AZZ Inc.

Good morning, everyone, and welcome to the AZZ Inc. second quarter of fiscal year 2021 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please know a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Mr. Joe Dorme, Lithium Partners. Sir, please go ahead.

Thank you, Jamie. Good morning, and thank you for joining us today to review the financial results of AZZ, Inc. for the second quarter of fiscal year 2021, ended March 31, 2020. Joining the call today are Tom Ferguson, Chief Executive Officer of Philip Shlom, Interim Chief Financial Officer, and David Nart, Senior Vice President, Marketing and Communications and Investor Relations. After the conclusion of today's prepared remarks, we'll open the call for a question and answer session. Please note there is a slide presentation for today's call, which can be found on AZZ's Investor Relations page under financial information at azz.com. Before we begin with prepared remarks, I'd like to remind everyone certain statements made by the management team of AZZ during this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Except for the statements of historical fact, this conference call may contain forward-looking statements that 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 annual report on Form 10-K for the fiscal year ended February 29, 2020. Those risks and uncertainties include, but are not limited to, changes in customer demand and response to products and services offered by the company, including demand by the power generation markets, electrical transmission and distribution markets, the industrial markets, and the metal coatings markets, prices and raw material costs, including zinc and natural gas, which are used in the hot-dip galvanizing process, changes in the political stability and economic conditions of the various markets that AZZ serves, foreign and domestic, customer requested delays of shipments, acquisition opportunities, currency exchange rates, adequate financing, and availability of experienced management and employees to implement the company's growth strategies. In addition, AZZ's customers and its operations could potentially be adversely impacted by the ongoing COVID-19 pandemic. The company can give no assurance that such forward-looking statements will prove to be correct. These statements are based on information as of the date hereof, and AZZ assumes no obligation to update any forward-looking statements, whether a result of new information, future events, or otherwise. With that out of the way, let me turn the call over to Tom Ferguson, Chief Executive Officer of AZZ. Tom?

