AZZ at Wolfe Research Conference: Strategic Insights on Coatings Business

On Wednesday, 18 June 2025, AZZ Incorporated (NYSE:AZZ) participated in the Wolfe Research 2nd Annual Materials of the Future Conference. The discussion, led by David Narkey, CMO & Investor Relations, provided a strategic overview of AZZ’s operations, highlighting its unique toll coater business model that shields it from commodity price fluctuations. While the company remains optimistic about its market position, it also acknowledged challenges posed by macroeconomic factors such as tariffs and interest rates.

Key Takeaways

• AZZ operates as a toll coater, insulating itself from commodity price volatility.
• The company maintains a strong presence with 41 metal coating locations and 15 precoat metal lines.
• AZZ is actively pursuing bolt-on acquisitions to enhance its market footprint.
• The company reported $1.5 billion in sales with a robust EBITDA margin of 24.4%.
• AZZ’s future outlook includes capitalizing on trends like reshoring and reduced imports of pre-painted steel.

Financial Results

• Sales: AZZ achieved $1.5 billion in sales in the last fiscal year.
• EBITDA: The company reported $384 million in EBITDA, reflecting a strong margin of 24.4%.
• Debt: AZZ has successfully reduced its debt to EBITDA ratio from 4.3x to 2.5x, paying down over $100 million annually for several years.

Operational Updates

• Metal Coatings: AZZ operates 41 locations, serving a 250-mile radius, marking it as the largest independent batch galvanizer in the U.S.
• Precoat Metals: The segment focuses on custom finishes with 15 coil coating lines and over 200 shades of white paint.
• New Facility: A $125 million investment in a new coil coating line targets the aluminum market, supported by a 7-year agreement with TriArrows.
• Technology: Innovations include a Digital Galvanizing System and a homegrown CRM solution, enhancing customer interaction and feedback.

Future Outlook

• M&A Strategy: AZZ is targeting bolt-on acquisitions, focusing on mom-and-pop galvanizers and converting captive coil coating lines into customers.
• Secular Tailwinds: The company aims to benefit from reshoring, the shift from plastics to aluminum, and data center growth.
• Guidance: AZZ maintains its guidance on sales, adjusted EBITDA, and EPS despite market uncertainties.

Q&A Highlights

• Barriers to Entry: AZZ’s specialization in custom finishes creates significant entry barriers for competitors.
• Residential Construction: This sector accounts for less than 20% of AZZ’s construction-related business.
• Tariffs and Imports: Tariffs have minimal impact due to the tolling model, while reduced imports of finished products could boost demand.

Readers are encouraged to refer to the full transcript for a more detailed account of the conference discussion.

Full transcript - Wolfe Research 2nd Annual Materials of the Future Conference:

Timna Tanners, Analyst, Wolfe Research: Everyone, welcome. I’m Timna, Timna Tanners, cover metals, mining, building materials and waste here at Wolfe Research. Delighted to welcome you. We have here David Narkey. He is the CMO of AZZ, not as AZZ, and also investor relations.

He wears a lot of hats. We were just talking about them. David is gonna do a fireside chat with me. We’re gonna talk about who is AZZ, what’s interesting about them, and how they’re positioned in this current market environment. So we just picked up AZZ kind of recently, and I think it’d be useful to kind of go through where you sit.

And, you know, we cover the steel industry now for twenty four years, and we hadn’t heard of AZZ. So AZZ is kind of this this important player in the market who’s a customer of a lot of our companies and related, but still kind of getting to be known in the investment community. And so I think it’d be helpful to kind of get the lay of the land directly from David.

David Narkey, CMO & Investor Relations, AZZ: Terrific. Happy to do that. And thanks for inviting us. We’re happy to be here. This is our first conference with Wolf since you picked us up.

So so we’re we’re thrilled to be here today and sharing our story. I brought along a slide deck. I’ll rip through that, but open forum. So feel free if, you know, there’s something here in here that you wanna ask a question on. We don’t have to wait till the end.

