Q1 2026 AZZ Inc Earnings Call
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Operator: Please note, this event is being recorded.
Good morning, and welcome to the Azz. First quarter fiscal 2026 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then 1 on your telephone keypad to withdraw your question. Please press star then 2
Sandy Martin: I would now like to turn the conference over to Sandy Martin of Three Part Advisors. Please go ahead.
Speaker Change: Please note this event is being recorded, I would now like to turn the conference over to Sandy Martin of 3-part advisors. Please go ahead.
Tom Ferguson: Good morning, everyone, and thank you for joining us today to review AZZ's first quarter fiscal 2026 results for the period ended May 31st, 2025.
Tom Ferguson: Joining the call today are Tom Ferguson, President and Chief Executive Officer, Jason Crawford, Chief Financial Officer, and David Nark, Chief Marketing, Communications, and Investor Relations Officer. After today's prepared remarks, we will open the call for questions. Please note that the live webcast for today's call can be found at www.azz.com slash investor dash event.
Good morning, everyone. And thank you for joining us today to review, az's first quarter fiscal 2026 results for the period ended May 31st 2025.
Tom Ferguson: 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 the company's control. Except for actual results, AZZ's 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 latest annual report on Form 10-K.
Joining the call today are Tom Ferguson, president and Chief Executive Officer, Jason Crawford Chief Financial Officer and David narc, Chief marketing Communications and investor relations officer. After today's prepared remarks, we will open the call for questions. Please note that the live webcast for today's call can be found at www.as.com investor-supplied
Tom Ferguson: 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.
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 the company's control except for actual results. Az's comments, containing forward-looking statements may involve risks and uncertainties some of which are detailed from time to time in documents filed by as with the Securities and Exchange Commission, including the latest annual report on form 10K. These statements are not guarantees of future performance. Therefore, undue Reliance should not be placed upon them. Actual results could differ materially from these.
Tom Ferguson: In addition, today's call will discuss non-GAAP financial measures, which should be considered supplemental to and not a substitute for GAAP financial measures. We refer our shareholders to our reconciliations from GAAP to non-GAAP measures, and those are contained in today's earnings press release.
Tom Ferguson: I would now like to turn the call over to Tom Ferguson. Thank you, Sandy.
Speaker Change: These expectations. In addition, today's call will discuss non-gaap Financial measures which should be considered supplemental to and not a substitute for gaap financial measures. We refer our shareholders, to our reconciliations, from gaap to non-gaap measures. And those are contained. In today's earnings, press release, I would now like to turn the call over to Tom Ferguson.
Tom Ferguson: First, we at AZZ send our condolences to the families affected by the flash flooding throughout Central Texas. Having grown up in Austin, I've river-rafted the Guadalupe and camped along the banks often in my younger years, so I have a special place in my heart for folks affected throughout Central Texas. including friends and family.
Speaker Change: Thank you, Sandy.
First, we at as send our condolences to the families affected by the flash flooding throughout Central, Texas, having grown up in Austin. I River rafted the guadaloop and camped along the banks often in my younger years. So I have a special place in my heart for folks affected throughout Central Texas.
Speaker Change: Including friends and family.
Tom Ferguson: We are pleased to share our first quarter results. Today, we reported record high sales adjusted EBITDA and EPS for the quarter ended May 31st, 2025. along with industry-leading adjusted EBITDA margins of 32.9% for metal coatings and 20.7% for pre-coated metal. These positive operating results were driven by infrastructure-related demand and key markets for our metal coating segment, including construction, industrial, and electrical transmission and distribution. Similarly, our pre-code metal segment experienced growth in construction, our largest market sector, as well as in the aluminum container market.
We are pleased to share our first quarter results. Today, we reported record high sales adjusted, ebit Dot, and EPS for the quarter ended May 31st 2025
Speaker Change: Along with industry-leading adjusted ebit dot margins of 32.9% from Milo Coatings and 20.7% for pre-code metals.
These positive operating results were driven by infrastructure related demand, and key markets for our metal code and segments, including construction, industrial and electrical transmission and distribution.
Tom Ferguson: We did take the opportunity during the quarter to restructure Metal Coat and Surface Technologies platform. We closed one powder coating facility and divested a plating facility to better position the surface technologies platform to achieve greater than 20% EBITDA margin. For pre-coat metals, while sales were down slightly versus prior year due to lower volume, the team outperformed the market when compared to the National Coil Coilers Association, or NCCA. Importantly, pre-coat shipments were up for the quarter as its customers began to draw down their inventories from pre-coat warehouses.
Similarly, our pre-cut metal segment experienced growth in construction, our largest market sector, as well as in the aluminum. Container Market,
We did take the opportunity during the quarter to restructure metal code and Surface Technologies platform. We closed 1 powder coating facility and divested a plating facility to better position. The Surface Technologies platform to achieve greater than 20% evida margins.
for pre-cut Metals, while sales were down slightly versus prior year due to lower volume, the team outperformed the market when compared to the National cool coaters Association or NCCA,
Tom Ferguson: They will discuss industry trends in a moment.
Importantly, pre-code shipments were up for the quarter as its customers began to draw down their inventories from pre-code warehouses.
They will discuss industry Trends in a moment.
Tom Ferguson: As we announced during the quarter, we monetized nearly all of the electrical products businesses that was held within our Avail joint venture and received $273 million in cash during the quarter. As a reminder, Avail still owns and operates the WSI and lighting businesses.
During the quarter.
Tom Ferguson: Jason will walk through the details of the transaction in a moment. Our consolidated adjusted EBITDA for the quarter was over $106 million, representing an adjusted EBITDA margin of 25.2%. This is supported by higher EBITDA margins over the first quarter of last year in both segments. Additionally, we are excited to report our newly commissioned aluminum coating facility in Washington, Missouri, shipped its first qualification orders during the quarter. As we ramp up sales at the new facility throughout the year, we expect operating leverage to continue to improve, and we anticipate gross margins to turn positive in the second half of the year.
As a reminder Avail still owns and operates the WSI and lighting businesses, Jason will walk through the details of the transaction in a moment.
Speaker Change: Our Consolidated adjusted ebit. Dot for the quarter was over, 106 million representing an adjusted ebit dot margin of 25.2%. This is supported by higher ibida margins over the first quarter of last year in both segments. Additionally, we are excited to report our newly. Commissioned aluminum coating facility in Washington. Missouri, shipped. His first qualification orders during the quarter.
As we ramp up sales at the new facility throughout the year, we expect operating leverage to continue to improve and we anticipate growth. Margins to turn positive in the second half of the year.
Tom Ferguson: We continue to invest in systems that enable us to improve productivity and better support our customers with AZZ's proprietary technology, specifically our digital galvanizing system or DGS platform. which serve all of our galvanizing plants, and CoilZone in our pre-coat facilities. These technologies provide our customers with real-time updates and enable management to gain business intelligence, further enhancing production efficiencies across our 46 metal coatings locations and 14 coil coatings facilities throughout North America.
We continue to invest in systems that enable us to improve productivity and better support. Our customers with az's proprietary technology. Specifically our digital galvanizing system or dgs platform.
We serve all of our galvanizing plants and coil Zone in our pre-code facilities. These Technologies, provide our customers with real-time updates and enable management to gain business intelligence further, enhancing production efficiencies across our 46, metal, codings, locations and 14 coal, codings facilities throughout North America.
Tom Ferguson: On July 1st, we announced the acquisition of Canton Galvanizing located in Canton, Ohio. This acquisition is immediately accretive as it further scales our galvanizing business with predictable centers. We will also benefit from gaining a new set of customers to serve in that market and the expansion of our spin galvanizing office. Our distinct competitive advantage is deeply rooted in high value, environmentally responsible solutions with nearly seven decades of technical expertise, customer centered digital platforms, and a network of strategically located facilities across North America. AZZ's longstanding, deep customer relationships combined with a culture of operational excellence position us well to sustain growth and add to profits and significant cash flows this year and for many years to come.
