AZZ INC Q4 FY2025 earnings call

• The Coatings segment achieved record sales and profitability in fiscal 2025 due to business momentum and growth initiatives.
• Strong sales were driven by infrastructure investments in bridge/highway construction, transmission/distribution, and general construction (including data centers).
• Fourth quarter 2025 was affected by significant inclement weather, resulting in over 200 days of lost production.
• Generated $250 million in cash from operations in 2025, paid down $110 million in debt, and funded a greenfield facility near St. Louis.
• Plan to continue debt reduction, invest in enterprise-wide technologies (e.g., DGS), and evaluate M&A opportunities.
• New coil coating facility in Washington, Missouri is ramping up commercial production.
• JV partner sold electric products group, with AZZ expected to receive ~$200 million post-transaction.

In fiscal 2025, the Coatings segment was strong. Metal Coatings generated sales of $665 million with an EBITDA margin of 30.9%. Precoat Metals had sales of $912 million and an EBITDA margin of 19.6%. Total reported sales for the full year were $1.578 billion. Metal Coatings contributed approximately 42.1% of total sales ($665M / $1.578B) and Precoat Metals contributed approximately 57.8% ($912M / $1.578B). The fourth quarter saw sales of $351.9 million, down 4% from the prior year quarter, impacted by inclement weather with over 200 days of lost production.

• Fiscal 2026 sales guidance: $1.625 billion to $1.725 billion.
• Adjusted EBITDA guidance: $360 million to $400 million.
• Adjusted EPS guidance: $5.50 to $6.10.
• Capital expenditures expected to be $60 million to $80 million.
• Debt paydowns expected to exceed $165 million.
• Anticipate a strong first quarter recovery, especially in Metal Coatings, and expect to complete a bolt-on galvanizing deal this quarter.

• Inclement weather in the fourth quarter led to over 200 days of lost production, impacting sales.
• Tariff uncertainties could affect project viability and cost estimates for future projects.
• Dependence on infrastructure spending and economic conditions which could fluctuate.

Q: What's the impact of weather on the 4Q fiscal year '25 quarter?

A: Lost revenue directly attributable to Metal Coatings was $8 million to $12 million, but March and April have recovered most of this, with Precoat also impacted by weather and inventory build but ramping up well in Q1.

Q: Are there any incremental positives for fiscal year '26 relative to the view back in February?

A: A strong start to Q1, intention to complete bolt-on galvanizing deals, and pushing prices due to cost inflation are incremental positives.

Q: What geographies are most compelling for acquisitions?

A: For galvanizing, almost any geography in U.S. and Canada is compelling; for Precoat, U.S. and Canada are the key geographies, focusing on same served markets.