PriceSmart, Inc. earnings

Management highlights

- Overall Results & Strategy * Achieved record consolidated first-quarter sales of $448.5 million, up 6.3% year-over-year, with gross margin expanding 30 basis points to 25% and operating margin expanding 70 basis points to 17.2% * GAAP net income reached $52 million, with adjusted diluted EPS of $1.85, up 3.9% year-over-year despite the absence of prior-year JV divestiture-related earnings * Generated $37.1 million in operating cash flow, with a low net leverage ratio of 1.4x, supporting flexible capital allocation * Strategic focus remains on growing market share, deepening customer partnerships, and deploying capital into high-return organic and inorganic growth opportunities - Operational Updates * Successfully commissioned a new large galvanizing kettle at the Crowley, Texas facility, doubling capacity in the region to meet growing demand for utility and infrastructure projects in the high-growth southern U.S. * Closed a first de-verticalization partnership with a vertically integrated manufacturer: AZZ acquired the customer's non-core galvanizing operation, provided immediate cash liquidity to the customer, and secured a long-term service agreement; management views this as a scalable blueprint for future similar deals * The new Washington, Missouri pre-coated metals facility continues to ramp on schedule, is approaching target run rates and expected margin levels earlier than planned, with strong performance from its beverage container strategic partner; the company is actively commercializing the remaining 25% of the facility's unused capacity * Enhanced end-market sales disclosure to improve transparency, now disclosing performance across six categories: Construction, Industrial, Infrastructure, HVAC & Appliances, Transportation, and Container * Digital tools (digital galvanizing system for Metal Coatings, CoilZone for Pre-Coat Metals) are core strategic assets that improve efficiency and customer relationships, with management planning to integrate AI to further improve pricing, customer intimacy, and operating efficiency - End Market Performance * Construction: +3.9% year-over-year, led by strong growth in large data center and manufacturing projects; remains the company's largest end market * Industrial: +7.8% year-over-year, supported by rising demand for utility-scale power projects * Container: +194% year-over-year, driven entirely by the ramp of the Washington, Missouri facility * Infrastructure: Flat year-over-year, with mixed performance across sub-segments * Transportation: -1.2% year-over-year, due to lower commercial trailer activity * HVAC & Appliances: -2.4% year-over-year, due to lower residential new construction - Capital Allocation * Increased quarterly cash dividend by 20% from $0.20 to $0.24 per share, reflecting confidence in sustained earnings and cash flow * Capital expenditures totaled $18.7 million in the quarter, with a growing focus on high-return organic investments * $133.2 million remains available under the existing share repurchase program; the company anticipates repurchasing shares if the current trading range continues * Core capital allocation priorities are unchanged: maintain a strong balance sheet, invest in high-return growth, and return excess capital to shareholders

Guidance

- Management raised full-year fiscal 2027 guidance from the prior range, with the midpoint of adjusted EBITDA increasing by $15 million. The new guidance is: * Sales: $1.8 billion to $1.85 billion * Adjusted EBITDA: $375 million to $415 million * Adjusted diluted EPS: $6.75 to $7.15 - The company expects to reduce total debt by $130 million to $170 million in fiscal 2027, continuing its commitment to balance sheet strength - Second quarter 2027 is off to a strong start, and management expects second and third quarters to track in line with the updated guidance, with no unusual near-term headwinds anticipated - The expected M&A deal planned for announcement this month was not included in the original full-year fiscal 2027 revenue guidance - The Washington, Missouri facility is expected to reach full contracted run rate by the end of fiscal 2027, with commercialization of remaining 25% capacity expected to progress in the second half of the year

Segment performance

1. Metal Coatings Segment: First quarter revenue grew 12.3% year-over-year, outperforming consolidated growth. The segment achieved record sales in the quarter, supported by strong momentum across construction, industrial, and infrastructure end markets. Year-over-year margins dropped, partially due to large project mix and the prior year quarter including a land sale gain, but underlying margins remain consistent with long-term expectations. 2. Pre-Coat Metals (Preco) Segment: First quarter revenue grew 1.5% year-over-year. Growth was supported by pass-through of higher input costs and continued ramp-up of the new Washington, Missouri facility, partially offset by softer volume in construction, HVAC, and appliance end markets. Margins improved modestly due to better operational performance and favorable product mix from the new Washington, Missouri facility. The segment is on track to hit expected full-year contribution margin levels, with strong performance from its beer and beverage container customer partnership.

Risks & headwinds

- No material new risks were disclosed in the call. The standard safe harbor disclosure notes that forward-looking statements are subject to uncertainty and risks, including those detailed in prior SEC filings, and actual results may differ materially from expectations - Project delays have been discussed in the broader market due to interest rate and energy cost volatility, but management has not seen meaningful delays impact its own business to date - Tariffs on imported steel substrate created supply disruptions and higher costs for Pre-Coat Metals customers in prior periods, though management notes this impact has now stabilized - Fourth quarter performance is typically sensitive to winter weather severity, which can impact operations and results and is not predictable far in advance

Analyst Q&A

• Q: Given recent energy cost volatility and geopolitical uncertainty, have you seen customer projects delayed, and how are overall market conditions? /

  A: Management reports no meaningful project delays for AZZ to date. Core demand for grid modernization, utility infrastructure, and data center projects remains robust, with most projects moving forward as scheduled. Pre-Coat Metals tariff impacts have stabilized, and market conditions have bottomed out, with positive momentum from the new Washington facility that is already hitting its early run rate targets. No material headwinds are visible for the metal coatings segment currently.

• Q: Can you share more details on your new de-verticalization partnership model? Is this a growing trend, and how does it work? /

  A: The model targets customers that own in-house galvanizing operations, particularly when they need to replace or repair an existing kettle. AZZ acquires the existing assets, provides the customer with immediate cash, removes the operational complexity of non-core galvanizing, and secures a long-term service agreement. Management is actively pursuing multiple similar opportunities, has a target list of potential customers, and views this as a scalable, capital-efficient growth path.

• Q: You expect to announce an M&A deal later this month; can you share context on the M&A pipeline and process? /

  A: The upcoming deal is the same target that was previously in due diligence, and it is a small one-off galvanizing acquisition that has taken longer than the typical 45-75 day timeline to close. The pipeline of potential targets is robust, with active ongoing conversations with independent galvanizing owners; some owners are holding off on transacting amid current strong market demand, but AZZ is offering attractive multiples for targets that fit its geographic and return criteria. Pre-Coat Metals M&A is focused on bolt-on deals that fit existing core capabilities, not large transformative acquisitions.

• Q: What gives you confidence to raise full-year guidance by such a large amount after a $2 million first-quarter EBITDA beat? /

  A: A key driver is the Washington, Missouri facility reaching its run rate and margin targets sooner than originally budgeted, driven by stronger-than-expected performance from its container customer. Additional support comes from pricing actions including zinc surcharges that offset ongoing material inflation, and the full ramp of the Crowley, Texas capacity expansion that will contribute to results in the second half of the year.