Speaker Change: On July 1st. We announced the acquisition of Canton galvanizing located in Canton, Ohio, this acquisition is immediately accretive as it further scales. Our galvanizing business with predictable synergies.
Speaker Change: We will also benefit from Gaining a new set of customers to serve in that market and the expansion of our spin galvanizing offerings.
Our distinct competitive Advantage is deeply, rooted in high-value, environmentally responsible Solutions with nearly 7 Decades of technical expertise, customer Centric, digital platforms and network of strategically located facilities across North America.
Tom Ferguson: I am incredibly proud of our progress and the accomplishments of the entire team. In fiscal year 2014, we initiated a strategy to drive greater operational and customer service excellence, as well as to optimize the metal coatings business. The successful execution of this strategy has ultimately transformed the company through a series of strategic acquisitions and divestitures, which culminated in the pure-play metal coatings company we are today. AZZ is a leader in the North American metal coatings market. And over the past 12 years, we have added over $1 billion in sales through the disciplined execution of our organic and inorganic growth initiatives, and expanded our margins and doubled our EBIT.
Az's long-standing. Deep customer relationships combined with a culture of operational excellence positioned as well to sustain growth and add to profits and significant cash flows this year. And for many years to come,
Speaker Change: I am incredibly proud of our progress in the accomplishments of the entire team. In fiscal year 2014, we initiated a strategy to drive greater operational and customer service Excellence as well as to optimize the metal Coatings business.
Tom Ferguson: Coming out of COVID, we shifted our strategy and embarked on transforming AZZ into a pure play metal coatings company. A key part of our strategy included the acquisition of pre-code metals in 2022, which has outperformed our expectations. We are also proud of the significant progress achieved by monetizing a large portion of our avail joint venture following Fernwas' sale of the legacy electrical businesses to Invent. This deal is a testament to the success of our long-term strategy.
The successful execution of this strategy is ultimately transformed. The company through a series of strategic Acquisitions and destitutes which culminated in the Pure Play. Metal Coatings company we are today. As is a leader in the North American Metal Coatings market and over the past 12 years we have added over 1 billion in sales through the disciplined execution of our organic and inorganic growth initiatives and expanded our margins and doubled our even dial
Speaker Change: coming out of Co we shifted our strategy and barked on transforming as into a pure play, metal code, in its company, a key part of our strategy included, the acquisition of pre-code metals in 2022, which is outperformed our expectations
Tom Ferguson: I am very pleased with the strength of our team, our financial position, as well as the trajectory of our business growth initiatives.
Jason Crawford: With that, I will turn it over to Jason. Thanks, Tom. We are very pleased with our first quarter results, which align well with our full year fiscal and financial guidance. We reported first quarter sales of $422 million, compared to $413.2 million for the same quarter in the prior year. Total sales increased by 2.1% versus last year. Growth was driven by the metal coating segment, where sales rose 6% in Q1, due to higher steel volume processed, offset slightly by lower mix-related selling price. Precorp Metals outperformed the market despite sales from the quarter declining 0.8% as customers navigated through inventory challenges associated with tariff concerns partially offset by an increase in the average selling price.
Speaker Change: We are also proud of the significant progress achieved by monetizing large portion of our Avail joint venture following Fern Los sale at Legacy electrical businesses to invent. This deal is a testament to the success of our long-term strategy. I am very pleased with the strength of our team, our financial position, as well as the trajectory of our business growth initiatives with that. I will turn it over to Jason.
Thanks Tom. We are very pleased with the first quarter results which align well with our failure fiscal Financial guidance.
Jason: We reported first quarter sales of 422 million compared to 413.2 million for the same quarter on the prior year.
Total sales increased by 2.1% versus last year.
Growth was driven by the Metal Coating segment, where sales Rose 6% in q1 due to higher steel. Volume processed offset slightly by lower mixed related selling price.
Pre-cop Metals outperformed the market despite sales from the quarter. Declining 0.8%. As customers navigated through inventory, challenges associated with tariffs, concerns partially offset by an increase in the average selling price.
Jason Crawford: The first quarter's gross profit was $104.1 million, or 24.7% of sales, compared to $102.7 million, or 24.9% of sales, in the prior year quarter. During the first quarter for metal coatings, we incurred a $3.8 million restructuring charge related to the previously mentioned disposition of a small powder coating facility and a small plating facility. In the pre-coat metal segment, our new Washington, Missouri, coil-coating facility began production in the first quarter, which, as planned, created a slight drag on margins. Without these two items, consolidated gross margins for the quarter would have been higher by 110 basis points compared to the prior year quarter.
The first quarter's gross profit was 104.1 million or 24.7% of sales, compared to 102.7 million or 24.9% the sales in the prior year quarter.
During the first quarter for metal Coatings. We incurred a 3.8 million. Restructuring charge related to the previously mentioned, disposition of a small powder, coating facility in a small plating facility.
In the prequel methods are new Washington Missouri. Coil coating facility began production in the first quarter which has planned created a slight Dragon margins.
Jason: Without these 2 items, Consolidated, gross, margins for the quarter would have been Higher by 110 basis points compared to the prior year quarter.
Jason Crawford: Selling, general and administrative expenses totaled $34.6 million in the first quarter, which included a charge to the Executive Retiree Long-Term Incentive Programme and its related Acceleration of Stock Awards. This resulted in a non-cash charge of $2.2 million in the quarter. Excluding this add back, Q1 SG&A costs were 7.7% of sales, an improvement versus 8% of sales in the prior year quarter. Operating income for the quarter was $69.5 million, or 16.5% of sales, compared to $69.7 million, or 16.9% of sales, in last year's first quarter. Current Quarter Operating Margins also compare favourably to prior year when you adjust for the items highlighted in Gross Margin and in SG&A Expenses.
Jason: Creative expenses. Total 34.6 million in the first quarter.
Jason: Which included a charge to the executive retiree long-term incentive program and its related to acceleration of stock awards.
This resulted in a non-cash charge of 2.2 million in the quarter.
Excluding this add back, q1 sgna cost for 7.7.
Sales.
Jason: In the prior year quarter.
operating income for the quarter was 69.5 million or 16.5% of sales compared to 69.7 million or 16.9% of sales in last year's, first quarter,
Current quarter, operate margins, also compared favorably to Prior year. When you adjust for the items highlighted in gross margin in SG and in sg&a expense,
Jason Crawford: As Tom mentioned, Fernway, our 60% joint venture partner on Avail, divested the majority of its electrical products businesses in the quarter. As part of the divestiture, we received a cash distribution of $273.2 million and we recorded $165.8 million on the income statement as positive equity and earnings, which represented the excess distribution after writing off the total equity investment of $107.4 million. Total equity and earnings for the period were $173.5 million, representing Q1 equity and earnings of $7.7 million, plus the excess income from distribution of $165.8 million.
Tom Ferguson: as Tom mentioned, firmware are 60% joint venture partner and Avail digested. The majority of its Electrical Products businesses in the quarter.
as part of the divestiture, we received a cash distribution of 273.2 million and we recorded 165.8 million on the income statement as positive equity and earnings, which represented the excess distribution after writing off the total Equity investment of 107.4 million,
Total equity and earnings for the period. Were 173.5 million, representing q1 equity, and earnings of 7.7 million. Plus the excess income, from distribution of 165.8 million.
Jason Crawford: Regarding the future estimates for equity and earnings in the availed JV, representing our 40% JV ownership interest in the remaining availed businesses, we are currently forecasting a range of zero to a small plus or minus for the remaining quarters of this year. Interest expense for the first quarter was $18.6 million, down $4.2 million from the prior year, due to a combination of debt paydown and debt repricings. As the availed funds were received in May, this had minimal impact on the interest expense in the quarter. The current quarter's income tax expense was $54.9 million, reflecting an effective tax rate of 24.3%.
Regarding the future estimates for equity and earnings in. The vjv, representing our 40% JV, ownership interest in the remaining available businesses. We are currently forecasting a range of 0 to a small plus or minus for the remaining quarters of this year.