You can jump in and interject. I’m I’m perfectly comfortable doing that. But I think just to, you know, level set folks on on who we are, what we do, we are a metal coatings provider. What’s important to know there are a couple of things. Number one is that we are a toll coater.

So we do not buy steel. We do not buy aluminum. So you might be saying, well, why are you here? We’re here because we’re really an indispensable component and we sit right in between, you know, mills and service centers and our end customers who are either fabricators in in most cases or in some cases, might be working with, you know, service center or something like that too. We have two lines of businesses, which I’ll get into.

They are what we call our metal coatings business, which is you’ll hear me interchangeably refer to that as our hot dip galvanizing business. I think the other key thing to pick up and take away from this conference is that when I talk about hot dip galvanizing, and I’ll get into that a little bit more, I’m referring to batch galvanizing, batch hot dip galvanizing. We do not have any lines that are coating or processing a rolled steel.

Timna Tanners, Analyst, Wolfe Research: Can I interject? Because so for those of you listening, like, a batch is a very less commoditized approach. So not anybody, but you could just buy equipment and run coding line, but to batch code is much more unique. I just wanted to make that look clear.

David Narkey, CMO & Investor Relations, AZZ: Yep. Good point. Good point. So we’re based in Fort Worth, Texas. We’re not new.

We’ve been around since 1956. We are the largest, independent, hot dip batch galvanizer in in the, the nation. We operate 41 of those locations. It’s important to have, a large footprint in this space because as you all know, steel doesn’t travel really well, it’s expensive to move around, and we sit very close to our customer base. Generally, each plant serving radius of about two fifty miles from its location.

On the other side of the business, we operate 15 coil coating lines. What we’re doing there, again, we’re not coating, for instance, galvanizing and doing Galvalume or Galvanille, but what we’re doing is roll coating paint. So we’re known as sort of the premium finisher in the space. So we do a lot of custom finishes, embossing, blanking, textures, just in terms of white, you think about white and how uniform of a color that is, we have over 200 shades of white on our books alone. So it’s a very custom finish provider in that space.

Can see the numbers of the business, 1,500,000,000.0 in sales in our last fiscal year and again, very strong EBITDA, dollars $384,000,000 and nice margin as well, 24.4%, which you typically don’t see a space like this. So often referred to as a shiny unicorn in the space, I think we’ll take that as a compliment and move on from there. So this slide, bit of an eye chart. What I’ll tell you on this slide, our strategic journey, what’s not so important here is where we’ve been, but where we’re going. And where we’re really focused on is continuing to strengthen our position in the two segments that we operate in, both our Metal Coating segment and our Pre Coat Metals segment.

We have actively announced that we’re back in the game and trying to build the M and A pipeline. We have a number of opportunities in there. We’re opportunistically looking forward to closing a few of those this year. I think they’re going to be bolt on type acquisitions that we’re looking at again in both segments. So we’re looking forward to doing that.

And then also capitalizing on a lot of the continued strong secular tailwinds that we see in the space. So things like reshoring plastics to aluminum in the beverage space are certainly secular tailwinds that are helping our business. We do have data center exposure, which is exciting. We have also exposure on when you think about semis and the reshoring that’s happening with semiconductors, we have that as well. Sure.

So I think in the

Timna Tanners, Analyst, Wolfe Research: context of talking about the attractive margin that you had on the prior slide and talking about kind of where you sit in the steel supply chain. What keeps Amel we have one around the corner, so they know about you all. What keeps Amel from kind of co opting some of what you do? What’s the barrier to entry for your business?

David Narkey, CMO & Investor Relations, AZZ: Yeah. I think a few things. When you think about on the roll coating side of the business first, certainly there are mills and service centers that have coil coating lines. Doing Galvalume, Galvanille type stuff, it makes all the sense in the world to be at the end of the mill. Some of them will add a a paint line.

And again, depending upon their customer base, if it’s maybe a uniform color or maybe they’re just just applying, you know, a base layer of primer to it, that makes sense because it’s uniform and they can run that all day very effectively for them. We’re unique and kind of insulated is in all of the specialty things that we do. So not in addition to all the custom colors textures and those things that we have, but we also have large warehousing logistics facilities. Mills in particular, they want to do one thing and they do it really well, which is produce steel and get it off their books as quickly as possible. There’s a lot of inefficiency that exists in the supply chain overall for steel and aluminum.

