AZZ Inc.

Good morning, and welcome to the AZZ, Inc. first quarter fiscal year 2023 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 a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Joe Dorme with Litham Partners. Please go ahead.

Thanks, Gary. Good morning, and thank you for joining us today to review AZZ's financial results for the first quarter of fiscal year 2023, ended May 31, 2022. Joining the call today are Tom Ferguson, Chief Executive Officer, Philip Schlump, Chief Financial Officer, and David Nark, Senior Vice President, Marketing, Communications, and IR. After the conclusion of today's prepared remarks, we'll open the call for questions. Please note there is a slide presentation for today's call, which can be found on ADZ's Investor Relations page under Latest Earnings Release Presentation at ADZ.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 Legation 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 28, 2022. 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 and the coil coating process, changes in the political stability and economic conditions of the various markets that AZZ serves, foreign and domestic, customer requested delays of shipment, supply chain vendor delays, 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 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. Welcome to AZZ's first quarter fiscal year 2023 earnings call, and thank you for joining us this morning. I am excited to have the opportunity to share the progress we have made on our strategic commitment to become predominantly a metal coatings company, as well as the outstanding results of our legacy AZZ businesses for the first quarter. During May, we completed the acquisition of Preco Metals and have structured it as AZZ Preco Metals Segment, led by Kurt Russell. When sales are combined with AZZ's metal coating segment led by Brian Stovall, we anticipate over 75% of our second quarter revenue to be derived from our metal coatings businesses. After the first quarter closed on June 23rd, we announced entering into a definitive agreement to sell 60% majority stake in infrastructure solutions to Fernway Group LLC for estimated cash proceeds of $228 million. I know many are asking why we decided to participate in a joint venture rather than divesting AIS entirely. I can assure you that all, I can assure you all that we evaluated numerous options before entering into a joint venture. We believe this joint venture offers the optimum benefits for our investors, employees, and customers. AZZ will receive approximately $228 million in cash to quickly reduce debt. and we will have an ongoing equity income stream and potential cash dividends from the success of the joint venture. The JV will also allow AZZ to deconsolidate the financials of AIS. FERNWAT brings resources, capital, and industrial process improvement expertise to the JV, all of which bode well for infrastructure solutions' future success. So let's talk about the outstanding operational performance of our businesses in spite of the corporate and segment disruption that resulted from these concurrent transformational transactions. With the addition of pre-code during the middle of May, we generated sales of $314 million, with the AZZ metal coating segment posting almost $161 million, which is another record quarter. The infrastructure solution segment generated a solid $110 million in revenue, for what is typically a slow quarter for our industrial platform, and Precoat contributed $44 million for just two weeks of being part of AZZ. Most markets were active, and we had great bookings in our electrical products platform, which bodes well for the balance of this year and even into the next. Our businesses managed well through the ongoing supply chain delays and labor shortages and continue to take care of their customers while operating safely. AZZ legacy company sales were up 18%, and pre-cut metals joined with some momentum. EBITDA, which we will be referring to more going forward, was up 27% versus prior year's first quarter, and up 41% on an adjusted basis. Net income and EPS were up nicely on a reported basis, but really strong, with EPS of $1.40 on an adjusted basis, which is an increase of 59%. It gives me great pleasure to congratulate the entire Metal Coatings team on another amazing quarter. In spite of zinc supply issues and labor shortages, they battled through another wave of COVID cases, kept their people safe, took care of their customers, and drove operating results to another record level. The results also reflect a full quarter of DOM and Steel Creek galvanizing, but Metal Coatings still had organic sales growth of over 20% versus prior year's first quarter. Operating margin of almost 28% provided operating income of over $44 million, or a 41% increase. We will get pre-code metals into the same format as metal coatings in AIS next quarter, but I wanted you to see how pre-code was doing while we were working on closing the transaction. Pre-code on a performa basis for the first quarter had sales up almost 40% year-over-year at $237 million. operating income up 57% at over $46 million with 19% margin, and EBITDA of $54 million up over 40% at 22.8% margin. The AAS team dealt with the disruption of supporting due diligence efforts with Fernway and also battled supply chain delays, labor shortages, and outbreaks of COVID, but posted solid results for the first quarter. Backlog continued to grow as bookings remained strong. Electrical platform bookings were particularly strong, even with longer quoted lead times on most of the electrical products due to longer component lead times. On a 7.6% growth in sales, the AIS team increased operating income by over 33% to $12.9 million, primarily as a result of electrical's strong quarter. Industrial had slightly lower sales than the first quarter of last year as some projects continued to push out, but did improve their operating margins through great execution. With that, I'll turn it over to Philip to discuss our results in further detail. Philip?