Sales and Margin Expansion Drives Quarterly Results; Narrowing and Raising Fiscal Year 2025 Financial Guidance
FORT WORTH, Texas, Oct. 9, 2024 /PRNewswire/ --- AZZ Inc. (NYSE:AZZ), the leading independent provider of hot-dip galvanizing and coil coating solutions, today announced financial results for the second quarter ended August 31, 2024.
Fiscal Year 2025 Second Quarter Overview (as compared to prior year(1)):
Total Sales $409.0 million, up 2.6%
Metal Coatings sales of $171.5 million, up 1.0%
Precoat Metals sales of $237.5 million, up 3.8%
Net Income of $35.4 million, up 25.0% and Adjusted net income of $41.3 million, up 11.0%
GAAP EPS of $1.18 per diluted share, up 21.6%, and Adjusted diluted EPS of $1.37, up 7.9%
Adjusted EBITDA of $91.9 million or 22.5% of sales, versus prior year of $88.0 million, or 22.1% of sales
Segment Adjusted EBITDA margin of 31.7% for Metal Coatings and 21.1% for Precoat Metals
Debt reduction of $20.0 million in the quarter; fiscal year-to-date debt reduction of $45 million, net leverage ratio 2.7x
Cash dividend of $0.17 per share to common shareholders.
Subsequent to the end of the quarter, on September 24, 2024, repriced Term Loan B reducing borrowing rate by 75 basis points to SOFR+2.50%
(1) Adjusted Net Income, Adjusted EPS, Adjusted EBITDA and net leverage ratio are non-GAAP financial measures as defined and reconciled in the tables below.
Tom Ferguson, President, and Chief Executive Officer of AZZ, commented, "Focused execution and seasonal strength contributed to second quarter sales of $409.0 million, up 2.6% over the prior year, and Adjusted EPS of $1.37. Consolidated Adjusted EBITDA margin grew to 22.5%, primarily driven by higher volume for hot-dip galvanized steel and coil-coated materials and operational productivity over the prior year. Metal Coatings benefited from the diversity of its serviced markets, improved zinc utilization, and delivered an Adjusted EBITDA margin of 31.7%. Precoat Metals' Adjusted EBITDA margin improved to 21.1%, primarily due to sales growth, favorable mix and improved operational performance.
Our fiscal year-to-date cash from operations of $119.4 million allowed us to reduce debt by $45.0 million and continue to reduce our net leverage ratio to 2.7x at the end of the quarter. We are on pace to exceed our previously stated target debt reduction range of $60 to $90 million, and now expect debt reduction of at least $100 million in the fiscal year. Additionally, subsequent to the end of the second quarter, we repriced our Term Loan B, resulting in a 75-basis point reduction in our borrowing rate with no other changes to our terms, covenants, or maturity date. Capital expenditures for the second quarter were $32.1 million, including $19.4 million of spending related to the new Washington, Missouri, facility, which is on budget and schedule. I want to thank all of our dedicated AZZ employees for their work this quarter on both sales volume, and productivity improvements and for continuing pride and passion for delivering outstanding quality and service to our customers, while driving operational excellence," Ferguson concluded.
Fiscal Year 2025 Second Quarter Segment Performance
AZZ Metal Coatings Sales of $171.5 million increased by 1.0% over the second quarter of last year, primarily due to slightly increased volume supported by infrastructure spending, including construction, bridge and highway, transmission and distribution, and renewables. Segment EBITDA of $54.4 million resulted in EBITDA margin of 31.7%, on increased volume and zinc productivity improvement, an increase of 130 basis points from the prior year second quarter.
AZZ Precoat Metals Sales of $237.5 million increased by 3.8% over the second quarter of last year on increased volume driven by growth in end markets including construction, HVAC, and transportation. Segment EBITDA of $50.2 million resulted in EBITDA margin of 21.1%, an increase of 80 basis points from the prior year second quarter.
Balance Sheet, Liquidity and Capital AllocationThe Company generated significant operating cash of $119.4 million for the first six months of fiscal year 2025 through improved earnings and disciplined working capital management. At the end of the second quarter, the Company's net leverage was 2.7x trailing twelve months EBITDA. During the first six months of fiscal year 2025, the Company paid down debt of $45 million and returned cash to common shareholders through cash dividend payments totaling $9.3 million. Capital expenditures for the first half of fiscal year 2025 were $59.5 million, and full fiscal year capital expenditures are expected to be approximately $100 - $120 million.
Financial Outlook - Fiscal Year 2025 Revised Guidance Revised Fiscal Year 2025 guidance reflects our best estimates given expected market conditions for the full year, lower interest expense, an annualized effective tax rate of 24% and excludes any federal regulatory changes that may emerge.
Revised
FY25 Guidance(1)
Sales
$1.525 - $1.625 billion
Adjusted EBITDA
$320 - $360 million
Adjusted Diluted EPS
$4.70 - $5.10
(1) FY2025 Revised Guidance Assumptions:
a.
Excludes the impact of any future acquisitions.
b.