Interest expense for the first quarter was 18.6 Million down 4.2 million from the prior year. Due to a combination of Debt Pay down and debt re pricing
As the Avail funds were received in May, this had minimal impact and interest expense in the quarter.
Jason Crawford: This includes $42.5 million of accrued taxes on the equity and earnings recorded in the period. Excluding the impact of equity and earnings, our effective tax rate would have been 22.2% compared to 22.4% in the prior year quarter. Reported net income for the first quarter was $170.9 million, compared to $39.6 million for the prior year quarter.
The current quarter's income tax expense was 54.9 Million reflecting an effective tax rate of 24.3%.
This includes 42.5 million of acred taxes on the equity and earnings recorded in the period.
Excluding the impact of equity and earnings are effective. Tax rate would have been 22.2% compared to 22.4% in the prior year quarter.
Reported net income for the first quarter was 170.9 Million compared to 39.6 million for the prior year quarter.
Jason Crawford: Since our non-GAAP measure for Adjusted Net Income excludes, amongst other items, equity and earnings from the available divestiture of $165.8 million, AZZ reported Adjusted Net Income of $53.8 million or Adjusted Diluted EPS of $1.78. This compares favourably to the prior year's Adjusted Net Income of $44 million or Adjusted Diluted EPS of $1.46. On an adjusted basis, our first quarter earnings increased by 22.2% compared to the same period of the prior year. First quarter adjusted EBITDA was $106.4 million, or 25.2% of sales, compared to $94.1 million, or 22.8% of sales in the prior year. This 240 basis point improvement and adjusted EBITDA margin was mainly driven by increased volume, productivity improvements and the performance in the quarter from the availed JV.
Since our non-gaap measure for adjusted net income, excludes amongst other items, equity, and earnings from the Ava investiture of 165.8 million.
Tom Ferguson: EZ reported adjusted net, income of 53.8 million or adjusted deleted EPS of $1.78.
This compares favorably to the prior Year's adjusted net income of 44 million or adjusted deleted, DPS of 1.46.
Tom Ferguson: On an adjusted basis. Our first quarter earnings increased by 22.2% compared to the same period of the prior year.
First quarter adjusted ibida was 106.4 million or 25.2% of sales, compared to 94.1 million, or 22.8% of sales, in the prior year.
Tom Ferguson: This 240 basis, point Improvement and adjusted either the margin.
Was mainly driven by increased volume productivity improvements and the performance in the quarter from the AVL JV.
Jason Crawford: Turning to our financial position and balance sheet, for the first quarter we generated cash flow from operations of $314.8 million, which included $273.2 million from the availed divestiture mentioned earlier. Under GAAP accounting, this JV distribution was recognized as a cash flow from operations. Our Q1 capital spending was $20.9 million, of which $3.2 million related to the new Washington, Missouri facility, while in the quarter we realized proceeds of $3.8 million from the sale of certain property, plant and equipment. Proceeds from the available divestiture, combined with free cash flow generation, allowed us to pay down $285.4 million of debt in the quarter.
Tom Ferguson: Turning to your financial position and balance sheet.
For the first quarter, we generated cash flow from operations of 314.8 million, which included 273.2 million from the availed diversity. You mentioned earlier,
Tom Ferguson: Under gaap accounting, this JB distribution was recognized as a cash flow from operations.
Our q1 Capital spending was 20.9 million of, which 3.2 million related to The New Washington, Missouri facility.
Tom Ferguson: While on the quarter, we realized proceeds are 3.8 million from the sale of certain property plant and equipment.
Jason Crawford: With the pay down of debt and our continued financial performance, our credit agreement net leverage ratio improved to 1.7 times compared to 2.8 times in Q1 of last year.
Proceeds from the availability of diversity that you're combined with 3, cash flow generation allowed us to pay down 285.4 million dollars of debt in the quarter.
Jason Crawford: Our capital allocation strategy remains disciplined, with a focus on debt pay-down, investments in organic growth, combined with strategic M&A, as demonstrated by the bolt-on acquisition announced on July 1. Additionally, as part of our capital allocation plans, we expect to pursue regular and opportunistic share repurchases under our current 10b5-1 buyback plan in the current fiscal year.
Our Capital allocation strategy remains disciplined with a focus on Debt. Pay down investments in organic growth, combined with strategic m&a as demonstrated by the bolt-on acquisition announced in July 1st.
Additionally. As part of our Capital allocation plans, we expect to pursue regular and opportunistic. Share repurchases under our current 10 b51 buyback plan in the current fiscal year.
Jason Crawford: And finally, the Board approved an increase to our quarterly cash dividend from $0.17 per share to $0.20 per share, representing a 17.6% increase.
David Nark: With that, I'd like to turn the call over to David. Thank you, Jason. In Q1, we continued to see the demand from infrastructure-related project spending benefit AZZ across multiple end markets. Overall, market strength continued in both construction and electrical, driven by continued growth in sub-markets, including data centers, electrical transmission and distribution, and solar power generation. This was somewhat offset by lower demand in end markets, including industrial, particularly agriculture, transportation, as well as... Our clients and HVAC.
And finally, the board approved, an increase to our quarterly cash dividend from 17 cents per share to 20 cents per share. Representing the 17.6% increase.
David: With that. I'd like to turn the call over to David.
Thank you. Jason in q1, we continue to see the demand from in infrastructure related project. Spending benefit as across. Multiple and markets overall Market strength continued in both construction and electrical driven by continued growth in submarkets, including data centers, electrical transmission and distribution and solar power generation.
David: this was somewhat offset by lower demand and end markets, including industrial, particularly agriculture Transportation, as well as
David: Appliance and HVAC.
David Nark: The aluminum transition in food and beverage packaging remains a key driver for growth in the business, and we are excited about our new Greenfield plant, which continues to ramp production. We will also continue to benefit from the execution of reshoring activity accelerated by Invest in America initiatives and tariffs under the current administration, which we believe will be tailwinds for the domestic steel market, as well as U.S. manufacturing and warehousing. As we are busy in an active construction season, our teams are well positioned to execute for the remainder of the fiscal year.
The aluminum transition in food and beverage, packaging remains a key driver for growth in the business. And we are excited about our new Greenfield Plant, which continues to ramp production.
We'll also continue to benefit from the execution of reshoring. Activity accelerated by invest in American initiatives and tariffs under the current Administration, which we believe will be Tailwind for the domestic steel Market, as well as us manufacturing and warehousing.
Tom Ferguson: With that, I would now like to turn the call back over to Tom. Thanks, David. Fiscal year 2026 is starting off with good momentum, and our teams continue to focus on the disciplined execution of our strategic plan by growing via market share expansion and converting customers from post-paint to pre-paint. As Jason discussed, our capital allocation playbook remains active, with the recent acquisition on the metal coding side, debt paydown, an increase in our quarterly cash dividend, and a plan to opportunistically repurchase our stock to offset dilution. We believe AZZ continues to be undervalued at 9 to 10 times forward EBITDA, which gives us confidence to buy back our stock.
David: As we are busy and inactive construction season, our teams are well positioned to execute for the remainder of the fiscal year.
With that, I would like now like to turn the call back over to Tom.
Tom Ferguson: Thanks David.
Fiscal year 2026 is starting off with good momentum and our teams continue to focus on the disciplined execution of our strategic, plan by growing via market, share expansion and converting customers from post paint to prepaid.
Speaker Change: As Jason discussed our Capital allocation Playbook remains active, with the recent acquisition on the metal coding side Debt, Pay down and increase in a quarterly cash dividend and a plan to opportunistically repurchase our stock to offset dilution.
