable, and environmentally friendly metal coating solutions.

Speaker Change: We bring over 65 years of technical expertise, customer-centric technologies, and strategically located facilities across North America.

Jason Crawford: AZZ is recognized for its number one market position in both of our metal coating segments with strong and growing economic moats, providing us with a significant competitive edge. This business edge is built on our differentiated, highly sustainable, and environmentally friendly metal coating solutions. We bring over 65 years of technical expertise, customer-centric technologies, and strategically located facilities across North America. Our relationships with Blue Chip customers, as well as our scale and culture of operational excellence, are crucial elements that we believe will continue to drive our future success this year and for years to come. And with that, I'll turn it over to Jason.

Speaker Change: Our relationships with Blue Chip customers, our scale and culture of operational excellence, are crucial elements that we believe will continue to drive our future success this year and for years to come. And with that, I'll turn it over to Jason.

Tom Ferguson: This business edge is built on our differentiated, highly sustainable, and environmentally friendly metal coated solutions. We bring over 65 years of technical expertise, customer-centric technologies, and strategically located facilities across North America. Our relationship with blue chip customers are scale and culture of operational excellence, and our crucial elements that we believe will continue to drive our future success this year and for years to come.

Jason Crawford: Good morning. As Tom mentioned, we reported first quarter sales of $413.2 million, compared to $390.9 million in the prior year quarter.

Jason Crawford: Total sales increased by 5.7% over the first quarter of last year, with metal coating sales up 4.7% and pre-caught metal sales up 6.5%.

Jason Crawford: I'll turn it over to Jason. Good morning. As Tom mentioned, we reported first quarter sales of $413.2 million, compared to $390.9 million in the prior year quarter. Total sales increased by 5.7 percent over the first quarter of last year, with metal coating sales up 4.7 percent and pre-caught metal sales up 6.5 percent. The first quarter's gross profit was $102.7 million, or 24.8 percent of sales, compared to $97 million, or 24.8 percent of sales in the prior year quarter. Lower zinc costs in the metal coating segment and productivity improvement in both segments helped offset wage and other inflationary headwinds, resulting in steady gross margins as compared to the prior year.

Jason Crawford: Good morning. As Tom mentioned, we reported first quarter sales of $413.2 million, compared to $390.9 million in the prior year quarter. Total sales increased by 5.7% over the first quarter of last year, with metal coating sales up 4.7% and pre-caught metal sales up 6.5%. The first quarter's gross profit was $102.7 million, or 24.8% of sales, compared to $97 million, or 24.8% of sales, in the prior year quarter. Lower zinc costs in the metal coatings segment and productivity improvement in both segments helped offset wage and other inflationary headwinds, resulting in steady gross margins as compared to the prior year.

Jason Crawford: The first quarter's gross profit was $102.7 million, or 24.8% of sales.

Jason Crawford: compared to $97 million or 24.8% of sales in the prior year quarter. Lower zinc costs in the metal coatings segment and productivity improvement in both segments helped offset wage and other inflationary headwinds, resulting in steady gross margins as compared to the prior year.

Jason Crawford: Selling general and administrative expenses were $32.9 million in the first quarter, or 8% of sales, compared to $31.5 million, or 8.1% of sales, in the prior year first quarter.

Jason Crawford: Operating income improved to $69.7 million, or 16.9% of sales, compared to $65.5 million, or 16.8% of sales in last year's first quarter.

Jason Crawford: Selling, general and administrative expenses were $32.9 million in the first quarter, or 8 percent of sales, compared to $31.5 million, or 8.1 percent of sales, in the prior year first quarter. Operating income improved to $69.7 million, or 16.9 percent of sales, compared to $65.5 million, or 16.8 percent of sales, in last year's first quarter. Interest expense of the first quarter was $22.8 million, compared to $28.7 million in the prior year. The decrease is primarily due to consistently paying down debt, and our lower-weighted average interest rates from various debt reprisings that have occurred over the last 12 months.

Jason Crawford: Selling general and administrative expenses were $32.9 million in the first quarter, or 8% of sales, compared to $31.5 million, or 8.1% of sales, in the prior year's first quarter. Operating income improved to $69.7 million, or 16.9% of sales, compared to $65.5 million, or 16.8% of sales, in last year's first quarter. Interest expense for the first quarter was $22.8 million compared to $28.7 million in the prior year. The decrease is primarily due to consistently paying down debt and our lower weighted average interest rates from various debt repricings that have occurred over the last 12 months.

Jason Crawford: Interest expense for the first quarter was $22.8 million compared to $28.7 million in the prior year. The decrease is primarily due to consistently paying down debt and our lower weighted average interest rates from various debt repricings that have occurred over the last 12 months.

Jason Crawford: Equity in earnings of unconsolidated subsidiaries for the first quarter increased to $3.8 million compared to $1.4 million for the same quarter last year. This increase is due to higher earnings from our 40% JV ownership in Avail.

Jason Crawford: Current quarter income tax expense was $11.4 million, reflecting an effective tax rate of 22.4% compared to 25.3% in the prior year quarter.

Jason Crawford: Equity and earnings of unconsolidated subsidiaries for the first quarter increased to $3.8 million, compared to $1.4 million for the same quarter last year. This increases due to higher earnings from our 40 percent JV ownership and avail. Current quarter income tax expense was $11.4 million, reflecting an effective tax rate of 22.4 percent, compared to 25.3 percent in the prior year quarter. Reported net income from the first quarter was $39.6 million, compared to $28.5 million for the prior year quarter.

Jason Crawford: Equity in earnings of unconsolidated subsidiaries for the first quarter increased to $3.8 million compared to $1.4 million for the same quarter last year. This increase is due to higher earnings from our 40% JV ownership in Avail. Current quarter income tax expense was $11.4 million, reflecting an effective tax rate of 22.4% compared to 25.3% in the prior year quarter.

Jason Crawford: Reported net income for the first quarter was $39.6 million compared to $28.5 million for the prior year quarter.

Speaker Change: As Tom mentioned, we redeemed our company's 6% Series A preferred stock on May 9th of this year.

Speaker Change: The Redemption Premium.

Speaker Change: The amount in excess of the face value of the preferred stock of $75.2 million was recorded as a dividend in our first quarter income statement.

Jason Crawford: Reported net income for the first quarter was $39.6 million compared to $28.5 million for the prior year quarter. As Tom mentioned, we redeemed our company's 6% Series A Preferred Stock on May 9th of this year. The redemption premium, the amount in excess of the face value of the Preferred Stock of $75.2 million, was recorded as a dividend in our first quarter income statement. This resulted in a gap loss to common shareholders of $36.8 million and a gap-deleted loss per share of $1.38.

Speaker Change: This resulted in a gap loss to common shareholders of $36.8 million and a gap deleted loss per share of $1.38.

Jason Crawford: As Tom mentioned, we redeemed our company's 6 percent Series A preferred stock on May 9th of this year. The redemption premium, the amount and excess of the face value of the preferred stock of $75.2 million, were recorded as a dividend in our first quarter income statement. This resulted in a gap loss to common shareholders of $36.8 million, and a gap deleted loss per share of $1.38. Since a non-gap measure for adjusted net income excludes a serious redemption premium, AZZ reported adjusted net income of $44 million or adjusted the LITDPS of $1.46. This compares very related to the prior year's adjusted net income of $33.4 million or adjusted the LITDPS of $1.14.

Speaker Change: Since our non-GAAP measure for Adjusted Net Income excludes the Serious Aid Redemption Premium, AZZ reported Adjusted Net Income of $44 million or Adjusted Deleted EPS of $1.46.

Speaker Change: This compares favourably to the prior year's adjusted net income of $33.4 million or adjusted diluted EPS of $1.14. On an adjusted basis, our earnings increased 31.9% from the first quarter of the prior fiscal year.

Jason Crawford: Since our non-GAAP measure for Adjusted Net Income excludes the Serious Aid Redemption Premium, AZZ reported Adjusted Net Income of $44 million, or Adjusted Deleted EPS of $1.46. This compares favorably to the prior year's adjusted net income of $33.4 million, or adjusted diluted EPS of $1.14. On an adjusted basis, our earnings increased 31.9% from the first quarter of the prior fiscal

Speaker Change: The timing was right to redeem the Series A preferred stock to avoid further annual increases.

Speaker Change: While the redemption resulted in a one-time redemption premium payment of $75.2 million,

Jason Crawford: On an adjusted basis, our earnings increased 31.9% from the first quarter of the prior fiscal year. The timing was right to redeem the Series A preferred stock to avoid further annual increases. While the redemption resulted in a one-time redemption premium payment of $75.2 million, the decision to redeem the Series A preferred stock during the first quarter allowed the company to avoid $14.4 million in future annual preferred stock dividends and future escalations in the redemption premium by a minimum of $36 million per year. First quarter, adjusted EBITDA was $94.1 million or 22.8% sales compared to $85.4 million or 21.8% of sales in prior year.

Speaker Change: The decision to redeem the Series A preferred stock during the first quarter allowed the company to avoid $14.4 million in future annual preferred stock dividends and future escalations in the redemption premium by a minimum of $36 million per year.