Thanks, Joe, and welcome to our second quarter fiscal 2021 earnings call. And thank you for joining us this morning. Let me first start by saying that COVID-19 is still very much front and center for all of us here at AZZ and continues to affect our results. Our top priorities at AZZ continue to be ensuring employee health and safety, supporting our customers during these unprecedented times, finishing this fiscal year well, and positioning the company for fiscal year 2022, as well as beyond. As an essential infrastructure manufacturing company, all of our facilities remained open. I am extremely proud of the way our folks managed through this crisis during our first quarter and second quarter as well, and took care of each other and our customers. During this pandemic, we are truly grateful for everyone's efforts that allowed us to continue safe operation of our plants worldwide. We entered the second quarter in June, which is normally the final month of the seasonal spring turnaround season. Consequently, the quarter got off to a slow start. Historically, however, Q2 is sequentially lower for our infrastructure solution segment under any circumstances. The metal coating segment navigated the economic uncertainty well. However, results in our galvanizing business were impacted by several factors beyond COVID, but I will cover these later. As a result, our second quarter consolidated sales declined 13.9% versus the second quarter of the prior year. Adjusted net income decreased 16.7% to $13 million, or 49 cents per diluted share. In light of the disruption caused by COVID on our markets and some of our operations, we decided to accelerate elements of our long-term strategic plan and initiate some strategic actions that will have longer-term benefits. Our metal coating segment experienced a wide range of challenges. Plants experienced disruptions from hurricanes in the Gulf to civil unrest in some cities, and some even had difficulty finding direct labor. Suffice it to say, it was a crazy summer. Sales totaled $117 million for the quarter as compared to $125 million for the same quarter a year ago. I am particularly pleased with how our galvanizing team, in particular, was able to benefit from lower zinc costs during the quarter while maintaining above-average industry pricing. These actions, coupled with our quality of workmanship and outstanding customer service, resulted in overall segment margins that were flat at 23%, while our galvanizing margins in particular finished above 25%. Additionally, the metal coatings team did a nice job of integrating the powder coating and plating operations and sales teams during the quarter. Many of our powder coating customers that had closed or reduced production because of COVID began to place orders again. We remain committed to our strategic growth plan for the powder coating and plating business and driving meaningful margin improvement post-COVID-19 crisis. So much so that we chose to rename surface technologies to powder coating and plating to better represent our focus for that business. Because of the impact of COVID on the oil and gas and petrochemical sectors, we made a difficult decision to classify some underutilized facilities as assets held for sale. as well as close a couple of sites and integrate their business into our other sites in the adjacent areas. We also closed one plating site, relocated its operations to a nearby plant. We are excited by the progress the new integrated team is making and the speed at which they are moving. We believe the restructuring actions that are currently in process should provide approximately $2 million of savings benefits annually. Our infrastructure solution segment segment's second quarter fiscal 2021 sales decreased by 22.5% to $86 million, resulting in an adjusted operating income of about $3 million as compared to about $4 million in the same quarter a year ago. As I mentioned previously, the decline in sales was a result of lack of refinery turnaround activity in June, lower China high-voltage bus shipments, and lower overall demand for some of our electrical products and services. While our industrial platform shops were open and working and crews did begin deploying during the quarter, the summer is usually a period of weak activity. In line with our strategy to reduce our participation in the U.S. nuclear sector, a lower outlook for activity in the oil patch sector, and in our desire to focus on core businesses, we initiated several restructuring actions in this segment. These include personnel actions, some site consolidations, deciding to divest some non-corp businesses, the buyers that are interested in investing and growing these businesses, and impairing $2.5 million of inventory. We believe the third quarter will be sequentially better than Q2 of this year, but turnaround activity remains constrained by COVID travel restrictions and continued low demand for gasoline and jet fuels. Due to the prolonged uncertainty associated with the recent COVID-19 pandemic on many of our end markets and delays by some of our customers due to election uncertainty, we were not able to accurately provide an update for the full year at this time. We can say that our third quarter will be nicely improved sequentially over the second quarter, but it is unlikely to generate the earnings we did in the strong third quarter of last year. Our low debt level combined with our consistent ability to generate cash gives us the confidence that we can manage both debt and liquidity satisfactorily throughout fiscal year 21 as well as beyond. We hope to get back into a normal guidance cadence as we enter calendar year 2021 and as we see customers returning to normal business engagement levels. Our metal coatings business is operating at a fairly normal level, although there are restrictions and disruptions in some of the cities and states we operate in. We are also experiencing additional expense as we work to keep our facilities clean and safe so our employees remain healthy and productive. We are confident that our businesses remain vital to improving and sustaining infrastructure, so we will use this time of global pandemic to position our core businesses to emerge stronger and better equipped to provide sustainable profitability long into the future. With that said, I'll turn it over to Philip.