We believe as continues to be undervalued at 9 to 10 times. Forward. Ebit dock, which gives us confidence to buy back our stock
Tom Ferguson: Today, we are reiterating our sales and EBITDA guidance and are moving up our EPS guidance. We continue to believe that our fiscal 2026 sales will be in the range of $1.625 to $1.725 billion, and adjusted EBITDA will be in a range of $360 million to $400 million, with the midpoint representing our best estimates. Regarding adjusted diluted EPS, we believe that $5.75 to $6.25 better reflects our current forecast, which means an increase of between 10% and 20% over the fiscal 2025 adjusted earnings. These numbers are supported by strength and demand forecasts and continuing momentum in our operational performance.
Speaker Change: Today we are reiterating our sales and eBid do guidance and are moving up our EPS guidance. We continue to believe that our fiscal 2026 sales will be in the range of 1.625 to 1.725 billion.
And adjusted ebit da will be in a range of 360 million to 400 million with the midpoint representing our best estimate.
regarding adjusted diluted EPS, we believe that 5.75 to 6 dollars, better reflects our current forecast, which means an increase of between 10 and 20% over the fiscal, 2025 adjusted earnings
Tom Ferguson: Our liquidity position and balance sheet are strong and flexible, particularly following our debt reduction in the first quarter. Also, we are well positioned to pursue strategic growth opportunities, including our other capital allocation strategies, as already discussed.
Speaker Change: These numbers are supported by strengthening demand forecasts and continuing momentum in our operational performance.
Tom Ferguson: To summarize, AZZ delivered a great start to fiscal 2026. Both metal coatings and pre-coat metals performed well with strong profitability and disciplined execution of our business strategy.
Speaker Change: Our liquidity position and balance sheet are strong and flexible particularly following our debt reduction in the first quarter. Also, we are well, positioned to pursue strategic growth opportunities, including our other Capital, allocation strategies as already discussed.
To summarize as delivered a great start to fiscal 2026. Both metal Coatings and pre-code metals performed, well with strong profitability and disciplined execution of our business strategy.
Operator: Now, operator, we would like to open it up to call for questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are 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.
Speaker Change: Now, operator, we would like to open it up to the call for questions.
Operator: At this time, we will pause momentarily to assemble our roster.
Speaker Change: We will now begin the question and answer session to ask a question. You may press star then 1 on your telephone keypad. If you are using a speaker-phone 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 at this time we will pause momentarily to assemble our roster.
Ghansham Panjabi: And the first question comes from Ghansham Panjabi with Baird, please go ahead. Operator, good morning guys. Congrats on a strong start to your fiscal year 26. I guess on that, you know, if I remember correctly, volumes during your 4Q quarter was impacted by some extent, you know, because of weather and some of the tariff uncertainty, etc. Did 1Q benefit from any sort of normalization in volumes according Yeah, there was there was some I'd say on the metal coating side was where we were mostly affected by by storms, weather, that kind of thing. And I'd say so about half of that was recovery from Q4 and the other half was, you know, pure organic growth.
In the first question comes from gum. Punjabi with beard, please go ahead.
Speaker Change: Thanks operator. Good morning, guys. Congrats on a strong. Start to your fiscal year 26. Um,
I, I guess on that, you know, if I remember correctly volumes during your 4q quarter was impacted by some extent, you know? Because of the weather and some of the Tariff uncertainty Etc. Did did 1 Q benefit from any sort of normalization and volumes accordingly?
Yeah, there was, there was some, I'd say on the medical coding side was, where we were mostly affected by by storms, whether that kind of thing. Uh, and I'd say so about half of that was recovery from Q4 and the other half was, you know, pure organic growth.
Tom Ferguson: Perfect. And then in terms of, you know, your prepared comments and also the press release you referenced.
Tom Ferguson: Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com Can you just give us more specific color and what drove that and also give us the volume numbers by segment? Yeah, I can talk to the first part. You know, I think what what the team's been doing, and we talked a lot about digital galvanizing system, developing the leadership bench, the playbooks, we we have the the training, the technical capabilities, engineering, you put them all together, and we're in many parts of of our, particularly our galvanizing operations, we're pretty much nearing the theoretical zinc efficiency levels because, and it's, you know, it's all those factors together.
Group of zinc utilization for metal Coatings during the first quarter, obviously very, very strong performance for that. Segment from a margin standpoint. Can you just give us more specific color on what drove that and also give us the volume numbers by segment uh, specific to 1 Q. Thank you.
Yeah, I I can talk to the the first part. Um, you know I think what what the team's been doing and we talk a lot about digital galvanizing system, developing the leadership bench the playbooks. We we have the the training, the technical capabilities, engineering you, you put them all together and we're in, in in, in many parts of, uh,
Tom Ferguson: Everything from, you know, digital tools, the training, experienced people, leadership, and just managing a lot of the details really, really well. I think the team still feels like they got a little bit of room, but in terms of zinc efficiencies and productivity, we're getting to the, you know, close to perfection. Obviously, we still have opportunities on labor productivity, utilizing our assets, you know, efficiently, continuing to invest in things that will make us even more productive from those, in those perspectives, and continuing to drive outstanding quality and service for our customers and meet, you know, lead the industry in terms of short cycle times.
Of our particular galvanizing operations. We're we're pretty much near in the theoretic theoretical zinc, uh, efficiency levels. Uh, because and it's, you know, it's all those factors together everything from, you know, the digital tools, the the training experience people leadership. Um, and just managing a lot of the the details really, really well. Um, I think the team still feels like they got a little bit of room, but uh, but in terms of zinc, efficiencies and productivity. We're we're, we're, we're, we're getting to the, you know, close to Perfection. Um, obviously we still have opportunities on uh, labor productivity, utilizing our assets. Uh, you know, efficiently continuing to invest in.
Tom Ferguson: So, I don't think we typically give volumes. I'm looking over at Jason and David. Yeah, we typically don't break out the volume numbers specific in this. in the reporting. I'll try anyway. Okay.
Uh, things that will make us even more productive from those, uh, in those perspective. And, and, uh, continuing to drive outstanding quality, and service for our customers and and meet, uh, you know, lead the industry in terms of short cycle times. So, um, I don't think we typically give volumes, um,
I'm looking over at Jason and David.
yeah, we we typically don't break out the volume number specific um in the
In the reporting.
Ghansham Panjabi: Thanks so much, guys.
Speaker Change: Got to try. Anyway. Okay, thanks so much guys.
Adam Thalhimer: And your next question comes from Adam Thalhimer with Thompson Davis. Please go ahead. Hey, good morning, guys. Congrats on the strong Q1. I wanted to ask on the outlook for precode, you mentioned that customer inventory levels are higher than last year, you have Washington ramping up. And I'm curious if there's an impact of tariffs on imported pre-painted steel. Just curious how that all rolls up in terms of your top-line expectations.
And your next question comes from. Adam thalhimer with Thompson Davis. Please go ahead.
Hey, good morning guys, congrats on the strong q1.
I wanted to ask on the, um,
the outlook for pre-code.
You mentioned that, uh, customer inventory levels are higher than last year.
Speaker Change: You have Washington ramping up.
And I'm curious if there's an impact um, of tariffs on imported pre-painted steel, just curious how that all, uh, rolls up in terms of your Topline expectations at pre-code.
Tom Ferguson: Yeah, I'll give you some color on that. David may want to add something. But yeah, so yeah, our customer inventory. So when we talk about sales, we're talking about what we produce and how we recognize revenue. When we're talking about shipments, that's the shipments out of inventories in our warehouses for customers. So a couple of things. One, the inventories have ramped up as towards the end of the year. And in the first quarter, we, we had customers pulling inventory down, which which we view as the true demand. Now, overall, the markets are still generally down when you look at the NCCA or the MBNA.
Tom Ferguson: So, you know, we're down less than than the overall market, but seeing we did as a positive sign that the customers are pulling, pulling inventory, which says they've got, you know, demand. When it comes to the imports, we did see a ramp up coming into the year of imported prepaint, in anticipation of the tariffs. And then since then, we've seen the drawdown. So we've seen those, those prepainted imports falling off pretty dramatically here the last few months.
