AZZ Inc.

Good day and welcome to the AZZ Inc. Third Quarter Fiscal Year 2022 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal 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 then one on your touch-tone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Joe Dorme with some partners. Please go ahead, sir.

Thanks, Rocco. Good morning, and thanks for joining us today to review the financial results of AZZ Inc. for the third quarter of fiscal year 2022, ended November 30th, 2021. Joining the call today are Tom Ferguson, Chief Executive Officer, Philip Schwab, Chief Financial Officer, and David Nark, Senior Vice President, Marketing Communications and IR. After the conclusion of today's prepared remarks, we will open the call for questions. Please note there is a slide presentation for today's call, which can be found on AZZ's investor relations page under latest earnings release presentation. Again, that's www.AZZ.com. Before we begin with prepared remarks, I would 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 end report on Form 10-K for the fiscal year ended February 28, 2021. 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 shipment, acquisition opportunities, currency exchange rates, adequate financing, and availability of experienced management and employees to implement the company's growth strategies. In addition, AZZ customers and its operations could potentially be adversely impacted by the ongoing COVID 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 as 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 third quarter fiscal 2022 earnings call. And thank you for joining us this morning. We continue to gain momentum in the third quarter and completed our fifth consecutive quarter of solid performance after the disruption from COVID in the first half of last year. I especially want to thank our employees who show up every day and do their job well. Their perseverance continues to allow us to achieve these kinds of results. Consolidated sales of almost 232 million improved 2.3% versus the prior year, or 4.1% when adjusted for the divestiture of SMS last year. Metal coatings generated another excellent quarter with sales up 15.4% to over $133 million, and infrastructure solution sales down 11% at about $99 million. Sales in AIS were impacted by labor constraints, COVID-related material shortages, and COVID issues at some customer sites, which I will describe further during this call. We are pleased to have completed another strong quarter of performance, We continue to generate solid cash flow and return capital to our shareholders during the third quarter. We generated net income of over $21 million and EPS of 85 cents per diluted share, reflecting the resiliency of our businesses and the dedication of our people. Our businesses leveraged the realignment actions taken last year to improve profitability while maintaining their focus on providing outstanding quality and service to our customers. We also benefited from lower interest expense and a lower tax rate of 22% for the third quarter. In line with our strategic commitment to value creation, we repurchased over 148,000 shares for $7.6 million and distributed $4.2 million in dividends. In metal coatings, we achieved 24.5% operating margins on sales of $133 million. This resulted in operating income being up over 14% from the previous year. The margin improvement was primarily due to driving operating deficiencies and productivity while realizing improved pricing in the face of rapidly rising zinc, labor, and energy costs. In spite of the ongoing challenges of COVID, our team succeeded in completing the acquisition of Steel Creek Galvanizing in South Carolina. This site was completed in 2019 and includes a lot of automation, making it the newest and most modern in our fleet. Our team is excited about the growth opportunity it presents in a region we were not present in. Our metal coatings team continues to demonstrate their ability to perform and deliver great results while managing labor shortages and the increasing costs. Our infrastructure solution segment demonstrated continued profitability improvement in the quarter, leveraging the cost reduction actions that they took last year. We were down about 8 percent when considering the impact of the SMS divestiture. The infrastructure solution segment delivered operating income of over $9 million, with operating margins improved 140 basis points to 9.3 percent as compared to the prior year. The segment did face growing labor constraints and delays in materials due to supply chain disruptions resulting from COVID, including components from customers. One WSI international project was significantly impacted by a COVID outbreak, which was managed well, but resulted in lower profitability. We remain focused on strategic selling initiatives across both the electrical and industrial platforms, and we believe we are well positioned to finish this fiscal year well. For fiscal year 2022, while COVID continues to generate some uncertainty in many sectors, Given our strong performance in the first three quarters and due to seeing more opportunities than risk, the balance of this year, we are tightening our EPS guidance. We anticipate annual sales to be in the range of $865 to $925 million, and EPS at $3 to $3.20 per diluted share. We do not anticipate any material impact in the fourth quarter from the recently announced acquisition, as we're focused on integration these first couple of months. Metal Coatings is continuing to focus on sales growth, including leveraging our spin galvanizing operations at several sites. Operational execution and customer service as labor and operating expenses increase due to inflation. Our infrastructure solution segment is cautiously optimistic as it enters the fourth quarter, with some momentum in bookings activity, particularly in the electrical platforms. Our WSI business is seeing good results from the expanded polling facility, although internationally the business continues to experience some intermittent project delays due to COVID outbreaks at some customer sites. As we noted on the last call, some of the fall season projects will now be completed in the fourth quarter. We also have some spring projects that look to kick off a little earlier than normal. The electrical platform is focused on operational execution and growing its e-house and switchgear businesses. Due to the project extensions from the third quarter, we expected better than normal performance in the fourth quarter. I will note that our outlook for the spring turnaround season is quite good based upon the level of quotations, but we remain cautious due to the ongoing battles with COVID outbreaks at customer sites. For the balance of fiscal year 2022, AZZ will continue to execute on our strategic growth initiatives to drive shareholder value while positioning for a strong start to fiscal 2023. Our commitment to superior customer service is unwavering. Our ability to generate strong cash flow is based on initiatives that drive operational excellence, tightly manage costs, ensure pricing discipline, and emphasis on receivables collection within our operating platforms. We are confident that our businesses remain vital to improving and sustaining infrastructure, so we continue to drive profitable growth and enhance shareholder value. With that said, I'll turn it over to Phillip.