Thanks, Tom. For the second quarter of fiscal year 2021, we reported sales of $203.4 million, a decrease of $32.8 million, or 13.9% lower than the second quarter sales of $236.2 million last year. Our earnings release in 10K reported, due to the impact of COVID and certain restructuring and impairment charges, the company reported a net loss for the second quarter of fiscal 21 of $1.8 million, or 111.5% lower than the prior year's second quarter. As a result, reported diluted earnings per share was a loss of 7 cents, compared to EPS of 59 cents in the prior year's same quarter. On an adjusted basis, reflecting the impact of the impairments we took, the company's net income was $13 million, or 49 cents per diluted share. In the current quarter, the company recorded restructuring and impairment charges of $18.7 million, $14.8 million net of associated tax benefits. As a result of the restructuring, we classified four operating facilities as assets held for sale. Two operating locations are within the infrastructure solution segment, and two other non-operating locations are in the metal coating segment. The impact of the impairments to the metal coating segment operating income was $11.3 million and includes the loss of sale of Galvabar, assets held for sale impairments, and impairments related to closing facilities. The impact of the impairments to the infrastructure segment, operating income was $7.4 million, including assets held for sale impairments and write-down of oil and gas tubing inventories. Q2 fiscal 21 gross margins improved to 22.7% from 22.3% on a year-over-year basis, primarily on continued strength in the metal coating segment. Operating profit, as reported for Q2 fiscal year 21, was $0.7 million, down from $22.2 million in the prior year. On an adjusted basis, operating income was $19.3 million, or 9.5% of sales compared to 9.4% in the prior year, a 10 basis point improvement over prior year. EBITDA, as reported for Q2, was $12 million, EBITDA as adjusted was $30.7 million, or down 9.2% as compared to the second quarter of fiscal year 2020, with much of the reduction being directly attributable to the economic impact and business disruption associated with COVID pandemic. Year-to-date, through the second quarter of fiscal 21, we reported sales of $416.7 million, a 20.7% decrease from the strong prior year-to-date sales of $525 million. Ninety percent of that decrease in sales occurred within the infrastructure solution segment where the company experienced the most prominent impacts of the pandemic. Fiscal year 21 year-to-date net income for the second quarter, as reported, was $3.8 million, a decrease of $33.1 million from the prior year-to-date results. On an adjusted basis, taking into consideration the impairment-related charges, Year-to-date net income was $18.5 million, or 71 cents per diluted share, a 49.3% reduction from the prior year-to-date diluted EPS of $1.40. I will now provide highlights on the balance sheet and our liquidity position, given the attention this has garnered as a result of the pandemic. For the first half of the year, cash flow from operations was $32.2 million, down $6 million or 15.7% from prior year, as a result of lower sales and net income generated by the business. Free cash flow was $12.9 million on a year-to-date basis. Current borrowings on a revolver ended the second quarter at $47 million, a $31 million or 39.7% reduction from the $78 million as of year-end February. We invested $19.3 million in capital spending during the first half of the year, an increase of 17% from the prior year-to-date capital spending of $16.5 million. We repurchased $6.4 million of 200,000 shares of our stock during the quarter, an average price of just under $32 per share. And we continue to announce and make dividend payments. While slowed for a period of time by the pandemic, we continue to actively pursue acquisition targets, primarily in our metal coatings businesses. And some great news on the liquidity front. Last Friday, we finalized the refinancing and upsizing of our 5.42%, $125 million senior secured notes that are set to mature in January of 21. We reentered the private placement market and borrowed $150 million with a combination of 7 and 12-year senior secured notes, in two tranches of $70 and $80 million, with fixed rates of 2.77% and 3.17%, respectively, for a blended rate of 2.98%. The new notes will fund in December 2020 and January 21. The company intends to use these proceeds to repay the notes maturing in January, as well as using the excess borrowings to reduce our revolving credit and to repurchase shares to reduce further dilution from employee stock plans. Lastly, like Tom, I'd like to thank our employees for remaining committed during the difficult year, following and demonstrating the company traits by which we all ascribe by. With that, Tom, I'd like to turn it back to you.

Thanks, Phillip. As I did on the previous earnings call, I wanted to close by sharing with you some key indicators that we continue to pay particular attention to. For the metal coating segment, fabrication activity remains solid in Q3, and we got off to a good start in September. Within our galvanizing business, we are carefully tracking steel fabrication and construction activity. Zinc costs are relatively stable, and the cost of zinc in our kettles continues to gradually decline. For powder coating and plating, we are primarily focused on getting back to normal production levels with both existing and new customers, but would like to see more activity from our aerospace customers. Within the infrastructure solution segments industrial platform, we are seeing the fall turnaround activity improve, but not to the same level from last year. particularly in the U.S. market. We're carefully monitoring the COVID situation in the states with large refining capacities. Currently, we still have travel restrictions in some countries. For the electrical group, we are carefully tracking proposal activity and expect bookings to continue to increase this quarter and beyond, which should provide sufficient backlog for many of our business units in the back half of the year. For tubing and lighting, which make up a small portion of our electrical group, we continue to look for increased rig activity and have already taken significant realignment actions. Finally, for corporate, we have very good cash management processes and have further tightened our oversight on cash flow indicators and customer credit. Currently, we're not seeing any slowdown in customer payments. So, post-COVID-19 crisis, or at least as it winds down at some point. We remain committed to our growth strategy around metal coatings and achieving 21% to 23% operating margins, including an increased contribution from powder coating and plating. We believe galvanizing would tend to run to the high end, if not above the 23%, while powder coating and plating should be able to consistently generate 15% to 20%. We believe the integration will allow the outstanding galvanizing resources to be brought to bear to increase sales penetration, drive operational efficiencies, and leverage the seasoned business development resources. And we're already seeing the benefits of that. For infrastructure solutions, we will continue to focus on our core businesses, seek to divest things that are not core to our future strategic interests. Most of our infrastructure BU's are experiencing a relatively modest level of disruption due to COVID. And we're taking this opportunity to right-size operations and align them with expected demand post-pandemic. We feel quite confident, in spite of COVID and other disruptions, about the actions we have already taken and the restructuring activities that are now underway. We intend to complete our restructuring actions quickly and effectively, finish this fiscal year well, and position our businesses to enter fiscal 2022 with momentum. Finally, we will remain active in the area of M&A, primarily in Mountain Codents, with activities that support our strategic growth initiatives. While pandemic-related deal travel was still somewhat restricted during Q2, we do see improving conditions and have an active portfolio of opportunities to pursue and have our teams actually out in the field as we speak. We hope to close on anywhere from one to three galvanizing deals to balance of this year. And with that, we'll open it up for questions.