And oftentimes, you know, when buyers opportunistically are looking to purchase that from a mill, it needs to go somewhere for a period of time before it gets consumed. That often lands in our warehouses where we’ll be happy to store for a brief period of time, and then at some point, there’s a a a fee for that and and then paint that for them. So we we capture customers in that regard. I I appreciate that.

Timna Tanners, Analyst, Wolfe Research: And I think you’re right. For the most part, historically, the mills have been, let’s churn out lots of steel. But, you know, you talk to Nucor on their towers and structures business. You talk to Reliance. They also do some coding, I believe, this kind of stuff.

So is that separate, though? Is that something that you still think? Because there’s levels of niche. There’s levels of value add. And maybe what you’re doing is even more value add or not necessarily overlapping?

David Narkey, CMO & Investor Relations, AZZ: There are. Yeah. There’s a lot of value add in our equation on both sides of the house. So on our hot tip galvanizing side of the house, so for instance, mentioned Nucor towers and structures, they’ve got the facility that they’ve announced down in the South, I think it’s in Alabama, they’ll add a galvanizing line to that. We’re not too concerned about that.

It’s new capacity that’s coming on to the market. They’re going to purposely be galvanizing their own steel. I think that presents more of a competitive threat to somebody like Valmont who’s already in that business for for quite some time, and so they’ll be kind of competing head to head. And then that facility also sits in the Southeast, which we don’t really have any galvanizing facilities near there. There’s another competitor that operates about eight locations in that market that I think would be more concerned than than we would.

But overall, we would signal that, you know, that expansion is great. We love it when our market collectively is expanding, and that’s what’s really happening on both the the metal coating side, the hot dip galvanizing side, as well as the coil coating side. As you know, in addition to AZZ completing a coil coating greenfield plant, which we did on time and on budget. And I think it’s been the only roll coating facility that’s come online.

Timna Tanners, Analyst, Wolfe Research: Probably also the only one on budget too.

David Narkey, CMO & Investor Relations, AZZ: That’s right. So we’re really excited about that. There’s been others that have been announced as well. So again, this is a space that is definitely growing.

Timna Tanners, Analyst, Wolfe Research: Okay. Great. I’ll let you go through the presentation. We have enough time to talk about tariffs too.

David Narkey, CMO & Investor Relations, AZZ: Absolutely. Feel feel free. Well, again, we can pivot. I’m I’m perfectly fine pivoting away from the the the slides if we need to. I’ll skip ahead.

A couple of things. Well, you know, we can kind of skip over the the management team and all that stuff. You guys can look at that later. We get a lot of questions about end markets and our exposure there. What you’ll see here is a very big weighting on construction.

That’s kind of a big catch all bucket for us. We’ve got both residential and commercial construction in there. When you peel that back, we have exposure across kind of all of the subcategories that you would typically follow and track, whether that’s warehouses, data centers, it’s airports and infrastructure type projects, all of the above are kind of in our numbers with respect to construction. Can

Timna Tanners, Analyst, Wolfe Research: I ask a bit a bit more about the demand as well? So we’ve been hearing that construction’s a mixed bag, so I’d love to get your thoughts on it. Like, construction, we’re hearing quite steady. Housing, not so steady. I don’t think well, he doesn’t say he says residential within your how how much is residential within your construction bucket?

David Narkey, CMO & Investor Relations, AZZ: Yeah. Residential is probably in in this number, call it sub 20%. Okay.

Timna Tanners, Analyst, Wolfe Research: Yeah. So so we’re hearing that’s the weakest, and then public is the strongest, and non res somewhere in between. Somebody last week told me I’m fascinated with this. I keep bringing it up. That it is a building materials company, so not steel.

But he said that if there were clarity on tariffs, the demand would be five to 10% higher. And then other people are pointing out, of course, it’s the interest rates that are the bigger constraint. Curious what you’re seeing. So obviously, data center is super strong, warehouses not weakening anymore. Any more color and any more thoughts about tariffs and interest rates?