Includes approximately $15 - $18 million of equity income from AZZ's minority interest in its unconsolidated subsidiary.
c.
Management defines adjusted earnings per share to exclude intangible asset amortization, acquisition expenses, transaction related. expenses, certain legal settlements and accruals, and certain expenses related to non-recurring events from the reported GAAP measure.
Conference Call Details
AZZ Inc. will conduct a live conference call with Tom Ferguson, Chief Executive Officer, Jason Crawford, Chief Financial Officer, and David Nark, Senior Vice President of Marketing, Communications, and Investor Relations to discuss financial results for the second quarter of the fiscal year 2025, Thursday, October 10, 2024, at 11:00 A.M. ET. Interested parties can access the conference call by dialing (844) 855-9499 or (412) 317-5497 (international). A webcast of the call will be available on the Company's Investor Relations page at http://www.azz.com/investor-relations.
A replay of the call will be available at (877) 344-7529 or (412) 317-0088 (international), replay access code: 5013909, through October 17, 2024, or by visiting http://www.azz.com/investor-relations for the next 12 months.
About AZZ Inc.
AZZ Inc. is the leading independent provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets. Collectively, our business segments provide sustainable, unmatched metal coating solutions that enhance the longevity and appearance of buildings, products and infrastructure that are essential to everyday life.
Safe Harbor Statement
Certain statements herein about our expectations of future events or results constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as "may," "could," "should," "expects," "plans," "will," "might," "would," "projects," "currently," "intends," "outlook," "forecasts," "targets," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Such forward-looking statements are based on currently available competitive, financial, and economic data and management's views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Forward-looking statements speak only as of the date they are made and are subject to risks that could cause them to differ materially from actual results. Certain factors could affect the outcome of the matters described herein. This press release may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our manufactured solutions, including demand by the construction markets, the industrial markets, and the metal coatings markets. We could also experience additional increases in labor costs, components and raw materials including zinc and natural gas, which are used in our hot-dip galvanizing process, paint used in our coil coating process; supply-chain vendor delays; customer requested delays of our manufactured solutions; delays in additional acquisition opportunities; an increase in our debt leverage and/or interest rates on our debt, of which a significant portion is tied to variable interest rates; availability of experienced management and employees to implement AZZ's growth strategy; a downturn in market conditions in any industry relating to the manufactured solutions that we provide; economic volatility, including a prolonged economic downturn or macroeconomic conditions such as inflation or changes in the political stability in the United States and other foreign markets in which we operate; acts of war or terrorism inside the United States or abroad; and other changes in economic and financial conditions. AZZ has provided additional information regarding risks associated with the business, including in Part I, Item 1A. Risk Factors, in AZZ's Annual Report on Form 10-K for the fiscal year ended February 29, 2024, and other filings with the SEC, available for viewing on AZZ's website at www.azz.com and on the SEC's website at www.sec.gov. You are urged to consider these factors carefully when evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. These statements are based on information as of the date hereof and AZZ assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
Company Contact:
David Nark, Senior Vice President of Marketing, Communications, and Investor RelationsAZZ Inc.(817) 810-0095www.azz.com
Investor Contact:
Sandy Martin / Phillip KupperThree Part Advisors(214) 616-2207www.threepa.com
---Financial tables on the following page---
AZZ Inc.
Condensed Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended August 31,
Six Months Ended August 31,
2024
2023
2024
2023
Sales
$ 409,007
$ 398,542
$ 822,215
$ 789,415
Cost of sales
305,493
301,296
616,031
595,150
Gross margin
103,514
97,246
206,184
194,265
Selling, general and administrative
35,868
36,239
68,789
67,762
Operating income
67,646
61,007
137,395
126,503
Interest expense, net
(21,909)
(27,770)
(44,683)
(56,476)
Equity in earnings of unconsolidated subsidiaries
1,478
974
5,302
2,394
Other income, net
417
88
621
50
Income before income taxes
47,632
34,299
98,635
72,471
Income tax expense
12,213
5,967
23,614
15,617
Net income
35,419
28,332
75,021
56,854
Series A Preferred Stock Dividends
—
(3,600)
(1,200)
(7,200)
Redemption premium on Series A Preferred Stock
—
—
(75,198)
—
Net income (loss) available to common shareholders
$ 35,419
$ 24,732
$ (1,377)
$ 49,654
Basic earnings (loss) per common share
$ 1.19
$ 0.99
$ (0.05)
$ 1.99
Diluted earnings (loss) per common share
$ 1.18
$ 0.97
$ (0.05)
$ 1.95
Weighted average shares outstanding - Basic
29,852
25,054
28,294
24,997
Weighted average shares outstanding - Diluted
30,057
29,210
28,294
29,196
AZZ Inc.
Segment Reporting
(dollars in thousands)
(unaudited)
Three Months Ended August 31,
Six Months Ended August 31,
2024
2023
2024
2023
Sales:
Metal Coatings
$ 171,500
$ 169,837
$ 348,152
$ 338,631
Precoat Metals
237,507