And ladies and gentlemen, at this time, we'll begin the question and answer session. Once again, to ask a question, you may press star and then 1 using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys. To withdraw your questions, you may press star and 2. Again, that is star and then 1 to ask a question. We'll pause momentarily to assemble the roster. Our first question today comes from John Franzreb from Sidoti & Company. Please go ahead with your question.

Good morning, gentlemen. I'd like to start with the comments you made about the hurricane season. Perhaps, Tom, you can compare and contrast the potential disruptions you've had in the quarter or are currently having versus the relative opportunity or not of any reconstruction activity in the region.

Yeah, it's kind of interesting. None of our facilities, thankfully, were hit head-on, so we didn't have a lot of facility damage. But it did impact our customers and their ability to, you know, they were already in some ways, particularly along the Gulf, struggling with reduced demand on the oil and gas front, and some were struggling to keep people working. So I think we've experienced moderate disruption It's hard to say what opportunities we're seeing that may come out of that. We have not seen tremendous damage from our customers directly, which would be refining petrochemical and things like that. I'm going to guess, though, that on balance, we're going to pick up what we lost as the year goes on. That's assuming we don't have any more major stories.

Certainly deep into the season, aren't we? Okay, and you talked a little bit about the turnaround season, both the fall and the spring. The fall being a little muted, the spring you're getting, sounds like, bidding activity a little earlier than you expected. Can you talk about why that's the case or why you think that might be the case?

Yeah, I think on the refinery turnaround side in the U.S., we just As we talked last time, we weren't seeing the kind of activity that you normally expect at that point because we were kind of getting ready to come into what was hopefully a busy season. But we just, all the, not all, but a lot of the inquiry activity was already focused on the spring. And I think that's just because the refineries, even though the price of oil has increased, there's still not used demand in oil and gas or gasoline and depth oil. You just We see more planes flying, and today was the first day I looked out my condo window and saw all of the freeways jammed with traffic, so maybe that will get better. But they just didn't have the demand in the summer to drive production. Now, the good news for the spring is that we've already gotten firm orders. We've gotten engineering orders. for the spring, so our challenge for the spring is going to be accessing all of the craft that we can possibly access and making sure we get our crews deployed to the best opportunities. We also have seen still countries with restricted travel internationally, so places like India and to some extent in parts of Asia. which restricts our ability to get the people to those jobs. But even those customers are saying they're going to part as we get into the new calendar year, and particularly spring. And we also think that spring will be a longer turnaround season than we often experience. So longer and bigger.

Great, great. And I apologize if I missed this, but assets that are being held for sale, there are There are two in metal coatings and two in infrastructure.

Which businesses are they? We're not quite ready to announce that yet. We've got some internal communication, and we're under NDAs in active negotiations. So I want to be careful not to violate those NDAs. But we will announce those as soon as we possibly can, and they are active. They're non-core, which gives you a little direction. And I'm sorry, I just apologize for having to be so obtuse at this point.