David Narkey, CMO & Investor Relations, AZZ: Yeah. You know, for us, what I would say, first and foremost is tariffs, we’ve been largely not impacted because we are an independent toll processor and not buying aluminum and steel. We only see the tariff impact, you know, from a negative perspective, you even want to say that would be on sort of secondary supplies, things that we’re using in the production facility. On the end markets, in reference to end markets and end market demand, I think there’s a few things. I would echo the sentiments you’ve heard public projects certainly funded and moving forward.

I think also large infrastructure projects continue to move forward. Things like airports, port construction, all those things, they’re well financed, they’re multi year projects. And that’s what we’re really hearing is that anything that sees large, they have large tails to them, they’re multi year projects, whether in public or private, are are pretty much well financed and moving forward. The only caution out there that we’re really hearing is that people are just sort of playing, you know, holding their cards a little more closely to the vest, maybe not announcing as many projects and kind of waiting to see. And that’s that’s kind of been the the overall take has been there’s a sort of the wait and see approach because there’s just a sort of, you know, churn in in the news cycle that kinda gets everybody really edgy, whether it’s, you know, we’re we’re all anxiously waiting to see what, you know, the Fed says today on on interest rates, and we’re watching the news cycles to see what’s happening in The Middle East, and is you know, are things gonna get blockaded, and is there gonna be a, you know, oil shock?

So so it’s just all of this constant churn that just makes everyone get a little more conservative on their investment thesis.

Timna Tanners, Analyst, Wolfe Research: Gotcha. Okay. So probably some of it is that jitters about the uncertainty. I don’t know if it’s 510%. I thought that seemed high.

And then interest rates, would you say if we saw a of cuts this year, could that result in a stronger 2026? How do you think about that?

David Narkey, CMO & Investor Relations, AZZ: We do. Yeah, we think that that that would be a really strong signal. If we start to see some cuts in the rates, I think it always helps spur investment and projects will start to move forward. But again, large projects are already well financed with long tails. It’s just going be those new projects that I think everyone’s waiting and taking the wait and see approach.

Timna Tanners, Analyst, Wolfe Research: Now, and then I don’t know if this is part of how this framework would look, but if we have fewer imports coming in and the domestics are able to produce more, does that also improve your demand or is it not relevant?

David Narkey, CMO & Investor Relations, AZZ: It will, yeah. So where we’ll see the net benefit of something like that will be on our precoat metal side. We do know that about 10% of the imported coil steel market comes in as pre painted steel, so that would be something that competes with our precoat metals business. We feel that if all of that plays out, just like you said, there’ll be opportunities as inventories kind of get consumed that are in supply chain now that there’ll be like a second half, back half of our year effect on a positive tailwind for pre COVID.

Timna Tanners, Analyst, Wolfe Research: As they work through the cheaper inventory first, right? And that makes sense. So that’s maybe one of the aspects of imports so that some of the imports that come in replaced by domestics and then you coat that rather than you competing directly with them in imports?

David Narkey, CMO & Investor Relations, AZZ: Yep. Absolutely.

Timna Tanners, Analyst, Wolfe Research: I want to make sure I understood that. Is there any other angle on the import side before we move on?

David Narkey, CMO & Investor Relations, AZZ: Really, no. I mean, like I said, no really negative impact as far as the business is concerned. Large concerns, we’re looking forward to potential tailwinds on that.

Timna Tanners, Analyst, Wolfe Research: We’re looking for an understanding it all better. Another element actually is some chatter of restraint on imports of finished products, right? So things like appliances. I don’t think you make appliances, but that’s a coated that could be a painted product, right? And so could that be another positive catalyst if there’s fewer derivative products that are allowed to be imported as well?

David Narkey, CMO & Investor Relations, AZZ: It could be. We have some exposure on appliance. Do. There’s some of the large domestic appliance manufacturers that are out there today we relationships with and will coat. So for instance, when you think about your fingerprint free refrigerator or appliances, there’s no magic behind the stainless steel, it’s just been coated with a clear coat.

So so we provide that type of service out there, and then we do some other coatings for for some white good products as well.

Timna Tanners, Analyst, Wolfe Research: So conceptually, in the short term, that to the extent that US steelmakers take share from imported steel, that could be a greater opportunity for AZZ. And then maybe down the road, to the extent that we get some more reshoring, I don’t know how quickly any of that happens, automotive, appliances, things that are made from steel that that maybe go through a painted or coated process. That could be another level of additional volume opportunity?

David Narkey, CMO & Investor Relations, AZZ: It could certainly be. Yeah. We don’t have a lot of exposure on automotive per se, but many of the other manufacturing sectors in The US that do rely on prepainted steel certainly could be a benefit for precoat.

Timna Tanners, Analyst, Wolfe Research: And anything you know that we don’t about any timing or magnitude of any of those No, think so.

David Narkey, CMO & Investor Relations, AZZ: Yeah, think our visibility there is probably just as good as everybody else in the room and certainly yours as well on the order of magnitude and timing But generally, we’ve been kind of saying it feels like it would shape up to be a sort of second half of the year event.

Timna Tanners, Analyst, Wolfe Research: In two weeks, you mean? That’s right. We’ll keep an

David Narkey, CMO & Investor Relations, AZZ: eye on it.

Timna Tanners, Analyst, Wolfe Research: Okay, thank you.

David Narkey, CMO & Investor Relations, AZZ: All right, so I’ll move on. So that kind of gives you an idea of the end markets. We’ll talk a little bit about more of those throughout the presentation. This slide, again, really all I want to communicate with this slide on generational infrastructure investment is that even before the Biden administration was in office, there was investment in infrastructure projects. When you think about the electrical grid infrastructure in The United States and the amount of investment that’s been happening there, We are certainly seeing benefit from that.

We galvanize a lot of monopoles and transmission towers that are used for high voltage projects throughout The U. S. We participated not that long ago with the 10 West Link project, which was 1,100 miles of new transmission lines that interconnected Arizona and California. There’s thousands of miles of additional projects that have been announced and awarded and and funded and are moving forward, to interconnect, for instance, you know, areas up here in the Northeast to to to Canada, Texas, which is where we’re based, ERCOT, which is the grid provider down there, has if you’re familiar with that, you follow grid infrastructure, ERCOT was the only provider in the nation that wasn’t interconnected to the rest of the nation’s grid infrastructure. And with all the growth that’s happening in the the Texas market in particular, they need to make some changes.

And so they have announced that they’re going to interconnect to the rest of the grid. That’s going be, again, hundreds and hundreds of miles of new transmission distribution tower that will likely be galvanized. So we see a lot of things happening there with roads, bridges, clean energy, airports, data centers, all that stuff is is all long term, long tail projects that we’re exposed to and and feel really good about.

Timna Tanners, Analyst, Wolfe Research: And again, on that galvanized product, that’s not gonna be competing with imports. You don’t import finished galvanized structures or things like that. Right? Or unless there’s some sort of massive increase in the price where people find a workaround. But generally speaking, you’re immune to imported product and not affected there.

David Narkey, CMO & Investor Relations, AZZ: Yeah, exactly right. And that’s a kind of a key distinction with AZZ is that when you think about these projects and the things that get hot dip galvanized, there are items that when they’re galvanized, they have to be fabricated into their intended end use. So they’re not necessarily coming in that way and then being galvanized overseas. They’re going to be using, whether it’s imported steel or domestic steel, they’re going to be fabricated here. And the reason for that is you have all those weld joints and how it’s all been constructed, all has to be galvanized together, so it’s one cohesive unit.

So I often tell people that when you think about AZZ, if you’re listening in on the first time or you’re here for the first time, what you’ll probably remember the most is that, you know, we’re the people that make the steel gray that you see out in the in the environment. Right? So when you’re driving down a, you know, one of the the interstate corridors and you see gray, you know, overpass beams or you see gray guardrails or or gray light poles, you know, we’re the we’re the ones that make that stuff gray. So that’s

Timna Tanners, Analyst, Wolfe Research: Otherwise, they would be what color?

David Narkey, CMO & Investor Relations, AZZ: Would be rusty.

Timna Tanners, Analyst, Wolfe Research: Yeah. Yeah.

David Narkey, CMO & Investor Relations, AZZ: Or or if they’re painted maybe.

Timna Tanners, Analyst, Wolfe Research: So Yeah.

David Narkey, CMO & Investor Relations, AZZ: Yeah. So moving on to your point about segments. These are our two segments, metal coatings on the top, precoat metals on the bottom. You can see the sales dollars associated with each one of these for our fiscal year, which ended in February. The two different processes, again, batch processing, we’re moving things through the factory on a crane, dipping it in a molten tank of zinc, that’s how you galvanize things.

And then we’ve got market size, market share on here, and then the the traditional chart there, we’re showing EBITDA growth for both segments over time. So, again, can’t overestimate the fact that we’re a value added toll processor. We don’t have exposure to aluminum and steel prices and fluctuations therein. So, really makes us that, again, that that unicorn in the space and different.

Timna Tanners, Analyst, Wolfe Research: Remind us what on the precoat side, know, they’re like slitting and blanking. Those are things that others can do. The painting, new cores out in the paint lines, dynamics, adding some paint lines. Are they going to be similar to what you do?

David Narkey, CMO & Investor Relations, AZZ: So, you know, as far as the paint lines go, they’re they’re going to be similar. They typically tend to like to run more uniform colors, longer runs, where what we really where we really specialize on precoat when we just talk about just one for one like for like paint, we’re going to specialize in colors and finishes, smaller runs, more custom runs. So if you were SDI and let’s say you’re you’re going to paint a coil for somebody, they’re going to have the 40,000 pound coil. They’re going to want to paint the whole coil and sell you the whole coil. For us, that 40,000 pound coil might come into our facility, be in in the warehouse, and then our customer is going to place an order for maybe 10,000 pounds of that coil for black and then maybe another 10,000 pounds for red and another 10,000 for white.

So we’ll be happy to chop that up into four different, you know, lengths for them over a period of weeks or months and sell that over time to that customer. All right. Moving forward, sort of, again, kind of key benefits of us, definitely market leaders, like I said, in both of our markets that we serve already have hit twice, I think, on tolling, so I won’t talk more about that. Technology, we’ve invested a lot in technology in the business. We have two proprietary technology solutions in the business on our metal coatings business.

We refer to it as our digital galvanizing system or DGS. For those in the room and listening in, I’ll tell you it’s sort of the Domino’s pizza tracker on steroids for our business. So prior to, that, you know, it was kind of the dark ages. You had to have a customer call you and say, where’s my order? And, you know, we’ll go check and, or things coming into the to the facility.

It was, hey, I I dropped off, you know, a 100 monopoles to be galvanized and you only gave me 98 back. Where are the other two? And people are running around trying to find those things. Now that’s all been automated. We’ve taken paper out of the business.

Orders are not only captured digitally as they’re coming in to the system, but the material is also captured digitally. We take photographs of that as it comes in on the trailers, as it’s running through the process, and then as it’s ready for pickup and then delivered to the customer. So terrific solution. We’ve also even displaced, we used to run salesforce.com, we’ve displaced that with our own homegrown CRM solution, which is baked into the system as well. We do Net Promoter Score out of the tool as well, so we’re following up with customers, making sure that we’ve got excellent quality.

And then on the precut side, much the same as well as some integration tools, we call that our coil zone solution. So a lot of investment in technology that others in our space don’t necessarily have. And really focused, like I said, on service, quality, turnaround times, and receptiveness to the customer, that’s where we really excel. One of your favorite topics and one of my favorite topics on the next slide really quick, we did, as I mentioned earlier, invest in a new facility. That facility is now up and running.

It’s our fifteenth coil coating line here in North America. This one is purpose built, serving the aluminum market. Aluminum continuing to expand in The US. We are coating in this this particular facility a lot of light gauge aluminum that’s used in the container space. So think about your beverages.