Jason Crawford: The timing was right to redeem the Series A preferred stock to avoid further annual increases. While the redemption resulted in a one-time redemption premium payment of $75.2 million, the decision to redeem the Series A preferred stock during the first quarter allowed the company to avoid $14.4 million in future annual preferred stock dividends and future escalations in the redemption premium by a minimum of $36 million per year. First quarter adjusted EBITDA was $94.1 million, or 22.8% of sales compared to $85.4 million, or 21.8% of sales in the prior year. This 100 basis point improvement and adjusted EBITDA margin were primarily driven by improved earnings and sales volume strength in both segments.

Speaker Change: First quarter adjusted EBITDA was $94.1 million or 22.8% of sales compared to $85.4 million or 21.8% of sales in the prior year.

Speaker Change: This 100 basis point improvement and adjusted EBITDA margin was primarily driven by improved earnings and sales volume strength in both segments.

Speaker Change: Turning to our financial position in balance sheet.

Speaker Change: We generated cash flow from operations of $71.9 million, which was more than 50% higher than the first quarter of the prior year.

Jason Crawford: This 100 basis point improvement and adjusted EBITDA margin was primarily driven by improved earnings and sales volume strength in both segments. Turning to our financial position and balance sheet, we generated cash flow from operations of $71.9 million, which was more than 50% higher than the first quarter of the prior year. After funding Q1 capital expenditures of $27.4 million, our free cash flow was $44.6 million.

Speaker Change: After funding Q1 capital expenditures of $27.4 million, our free cash flow was $44.6 million.

Jason Crawford: Turning to our financial position on the balance sheet, we generated cash flow from operations of 71.9 million dollars, which was more than 50% higher than the first quarter of the prior year. After funding Q1 capital expenditures of $27.4 million, our free cash flow was $44.6 million. As Tom mentioned, we're expanding our coil coating capabilities by constructing a new 25-acre aluminum coil coating facility in Washington, Missouri, which we anticipate to be operational in calendar 2025. We expect to spend approximately $63 million on the new facility this fiscal year, of which $16 million was paid in the first quarter.

Speaker Change: As Tom mentioned, we're expanding our coil coating capabilities.

Speaker Change: by constructing a new 25-acre aluminum coil coating facility in Washington, Missouri, which we anticipate to be operationally in calendar 2025.

Speaker Change: We expect to spend approximately $63 million on the new facility this fiscal year, of which $16 million was paid in the first quarter.

Jason Crawford: As Tom mentioned, we're expanding our coiloquoting capabilities by constructing a new 25-acre aluminum coiloquoting facility in Washington, Missouri, which we anticipate to be operationally in calendar 2020-25. We expect to spend approximately $63 million on the new facility this fiscal year, of which $16 million was paid in the first quarter. Our capital allocation strategy consists of investing in the business, paying down debt, returning cash to our shareholders through dividends, and evaluating potential boat-on acquisitions. During the first quarter, which ended May 31st, we reduced debt by $25 million, and we expect to pay down a total of $60 to $90 million for the 2.8 times, which compares favorably to 3.5 times 12 months ago.

Speaker Change: Our capital allocation strategy consists of investing in the business, paying down debt, returning cash to our shareholders through dividends, and evaluating potential bolt-on acquisitions.

Speaker Change: During the first quarter, which ended May 31st, we reduced debt by $25 million and we expect to pay down a total of $60 to $90 million for the full fiscal year.

Jason Crawford: Our capital allocation strategy consists of investing in the business, paying down debt, returning cash to our shareholders through dividends, and evaluating potential bolt-on acquisitions. During the first quarter, which ended May 31st, we reduced debt by $25 million, and we expect to pay down a total of $60 to $90 million for the full fiscal year. Our current trailing 12-month debt to adjusted EBITDA is 2.8 times, which compares favorably to 3.5 times 12 months ago.

Speaker Change: Our current trailing 12-month debt to adjusted EBITDA is 2.8 times, which compares favourably to 3.5 times 12 months ago.

Thomas E. Ferguson: As Tom has learned, we have delivered a public service for the past few years by generating £4.6 million from the general stock and generating $322 million, or $308.7 million from transactional services.

Speaker Change: 100% of these net proceeds from the secondary offering were used to redeem the Series A preferred stock. We believe this full redemption of the preferred stock significantly improves the company's capital structure.

Jason Crawford: As Tom touched on, we completed a secondary public offering earlier this year by issuing 4.6 million shares of common stock and raising $322 million, or $308.7 million net of transaction expenses. A hundred percent of these net proceeds from secondary offering were used to redeem the Series A Preferred Stock. We believe this full redemption of the preferred stock significantly improves the company's capital structure. At the end of the first quarter and May 31st, we continue to maintain ample liquidity and flexibility through our $400 million revolver, with no debt maturities until calendar 2027. Finally, in addition to paying down debt, during March of this year we reprised our term loan B, improving our margin from SO FAR plus 3.75% to SO FAR plus 3.25%.

Jason Crawford: As Tom touched on, we completed a secondary public offering earlier this year by issuing 4.6 million shares of common stock and raising $322 million, or $308.7 million, net of transaction expenses. 100% of the net proceeds from the secondary offering were used to redeem the Series A preferred stock. We believe this full redemption of the preferred stock significantly improves the company's capital structure. At the end of the first quarter on May 31st, we continued to maintain ample liquidity and flexibility through our $400 million revolver, with no debt maturities until calendar 2027.

Speaker Change: At the end of the first quarter on May 31st, we continued to maintain ample liquidity and flexibility through our $400 million revolver, with no debt maturities until calendar 2027.

Speaker Change: Finally, in addition to paying down debt...

Speaker Change: During March of this year, we repriced our Term 1B.

Speaker Change: Improving our margin from SOFR plus 3.75% to SOFR plus 3.25%. Our current interest rate swap agreement continues to fix our variable rate interest for a notional portion of our debt through September 30th of 2025. With that, I'd like to turn the call over to David Nark.

Jason Crawford: Finally, in addition to paying down debt, during March of this year, we repriced our term loan B, improving our margin from SOFR plus 3.75% to SOFR plus 3.25%. Our current interest rate swap agreement continues to fix our variable rate interest for a notionable portion of our debt through September 30th, 2025. With that, I'd like to turn the call over to David Nark.

David Nark: Thank you, Jason, and good morning, everyone.

David Nark: Momentum from year-end in February carried into the first quarter with strength in a number of end markets. For metal coatings, we reported record high sales driven by high single-digit volume expansion for the quarter. As Tom mentioned, we are now seeing an elevated number of public work projects related to essential industries that include bridge and highway.

Jason Crawford: Our current interest rates walk agreement continues to fix our variable rate interest for a notional portion of our debt through September 30th of 2025.

David Nark: With that, I'd like to turn the call over to David Nark. Thank you, Jason, and good morning, everyone. Momentum from year end in February carried into the first quarter with strength in a number of end markets. For metal coatings, we reported record high sales driven by high single-digit biome expansion for the quarter. As Tom mentioned, we are now seeing an elevated number of public work projects related to essential industries that include bridge and highway, construction, utility T&D, renewables, namely solar, as well as critical chip plant construction projects. We believe that the public sector has ongoing spending strength, which we expect to continue this year.

David Nark: Thank you, Jason, and good morning, everyone. Momentum from year end in February carried into the first quarter with strength in a number of end markets. For metal coatings, we reported record high sales driven by high single-digit volume expansion for the quarter. As Tom mentioned, we are now seeing an elevated number of public works projects related to essential industries that include bridge and highway, construction, utility T&D, renewables, namely solar, as well as critical chip plant construction projects. We believe that the public sector has ongoing spending strength, which we expect to continue this year.

David Nark: construction, utility T&D, renewables, namely solar, as well as critical chip plant construction projects. We believe that public sector has ongoing spending strength which we expect to continue this year.

David Nark: The pre-coat metal segment continued to perform better than the market in the first quarter.

David Nark: with total volume increases in the mid to high single-digit range. In fact, certain end markets saw significantly higher increases ranging in the high single to double-digit growth range.

David Nark: For construction, HVAC fueled by inventory build of cooling products and the implementation of a new refrigerant change.

David Nark: The pre-coat metal segment continued to perform better than the market in the first quarter, with total volume increases in the mid to high single digit range. In fact, certain end markets saw significantly higher increases, ranging in this high single to double digit growth range. For construction, HVAC fueled by inventory bill of cooling products and the implementation of a new refrigerant change and transportation based upon a rebound in the recreational vehicle market. In addition, pre-coat works on essential data center construction projects by pre-painting steel for the insulated wall panels used in modern data centers, which is a growing market for them.

David Nark: The pre-coat metal segment continued to perform better than the market in the first quarter, with total volume increases in the mid-to-high single-digit range. In fact, certain end markets saw significantly higher increases, ranging in the high single-to-double-digit growth range, for construction, HVAC, fueled by inventory build of cooling products and the implementation of a new refrigerant change, and transportation, based upon a rebound in the recreational vehicle market In addition, pre-coat works on essential data center construction projects by pre-painting steel for the insulated wall panels used in modern data centers, which is a growing market for them.

David Nark: and transportation based upon a rebound in the recreational vehicle market. In addition, Precoat works on essential data center construction projects by pre-painting steel for the insulated wall panels used in modern data centers, which is a growing market for them.

David Nark: We remain enthusiastic about public...

David Nark: sector spending and believe if interest rates soften later this year it could signal growth in private sector spending and commercial construction.

David Nark: We also expect to continue to see secular growth trends in reshoring of manufacturing, the migration to aluminum and pre-painted steel, as well as the conversion from plastics to aluminum in the beverage space that will continue to benefit our business.