Speaker Change: Yeah, I'll give you some color on that. David may want to add something but, you know, so yeah, our our customer inventory. Uh, so when we talk about sales, we're talking about what we produce and how we recognize Revenue, when we're talking about shipments, that's the shipments out of inventories in our warehouses for customers. Uh, so a couple of things 1 uh the inventories had ramped up as uh towards the end of the year. And in the first quarter we uh we had customers pulling inventory down uh which which we view as the, the true demand. Now overall the markets are are still generally down when you look at the NCCA or the MBNA. Um so you know we're down less than than the overall Market but seeing we do it as a positive sign that the the customers are pulling pulling inventory, which says they've got uh, you know, demand
David Nark: And I don't know if David wants to add anything to that. I would just add, yeah, a little more color on that. In May, the prepainted imports overall fell 38% year over year. You know, there was a 50% drop in April. So collectively, you know, on a calendar basis, it's about a 20% decline year over year, which really aligns with the team's expectations on on what we imagined that the the tariff impact would be. So, you know, as we roll forward, we think that, again, as we talked in our prepared remarks, that can provide a bit of a tailwind for the business as people will be sourcing steel locally.
When it comes to the Imports, we did see a ramp up coming into the year of imported prepaint in anticipation of the tariffs. And then, since then, we've seen the draw down. Uh, so we've seen those um, those prepainted Imports. Falling off pretty dramatically here the last few months and I don't know if David wants to add anything to that. I would just add. Yeah, a little more color on that and uh May the pre-painted Imports. Uh, overall fell 38% year-over-year. Um you know, there was a 50% drop and and April, so collectively uh, you know, on a calendar basis. It's about a 20%, uh,
Adam Thalhimer: And obviously, we're in a great position to coat that that steel here in the domestic market. Good. Good color.
Decline, uh, year-over-year, which really aligns with the team's expectations on on, what we imagine that the, uh, the Tariff impact would be. Uh, so, you know, as we roll forward, we think that, uh, again as we, we talked in our prepared remarks that, uh, can provide a bit of a Tailwind for the business as, uh, uh, people will be sourcing steel locally, uh, and uh, obviously, we're in a, a great position to coat, uh, that that steel here, uh, in the domestic Market.
Tom Ferguson: And then just quickly, the two small facilities that you disposed of during the quarter, do those volumes get shifted to another facility? Yeah, one of them was was over in Tampa, and we don't have any other facilities over there. But it was it was a small facility, keeping in mind that total surface technologies is, you know, one, one, one and a half percent of our, our overall sales. So and then the other facility was, you know, it was plating, we'll pick up some of that we've got, you know, facilities in the area. So not a tremendous impact on on sales, but definitely, you know, they were not profitable facilities.
Uh good, good caller. And then just quickly the the 2 small facilities that you disposed of during the quarter are do those volumes get shifted to another facility
Tom Ferguson: So an opportunity to clean that up, retain some of the volume, and clearly drive improved profitability through that through that, because we also took some some GNA. cost reductions as well to better align the overhead structure with the remaining volume. So just a good time to do it, and we've been at it for about three years, done what we can do. We still think there's opportunities in it, but we want to get it up to where it's a more profitable contributor to the sector.
Speaker Change: And a half percent of our, our overall sales. So, um, and then the other facility was, uh, you know, it it was plating. We'll, we'll pick up some of that. We've got, uh, you know, facilities in the area. So, uh, not a tremendous impact on on sales. But definitely, you know, they they were not profitable facilities. So, an opportunity to clean that up retain, some of the volume, uh, and clearly Drive improved profitability through that through that because we also took some some GNA um,
Speaker Change: Cost reductions as well to uh to better align the overhead structure with the remaining volume. So yeah, just a a good time to do it and uh we've been at it for about 3 years done, what we can do, we still think there's opportunities in it and uh but we want to get it up to where it's uh, you know, a more profitable contributor to the segment.
Adam Thalhimer: Perfect.
Tom Ferguson: Thanks, guys.
Operator: I'll turn it over.
Speaker Change: Perfect. Thanks guys. I'll turn it over.
Nick Giles: And your next question comes from Nick Giles with B. Reilly Securities. Please go ahead. Thanks, operator. Good morning, everyone. Guys, really significant debt reduction in the quarter, which is great to see. You're now comfortably below two times.
And your next question comes from Nick Giles with B Riley Securities. Please go ahead.
Tom Ferguson: So just was hoping to go back to capital allocation. I mean, is it fair to assume we could see share repurchases kind of tick up in future quarters? Or what other considerations should we keep in mind? Thanks. Yeah, you know, we took the dividend up for the first time in a while, so that was a fairly easy decision for us. In terms of share buybacks, as we've stated, we're committed to buying. We have the approved $100 million facility, which I think we have roughly half of it left. So we've got plenty of room within the approved facility to acquire our stock or buy it back, and we're committed to doing that.
Thanks operator. Good morning everyone. Um guys uh really significant debt reduction in the quarter which is great to see you're now comfortably below 2 times. So it just was hoping to go back to Capital. Allocation I mean is it fair to assume we could see share repurchases kind of tick up in future quarters or what other uh considerations should we keep in mind? Thanks.
Tom Ferguson: I think we've, as we've talked, we've got a full pipeline of bolt-on acquisition opportunities, so we'd like to get another one or two closed, particularly on the metal coating side. We were really pleased at getting the Canton-Galve deal done. We were a little rusty. It took us a little bit longer to close it than we probably would have liked, but I think we're all, you know, buffed back up and ready to remain active. So I feel real good about that. And then, yeah, we are kind of on the debt reduction side, pretty quickly approaching one and a half times leverage, which is pretty, is the low end of where we'd like to be.
Speaker Change: Yeah, you know, we took the dividend up for the first time in a while. So, we, uh, you know, had had a that was a fairly easy decision for us, uh, in terms of share BuyBacks as we've stated, we're committed to buying and we, we have the approved hundred million dollar facility if which, I think we have roughly half of it left. So we've got plenty of room within the approved uh, facility to acquire our stock or buy it back and we're committed to doing that. I think we've we've as we've talked we've got a full pipeline of bolt-on acquisition opportunities. So we'd like to get another 1 or 2 closed particularly on the metal coding side. Uh, we were really pleased, uh, at getting the Canton golf deal done. Uh, we were a little rusty. It took us a little bit longer to close it than, uh, we, we probably would have liked, but I think we, uh, we're, we're all, you know, buffed back up and, uh, and and ready to remain active. So, feel real good about that. And, um,
and then yeah, we are kind of on the debt reduction side, pretty quickly approaching 1 and a half times leverage, which is
Tom Ferguson: So yeah, share buybacks, get some additional deals done, and we've got good investment strategies for CapEx to continue to improve our productivity and allow us to take share and expand our services.
Nick Giles: And then we're committed to every year now looking at the dividends. That's all great to hear. I appreciate that, Tom.
Speaker Change: Pretty is the low end of where we'd like to be. So yeah. Share BuyBacks, get some additional deals done and we've got good investment strategies for capex, uh, to continue to improve our productivity and allow us to take share and, and expand our services. Um,
Speaker Change: And then we're we're committed to every year now, looking at the dividend.
Tom Ferguson: My second one, just be great to hear more color on what you're hearing from a customer and project perspective, particularly on the back of the copper tariff announcement. So are you hearing any rumblings of timelines that could shift out? I know it's, this is very recent, but just curious on your thoughts, given how copper intensive some of your NMR Yeah, that one we don't have much input on because it is so recent. I would say prior to that, we were hearing positive things, you know, getting the... getting sorry getting getting the tax cuts approved so that you know that becomes predictable for for projects companies still love to see a Fed rate cut I think a lot of our customers or you know it's just project viability it would improve it slightly but I think the the reshoring a lot of the data You know, when data centers just continued expansion, infrastructure, as we saw in the first quarter, particularly on the model coding side, you know, it's, it's all pretty positive.