Well, how about maybe in the broader sense, what's the collective sales profile of those four businesses?

You know, I think on the infrastructure side, we're looking at about $60 million in revenue, roughly, and really, you know, unfortunately, low-margin businesses, low-margin contributors. or fortunately, but we're hoping the businesses they go to can invest and do better than we've done with them as we've refocused. And I think on the metal coating side, we're really talking about real estate for the most part of plants that have been closed and we're now holding the real estate for sale for the most part. And we have taken action on one of the closures of one of the galvanizing plants, which there was just too much capacity in the area, and it was further impacted by some of the issues we talked about on the Gulf Coast. We were fortunate. We were able to get some really good seasoned employees to relocate to one of the other plants. So we were pleased with that.

Okay, great. Thanks for taking my questions. I'll get back into queue.

Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Noelle Diltz from Stiefel. Please go ahead with your question.

Hey, Noelle. Hi. Good morning. I just wanted to build on John's question there on the non-core businesses. I know you said they were low margin, but I guess I just wanted to confirm that they are contributing to operating margin right now. They're not a drag overall. Is that fair?

That's fair.

Okay. And then the second question that, again, is building on John is just could you tell us how many galvanizing facilities you're going to have, you know, after the closures, you know, given the closures that have occurred and the sales that you're planning? Okay.

Well, we'd like to think we're between the closures, divestitures, or I guess just closures. And then the acquisitions will still be at 40. Okay.

And then in terms of the acquisitions that you're pursuing, are they in new geographies? Could you help us just sort of understand the strategic rationale and what you're kind of targeting to bring in with these deals?

Yeah, we're looking to, you know, as you know us pretty well, so we like to buy adjacent to where we already have facilities. And so this will move us hopefully further north, further northeast. Yeah, so this will be a new geography that will be incremental to what we're doing and not overlapping for the most part.

Okay, great. And then I just wanted to touch on the rebranding of energy into infrastructure solutions and the strategy there. So when you kind of talk about this idea of infrastructure solutions, I know you have a solid presence there in transmission and distribution. Could you give us a little bit more of a feel for how you're thinking about that, serving that infrastructure sector as we move forward?

I'm going to let David answer that. Yeah, good morning, Noel. Yeah, we decided to rebrand it to really focus on those core markets transmission distribution and utility. We particularly like our enclosures and switchgear business, continue to invest in that area. We think that it's an area of secular growth. The other area that we like is our welding solutions business. We've got a lot of great technology in that business. And we have done a really good job there of expanding into other markets. They traditionally serve just, you know, refining, and then they've moved away from nuclear and are in all sorts of other interesting markets now that we're bringing that technology to bear. So collectively, I think those two markets, you know, we really like, and you'll continue to see us make moves there.

Yeah, Noel, I want to add this. I think in welding solutions, about 40% of their business is now non-refinery related. So we've been able to transition away from most of the nuclear and replace a chunk of that refinery business with other markets in the infrastructure sector. And the technology is really outstanding.

Okay, great. That's helpful. And then finally, just on, you know, galvanizing and metal coatings, I know you mentioned aerospace is still a little bit weaker, but any other verticals that you could call out in terms of particular strengths or weakness in the quarter?

You know, we've seen truck and trailer has been improving, ag is improving. Oh, and solar has been really, really active. You know, this move to renewables in a lot of areas has been really big for us, and there's a lot of steel on those. And then we've seen the transmission has been good as well.

Thank you. And our next question comes from DeForest Hinman from Walt Fusen and Company. Please go with your question.

Hi, thanks for taking my questions. Very nice. Transaction on the debt side, private placement going out seven in 12 years is a lot further than we've been seeing some companies go out, but still maintaining a very attractive fixed rate. Can you just give us any color there in terms of covenants attached to that debt or any other thing we should be aware about on that debt?

Yeah, this is Philip. No, we entered the market, you know, it's a good favorable rate environment. We entered the private placement market after 10 years of being outside that market and had a mix of new investors and existing investors join in on our deal. We were able to upsize. We had a tremendous amount of interest in our offering, so we were able to upsize, and we were also able to spread out some of our risk related to covenants. We were able to increase basket sizes and things like that for different covenants within our deal, so that really helps us as we look forward.

So just so we know, is there anyone who wants to call out that EBITDA covenant?

No, our primary covenant, our leverage covenant, is in line with our current credit facility at three and a quarter to one. But it was more the different covenants and baskets that we were able to stretch out, acquisition baskets and dividend payment baskets, things like that.

Okay, very helpful. It positions the company very well going forward and probably builds into the next question. On the M&A side, you talked about deals. It sounds like you want to try to get them closed. I think you said by the end of the year. Is that your calendar year or fiscal year?

Well, I'd like to get them done by the end of the calendar year, but given some of the travel things and stuff like that, it may be – we'll get one or two done in the calendar year, and I hope we get three done by the end of the fiscal year.

Okay. And can you help us understand – what you're seeing in terms of outlay. I know we just redid the debt. We got a lot of availability on the revolver, you know, ballpark in terms of, you know, cash outlay to get those deals done in any color you can provide on multiple range that you're seeing.

Yeah, you know, these are a traditional galvanizing deal, so they tend to be under $10 million each, although in this case there could be one larger. But that gives you a ballpark, and we tend to target five to seven times. The history of our galvanizing team is they tend to, with very quick integration and bringing their scale to bear, that we're usually able to improve that by at least one turn within the first year.

Okay. And then, M&A, on the sales side, can you give us any update in terms of what you think timing-wise on some of those transactions and then – I know you have the NDAs, and I respect that. Any color you could provide in terms of proceeds potentially from those transactions, and, you know, what would we do with those proceeds from balance?

Yeah, a couple things there. You know, we're trying to get these done as quickly as possible. We've been working on them for a little while and, you know, just somewhat restricted by travel, but, you know, but now the focus is to get those done as quickly as possible. So my intent, assuming we're successful, get them done before the end of this calendar year, which means we probably have to get them done before we get deep into the holidays. So proceeds are not going to be major, not anything that's going to move the needle to any great extent. What we are doing is getting out from under the capex that they draw, the resources they draw, just the various corporate functions that support them. And so we free up resources to focus on the growth side and focus on the core, and they will generate a little bit of cash.

Okay. And then can you give us all an update on the capital allocation focus post-restructuring? And I know you're working on the deals you just discussed, but maybe more broadly as it relates to the dividend strategy going forward, share repurchases, etc. And I do note that you bought some stock at, you know, somewhat lower valuations to offset dilutions. But, you know, has there been an updated discussion with the board about buybacks potentially more than offsetting dilution, actually looking to reduce the share count?

You know, we've had discussions before. We're not ready to really announce going beyond minimizing dilution or buying in the dilution. But that is something we're continuing to focus on. We do deploy quite a bit of CapEx into particularly our metal coatings business keep it productive and efficient and continue to invest in things like DGS. We did have the CapEx that we're continuing to deploy, particularly into WSI for both their facilities and technology that I spoke of. We announced this dividend. It's been a long time since we haven't paid a dividend, but each time we We look at it, and my forward look on it, I don't see any reason why we would withdraw it at this point. It's got a decent yield. And at this time, until we see bigger acquisition opportunities that would be attractive, we're probably going to continue to be committed to that. And then on the acquisition front, You know, it's just not given the cost of our debt. There's just not a huge draw. All the deals we talked about are just pretty easy to tuck in.

I would just add this is just more of a comment, but, you know, Being able to term out your debt the way you did with the private placement notes is a very positive development. I know you're working on getting that refinanced. I think we were discussing that on the last call. Really locking in very attractive rates, seven years and 12 years, is kind of a game changer for you from a cost of capital perspective. I would believe you're already working on initial discussions with your revolver, but in an environment where you have clear cost of capital requirements outlook out potentially five, six, seven years, you know, very low cost of debt, maybe not very large deals, it would seem that there would have to be a greater discussion on greater dividend payouts or share purchases or a combination of both.

Well, the good news is as we get this quarter wrapped up, this is where we usually do our – we're a little delayed on doing our strategic planning engagement. So we'll be doing that over the next few weeks. And we'll definitely take that into consideration.

Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and two. Our next question comes from Bill Baldwin from Baldwin Anthony Securities. Please go ahead with your question. Thank you.

Yeah, good morning. Good morning. A couple areas here, Tom. Can you give us any color as to kind of a proposal activity or pipeline you're seeing in your domestic enclosure and switchgear businesses at this point in time? Yeah, it's improving. And, you know, we're seeing engineering firms and contractors come back to, you know, kind of, I don't know if they're coming back to the office, but we're definitely seeing more activity. And we feel good about the outlook, the balance of this year, and hopefully getting some things in place. We've also taken the opportunity to to continue to train and work on improving the professionalism of all our sales organizations during this time and feel good about our opportunity pipeline as well as our visibility and ability to drive value. So, yeah, we're feeling pretty good. Super, super. So it looks like maybe we'll be going into fiscal 22 with a little bit of momentum going on. I'm hoping. I understand. Second area I wanted to cover just briefly, Tom, is your international area. I know you've had some ongoing projects with joint ventures in the bus business. Can you kind of bring us up to date as to where we stand on those projects at this point? You know, the high-voltage bus business in China, There's a ton of activity. It tends to not be in our sweet spot. We are continuing to work on a joint venture partner over there that would allow us to handle it better from that side. We have seen activity for the high-voltage bus domestically, and we do have things going on in Saudi Arabia as well. So, you know, it's kind of a mixed bag, but we see a lot of activity. It's just we're not seeing a whole lot that gets us too excited. So we're using good discipline around that. Okay, so that's more of a long-term situation. It is. Okay, and a second question internationally. Do you see opportunity, Tom, to take your enclosure and switch your business into some international markets for AZZ? You know, that would probably require us to go acquire something, and right now that's just not on our radar. And that will be one that we'll take your comment to and make sure we do have that discussion as we get into our strategic planning process. And lastly, domestically switched gear enclosure, do you feel like you've got the facilities you need right now to conduct that business the way you want to here in North America, or do you see a need for some additional products and or locations to really flesh out that business for you? I just took a tour of those facilities with some of our executive team and was really pleased with the progress our three enclosure sites have made. I only made it to one of the switchgear sites, but the big one in Fulton. The teams are really working well together. I think I've seen progress. in their supply chain, their design standardization, things that they've had to do working remotely. I mean, doing it apart instead of putting teams together. And I'm encouraged. I feel good with the five facilities we currently have. This will always be an area, as has happened on the last two deals, or particularly when we acquired electricity, it was an opportunistic kind of thing. So, you know, it's an area we don't have anything on our radar screen right now. But if it gets something popped up, you know, we'll take a look at it. The key right now is we have plenty of capacity. So, and we like kind of the distribution of it. So, because we're over on the East Coast outside of Baltimore, we're in, In Chattanooga, with a large facility, we're in Fulton, Missouri. We're in the southeast corner of Kansas. We're up in Oshkosh, Wisconsin. So right now, we like our distribution, given where the activity is, and we haven't had to go chase a whole lot down in the Gulf Coast. So, you know, it's plenty of capacity and just need to see more opportunities, but we feel good about our position. Very good. That's good, Keller. I appreciate it, and best of success. All right. Thanks, Bill. Okay. Well, I think that's it. Good.

Yes, sir. At this time, we've reached the end of the question and answer session. I'd like to turn the conference call back over to Mr. Ferguson for any closing remarks.

All right. Thank you. All right, thanks everybody. We've had good discussions and we look forward to finishing a reasonable third quarter and continue to let COVID and elections and things like that settle. And then we will have completed a strategic planning process, which was delayed while we saw how things kind of sorted themselves out. And we'll get back to that. So hopefully by the time we get to this call for the third quarter, we'll be able to talk to you in more detail about what's now fully core, what's not core, what is likely. Hopefully we'll have some announcements so you'll have seen some of the transactions we've talked about, and then also talk to you about how the outlook is for metal coatings going forward and that kind of thing. So thank you for your time. Look forward to talking more over as this quarter plays out. Thank you.

And, ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for joining. You may now disconnect your lines.