David Nark: We remain enthusiastic about public sector spending and believe if interest rates soften later this year, it could signal growth in private sector spending and commercial construction. We also expect to continue to see secular growth trends in reshoring of manufacturing, the migration to aluminum and pre-painted steel, as well as the conversion from plastics to aluminum in the beverage space that will continue to benefit our business. As Tom mentioned, AZZ is the market leader in both metal coating segments and providing superior capabilities as a high value added metal coatings provider with scale, innovative coatings, technologies, and customer centric systems that have become a distinct competitive advantage.

David Nark: We remain enthusiastic about public sector spending and believe if interest rates soften later this year, it could signal growth in private sector spending and commercial construction. We also expect to continue to see secular growth trends in reshoring of manufacturing, the migration to aluminum and pre-painted steel, as well as the conversion from plastics to aluminum in the beverage space that will continue to benefit our business. As Tom mentioned, AZZ is the market leader in both metal coating segments and provides superior capabilities as a high-value-added metal coatings provider with scale, innovative coatings technologies, and customer-centric systems that have become a distinct competitive advantage.

Thomas E. Ferguson: As Tom mentioned, AZZ is the market leader in both metal coating segments and providing superior capabilities

Thomas E. Ferguson: as a high-value-add metal coatings provider with scale, innovative coatings, technologies, and customer-centric systems that have become a distinct competitive advantage.

David Nark: With high barriers to entry and few competitors, our scale and strength, as well as strategic footprint, ensures proximity and logistical cost advantages to our customers. With that, I would now like to turn it back over to Tom. Thank you, David.

Thomas E. Ferguson: As Dave mentioned, we are optimistic about our business prospects this year and appreciate that our business is typically more brisk during the peak summer construction months.

David Nark: With high barriers to entry and few competitors, our scale and strength, as well as our strategic footprint, ensures proximity and logistical cost advantages for our customers. With that, I would now like to turn it back over to Tom.

David Nark: With high barriers to entry and few competitors, our scale and strength as well as strategic footprint ensures proximity and logistical cost advantages to our customers.

Thomas E. Ferguson: We also know that hurricanes, as we saw recently with Hurricane Beryl, and macroeconomic events or changes can impact our business, so we remain prepared for choppiness should it occur.

Tom Ferguson: With that, I would now like to turn it back over to Tom. Thank you, David. As they mentioned, we are optimistic about our business prospects this year and appreciate that our business is typically more brisk during the peak summer construction months. We also know that hurricanes, as we saw recently with Hurricane Burl, and macroeconomic events or changes can impact our business, so we remain prepared for choppiness should it occur. While we don't have a crystal ball into what the economy holds the balance of this year, nor the impact of the upcoming elections, we have accomplished what we set out to do in the first quarter.

Thomas E. Ferguson: As Dave mentioned, we are optimistic about our business prospects this year and appreciate that our business is typically more brisk during the peak summer construction month. We also know that hurricanes, as we saw recently with Hurricane Beryl, and macroeconomic events or changes can impact our business, so we remain prepared for choppiness should it occur.

Thomas E. Ferguson: While we don't have a crystal ball into what the economy holds the balance of this year, nor the impact of the upcoming elections, we have accomplished what we set out to do in the first quarter.

Thomas E. Ferguson: We established new records for adjusted...

Thomas E. Ferguson: Net income for adjusted EPS and for sales. So credit to both of our segment teams and also to corporate to accomplish the redemption of our preferred shares during the same quarter.

Thomas E. Ferguson: While we don't have a crystal ball into what the economy holds for the balance of this year, nor the impact of the upcoming elections, we have accomplished what we set out to do in the first quarter. We established new records for adjusted net income, adjusted EPS, and for sales. So credit goes to both of our segment teams and also to corporate to accomplish the redemption of our preferred shares during the same quarter.

Tom Ferguson: We established new records for adjusted net income, for adjusted EPS, and for sales, so credit to both of our segment teams and also to corporate to accomplish the redemption of our preferred shares during the same quarter.

Thomas E. Ferguson: Today we are pleased to reiterate previous guidance. Our fiscal 2025 sales guidance is $1.525 to $1.625 billion, adjusted EBITDA guidance of $310 to $360 million, and adjusted EPS guidance of $4.50 to $5.

Thomas E. Ferguson: Capital expenditures for the current fiscal year are expected to remain unchanged at $100 to $120 million, including approximately $63 million related to the new Greenfield plans.

Tom Ferguson: Today, we are pleased to reiterate previous guidance. Our fiscal 2025 sales guidance is $1.525 to $1.625 billion, adjusted EBITDAG guidance of $310 to $360 million, and adjusted EPS guidance of $4.50 to $5.00. Capital expenditures for the current fiscal year are expected to remain unchanged at $100 to $120 million, including approximately $63 million related to the New Greenfield plans. The equity and earnings from our minority interest in the Avail Joint Ventures is expected to be $15 to $18 million this year, and debt pay downs are planned in the $60 to $90 million range. We are focused on paying down debt, and we'll continue to evaluate both on acquisition opportunities that are beginning to enter the pipeline.

Thomas E. Ferguson: Today, we are pleased to reiterate previous guidance. Our fiscal 2025 sales guidance is $1.525 to $1.625 billion, adjusted EBITDA guidance of $310 to $360 million, and adjusted EPS guidance of $4.50 to $5. Capital expenditures for the current fiscal year are expected to remain unchanged at $100 to $120 million, including approximately $63 million related to the new greenfield.

Thomas E. Ferguson: The equity in earnings from our minority interest in the avail joint venture is expected to be $15 to $18 million this year, and debt paydowns are planned in the $60 to $90 million range.

Thomas E. Ferguson: We are focused on paying down debt and will continue to evaluate bolt-on acquisition opportunities that are beginning to enter the pipeline.

Thomas E. Ferguson: Our long-term strategic plans include continuing to focus on growing the business organically and inorganically. We offer a highly differentiated value proposition to customers through a tolling model that positions us with fewer commodity and financial risks simply because we do not own the steel or aluminum that we coat.

Thomas E. Ferguson: The equity in earnings from our minority interest in the avail joint venture is expected to be $15 to $18 million this year, and debt paydowns are planned in the $60 to $90 million range. We're focused on paying down debt, and we'll continue to evaluate bolt-on acquisition opportunities that are beginning to enter the pipeline. Our long-term strategic plans include continuing to focus on growing the business organically and inorganically. We offer a highly differentiated value proposition to customers through a tolling model that positions us with fewer commodity and financial risks simply because we do not own the steel or aluminum that we create.

Thomas E. Ferguson: Our margin and return profiles position us well this year to continue to generate significant free cash flow and maintain adequate liquidity to grow the business while maintaining a solid balance sheet.

Tom Ferguson: Our long-term strategic plans include continuing to focus on growing the business organically and inorganically. We offer a highly differentiated value proposition to customers through a totally model that positions us with fewer commodity and financial risks, simply because we do not own the steel or aluminum that we coat. Our margin and return profile has positioned us well this year to continue to generate significant free cash flow and maintain adequate liquidity to grow the business while maintaining a solid balance sheet. This all translates into the creation of long-term value for our shareholders through our sustainable solutions. We continue to recognize that by investing in our people and relentlessly executing our strategy, we can continue to accelerate AZZ's value creation.

Thomas E. Ferguson: This all translates into the creation of long-term value for our shareholders through our sustainable solutions.

Speaker Change: We continue to recognize that by investing in our people and relentlessly executing our strategy, we can continue to accelerate AZZ's value creation. Now, would the operator please open up the call for questions?

Thomas E. Ferguson: Our margin and return profiles position us well this year to continue to generate significant free cash flow and maintain adequate liquidity to grow the business while maintaining a solid balance sheet. This all translates into the creation of long-term value for our shareholders through our sustainable solutions. We continue to recognize that by investing in our people and relentlessly executing our strategy, we can continue to accelerate AZZ's value creation. Now, would the operator please open up the call to questions? Yes, sir. We will do it now...

Speaker Change: Yes sir, we will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then 1 on your touch-tone phone.

Speaker Change: If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster.

Operator: Now, with the operator, please open up the call for questions.

Operator: Yes, sir. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2, and at this time, we'll pause momentarily to assemble our roster. And the first question will come from Lucas Pipes with B. Reilly Securities. Please go ahead.

Operator: Yes, sir. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys.

Lucas Nathaniel Pipes: Good morning. Thank you so much for taking my question.

Speaker Change: And the first question will come from Lucas Pipes with B. Reilly Securities. Please go ahead.

Operator: If at any time your question has been addressed, and you would like to withdraw your question, please press star then two, and at this time we'll pause momentarily to assemble our roster.

Lucas Nathaniel Pipes: Good morning. Thank you so much for taking my question. The first one is just on the EBITDA guidance. Q1, very solid start to the year. You're annualizing to $376 million.

Lucas Pipes: Any first question will come from Lucas Pipes with B. Riley Securities.

Speaker Change: range for the full fiscal year 310 to 360 so well well below and where you've been annualizing especially at the midpoint

Lucas Pipes: Please go ahead.

Tom Ferguson: Good morning, thank you so much for taking my question. The first one is just on the EBITDA guidance. Key one, very solid start to the year. You're annualizing to $376 million. Range for the full fiscal year, $310 to $360, so well below where you've been annualizing, especially at the midpoint. You mentioned some factors: seasonality, election, the hurricane. But to what extent are you really conservative when it comes to the rest of the fiscal year?

Lucas Nathaniel Pipes: The first one is just on the EBITDA guidance. Q1 was a very solid start to the year. You're annualizing to $376 million, the range for the full fiscal year, $310 million to $360 million. So, well below where you've been annualizing, especially at the midpoint. You mentioned some factors, seasonality, the election, the hurricane, but to what extent are you really conservative when it comes to the rest of the fiscal year? Thank you very much for your call.

Speaker Change: You mentioned...

Speaker Change: Some factors, seasonality, election, the hurricane.

Speaker Change: But to what extent are you are you really conservative when it comes to the to the rest of the fiscal year? Thank you very much for your call

Speaker Change: Lucas, I mean generally we, as you probably have seen, we tend to be conservative so, you know, we're getting back into it. We had we had updated guidance in April which was a little out of cycle and

Speaker Change: And, you know, prior to then having the offering and then finishing up the quarter, but our normal cadence would be as we finish up the second quarter to.

Tom Ferguson: Thank you very much for your calling. I mean generally, as you probably have seen, we tend to be conservative, so we're getting back into it. We had updated guidance in April, which was a little out of cycle and prior to then having the offering and then finishing up to quarter. But our normal cadence would be, as we finish up the second quarter, to look at updating guidance at that point. And that also gives us a better benchmark since we'll have finished what is typically a strong summer construction season. And the quarter is off to a good start, so we feel good about our outlook at this point.

Thomas E. Ferguson: Yeah Lucas, generally, we tend to be conservative, as you probably have seen, so we're getting back into it. We had updated guidance in April which was a little out of cycle, and prior to then having the offering and then finishing up the quarter. But our normal cadence would be as we finish up the second quarter to, you know, look at updating guidance at that point.

Speaker Change: You know, look at updating guidance at that point. And that also gives us a better benchmark since we'll have finished what is typically a strong summer construction season.

Speaker Change: and the quarter's off to a good start. So, you know, we feel good about our outlook at this point.

Speaker Change: But just a little hesitant given nothing specific, so I don't want to say that. And Hurricane Beryl, while it affected a couple of our sites, we're talking about a handful of man-days of production.

Thomas E. Ferguson: And that also gives us a better benchmark since we'll have finished what is typically a strong summer construction season and the quarter is off to a good start. So, you know, we feel good about our outlook at this point. But just a little hesitant given nothing specific. So, I don't want to say that.

Speaker Change: that was that was affected and for the most part while while our sites had lost power and I think in three sites three or four sites

Tom Ferguson: But just a little hesitant, given nothing specific, so I don't want to say that. And here it came burrow while it affected a couple of our sites. We're talking about a handful of mandates of production that was affected. And for the most part, while our sites had lost power, and I think in three sites, three or four sites, our customers did as well down in Houston. So, you know that work's still going to get done, and we'll clear that out within a few days. So, overall, the net impact is... very minor. And then the longer term, almost sadly in some cases, I'd say we do tend to pick up work after hurricanes because you just look at some of the photos of the down transmission towers and poles and docks and piers and things like that, tends to be stuff that gets galvanized.

Speaker Change: Our customers did as well, down in Houston.

Speaker Change: So, you know, that work's still going to get done, and we'll clear that out within a few days. So, overall, the net impact is...

Thomas E. Ferguson: And Hurricane Beryl, while it affected a couple of our sites, we're talking about a handful of man days of production that was affected. And for the most part, while our sites had lost power, I think in three sites, three or four sites, our customers did as well down in Houston. So, you know, that work is still going to get done, and we'll clear that out within a few days. So, overall, the net impact is, very minor, and in the longer term, almost sadly, in some cases, I'd say we do tend to pick up work after a hurricane because, you just look at some of the photos of the downed transmission towers and poles and docks and piers and things like that It tends to be stuff that gets galvanized.

Speaker Change: very minor and in the longer term you know almost sadly in some cases I'd say we do tend to pick up work after a hurricane because you just look at some of the photos of the

Speaker Change: down transmission towers and poles and docks and piers and things like that. It tends to be stuff that gets galvanized. So, you know, over the longer term, we tend to pick up work.

Speaker Change: And the economy, you know, as we showed, we had record sales in the first quarter. Our teams are striving hard, taking some market share, driving volumes. So we're confident, but we just want to get back into our normal conservative cadence of how we set guidance.

Thomas E. Ferguson: So over the longer term, we tend to pick up work. In the economy, as we showed, we had record sales in the first quarter. Our teams are striving hard, taking some market share, and driving volumes. So we're confident, but we just want to get back into our normal conservative cadence of how we set guidance.

Tom Ferguson: So, over the longer term, we tend to pick up work. And the economy, as we showed, we had record sales in the first quarter. Our teams are striving hard, taking some market share, driving volumes. So we're confident, but we just want to get back into our normal, conservative cadence of how we set guidance.

Speaker Change: That's very helpful. Thank you. And then my second question is somewhat related.

Speaker Change: On the metal coatings business, you came in at an EBITDA margin of 31%. I remember you've spoken to kind of 25 to 30% as a target.

Speaker Change: before. And so I wondered, was there anything unusual going on that margins were above kind of the

Tom Ferguson: That's very helpful. Thank you. Then my second question is somewhat related. On the metal coatings business, you came in at an EBITDA margin of 31%. I remember you've spoken to 25% to 30% as a target before. And so I wondered, was there anything unusual going on that margins were above a target range? I guess they can always go higher. Same for example, was pretty volatile. Did that have an impact in any way? I would appreciate your perspective on this.

Lucas Nathaniel Pipes: That's very helpful. Thank you.

Lucas Nathaniel Pipes: And then my second question is somewhat related. In the metal coatings business, you came in at an EBITDA margin of 31%. I remember you've spoken to kind of 25 to 30% as a target before. And so I wondered, was there anything unusual going on that the margins were above kind of the Well, the target range; I guess it can always go higher. Think, for example, was pretty volatile. Did that have an impact in any way? I would appreciate your perspective on this. Thank you.

Speaker Change: I think, for example, was pretty volatile. Did that have an impact in any way? I would appreciate your perspective on this. Thank you.

Speaker Change: Yeah, a couple of things. One, zinc didn't have much, didn't really have any impact at all.

Speaker Change: For us, the cost in our kettles is still trending down, but then it...

Speaker Change: with the higher LME Zinc cost right now, it will flip over and start to gradually head back up as the year wears on. But that's all factored into our forecast and our guidance already. I think the main thing was it shows that when our teams...

Tom Ferguson: Thank you. Yeah, a couple of things. One, zinc didn't have much; didn't really have many impact at all. It's for us, the cost in our kettles is still trending down, but then it, you know, with the higher LME zinc costs right now, it will flip over and start to gradually head back up as the year wears on. But that, you know, that's all factored into our forecast and our guidance already. I think the main thing was, it shows that when our teams get a little bit of extra volume that, and keep in mind, we have no backlog in technically, no backlog in either segment, but at least on the pre-code side, we do have some, a lot of customer steel and aluminum sitting in our warehouses and plants, but on the galvanizing side, particularly, they basically have what's on their yards.

Thomas E. Ferguson: Yeah, a couple of things. One, zinc didn't have much of an impact, didn't really have any impact at all.

Speaker Change: get a little bit of extra volume that and keep in mind we have no backlog in it technically no backlog in either segment

Speaker Change: But at least on the pre-coat side, we do have a lot of customer steel and aluminum sitting in our warehouses and plants.

Thomas E. Ferguson: For us, the cost in our kettles is still trending down, but then, you know, with the higher LME zinc costs right now, it will flip over and start to gradually head back up as the year wears on. But, you know, that's all factored into our forecast and our guidance already. I think the main thing was that it shows that when our teams get a little bit of extra volume, and keep in mind, we have no backlog, technically no backlog in either segment, but at least on the pre-coat side, we do have a lot of customer steel and aluminum sitting in our warehouses and plants.

Speaker Change: But on the galvanizing side, particularly, they basically have what's on their yards. So they're forecasting off of their sales. We've got a great sales relationship management capability and our teams do well.

Speaker Change: Picking up an extra

Thomas E. Ferguson: But on the galvanizing side, particularly, they basically have what's in their yards. So, they're forecasting off of their sales. We've got a great, you know, great sales relationship management capability, and our teams do well. So, you know, picking up an extra, you know, a little bit of extra volume.

Speaker Change: 90 bips of EBITDA margin. That's pretty much, I hate saying, it's definitely not rounding error, but you know, a little bit of volume goes a long way and they stayed focused on what they do and they maintain their value pricing philosophy.

Tom Ferguson: So they're forecasting off of their sales. You know, we've got a great, you know, great sales relationship management capability in our teams do well. So, you know, picking up an extra 90 bits of EBIT dot margin, that's pretty much, I hate saying it's definitely not rounding there, but, you know, a little bit of volume goes a long way and they stay focused on what they do and they maintain their value pricing philosophy and just the, you know, the leadership team and the plants just executed outstandingly well, and it's not that we anticipate that falls off, but after the, you know, the summer construction cycle, then it gets a little chopier as we get into the fall, and then in winter, that's when construction does sell up, whether it's public sector or private sector.

Speaker Change: and just the leadership team and the plants.