So when you see the little red tab on the top of a Budweiser or a blue tab on Bud Light, we’re the folks that are painting that. When you see the the gold on the top of, you know, liquid death water, if you drink that, that’s coming out of our facilities. The blue tabs on Red Bull, the the black top on Celsius. So we’re kind of in the space and around a lot of products that you know, you just didn’t know that it was us doing it. So those tops and tabs are what we’re coding out of this facility.

We’ve been doing that for quite some time. We did it in our other St. Louis facility as well, but the demand of that is increasing and so we invested. We have a large customer, that customer which we can talk about now because we’ve been given permission is TriArrows, which is based out of Kentucky, one of the largest aluminum production facilities here in The US, which is exciting. And so we’re getting shipments in every day from them that’s feeding this facility.

We have a seven year take or pay agreement with them for 75% of the committed capacity in this facility, which is why we chose to invest $125,000,000 If we hadn’t had that contract in place, we probably would not have done that. And and we’re we’re really excited about the project and the fact that, like you said, we got it done on on budget and on time and it’s it’s producing.

Timna Tanners, Analyst, Wolfe Research: The question is what next?

David Narkey, CMO & Investor Relations, AZZ: Yeah. So what next? So we’ll continue to ramp this one. So we’re we’re in the process process now of doing that. We’re excited about ramping that.

And then as you know, as this space continues to grow as far as coil coating goes, we’re not going to make any large investments like this in the near future. But over time, if that needs to happen, then certainly we’d be interested in looking at that. But in the meantime, we’re looking at bolt on acquisitions to bolster both segments.

Timna Tanners, Analyst, Wolfe Research: So bolt on means lot too big and not something we probably would have necessarily heard of?

David Narkey, CMO & Investor Relations, AZZ: That’s right. Yeah. That kind of is a perfect description of of what a bolt on for us would be. So so not too big and, yeah, probably not something you’ve heard about.

Timna Tanners, Analyst, Wolfe Research: Not at all.

David Narkey, CMO & Investor Relations, AZZ: I might steal that line. You’re welcome to. Technology, we already talked about that, so we can skip through that one. Sustainability, what I’ll tell you about sustainability is if you need to read more about it, we have a whole section on our website about sustainability and our sustainability initiatives. We’ve got really good ESG scores, probably some of the leading scores in ESG.

Those efforts have been recognized by people like Newsweek for three years in a row now, where we’ve been recognized as one of the most sustainable companies list. And we’re really transparent as far as everything we’re doing on there and disclosing Scope one, Scope two emissions and then focusing on safety. Safety is a real underpinning of sustainability and we believe that you have to have safe employees doing the right thing every day or you’re not gonna be a sustainable company. And like I said, you can read about more all that on our on our sustainability website. Quick look here of sales and EBITDA growth over time.

Again, this kind of takes you back over the past five plus years even through COVID. We grew through COVID, as you can see, which is something that not a lot of companies can say. So we’re pretty excited about that. And again, margin growth as well over time.

Timna Tanners, Analyst, Wolfe Research: How much was the organic versus the acquisition timing in the chart there?

David Narkey, CMO & Investor Relations, AZZ: Yep. So on this one, I’ve got just the two segments combined here. So I’ve got just metal coatings and precoat metals. That’s

Timna Tanners, Analyst, Wolfe Research: all organic.

David Narkey, CMO & Investor Relations, AZZ: So this is everything that you see here is all organic. One other kind of interesting slide is when you look at AZZ as an investment and you’re looking at comps and how do I sort of go out and comp the stock versus others, there’s not a lot of direct comparisons that you’re going to find. So in our space, the second largest hot tip galvanizer out there is going to be Velmont, but Velmont is also a metal, know, a fabricator and does a lot of other things. So I put this slide together because whether you look at us against coatings, building products, service centers, or steel mills, and you’re looking at revenue growth, EBITDA margin, or working capital as a percent of sales, what you’ll see is that we kind of jump out on the page compared to all these other things that are kind of adjacent spaces to us. So really strong company, really strong performance.

The balance sheet is getting strengthened over time, which I think is a good lead into the next slide when we talk about debt to EBITDA. When we purchased Precoat back three and a half years ago now, we had spiked debt to EBITDA ratio up to about 4.3 times, That has now come down. We’re at the end of our last fiscal year, which again ended in February and we’re going to be announcing Q1 here in July. At the end of Q4, we were down to two and a half times, and we brought that down through consistent debt reduction. So it wasn’t that we just drove EBITDA up and then as a percentage just kind of did the math that way.

We have very methodically paid down debt more than $100,000,000 every year for the past several years. And that’s continued. We also will have more to say about what we did here in the first quarter very, very shortly as well. So definitely de risk the business and have strengthened the balance sheet.

Timna Tanners, Analyst, Wolfe Research: I think in the last couple minutes, I’d like to ask you a little bit more about the bolt on acquisitions, like what kinds of things would you be doing, things that are deviation at all with what you currently do or maybe businesses that are very similar to what you already do, those are just small mom and pop kind of operations?

David Narkey, CMO & Investor Relations, AZZ: Certainly, yes. So what we’re really looking at doing on the metal coating side would be there are a number of mom and pop family run hot tip galvanizers that that dot the landscape across The US, and we would love to fill in the white space that we have. When you look at AZZ, we’re particularly strong throughout, you know, the the Rust Belt, Upper Midwest, Midwest through the South. We’ve got some white space up in the Northeast up here, out on the West Coast, you know, particularly in places, maybe not necessarily California, but Washington, Oregon, Idaho, Utah, all those kind of places are there there’s several of these family run businesses that operate in those local environments that, quite frankly, are looking and they all have sort of their own timeline, but they they don’t have necessarily family members that are really keen on running mom and dad’s galvanizing business, and they’ve got, know, careers of their own. So we are known to be a very good acquirer of those.

We’ve rolled up the space very methodically over time. So we’re getting back to our knitting on that side of the house. And so we’ll look to that. And then on the pre coat side, I think there’s a few things that we’re doing that are kind of interesting with respect to M and A. One would be, of course, opportunistically if there’s any coil coating assets that we thought were available and would be a good fit, we would certainly take a look at those.

And then the team’s also been really good at converting captive lines that might exist that are, again, twenty, thirty year old lines are very suboptimal. And so we’ll go to those customers that maybe have that vertical integration in place and those lines are operating at 130 feet a minute and you get coil coating lines now are operating at 900 feet a minute, much more efficient to have us coat that stuff than have them do it themselves. So we can help sort of de verticalize them, for lack of a better term, and get them out of their old line, kind of decommission it, make sure it doesn’t show up somewhere else, and then get a long term customer for life.

Timna Tanners, Analyst, Wolfe Research: I don’t know why a kid wouldn’t want to run a galvanizing lab,

David Narkey, CMO & Investor Relations, AZZ: Really exciting stuff.

Timna Tanners, Analyst, Wolfe Research: It does sound good to me. This is great. Do you have a final slide as we wrap up here?

David Narkey, CMO & Investor Relations, AZZ: Yeah. I think just a couple of things. So you can see capital allocation priorities on this slide. I won’t go through all this, but we’re looking at a lot of things. I think we talked about all of these things already in the presentation.

And then final thing would just be guidance. We do provide guidance, and we update our guidance quarterly. One of the, again, companies out there that gives you guidance on sales, adjusted EBITDA and EPS for the year. So we have not taken any guidance down. We put this guidance out last calendar year, probably around the October, November timeline.

And then when we got to the fourth quarter and earnings, I think there was a lot of people in the market that had either adjusted guidance down, we did not. Actually, we came out pretty strong that we felt the CEOs took a very optimistic tone on our call, which I think resonated with a lot of people. And again, we’re looking forward to getting to our Q1 results and talking more about that when we get there.

Timna Tanners, Analyst, Wolfe Research: Fantastic. Thanks for joining us, David. Thanks, everyone.

David Narkey, CMO & Investor Relations, AZZ: Pleasure. Thank you.

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