That's all great to hear. I appreciate that Tom. Um, my second 1 just
Be great to hear more color on what you're hearing from, uh, customer and project perspective, particularly on the back of the copper tariff announcement. So are you hearing any Rumblings of timelines that could shift out? Um, I know it's, uh, this is very recent, um, but just curious on your thoughts given how copper intensive some of your end markets are
Speaker Change: Yeah, that that 1 we don't have much in input on because it is so recent. Uh, I would say prior to that, we were hearing positive things.
uh, you know, getting the
Speaker Change: Getting.
Speaker Change: um,
sorry uh getting uh getting the tax cuts uh approved so that you know that becomes predictable for for projects companies uh
Still love to see, uh, a Fed rate, cut. I think a lot of our customers are, you know, it's it's just project viability. It would improve it slightly but I think the the reshoring, uh, a lot of the data, um,
Tom Ferguson: But the more settled with the big, beautiful bill or whatever they're calling it these days, the more things are settled, the more opportunity, just read in the Wall Street Today, you know, the administration reducing a lot of the environmental holds and things like that to streamline permitting. That's all positive, but we will, over the next couple of weeks, be checking with customers on what this latest news may mean. I'm not sure that that I would not see it as a significant impact on the kinds of projects that we're. Well guys, great work again and keep it up.
You know, when you data centers uh just continued expansion and infrastructure as we saw in the first quarter, particularly on the model coding side, you know, it's it's all pretty positive. Uh but the more settled with uh the big beautiful bill or whatever, they're calling it these days the more things are settled. The the more opportunity uh just
Read in the Wall Street today, you know, uh, the administration reducing, uh, a lot of the environmental holds and, and things like that to streamline permitting. That's all positive. Uh, but we will over the next couple of weeks, uh, be checking with customers on what this latest news. Uh, May mean, I'm, I'm not sure that that I would not see it as a significant um impact uh, on the kinds of projects that we're looking at.
Speaker Change: Got it.
Speaker Change: Well guys, uh great work again and and keep it up.
Thank you.
Daniel Rizzo: And your next question comes from Daniel Rizzo with Jefferies. Please go ahead. Hey guys, thank you for taking my question. So the outlook, I mean, it was a pretty solid quarter and you raised your EPS guidance. I was just, I was a little surprised if you didn't raise EBITDA as well. I don't know. It just seems like things are going fairly well.
With Jeffrey's, please. Go ahead.
Tom Ferguson: And I don't know if you're just seeing a lot of uncertainty or what would cause you to trigger to be a little more, I guess, a little more positive with EBITDA and sales as well, or what's causing maybe some hesitancy. I think on the sales side, the tariff uncertainty, this continues to make us a little cautious. Since we don't have backlogs, we've got great customer relations and talking about their future plans and what they're doing, which I just alluded to, which is relatively positive going forward. But the fact that there's still that tariff uncertainty, what does it mean?
Hey guys, thank you for taking my question. So the, the Outlook, I mean, it was it was a pretty solid quarter and, and you raised your EPS guidance. I was just I I was a little surprised if you didn't raise even as well, I don't know. It just seems like things are going fairly well, and I don't know if you're just seeing a lot of uncertainty or what would cause you to trigger to be a little more, I guess a little more positive with with Eva and and sales as well or what's causing, maybe some hesitancy.
Tom Ferguson: So we're cautious on the sales side. We've got lots of levers to pull on the EPS side, so that's why we get more confident on that. EBITDA, just keep in mind that with the availed transacting, the electrical businesses, that so we're going to lose EBITDA from what was equity income, but we're getting interest savings that offsets that. So that's in the $10, $12, $13 million range, but they offset. So that's a headwind for EBITDA, but a tailwind for EPS, and that's about as far as we've calculated at this point. Thanks.
Speaker Change: I think on on the sales side, we're we're just continuing to, you know, the Tariff hunts are the this continues to make us a little cautious, you know, since we don't have backlogs, we're just basically, uh, we've got great customer relations and and talking about their future plans and what they're doing, which, I just alluded to, which is, is relatively positive going forward. But, uh, the fact that there's still that tariff uncertainty, what does it mean? So, we're we're cautious on the sales side. Be, uh, we've got lots of levers to pull on the EPS side so that's why we get more confident on that. EBA just keep in mind that with the Avail transacting, uh, the electrical businesses that so we're going to lose ibida from what was Equity income, uh, but we're getting interest savings, uh, that, that offsets that so, you know, that's in the 1012, uh, 13 million dollar range. But, but they offset. So, so, that's a a headwind for.
For ibida, but a Tailwind for EPS. It's and and that's about as far as we've calculated at this point.
Tom Ferguson: That's actually very helpful. And then if we think about the margin improvement you've kind of done already and what we expect going forward, I assume that a lot of what's going forward is going to come from just better throughput or, I mean, are there additional levers you can pull or should we just look for volume improvements to kind of drive most of that? Yeah, you got a couple of things going on. On the pre-code side, we do have the new facility ramping up, as I've talked about previously, that we view for that ramp really to hit in the second half, and then as we finish the year in the fourth quarter, so that's volume and EBITDA flow-through that we were anticipating.
Thanks that that's actually very helpful and then if we think about the the margin Improvement, you you've you've kind of done already and what we expect going forward. I assume that a lot of what's going forward is going to come from, just better throughput or I mean, are there additional leverage you can pull or is we just look for for vitamin to kind of Drive? Most of that?
Tom Ferguson: We will have the addition now, not that it's huge, but it's a typical site from the Camp and GALP acquisition, hopefully get another one done, and then it's just the typical organic growth, continuing to drive on market share. The levers that we will always focus on is related to operational excellence, how we manage our expenses, keeping things tight as the year plays out, and seeing where tariffs go. So, we feel like we've got good levers. Jason could talk about the fact we may be out repricing our debt again. There's things that we've got that should be positive going forward from an EPS perspective, and we'll pull all those levers as we go forward.
Yeah, you got a couple of things going on on the pre-code side. We do have the new facility ramping up, uh, as I've as I've talked about previously, that we, we view for that ramp really to hit in the second, half and, and then as we finish the year in the fourth quarter, so that's volume and and ibida flow through that, we were anticipating, um, on the E, we, we will have the addition now of not, not that it's huge, but it's a, you know, typical site. Uh, from the Canton galp acquisition, hopefully get another 1, and then, and then it's just the, the typical, uh, organic growth, uh, continuing to drive on market share, uh, the levers that we will always focus on is, is related to operational. Excellence, how we manage our our expenses, uh, keeping things tight as uh, you know, as, as the year plays on it plays out and and see it where tariffs go. So, you know, we we feel like we've got good levers. Uh, we'll you know based on them could talk about the facts a little
Jason Crawford: Jason, I just want to add on. Okay.
We we may be out re-pricing. Our debt. Again, there's things that we've got, uh, that should be positive going forward from, uh, from an EPS perspective and you know, we'll we'll pull all those levers as we go forward.
Jason, I want to add
Speaker Change: Okay.
Tom Ferguson: And then final question, when we look at M&A and your activity, should we think about it like we just saw, where there's like site additions and maybe some smaller tuck-ins, or are there things, not necessarily transformative, but are there bigger things out there that could be added to the network? Yeah, from the metal coding side, it's mostly the one-offs that we have in the pipeline right now. There's a couple of multi-site things, you know, six, seven, eight sites out there that if they come available, we'll obviously be very interested and believe we have good relationships in both those cases.
Speaker Change: All right. And then and then final question just when we look at m&a and your activity, should we think about it? Like like we just saw we're like, there's like site additions and maybe some smaller tuck-ins or are there things that are not necessarily transformative. But are there, bigger things out there that could be added to the to the network.
Tom Ferguson: But we can't predict when that would happen. What we can predict is, you know, the one-offs that are in the pipeline now. And can we get those closed? Can we get the right deal done? On the pre-code side, it's typically if we can buy a line from somebody, otherwise, which would be the smaller side, but if we could, and then it's going to get bigger. By bigger, there's, you know, same thing, there's a... A couple of multi-site opportunities out there that, you know, those would be Bigger, they're going to take a little bit longer. So I think to see those, it'd be towards the end of this year, getting into next year, before we would be looking at those kinds of things or actively pursuing them.