Thomas E. Ferguson: 90 bps of EBITDA margin. That's pretty much, I'd say, it's definitely not a rounding error, but a little bit of volume goes a long way, and they stayed focused on what they do, and they maintain their value pricing philosophy. And just the leadership team and the plants just executed outstandingly well, and it's not that we anticipate that falls off. But after the summer construction cycle, then it gets a little choppier as we get into the fall, and then in winter, that's when construction does slow up, whether it's public sector or private sector.

Speaker Change: just executed outstandingly well, and it's not that we anticipate that falls off.

Speaker Change: But after the summer construction cycle, then it gets a little choppier as we get into the fall. And then in winter, that's when construction does slow up, whether it's...

Speaker Change: public sector or private sector so

Speaker Change: You know, just keeping in mind, the fourth quarter gets a little bit weaker, so we tend to look at that 25 to 30 percent being a consistent target. If we do find that they continue to sustain above 30, we would naturally revisit that range, but I'm not anticipating that at this time.

Speaker Change: I really appreciate all the color to you and the team. Continue best of luck. Keep up the good work.

Thomas E. Ferguson: So just keeping in mind, the fourth quarter gets a little bit weaker, so we tend to look at that 25% to 30% being a consistent target. If we do find that they continue to sustain above 30%, we would naturally revisit that range. But I'm not anticipating that

Tom Ferguson: So, you know, that's just keeping in mind. The fourth quarter gets a little bit weaker, so we tend to look at that 25 to 30% being a consistent target. If we do find that they continue to sustain above 30, we would naturally revisit that range, but I'm not anticipating that.

Lucas Nathaniel Pipes: Thanks, Lucas.

Speaker Change: The next question will come from Stephen Volkman with Jeffries. Please go ahead.

Stephen Volkman: Hi, good morning guys. Thank you. And maybe just sort of pull on the same thread a little bit. I'm just curious, as you think about your end market exposures,

Lucas Pipes: I really appreciate all the color to you and the team. Continue to best the flock; keep up the good work.

Lucas Nathaniel Pipes: I really appreciate all the color you and the team have put in. Continue best of luck. Keep up the good work. Thanks, Lucas.

Stephen Volkman: Are there any, it doesn't sound like this, David, but are there any end markets out there that are...

Stephen Volkmann: Next question will come from Stephen Volkmann with Jeffries. Please go ahead. Hi, good morning, guys. Thank you, and maybe just sort of pull on the same thread a little bit. I'm just curious as you think about your end market exposures. Are there any, it doesn't sound like this David, but are there any end markets out there that are kind of choppy and giving you some concern for the rest of the year. Maybe there was some inventory stock or destock that we should keep in mind, just anything that we keep you kind of conservative on the top line outlook.

Stephen Volkman: The next question will come from Stephen Volkman with Jeffries. Please go ahead.

Stephen Volkman: kind of choppy and giving you some concern for the rest of the year. Maybe there was some inventory stock or destock that we should keep in mind, just anything that would keep you kind of conservative on the top line outlook.

Stephen Volkman: Hi, good morning, guys. Thank you. And maybe just sort of pull on the same thread a little bit. I'm just curious, as you think about your end market exposures, are there any, it doesn't sound like this, David, but are there any end markets out there that are kind of choppy and giving you some concern for the rest of the year? Maybe there was some inventory stock or destock that we should keep in mind, just anything that would keep you kind of conservative on the top line outlook.

Speaker Change: And a great question, as you look at our

Speaker Change: Stated end markets and and the the results we saw growth across every stated end market

Speaker Change: other than the the catch-all category of others. So kudos to the teams in both segments for for strong performance there.

Speaker Change: You know, when you look a little further into each segment, you know, we saw some choppiness here and there, some give and take, but overall, you know, we don't see anything that really worries us or brings too much concern to us across either segment.

David Nark: Great question. As you look at our stated end markets and the results, we saw growth across every stated end market other than the catch-all category of others. Kudos to the teams and both segments for strong performance there. When you look a little further into each segment, we saw some choppiness here and there, some give and take. But overall, we don't see anything that really worries us or brings too much concern to us across either segment.

David Nark: Great question. As you look at our stated end markets and the results, we saw growth across every stated end market other than the catch-all category of others. So kudos to the teams in both segments for strong performance there. But when you look a little further into each segment, we see some choppiness here and there, some give and take, but overall, we don't see anything that really worries us or brings too much concern to us across either segment.

Speaker Change: Okay, great. Thank you. And then as I sort of skimmed through the 10-Q, I saw that there was some headwind on mix. Can you just elaborate a little bit on sort of what you're seeing there?

Speaker Change: Yeah, I think again, as you look at each segment, we had some puts and takes through the quarter on mix.

Stephen Volkmann: Okay, great, thank you.

Stephen Volkman: Okay, great. Thank you. And then as I sort of skimmed through the 10-Q, I saw that there was some headwind on mix. Can you just elaborate a little bit on sort of what you're seeing there?

Speaker Change: Nothing really that jumps out at us too much as far as any kind of issues or concerns. And again, I think when you look at the overall results by both segments, they were really solid.

Stephen Volkmann: And then, as I sort of skin through the 10-Q, I saw that there was some headwind on mix.

David Nark: Can you just elaborate a little bit on sort of what you're seeing there? Yeah, I think again, as you look at each segment, we had some puts and takes through the quarter on mix. Nothing really that jumps out of us too much as far as any kind of issues or concerns. And again, I think when you look at the overall results, both by both segments, they were really solid. Yes, agreed.

David Nark: Yeah, I think, again, as you look at each segment, we had some put and takes through the quarter on mix, but nothing really that jumps out at us too much as far as any kind of issues or concerns. And, again, I think when you look at the overall results for both segments, they were really solid.

Speaker Change: Yes, agreed. Does this mix headwind continue or how do we think about forecasting that for the rest of the year?

Speaker Change: I think for, you know, mix, it can shift. I mean, our plants...

Speaker Change: with 40 particularly on the galvanizing side you've got we've got 41 different plants and so they they will chase they do a couple of different things they've got their their customers that they they focus on and then

Stephen Volkman: Yes, agreed. Does this mixed headwind continue, or how do we think about forecasting it for the rest of the year?

David Nark: Does this mix headwind continue, or how do we think about forecasting that for the rest of the year? Now, I think for, you know, mix it, it can shift. I mean, our plants with 40, particularly on the galvanizing side, we've got 41 different plants. And so they, they will chase; they do a couple of different things. They've got their, their customers that they, they focus on and then, as load shifts, they chase different segments of the market, different types of customers. So if they need load, they're going to, you know, go after structural stuff or structural stuff, close up, and they're going to chase some smaller, as I like to call soap rope and dope.

Speaker Change: As load shifts, they chase different segments of the market, different types of customers. So if they need load, they're going to, you know, go after structural stuff. Or if structural stuff slows up, then they're going to chase some smaller.

David Nark: I think for, you know, mix, it can shift. I mean, our plants with 40, particularly on the galvanizing side, you've got, we've got 41 different plants and so you know they will chase, they do a couple of different things. They've got their customers that they focus on, and then as load shifts, they chase different segments of the market, different types of customers. So if they need load, they're going to, you know, go after structural stuff, or if structural stuff slows up, then they're going to chase some smaller, as I like to call SOPR Open Dope.

Speaker Change: as I like to call soap, rope, and dope. So that can move, but it's not anything I'd say we typically forecast. It's just as we see it, then, you know, we can use it to explain what happened. But looking forward, I don't—I wouldn't say that we're—

Speaker Change: Beyond maybe a weekly, monthly basis, it's not something that we have a lot of forecasting detail about. So, we're anticipating normal mix going forward and continued good execution.

David Nark: So that could move, but it's not anything I'd say we typically forecast. It's just as we see it, then, you know, we can use it to explain what happened, but looking forward, I don't, I wouldn't say that we're beyond maybe a weekly, monthly basis. It's not something that we have a lot of forecasting detail about. So we're anticipating normal mix going forward and continue good execution.

David Nark: So that can move, but it's not something I'd say we typically forecast. It's just as we see it, then we can use it to explain what happened. But looking forward, I wouldn't say that we're, beyond maybe a weekly, monthly basis, it's not something that we have a lot of forecasting detail about. So we're anticipating a normal mix going forward and continued good execution.

Speaker Change: All right. I appreciate it. Thank you.

Speaker Change: The next question will come from Mark Reichman with Noble Capital Markets. Please go ahead.

Mark Reichman: Yes, well, sales were up in both business segments. It looked like, you know, the average selling price was...

Stephen Volkmann: All right, I appreciate it.

Stephen Volkman: All right, I will appreciate it. Thank you.

Stephen Volkmann: Thank you.

Mark Reichman: So I was just wondering, you know, to follow up on that last question, what's your outlook for pricing? Will it be, will the results be more volume driven or do you expect kind of a change in the mix that might help the prices going forward?

Mark Reichman: The next question will come from Mark Reichman with Noble Capital Markets. Please go ahead.

Mark Reichman: The next question will come from Mark Reichman with Noble Capital Markets. Please go ahead. Yes, well, sales were up in both business segments. It looked like you had the average. selling price was down in metals coding due to the product mix and the average price was flat and pre-toed metals. So I was just wondering, you know, to follow up on that last question, what's your outlook for pricing? Will it be, will the results be more volume driven, or do you expect kind of a change in the mix that might help the prices going forward? I think we're generally seeing so a couple of things, as even though we've tried to separate zinc costs from our pricing models.

Mark Reichman: Yes, while sales were up in both business segments, it looked like the average selling price was down in metal coating due to the product mix, and the average price was flat in pre-coat metals. So I was just wondering, you know, to follow up on that last question, what's your outlook for pricing? Will it be, will the results be more volume driven, or do you expect some kind of change in the mix that might help the prices going forward?

Mark Reichman: I think we're generally seeing, so a couple of things, as even though we've tried to separate zinc costs from our pricing models, the reality is when zinc starts to trend up as it has been on the LME, it makes it easier to hold price.

Mark Reichman: So...

Mark Reichman: Because customers are expecting it. They know it's a significant part of our cost of goods sold.

Thomas E. Ferguson: I think we're generally seeing a couple of things, as even though we've tried to separate zinc cost from our pricing models, the reality is that when zinc starts to trend up, as it has been on the LME, it makes it easier to hold prices because customers are expecting it. They see, they know it's a significant part of our cost of goods sold. So I'd say as we look forward, it actually gets a little bit easier.

Mark Reichman: So I'd say as we look forward, it actually gets a little bit easier. You know, part of the problem of being a public company, we do talk about how the zinc cost is moving in our kettles, and as we talk about it going down in our kettles.

Mark Reichman: The reality is when zinc starts to trend up as it has been on the LME, it makes it easier to hold price. So, you know, because customers are expecting it. They see; they know it's a significant part of our cost of goods sold. So I'd say, as we look forward, it actually gets a little bit easier. You know, part of the problem of being a public company, we do talk about how the zinc cost is moving in our kettles, and this we talk about it going down in our kettles. Customers are going to ask, so, you know, why is your price going down to?

Mark Reichman: Customers are going to ask, so, you know, why is your price going down too?

Mark Reichman: You know, it's good to see this flip over a little bit and head back up. And like I said, we try to sell on the value-add. We sell, you know, multiple services beyond just the hot-dip galvanizing itself.

Thomas E. Ferguson: You know, part of the problem of being a public company is that we talk about how the zinc cost is moving in our kettles. And as we talk about it going down in our kettles, customers are going to ask, "So, you know, why is your price going down too?" So, you know, it's good to see this flip over a little bit and head back up.

Mark Reichman: and that includes transportation. So there's a lot of things that affect mix.

Mark Reichman: But generally, I think we see prices holding as we look forward, supported by the fact that we still have inflation on virtually everything, from wages to...

Tom Ferguson: So, you know, it's good to see this flip over a little bit and head back up. And like I said, we try to sell on the value add. We sell, you know, multiple services that go beyond just the hot dip galvanizing itself. This includes transportation. So there's a lot of things that affect mix. But generally, I think we see prices holding this as we look forward, supported by the fact that we still have inflation on virtually everything from wages to our acid energy; you name it. And like I said, was zinc costs going up, and that usually kind of bodes well for our ability to continue to drive and deliver value pricing.

Thomas E. Ferguson: And like I said, we try to sell on the value add. We sell, you know, multiple services that go beyond just the hot dip galvanizing itself. And that includes transportation. So there's a lot of things that affect the mix. But generally, I think we see prices holding as we look forward, supported by the fact that we still have inflation on virtually everything from wages to our acid energy, you name it. And like I said, with zinc cost going up, then that usually kind of bodes well for our ability to continue to drive and deliver value prices.

Mark Reichman: Our acid, energy, you name it, and like I said, with zinc cost going up, that usually kind of bodes well for our ability to continue to drive and deliver value pricing.

Speaker Change: The second question is, you've got to take our pay contract for 75% of the output of the Washington, Missouri facility, and I guess that's what, $50 to $60 million of annual revenue. Do you expect to sign additional contracts before the facility is completed?

Speaker Change: I think that's possible. We've got other customers already, so this is not a new process for us. We actually have another plant in St. Louis that runs similar things, just on a smaller scale.

Thomas E. Ferguson: The second question is, you've got to take our pay contract for 75% of the output of the Washington, Missouri facility, and I guess that's what, $50 to $60 million in annual revenue. Do you expect to sign additional contracts before the facility is completed?

Mark Reichman: The second question is you've got to take a paid contract for 75% of the output of the Washington, Missouri facility. And I guess that's what 50 to 60 million of annual revenue. Do you expect to sign additional contracts before the facility is completed? You know, I think they're that's possible. We've we've got other other customers already. So it, you know, this is not a new process for us. We actually have another plant in St. Louis that runs similar things just on a smaller with smaller capacity. So speak. So we, you know, we're we're balancing. We're going to balance capacity and load as we ramp up, and the key thing for us is to ramp up the quality and the capabilities effectively.

Speaker Change: with smaller capacity so to speak.

Speaker Change: So, you know, we're balancing, we're going to balance capacity and load.

Thomas E. Ferguson: You know, I think that's possible. We've got other customers already. So this is not a new process for us. We actually have another plant in St. Louis that runs similar things just on a smaller scale with smaller capacity, so to speak.

Speaker Change: as we ramp up, and the key thing for us is to ramp up the quality and the capabilities effectively.

Speaker Change: So we will be looking for other customers, but keep in mind, we already do business with most of them. And so as we look and feel confident with it, we can move some of the demand.

Thomas E. Ferguson: So we're going to balance capacity and load as we ramp up, and the key thing for us is to ramp up the quality and the capabilities effectively. So we will be looking for other customers, but keep in mind we already do business with most of them. And so as we look at it and feel confident with it, we can move some of the demand and give us those opportunities. In this case, the reason for the contract was just given the amount of the investment.

Speaker Change: and give us those opportunities. In this case, the reason for the contract was just given the amount of the investment. Typically, our contracts are probably a little bit looser than this one, so to speak.

Tom Ferguson: So we will be looking for other customers, but keep in mind we already do business with most of them. And so, as we look to and feel confident with it, we can we can move some of the demand and give us those opportunities. In this case, the reason for the contract was just given the amount of the investment. Typically, our contracts are probably a little bit looser than this one, so to speak, but yeah, we'll be looking to get other customers to put some business in there so that we can run run that effectively. And it is a, you know, new state-of-the-art line.

Speaker Change: But yeah, we'll be looking to get other customers to put some business in there so that we can run that effectively. And it is a new state-of-the-art line, so we anticipate being run very effectively, efficiently, and cost-effectively too.

Thomas E. Ferguson: Typically, our contracts are probably a little bit looser than this one, so to speak. But yeah, we'll be looking to get other customers to put some business in there so that we can run that effectively. And it is, you know, a new, state-of-the-art line. So we anticipate it being run very effectively, efficiently, and cost-effectively.

Speaker Change: That's very helpful. Thank you. Much appreciated.

Speaker Change: The next question will come from Kevin Ganey with Thompson Davis. Please go ahead.

Kevin Ganey: Good morning, gentlemen. Congrats on the great quarter.

Tom Ferguson: So we anticipate being run very effectively, very effectively, efficiently, and cost effectively too.

Kevin Ganey: Thanks.

Kevin Ganey: Maybe if we can start on pre-COVID margins. They were flat year over year. Is it more of like a one-quarter phenomenon or are you guys...

Mark Reichman: That's very helpful. Thank you. It is much appreciated.

Mark Reichman: That's very helpful. Thank you. Thank you very much for much appreciated.

Kevin Gainey: The next question will come from Kevin Gainey with Thompson Davis. Please go ahead. Good morning, gentlemen. Congrats on the great quarter. Maybe if we can start on pre-coat margins, they were flat year ago year. Is it more of a like a one quarter phenomenon, or are you guys? What do you guys think of for the balance of the year there? And then maybe how you see that over the longer term? Is there still opportunity to push those up? Yeah, there's still opportunities and a couple of things. One, the customer inventories in our plants has increased, which says at some point we're going to run that and paint it.

Kevin Ganey: The next question will come from Kevin Ganey with Thompson Davis. Please go ahead.

Kevin Ganey: What are you guys thinking for the balance of the year there, and then maybe how you see that over the longer term? Is there still opportunity to push those up?

Kevin Ganey: Good morning, gentlemen. Uh, congrats on the great job.

Kevin Ganey: Thanks. Bye.

Kevin Ganey: Maybe if we can start on pre-COVID margins, they were flat year over year. Is it more of a one-quarter phenomenon, or are you guys... What are you guys thinking for the balance of the year there and then maybe how you see that over the longer term? Is there still opportunity to push those up?

Speaker Change: Yeah, there's still opportunities and a couple of things. One, the...

Speaker Change: The customer inventory in our plants has increased, which says at some point we're going to run that and paint it.

Speaker Change: So, you know, that tends to give us some confidence on the volume side of it. And as we can sustain the volumes, then we'll sustain those above 20% margins. There's other opportunities too, I think.

Thomas E. Ferguson: Yeah, there's still opportunities and a couple of things. One, the customer inventories in our plants have increased, which says that at some point, we're going to run that and paint it. So, you know, that tends to give us some confidence on the volume side of things. And as long as we can sustain the volumes, then we'll sustain those above 20% margins. There are other opportunities, too. You know, both segment teams focus on operational excellence, driving outstanding quality.

Speaker Change: You know both both segment teams

Speaker Change: focus on operational excellence, driving outstanding quality and I'd say on the pre-code side we've got, you know, across the fleet of plants and 15 lines.

Kevin Gainey: So that tends to give us some confidence on the volume side of it. And as we can sustain the volumes, then we'll sustain those above 20% margins. There's other opportunities too. I think both segment teams focus on operational excellence, driving, and outstanding quality. And I'd say, on the pre-code side, we've got across the fleet of plants and 15 lines. We're going to have opportunities to improve quality, improve productivity, drive on three-foot. So those are obvious things. I think that when you think about some of the distractions as you go back to fourth quarter last year, where we had too much customer inventory and it got in the way of our productivity, we're not going to allow that to happen again.

Speaker Change: We're going to have opportunities to improve quality, improve productivity, drive on throughput.

Speaker Change: So those are all these things I think that when you think about some of the distractions as you go back to

Thomas E. Ferguson: And I'd say on the precode side, we've got, you know, across the fleet of plants and 15 lines, we're going to have opportunities to, you know, improve quality, improve productivity, and drive throughput. So those are obvious things. I think that when you think about some of the distractions as you go back to the fourth quarter last year, where we had too much customer inventory and it got in the way of our productivity, we're not gonna allow that to happen again. So I think the 20% range is something we'd like to hold and continue to move towards the higher end of the 22%.

Speaker Change: [inaudible]

Speaker Change: That sounds good. And then maybe, welcome to the call, Jason. I'll give you this chance here. How are you guys thinking about being able to generate cash from working capital as the year progresses?

Kevin Gainey: So I think the 20% range is something we'd like to hold and continue to move towards the higher end of the 22% in the range. That sounds good.

Jason Crawford: Yeah, I think if you look at our last prior fiscal year, we really made a step change improvement in working capital. I think this year, if you look at our projections, then we're not necessarily projecting any...

Jason Crawford: That sounds good. And then maybe, welcome to the call, Jason. I'll give you this chance here. Cash flow. How are you guys thinking about being able to generate cash from working capital as the year progresses?

Kevin Gainey: And then maybe welcome to the call, Jason.

Jason Crawford: I'll give you this chance here. How are you guys thinking about being able to generate cash from working capital as the year progresses? I think if you look at our last prior fiscal year, we really made a step change improvement in working capital.

Jason Crawford: step change. There's always opportunity but you know really a focus is more operationally and driving cash from there so anything that we pick up from working capital will be above and beyond that but it's certainly not a number one focus given where we sit with our inventory levels and our you know our

Jason Crawford: I think this year, if you look at our projections, then we're not necessarily projecting any step change. There's always opportunity, but really a focus is more operational in driving cash from there. So anything that we pick up from working capital will be above and beyond that. But it's certainly not a number one focus given where we sit with our inventory levels and our other constituents within that working capital bracket. I appreciate that.

Jason Crawford: and other constituents within that working capital bracket.

Speaker Change: I appreciate that color. And then, just to squeeze one more in, because you guys brought it up.

Speaker Change: Maybe if you could talk about the data center opportunity for pre-code and if there's anything else you guys can give on that.

Jason Crawford: One focus given where we sit with our inventory levels and our other constituents within that working capital bracket.

Kevin Ganey: Yeah, just a little bit on that, Kevin. You know, the data center market obviously is a large and growing market in the U.S. and has been. The pre-code business in particular has a customer

Kevin Ganey: I appreciate that color, and then just to squeeze one more in because you guys brought it up. Maybe if you could talk about the data center opportunity for pre-code and if there's anything else you guys can give on that.

Kevin Gainey: And then just to squeeze one more in, because you guys brought it up, maybe if you can talk about the data center opportunity for pre-code and if there's anything else you guys can give on that. Just a little bit on that, Kevin. You know, the data center market obviously is a large and growing market in the U.S. and has been the pre-code business. In particular, it has a customer where they're supplying pre-painted steel to them, and that customer makes a sandwich insulated wall that is being used in a lot of that market. So it's a small but growing area for them.

Kevin Ganey: where they're supplying pre-painted steel to them and that customer makes a sandwiched insulated.

David Nark: Yeah, just a little bit on that, Kevin. You know, the data center market is obviously a large and growing market in the U.S., and has been for some time. The pre-coat business, in particular, has a customer where they're supplying pre-painted steel to them, and that customer makes a sandwiched insulated wall that is being used in a lot of that market. So it's a small but growing area for them. It's an initiative that they're focused on, and, you know, we're optimistic about the future for that.

Kevin Ganey: Wall that is being used in a lot of that market. So it's a it's a small but growing area for them. It's an initiative that they're focused on and you know we're opportunistic about the future for that. Yeah I'd like to add too you know even though

Speaker Change: and AIS, which we sold the majority of, but a lot of that was electrical, well, five of the facilities produced electrical enclosures and the skins on those enclosures were actually not pre-painted, so

Tom Ferguson: It's an initiative that they're focused on, and we're opportunistic about the future for that.

Speaker Change: That alone, the manufacturers that fabricate the enclosures that quite often form the basis or foundation of a data center,

Tom Ferguson: Yeah, I'd like to add to even them. into AIS, which we saw the majority of, but a lot of that was electrical. Well, five of the facilities produced electrical enclosures, and the skins on those enclosures were actually not pre-painted. So that alone, the manufacturers that fabricate the enclosures that quite often form the basis or foundation of a data center farm, so to speak, is opportunities. So there's lots of opportunities for us to continue to convert post-paint type things, in this case, the electrical enclosures themselves, to pre-paint. So that's what the sales teams focus on and trying to just get customers to understand.

Thomas E. Ferguson: Yeah, and I'd like to add too, you know, even though AIS, which we sold the majority of, but a lot of that was electrical, well, five of the facilities produced electrical enclosures, and the skins on those enclosures were actually not pre-painted, so. That alone, the manufacturers that fabricate the enclosures that quite often form the basis or foundation of a data center farm, so to speak, is an opportunity. So there are lots of opportunities for us to continue to convert post-paint type things, in this case, the electrical enclosures themselves, to pre-paint.

Speaker Change: Farm, so to speak, is opportunity. So there's there's lots of opportunities for us to continue to convert post-paint type things.

Speaker Change: In this case, the electrical enclosures themselves to pre-paint.

Speaker Change: You know, that's what the sales teams focus on in trying to just get customers to understand.

Speaker Change: We're going to capture 99.9% of the emissions, and we're going to do it far more efficiently, far more effectively, and at a great cost. So that's what we like to pitch, and it's what gets us excited. We have started doing some of that for now the avail side.

Thomas E. Ferguson: So, you know, that's what the sales teams focus on in trying to just get customers to understand. We're going to capture 99.9% of the emissions, and we're going to do it far more efficiently, far more effectively, and at a great cost. So that's what we like to pitch, and it's what gets us excited. We have started doing some of that on the availability side.

Speaker Change: Yeah, that sounds great. Looking forward to it. Appreciate that.

Kevin Gainey: We're going to capture 99.9% of the emissions, and we're going to do it far more efficiently, far more effectively, and at a great cost. So that's what we like to pitch, and it's what gets us excited. We have started doing some of that for now the avail side. Yeah, that sounds great. Looking forward to it. Appreciate the questions.

Speaker Change: Appreciate the questions.

Speaker Change: The next question will come from John Braatz with Kansas City Capitol. Please go ahead.

Jonathan Paul Braatz: Good morning everyone. Tom, a question for you, you know, broadly speaking, can you talk a little bit about the trend towards pre-coated steel?

Kevin Ganey: Yeah, that sounds great. I'm looking forward to it. I appreciate that.

Jonathan Paul Braatz: and talk about it relative to where, what you were thinking back when you acquired PreQuote and maybe where you think it is today. Is the trend accelerating the same? Can you talk a little bit about that?

Jonathan Paul Braatz: The next question will come from John Braatz with Kansas City Capital. Please go ahead.

John Bratz: The next question will come from John Bratz with Kansas City Capitol. Please go ahead. Good morning, everyone. Tom, a question for you. You know, broadly speaking, can you talk a little bit about the trend towards pre-coded steel, and talk about relative to where what you were thinking back when you acquired Pre-Cote and maybe where you think it is today, is the trend accelerating the same. Can you talk a little bit about that? Yeah, I think a lot of it. The trend is tracking pretty much to how we had modeled it, I think. But what we're finding is more opportunities as we have a strong balance sheet, and we have access to cash.

Jonathan Paul Braatz: Good morning, everyone. Tom, I have a question for you.

Thomas E. Ferguson: Broadly speaking, can you talk a little bit about the trend toward pre-coated steel and talk about it relative to what you were thinking back when you acquired pre-coat and maybe where you think it is today. Is the trend accelerating the same? Can you talk a little bit about that?

Jonathan Paul Braatz: Yeah, I think a lot of it, the trend is...

Jonathan Paul Braatz: tracking pretty much to how we had modeled it I think.

Jonathan Paul Braatz: What we're finding is more opportunities.

Jonathan Paul Braatz: as we

Jonathan Paul Braatz: You know, we have a strong balance sheet and we have access to cash, but working with customers to...

Thomas E. Ferguson: Yeah, I think a lot of it is tracking pretty much to how we had modeled it. What we're finding is more opportunities as we have a strong balance sheet and we have access to cash, but working with customers to get them to get out of maybe their coal paint lines and things like that, we're seeing opportunities that are probably more than we thought. They do take longer to convert, but there's just a good, strong list of those opportunities. And then on the aluminum side, that's probably been a little bit slower than we anticipated, but we do see that conversion. I'm sitting here drinking water out of a painted metal can myself.

Jonathan Paul Braatz: to get them to get out of maybe their coal paint lines and things like that. We're seeing opportunities that probably more than we thought. They do take longer to convert.

Tom Ferguson: But working with customers to get them to get out of maybe their coal paint lines and things like that, we're seeing opportunities that probably more than we thought. They do take longer to convert. But, you know, there's just a good strong list of those opportunities. And then on the aluminum side, that's probably been actually a little bit slower than we anticipated, but we do see that conversion. I'm sitting here drinking water out of a painted metal can myself. So, you know, those things are happening. And so on one hand, we've got things moving faster; on the other hand.

Speaker Change: and a painted metal can myself.

Speaker Change: So, you know, those things are happening, and so on one hand, we've got things moving faster. On the other hand, we've got some things moving a little bit slower.

Speaker Change: Overall, though, the record sales track into ahead of our models from that perspective.

Speaker Change: And then the margin profile, they're kind of dead center on what we had hoped for.

Thomas E. Ferguson: So those things are happening. And so, on the one hand, we've got things moving faster. On the other hand, we've got some things moving a little bit slower. So overall, though, the record sales track ahead of our models from that perspective. And then the margin profile, they're kind of dead center on what we had hoped for. So, very, very positive overall. And I think what we're seeing with the sales teams is the ability to focus on these conversions.

Speaker Change: So, very, very positive overall. And I think what we're seeing with the sales teams is the ability to focus on these conversions.

Tom Ferguson: We've got some things moving a little bit slower. So, overall though, the record sales tracking to ahead of our models from that perspective. And then the margin profile, they're kind of dead center on what we had hoped for. So, very, very positive overall. And I think what we're seeing with the sales teams is the ability to focus on these conversions. And as we read the weekly reports, you know, we're winning a lot of battles, and we hope that would continue. On the macro side, I think we still have to do a better job on the macro side of getting customers to understand the benefits of pre-paint versus post-paint.

Speaker Change: And as we read the weekly reports, you know, we're winning a lot of battles and we hope that would continue.

Speaker Change: On the macro side, I think we still have to do a better job on the macro side.

Speaker Change: of getting customers to understand the benefits of pre-paint versus post-paint. So, that's work that's ongoing in the associations that we belong to, as well as with our own sales teams. So, I'd like to say we're still early innings on this conversion opportunity.

Thomas E. Ferguson: And as we read the weekly reports, we're winning a lot of battles and would hope that would continue. On the macro side, I think we still have to do a better job on the macro side of getting customers to understand the benefits of pre-paint versus post-paint. So that's work that's ongoing in the associations that we belong to, as well as with our own sales teams. So I'd like to say we're still in the early innings on this conversion opportunity.

Speaker Change: Okay, thank you. And secondly, in the press release, you use the term, I haven't seen this before,

Speaker Change: Improved zinc productivity. I don't think you're trying to imply that you're using less zinc in your galvanizing operations, but what is zinc productivity improvement?

Tom Ferguson: So, that's work that's ongoing in the associations that we belong to, as well as with our own sales teams. So, I'd like to say we're still early innings on this conversion opportunity.

John Bratz: Okay, thank you.

Thomas E. Ferguson: Okay, thank you. And secondly, in the press release, you used the term, I haven't seen this before, improved zinc productivity. I don't think you're trying to imply that you're using less zinc in your galvanizing operations, but what is zinc productivity improvement?

Speaker Change: Yeah, zinc productivity, so we track this, it's one of our key operating metrics. You know, the idea is you want to put just enough zinc on the metal to protect it perfectly, but not too much zinc so that you're layering it on.

John Bratz: And secondly, in the press release, I haven't seen this before. Improved zinc productivity. I don't think you're trying to imply that using less zinc in your galvanized operations.

Tom Ferguson: But what is zinc productivity improvement? Yeah, zinc productivity. So we track this. It's one of our key operating metrics. You know, the idea is you want to put just enough zinc on the metal to protect it perfectly, but not too much zinc so that you're layering it on, which also affects the appearance. So for us, that zinc productivity is just how effectively we utilize the zinc per pound. Or so to speak. So it is how effectively we can apply it. Tools like digital galvanizing system have made us operationally more efficient, more effective. We still have outstanding experience kettle operators that do this, you know, as I call it, to do it as a day job and make it look easy, but it's not.

Speaker Change: which also affects the appearance. So for us, that zinc productivity is just how effectively we utilize the zinc per pound.

Thomas E. Ferguson: Yeah, zinc productivity. We track this. It's one of our key operating metrics.

Thomas E. Ferguson: You know, the idea is you want to put just enough zinc on the metal to protect it perfectly, but not too much zinc so that you're layering it on, which also affects the appearance. So, for us, zinc productivity is just how effectively we utilize the zinc per pound, so to speak. It's how effectively we can apply it. Tools like the digital galvanizing system have made us operationally more efficient, more effective.

Speaker Change: So to speak, so So it is it's how effectively we can apply it tools like digital galvanizing system have made us Operationally more efficient more effective. We still have outstanding Experienced kettle operators that

Speaker Change: that do this, you know, as I call it, do it as a day job and make it look easy, but it's not. So that's a key measurement for us and something that technically we're using.

Thomas E. Ferguson: We still have outstanding, experienced kettle operators that do this, you know, as I call it, do it as a day job and make it look easy, but it's not. So, that's a key measurement for us and something that, technically, we're using. We're trying to use the optimum amount of zinc to provide outstanding quality, not have any rework, but not clump a bunch of zinc on the fabrication.

Speaker Change: We're trying to use the optimum amount of zinc to provide outstanding quality, not have any rework, but not clump a bunch of zinc on the fabrication. Is that making a big difference in the margins?

Tom Ferguson: So that's a key key measurement for us and something that technically we're using the we're trying to use the optimal amount of zinc to provide outstanding quality, not having a rework, but not bump a bunch of zinc on the fabrication. Is that making a big difference in the margins? The improvement in the margins, how much is that help? You know, it's it's it's a decent and it's got a decent impact. You know, I don't want to give out too much competitive information. We do have some good competitors on this call, but.

Speaker Change: The improvement in the margins, how much does that help?

Speaker Change: You know, it's...

Speaker Change: It's a decent, you know, it's got a decent impact. You know, I don't want to give out too much competitive information. We do have some competitors on this call, but...

Thomas E. Ferguson: Is that making a big difference in the margins, the improvement in the margins? How much does that help? You know, it's...

Speaker Change: Pardon me, it seems that our speaker line has dropped. Please stay connected while we reconnect.

Thomas E. Ferguson: It's a decent call, you know, it's got a decent impact. You know, I don't want to give out too much competitive information. We do have some competitors on this call, but

Operator: Pardon me, it seems that our speaker line has dropped. Please, they connect it while we reconnect.

Operator: Pardon me. It seems that our speaker line has dropped. Please stay connected while we reconnect.

Operator: ?? ??

Speaker Change: ?? ?? ?? ?? ??

Operator: David Nark, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, David Nark, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson Hey, thanks, John.

Speaker Change: Pardon me, our speaker line has reconnected. The floor is yours.

Speaker Change: Yeah, let's go ahead and, if we can operator, jump to the next individual in the queue. That next question will come from Mr. John Franzreb with Sidotian Company. Please go ahead.

Operator: Pardon me, our speaker line has reconnected. The floor is yours.

Speaker Change: Oh yes, all my questions have been answered. Thank you.

Speaker Change: Hey, thanks, John . We're sorry for the disruption. We lost phone service here. No worries. Okay. Thank you.

Operator: Yeah, let's go ahead, and if we cannot write or jump to the next individual, that next question will come from

Speaker Change: As there are no more questions, I would like to pass the call over to Mr. Thom Ferguson for any closing remarks.

John Edward Franzreb: That next question will come from Mr. John Franzreb with the Sidotian Company. Please go ahead.

Thomas E. Ferguson: Thank you, operator. And thank you all for your time. Sorry for the phone disruption, but I look forward to updating you at the end of our second quarter, which will just be in a couple of months. So, thank you all and have a great day.

John Edward Franzreb: Oh yes, all my questions have been answered. Thank you.

John Edward Franzreb: Hey, thanks John. We're sorry for the disruption. We lost phone service here.

Tom Ferguson: We're sorry for the disruption; we lost phone service here.

John Edward Franzreb: No worries. Okay. Thank you.

Tom Ferguson: Thank you.

Tom Ferguson: As there are no more questions, I would like to pass the call over to Mr. Thomas Ferguson for any closing remarks. Thank you, operator. And thank you all for your time. Sorry for the phone disruption that I look forward to updating you at the end of our second quarter, which will just be in a couple of months.

Thomas E. Ferguson: As there are no more questions, I would like to pass the call over to Mr. Tom Ferguson for any closing remarks.

Thomas E. Ferguson: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: [inaudible] John Ossoff Joseph Wffey Daniel Hoffman Philip Deborough John assim Joseph Wffey Daniel Hoffman Joseph Wffey Daniel Ossoff Joseph Wffey Daniel Ossoff Joseph Wffey Daniel Ossoff Joseph Wffey

Thomas E. Ferguson: And thank you for your time. Sorry for the phone disruption. I look forward to updating you at the end of our second quarter, which will just be in a couple of months.

Operator: So, thank you, and have a great day. The conference is now concluded. Thank you for attending today's presentation.

Tom Ferguson: So thank you all for having a great day.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: BF-WATCH TV 2021

David Nark: David Nark, David Nark, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson, Thomas Ferguson