Yeah, on from the medical coding side is mostly the, the 1 offset we have in the pipeline right now, there's a couple of multi-site things, you know, 6 7, 8 sites out there. That if they come available, um, we'll we'll obviously be very interested and believe we, we have good relationships, uh, in in, both those cases, um, but we can't predict when, um, when when, when that would happen, uh, what we can predict is the, you know, the 1 offset that we're
Speaker Change: That are in the pipeline now and can we get those closed? Can we get the right deal? Done on the pre-cut side? It's typically if we can buy a line from somebody, uh, otherwise which would be the the smaller side, but if we could, um, and then it's going to get bigger. But by, by bigger, there's, you know, same thing, there's a
Speaker Change: oh, a couple of multi-site, um, opportunities out there that uh, you know, those those would be
Tom Ferguson: But there are some out there. And we like to think they're nicely placed in our pipeline as we continue to generate cash at the levels we're doing. All right. Thank you very much.
Bigger. They're going to take a little bit longer. Um, so I think if if, you know to see those, it'd be towards the end of this year, getting into next year before we would, uh, be looking at those kinds of things, or, or active actively pursuing them, uh, but there are some out there. So, uh, and and we like to think they're, you know, nicely placed in our pipeline as, uh, as we continue to generate cash at the, the levels, we're doing.
All right. Thank you very much.
Tom Ferguson: And I will add one other thing. David had just shown the Dodge Momentum Index is showing up 7 percent. So things are trending in a positive way. Thank you.
And I I will add 1 other thing. David had just shown the Dodge momentum index is showing up 7%. So things are trending in in a positive way.
Speaker Change: Thank you.
Mark Reichman: And your next question comes from Mark Reichman with Noble Capital Markets. Please go ahead. I'm just curious, you know, in the past you've kind of described the Bolton Act.
And your next question comes from Mark reichman with Noble Capital markets, please go ahead.
Tom Ferguson: © The Bulletproof Executive 2013 I was just wondering, is Kent Does that match pretty much that profile or was it on the smaller side? And because that asset was relatively new, are there meaningful opportunities to improve the economics once it's out of the market? Yeah, that's a great question. It's within the range, but on the lower side of that range you just gave in the $10-20 million, it was nicely profitable, so it's definitely not a fixer-upper. Very nice business with, you know, a good customer base. So, you know, can we add some, we will drive some margin improvement using DGS.
I was just curious you know in the past you've kind of described the bolt-on Acquisitions as those with kind of Revenue and the 10 to 20 million dollar range and even done the 3 to 4 million dollar range. I was just wondering, is, is Canton, is that a? Is that does that match pretty much that profile or was it on the smaller side? And because that asset was relatively new are there. Meaningful opportunities to improve the economics uh uh once integrated
Yeah, that's a that's a great question. Uh, it's it's it's within the range but on the lower side of that range, you just gave and the 10 to 20 million. Um, it was nicely profitable so it's definitely not a fixer upper very nice business with, you know, a good customer. Um, good customer base that, uh,
Tom Ferguson: We've got a good sales team in the area, things like that, so we would hope to grow it quickly out of the box and improve the margin somewhat, but it was already in a very nice profit.
So, you know, can we add some, we we will drive some margin Improvement using, uh, dgs. Uh, we've got a good sales team in the area, things like that. So we would hope to grow it, um, quickly out of the box and and, uh, and improve the margins somewhat, but, uh, but it was already in a very nice, uh, profit range.
Tom Ferguson: Thank you. And then, second question, I guess really last. And the pre-tote medals, you know, the sales. Relative to the prior year period, and I was just wondering, you know, if you could kind of provide your expectation. pre-tote metal segment in terms of maybe sales growth or margin, given that there's some moving pieces there with the, you know, with the wash. Yeah, I think as we talked, pre-kill has been more affected by tariffs and... You know, some moving pieces when it comes to imported pre-painted metal and stuff like that. So, you know, their volumes were affected, but I think the thing I would point to, their margins were up and that just demonstrates the variability of their cost structure.
Oh, thank you. And then the second question I guess really last question is, you know, the precoat metals? You know, the sales were down uh, relative to the prior year period. And I was just wondering, you know, if you could kind of provide your expectations for the pre-cog segment in terms of maybe sales growth, or, or margin given that, there's some moving pieces there with the uh, you know, with the Washington Missouri, facility coming online and and expected to operate at a at a slightly, higher margin.
Speaker Change: Yeah, I think as we talked the pre coat was has been more affected by tariffs and
Tom Ferguson: They, like on the metal coating side, they can adapt their cost quickly due to the variability of it and sustain their margins, and so we look for them to continue that discipline focus and adjust as volumes, you know, play out. So as the new facility ramps up, you know, we're, this first quarter was test, qualifications, things like that, finalizing the equipment performance. This quarter, we'll start to ramp some volume up, and then as we get into the third quarter, you know, we start to get into a pretty good level of contribution, and fourth quarter, we're hoping to be at, you know, almost normal run rates.
You know, some moving moving pieces when it comes to imported uh pre-painted metal and and stuff like that. So you know their volumes were affected. But I think the, the thing I would point to their margins were up and that just demonstrates the the variability of their cost structure. They like on the Metal Coating side. They can adapt their cost quickly due to the variability of it and sustain their margins. And so, we look for them to continue that. That discipline, uh, focus and adjust.
Just as, as volumes, um, you know, play out. So, uh, as the as, the new facility ramps up, you know, we're we're, this is first quarter was
Jason Crawford: It's a lot of moving pieces, so I don't want to oversimplify that, but, you know, so far everything's been tracking really well. The team's been doing a great job of bringing up a large, complex facility.
Jason Crawford: Jason, I don't know if you want to add something to that. No, no, I think you highlight the two main points there, which, you know, greater margins and smaller volumes, so businesses are doing all the right things. Q1 was a fairly disruptive quarter, just in terms of the volumes associated with the import material coming in, and, you know, some build ahead in terms of the tariff impact. So we see that starting to come back out of the system as we enter Q2 and going forward.
Test qualifications things like that. Finalizing uh the the equipment performance uh this quarter will start to ramp some volume up and then as we get into the third quarter you know we start to start to get into a pretty good uh level of contribution and fourth quarter. We're hoping to be at at you know, almost normal run rates, it's a lot of moving pieces. So I don't want to oversimplify that but uh you know, so far everything's been tracking really well. The team's been doing a great job of bringing up a a large complex facility. Jason. I don't know if you want to add something to that. No no I I think you you highlight the the 2 main points there which, you know, uh, greater margins and smaller volume. So uh, the business is doing all the right things. Uh, q1 was a fairly disruptive quarter just in in terms of the
The, the, the the, the volumes associated with the import material coming in and, you know, some some build ahead in terms of the, the Tariff impact. So, uh, we see that's starting to come back out the system as we enter Q2, and going forward.
Tom Ferguson: That's great and very helpful. Thank you very much.
Speaker Change: Well, that's great and very helpful. Thank you very much.
John Braatz: And your next question comes from John Braatz with Kansas City Capital. Please go ahead. Good morning, everyone.
David Nark: A question for David. David, you mentioned a couple pieces of the metal coating business being strong, that is solar and electrical. I guess with the passage of the big bill and maybe the solar subsidies easing, how do you look at the outlook for the solar piece of the metal coating business? And maybe also, you know, they're talking about copper tariffs going up 50%. Any thoughts on how that might impact the business? Yeah, sure thing. As you look at it, you know, we With respect to to the first part of the question, I think what we're seeing and are going to expect to see is that there'll be a pull forward of some of these projects, specifically the solar projects.
And your next question comes from John Bratz with Kansas City capital. Please go ahead, good morning everyone. Um a question for David. Uh David, you mentioned a couple pieces of the of the Metal Coating business being strong, that is solar and and um, electrical and
John Bratz: I guess with the passage of the Big Bill and and maybe the solar subsidies easing, uh, what do you? How do you, how do you look at the outlook for the, the solar piece of that, uh, of the Metal Coating business and maybe also, you know, they're talking about copper tariffs. Um, going up 50%, uh, any, any thoughts on how that might, uh, might impact the business?
yeah, sure thing, as you look at it, you know, we um,
David Nark: Those will need to, as they look at what's happened with the big, beautiful bill and some of the cuts that have happened, those need to get from planning into production within the next 12 months, and then they need to be completed within, you know, by 2027. So we do think that a lot of the solar projects that are in the pipeline are going to get pulled forward as a result. So that could provide some tailwind again for the business, you know, in the shorter term. Yeah, and I'd also add that, you know, our electricity demand is going to continue to go up with the addition of all these data centers.
Part of the question. I think, uh, what we're seeing and and are going to expect to see is that, uh, there'll be a pull forward of some of these projects specifically the Solar projects. Uh, those will need to, as they look at the the what's happened with the big, beautiful Bill and and some of the the cuts that have happened, uh, those need to get uh, from planning into production, uh, within the next 12 months and then they need to be completed within, um, you know, by 2027. So, we do think that a lot of the Solar projects that are in the pipeline are going to get, uh, pulled forward as a result. Uh, so that could provide some Tailwind again, for the business, uh, you know, in the, in the short term,
David Nark: And so it's going to have to be electricity of some kind that comes into place, whether that's New Gas Turbine Plants or other things. So as long as it uses steel that we can galvanize or paint, we're good with it.
Yeah, and I'd also add that you know our electricity demand is going to continue to go up with the addition of all these data centers. And so it's going to have to be electricity of some kind that comes into place whether that's
Tom Ferguson: Okay, Tom, not that it's a big deal, but the remaining interest in your joint venture, industrial lighting, But does that also include the welding business? Yes, it does include the welding solutions Inc, which is the WSI business, which is a bigger piece of it. Okay, now, did they not have exposure to the nuclear industry? They do. At one time that was almost half the business. It's a smaller piece now, but it's still a good solid piece and that has lots of opportunities. Okay, I mean, can it move the needle for you? Um, you know, I think, I think right now the, the avail team's focus is on supporting the TSAs with InVent for the divested business.
John Bratz: New gas turbine plants or or or other things so all, and as long as it uses a steel that we can Galvanize or paint we're, uh, we're good with it. So,
Speaker Change: Okay. Tom, uh, not that it's a big deal, but um, either remaining interest in your joint venture industrial lighting.
But does that also include uh, the welding business.
Yes, it does, it does include the the welding Solutions Inc, which is the WSI business, which is the bigger piece of it, okay? Now, did they not have exposure to the nuclear industry? Um, they do,
They do that. Uh, at 1 time that was almost half the business. It's, uh, it's a smaller piece now, but it's, uh, it's still a, a good solid piece and, and that has lots of opportunities.
Speaker Change: Okay. I mean can it move the needle for you?
Tom Ferguson: Not that they're not paying attention to WSI and lighting, but I think, you know, there, there is that opportunity and I know they are focused on it. Um, I think we've got a board meeting coming up here in another month, so we'll get better color on that. But, um, you know, I, I, yeah, no, there's that, that, that used to be a very profitable piece of the business. If you go back a decade or so, yeah. Yeah. Okay.
Um, you know, I think, I think, right now, the, the Avail team's focus is on, supporting the tsa's within vent for the divested business. Not that they're not paying attention to WS, so high-end and lighting. But I think, you know, there there is that opportunity and I know they are focused on it. Um, I think we've got a board meeting coming up here in another month, so we'll get better color on that. But, um, you know, I, I
Tom Ferguson: All right. Thank you very much.
Speaker Change: Yeah. No. There's that that, that used to be a very profitable piece of the business if you go back a decade or so. Yeah, yeah. Okay, all right, all right, thank you very much.
Good thing.
Jerry Sweeney: And your next question comes from Jerry Sweeney with Roth Capital. Please go ahead. Good morning, everyone. Most of my questions are asked. Just one quick one. And just with the Canton Acquisitions, Ben Galvin.
Speaker Change: In your next question comes from. Jerry Sweeney with Roth Capital. Please go ahead.
Tom Ferguson: This is Curious. being galvanizing side, you can leverage some of your existing customers and sort of what You know, we've got a facility in the vicinity, within a few miles, which is a larger, much larger kettle, structural, does a lot of structural work, you know, so we'll be operating those two plants, optimizing, you know, what customers we can bring in, and just view it as a broader set of capabilities and capacities. So yeah, I think between the two, the team will focus on optimizing the capacity utilization. There are some customers, including some vertically integrated customers for Camp Galvanizing, which will be additional customer base for us at our existing site.
Uh, good morning everyone. Uh, most of my questions are asked, just 1 quick 1, uh, and probably an easy 1. But uh, just with the, um, Canton acquisition. It's been galvanizing. I think you've mentioned when you announced that, uh, you know, that expands that type of business, just curious. If
If the spin galvanizing side, you can leverage some of your existing customers and sort of what is the potential Revenue uh capacity at the Ken facility. You know, we've we've got a facility in in the in the vicinity um within a few miles which is a larger much larger Kettle structural um does a lot of structural work, you know. So we'll we'll be operating those 2 plants. Uh,
Tom Ferguson: So, you know, it's a fun one, but, you know, these things, if we can pick up another five or six million of incremental volume across the whole thing, that, you know, so not...
Optimizing. You know what customers we we can bring in, uh, and, and just viewing as a broader set of of capabilities and capacities. So, yeah, I I, I think between the 2, we're, we're, uh, the, the team will focus on optimizing. Uh, the util the capacity utilization. Um, there are some customers in including some, some vert vertically, integrated customers at, uh, for the for Camp galvanizing, which will be additional customer base for us, uh, at at our existing site. So, you know, it's it's a fun 1. Um,
Speaker Change: but,
You know, these these things if we can pick up another 5 or 6 million of incremental volume across the whole thing that you know. So so not
Tom Ferguson: Not huge, but like I said, fun and getting back in the bolt-on acquisition game just makes us feel good and getting another flag planted and another one under our belt so hopefully we get a couple more done. I appreciate it. All right, thank you.
Speaker Change: Um, nothing nothing. Yeah, not huge. But uh, but like I said, fun and uh, and getting back in the the act of the bolt-on acquisition game just makes us feel good and getting a another flag planted and another 1 under a belt. So hopefully when we get a couple more done
Speaker Change: It gets a cop website as you said, so I I appreciate it. That's a nice quarter. Nice start to the year. All right, thank you.
Operator: This concludes our question and answer session.
Tom Ferguson: I would like to turn the conference back over to Tom Ferguson for any closing remarks. Thank you, Operator. Thank you all for joining us today. As you know, we continue to believe we've got an outstanding business, tremendous cash flows that we intend to utilize well and deploy to continue to grow this business, to buy back stock as we move forward, and continue to invest in acquiring businesses that we think we can drive great synergies and become a great piece of our platform. We feel well-positioned for this year and believe we're off to a great start.
Speaker Change: This concludes our question and answer session, I would like to turn the conference back over to Tom Ferguson for any closing remarks.
Tom Ferguson: Thank you, operator.
Uh, thank you all for joining us today. Uh, as you know, we we continue to believe we've got a an outstanding business. Uh,
Tom Ferguson: Looking forward to finishing up the second quarter and talking to you all in just a couple of months. Thank you very much.
Tom Ferguson: You continue to grow this business, uh, to buy back stock. If uh as as we move forward, and continue to invest in, in acquiring businesses that we think, we can drive great synergies, and, and become a great piece of our platform. We feel well positioned for this year, uh, and I believe we're off to a great start. Looking forward to uh, finishing
Tom Ferguson: Finish up finishing up the second quarter and uh talking to y'all. And uh just a couple of months. Thank you very much.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect