AZZ Inc.

Good morning and welcome to the AZUZ, Inc. Fourth Quarter and Fiscal Year 2023 Earnings 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 telephone keypad. 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 Sandy Martin, three-part advisors. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us today to review AZZ's financial results for the fiscal 2023 fourth quarter and full year ended February 28, 2023. Joining the call today are Tom Ferguson, President and Chief Executive Officer, Philip Schlaum, Chief Financial Officer, and David Nark, Senior Vice President, Marketing, Communications, and Investor Relations. After the conclusion of today's prepared remarks, we will open the call for questions. Please note there is a webcast and slide presentation for today's call, which can be found on AZZ's Investor Relations page under the latest earnings presentation at azz.com. Before we begin, I would like to remind everyone that our discussion today will include forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements by their nature are uncertain and outside of the company's control. Except for actual results, our comments containing forward-looking statements may 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. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. Actual results could differ materially from these expectations. In addition, today's call will include a discussion of non-GAAP financial measures. Non-GAAP financial measures should be considered as a supplement to and not a substitute for GAAP financial measures. We refer you to the reconciliation of non-GAAP to the nearest GAAP measure included in today's earnings press release and investor presentation for further detail. The earnings press release and Q4 presentation are posted on our website and have been included in the Form 8 case submitted to the SEC. I would now like to turn the call over to Tom Ferguson, CEO. Tom?

Thank you, Sandy. Welcome to AZZ's fourth quarter and fiscal year 2023 full year earnings call. Thank you for joining us this morning. Starting on slide three, I am pleased with our performance for fiscal 2023. We made tremendous progress towards our strategy to become a pure metal coatings company. I'm appreciative of the hard work of the entire AZZ team. I commend our AZZ metal coatings team for generating record results and our AZZ pre-code metals team for coming into AZZ and performing well. We are fully committed to building a stronger and more sustainable and focused company. On a continuing operations basis, we achieved record annual sales of $1.32 billion, up 46% versus reported fiscal 2022 sales of $903 million, while generating EBITDA and adjusted earnings per share within our previously stated guidance. We paid down debt, resulting in net leverage of 3.5 times adjusted EBITDA at year-end, and received 2.6 million equity income from our remaining interest in AIS. As you can see here on slide four, we achieved good flow-through on higher sales, generating over 267 million of adjusted EBITDA, or 20 percent of sales. These numbers reflect metal coatings for a full 12 months and pre-co metals for about 42 weeks in fiscal year 2023. Net income on an adjusted basis was $86.9 million, up 55 percent, resulting in an adjusted EPS of $3.48. Philip will talk more about our fourth quarter and full-year financial results shortly. Moving to slide five, AZZ Metal Coatings had another strong year with sales up 21 percent to $637 million, with over 16 percent coming from organic growth. The growth was a result of organic sales growth of $87 million and the earlier acquisitions of Dom and Steel Creek, which added another $25 million. Operating income was up 21 percent versus prior year with an operating margin of 24.5 percent despite inflationary pressures, particularly as zinc costs peaked in most of our kettles. We continue to maintain our pricing discipline and focus on delivering value to our customers. Our investments in digitization continue to pay off in both productivity and customer service. Our investments in technology and innovation are focused on improving efficiencies, asset maintainability, and supporting our energy efficiency and sustainability initiatives. Turning to slide six, Precoat, during its 42 weeks as part of AZZ, had solid sales growth to nearly $687 million and generated $120 million of EBITDA. Precote sales grew by 20% on a comparable basis versus the prior year, mostly through unit volume growth and paint cost increases that were passed through. Precote's business performance was solid and within our expectations through its seasonally slower quarters where construction slows due to weather. As mentioned during our third quarter call, the management team at Precote took action in the fourth quarter, reduced the customer-owned inventory that had caused bottlenecks at many locations. Additionally, the team recently finished a plant expansion project at their MMC facility that had started prior to our acquisition. This was an important expansion as this facility focuses on heavier gauge material that supports our construction and infrastructure initiatives. Pre-code team is now reporting normalized inventory levels at most of their plants. Finally, I believe pre-code has taken steps to bring its pricing curve in line with the cost curve that has experienced significant inflation. While the team still has more work to do on production efficiencies, we have realized over half the expected synergies and still expect to identify sales synergies between pre-code and metal coatings. I am encouraged by the progress and expect their efforts to show up in our run rates in fiscal year 2024. And with that, I will turn it over to Philip to run through the financials.

Thanks, Tom. My financial commentary will focus on the results from continuing operations. Our continuing operations include the results of our AZZ metal coating segment and our pre-coat metal segment from our acquisition date on May 13th. Equity and earnings resulting from our non-controlling interest in the Avail infrastructure business and our corporate overhead supporting these businesses. On slide seven, AZZ generated fourth quarter sales from continuing operations of $336.5 million, significantly above the $138.1 million recognized in the same quarter of the prior year. The significant current year quarterly increase is a direct result of the addition of AZZ pre-coat metals of $187.1 million and our current quarter AZZ metal coating sales of $149.4 million. The metal coating segment sales were up 14.8% in the quarter versus prior year on stronger volumes and pricing. On a comparable basis, pre-cut metal sales for Q4 increased by roughly 17%. Operating profits from continued operations for the fourth quarter were $36.2 million, or 10.8% of sales. Prior year operating margins of 13.1% reflected only with the results of our metal coating segment. while the current year reflects the inclusion of AZC pre-code metals. As we explained on our last earnings call, pre-code's fourth quarter margins were compressed primarily due to normal seasonally lower volumes, coupled with inflationary headwinds. We expect this to reverse in the first quarter due to improved volumes and the pricing curve, as Tom noted, catching up to the inflated cost curve. Adjusted EBITDA in the fourth quarter of $57.2 million. was 112.6% higher than the prior year, again, as a result of the addition of pre-coat metals. Adjusted EBITDA as a percentage of sales was 17% reflected blended with pre-coat metals and was 370 basis points lower than the prior year's fourth quarter, a period in which included only our metal coating segment. The combined results of the two businesses for the fourth quarter was in line with our expectations. We anticipate higher EBITDA margins moving forward as contemplated in our full-year guidance. On Flight 8, our full-year sales were on $1.32 billion, reflecting the addition of pre-coat metals for roughly 42 weeks of the year. Our full-year operating profit of $173.6 million was significantly above prior year when including pre-coat metals for the period under ownership. operating margins from continuing operations of 13.1 percent, or 200 basis points below the prior year, a period only including our metal coating segments who had strong performance during the period. Adjusted EBITDA of 267.4 million, or 20.2 percent, reflects the strong performance of the newly combined businesses. Both our metal coatings and pre-coated metal segments have worked hard at managing the inflationary market pressures and generated results in line with our expectations. Adjusted EPS from continuing operations for fiscal year 2023 was $3.48 per diluted share compared with adjusted EPS of $2.24 per share in fiscal 22. On slide 9, cash flows from continuing operations for the fiscal year were $91.4 million compared with $60.6 million in the prior year. Our fiscal year 2023 capital expenditures from continuing operations were $57.1 million compared with $23.6 million in the prior year. This increase was expected as part of our strategic rationale for the precote acquisition. Our fiscal 2024 capital investment plan of nearly $80 million includes roughly $50 million in normal maintenance and growth capital spending and nearly $30 million allocated to the construction of our new precote greenfield facility in the St. Louis, Missouri area. We have continued to declare and pay quarterly common dividends. For the full year, we paid common dividends of $16.9 million and made payments of $5.8 million in preferred dividends. On slide 10, we purchased pre-cut metals on May 13, 2022, from Carlisle CEQA for $1.3 billion and then subsequently sold the controlling interest in our AZZ infrastructure solution segment, excluding our small oil tubing business, for $220 million in cash on September 30, 2022. During the year, we reduced our debt by $237.5 million through proceeds from the AIS sale and from operating cash flows, reducing our acquisition date leverage of 4.25 to 3.46 as of fiscal year end. While we have a good pipeline of M&A opportunities, particularly for galvanizing, we are focused only on highly accretive, low-risk deals that exceed our targeted returns. Given our focus on growth and debt reduction, we did not buy We did not buy back stock in fiscal 2023. Slide 11, we reduced our term loan B debt since the precode acquisition date improved our leverage to three and a half times, a good step towards a long-term target of below three times leverage. We continue to have more than 50% of our existing term loan debt covered by a swap agreement to reduce further interest rate exposure. We do not have any maturities under our current credit facility until 2027. I'll turn it back to Tom now for his closing comments.

Thank you, Philip. Moving to slide 13, the outlook in the first quarter for metal coatings is for a seasonally strong spring fabrication and construction season, with many of our customers citing good backlogs as they benefit from increased infrastructure spending. Fabrication activity remains solid, with many of our customers noting good backlogs. Preco continues to see solid customer demand, particularly in growing industries that directly relate to construction, container, and data centers. As I mentioned earlier, customer inventories have normalized due to the actions we have taken. Our announced pricing actions to offset inflation are beginning to show positive impact on Preco's margins. We have entered the stronger quarters of the year, and quite frankly, I'm glad to have the slower fourth quarter behind us. Our corporate team will continue to focus on cash flow generation to allow rapid debt reduction, customer credit metrics, risk mitigation, prudently allocating capital to the highest return on investment projects. Before we move on to the guidance slide, I would like to comment on strong secular growth drivers impacting our end markets that we are excited about for fiscal 2024. Our financial outlook this year reflects our expectation to directly or indirectly benefit from U.S. spending bills totaling over $250 billion from the American Infrastructure Investment and Jobs Act. We hold strong market positions in metal coatings and pre-coat metals, and with these leadership positions, we are bullish about our prospective opportunities related to roads, bridges, and important clean energy and power transmission projects, as well as data centers, airports, and other critical infrastructures. Our long-term growth drivers include the shift to manufacturing reshoring with the Build America, Buy America focus, as well as benefiting from the migration to pre-painted aluminum and steel. In addition, there are important sustainability projects that are supporting critical material conversions, for example, the conversion from plastics to aluminum in the beverage industry. All of these secular trends create incremental opportunities for AZZ. Finally, We are progressing with our greenfield plant construction that supports aluminum coatings with a valuable, dedicated customer committed to filling a majority of our capacity in this new plant. That is an exciting project for us, and we will keep you updated on the progress. As you can see here on slide 14, we are maintaining our full fiscal 2024 sales guidance of 1.4 to 1.55 billion, adjusted EBITDA guidance of 300 to 325 million, and adjusted EPS guidance of $3.85 to $4.35. While we're expecting some equity income from our minority stake in Avail, we are not ready to predict how much this will be while they are still working on their purchase price accounting. I will also note that the first quarter EPS is based on a more normalized tax rate than we experienced in the fourth quarter. Finally, on slide 15, as a reminder, why we believe AZZ is a great investment. AZZ is the leading independent hot-dip galvanizing and coal-coating company with an irreplaceable footprint, serving a broad and diverse set of markets. As a high-value-added tolling business, we are not directly exposed to metal commodities. Also, we have shown that we can protect margins with a long track record of profitability during all economic cycles. We produce great margins and solid financial returns, as well as generate free cash flow by delivering outstanding value to our customers, emphasizing operational excellence and continuing to innovate and develop our people and technology. We're driving sales expansion through both organic and acquisition growth and are committed to improving margins and cash flow generation to fund our growth strategy. We will continue to focus on driving performance and financial results, as well as maximizing long-term shareholder value. Again, I want to thank all our shareholders in the board for their support, and I especially want to thank our AZZ team for their hard work and dedication during our transformational journey to become a focused metal coatings company. This is an exceptional accomplishment, and I'm proud of our entire team. With that, we'll open it up for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. And our first question will come from John Franz of Sedodian Company. Please go ahead.

Good morning, guys, and thanks for taking the questions. Hey, John. I'd like to start with the two business segments. Surprisingly good underlying growth, roughly 15% and 17% in the fourth quarter. Could you just talk about what your growth assumptions are in the two segments embedded in your revenue guide of 1.4% and 1.55%?

Yeah, John, I think on the two segments, when you look at the metal coating segment to start with, they have continued to run a really solid business, you know, through COVID, you know, the last eight or 12 quarters. And, you know, the back, well, we don't have a lot of backlog, but the opportunities for some of those secular drivers that Tom was speaking to are there. When you look at the pre-coat segment, side of the business, same thing. They've got good opportunities in a lot of their markets. They're seeing a slight slowdown in some of the construction, but overall a very solid business.

Yeah, John, let me just add, I think, you know, we don't have significant growth, top-line growth embedded in our guidance. Most of the uptick is going to come from having pre-coat for the full year. and our focus is going to be more on value and cash flow management and generation. So we don't have to have significant growth to hit that guidance.

Okay, fair enough. And last quarter you talked about roughly three to four plants at pre-code that was taking lower margin business, and this was roughly a three to four quarter solution, any of you back then, probably fiscal 25 to get resolved. update us on the status of that and maybe talk about what kind of business they're taking that's lower margin?

Yeah, you know, I think some of it was more focused on just more our internal efficiency misses, if you will. So we've made some management changes at some of those plants. We've also made some organizational changes to help support the focus on improving efficiencies and productivity. And we have made some pricing adjustments for some lower margin customers that have just kind of been consistently – it's not really a category of customers. It's just things that have gone on for a while in the type of business. So it's not anything specific, more just a focus on – a general focus on we want to deliver value. We want to perform well. And the vast majority of pre-code plants do exactly that.

Got it. And just one last question, I'll get back into the queue. The new aluminum coil plant, 80 million in CapEx this year, how does that look two years from now in the CapEx and maybe kind of any update of the status of the build?

Yeah, we had the groundbreaking ceremony with the governor of Missouri. That was a fun event on a cold, dreary day. And quite frankly, the groundbreaking was more of they were already doing quite a bit of excavation work on that site. So, you know, official groundbreaking, but things have been going on. We've got the equipment. on order and deliveries secured. We've got the, you know, long lead items under control. We've, you know, it's a really good schedule with, you know, enough float in it that we're going to hit the targets. So I feel real good about it at this point. We are going to spend about $30 million this year on that facility, which is both construction, down payments on equipment, things like that, to make sure we get critical items in. That drifts off, especially as we get into, I want to say, calendar 25. That drops pretty significantly. We get the facility open. I'd also say that we're still having some somewhat slightly higher than normal CapEx spend in both metal coatings and pre-coat. I think that normalizes back in, you know, nicely under the 50 million range. So, you know, we're doing things both to drive some operational improvements. I mentioned in my remarks this MMC facility expansion. We had some other CapEx that's being deployed to improve controls and continue to drive digitization. And those things just play out as helping us improve efficiencies and productivities, but the investments start to go away.

All right, great. Thank you, Adam. I'll get back to you.

The next question comes from Adam Tossamer of Thompson Davis. Please go ahead.

Hey, good morning, guys. Congrats on the solid Q4. Thanks. Thank you. You had a – oh, I wanted to get your thoughts on – and you commented on sequential revenue growth at metal coatings. What are the expectations, just because we don't have a lot of history, for sequential revenue growth at pre-coat, Q4 to Q1?

It's pretty – it's significant because Q4 is by far the slowest quarter for pre-coat. It's winter months, so construction just slows up, and the construction they're doing is inside when they can. We're now into spring, which better weather, more construction. Quite frankly, I'd have to check the percentage, but I'm going to say at least 10%, 15% quarter over quarter. Phillip, do you have anything better?

No, that's about right. It's You know, their fourth quarter is, I think, 12 of their 13 slowest weeks of the year.

Yeah.

So we'll see a nice uptick in Q1. Okay.

And then you had a comment in the press release about a seasonally higher first quarter. Was that a sequential comment, or is Q1 the highest EPS for the year?

You know, Q1 and Q2 are both – Strong quarters. I think if you look historically, particularly for metal coatings, sometimes it's Q1, sometimes it's Q2. But mainly we're talking about the seasonality coming out of winter, going into spring as a general seasonality thing. And signaling, of course, now we enter two really good strong quarters for both construction and infrastructure. Then third quarter in the fall, somewhat more dependent on weather, but it tends to be a reasonably good quarter. Then the fourth quarter, you just get, as Philip just said, 12 of the 13 weeks tend to be heavy winter, particularly in some of the areas that we serve as you get up north. Our metal coatings business, they tend to be a little stronger in third quarter because most of our facilities are in the south and midwest. other than the things we have up in Canada, so.

Okay. And then, Philip, within the EPS guide, what are you assuming for share count and preferred dividends? I'm trying to get to the right EPS. No. I'm within your range for revenue and EBITDA, but something's off on EPS, and I'm just wondering if it might be share count and the preferred dividends.

Yeah, on the preferred dividends, there's 4.1 million shares. associated with the Blackstone preferred equity. It's $240 million, and the conversion price is $58.30. And the preferred will be dilutive for the year, so you need to take that into consideration.

Okay. And then, last one, high-level thoughts on cash flow from operations in fiscal 24.

When you look at our guidance, I think it's in line with the EBITDA less CapEx as a good barometer for our ability to generate cash flow.

Should be a good year. Yeah, as we've noted, we're targeting 75 to hopefully $100 million of debt pay down. just to help us as we move on. Q1 is more of a we consume some cash, so not likely to be paying down a lot of debt in Q1 just because it's two things. We're ramping up some inventory for the big season, and this is also when we do have bonus payouts and things like that. So then we get into the quarters where you can expect to see more significant debt pay down.

I'll turn it over. Thanks, guys. Thank you.

The next question comes from John Bratz of Kansas City Capital. Please go ahead.

Morning, everyone. Morning, John. Tom, it seems like you're, let's say this year, the focus at Preco will be on improving productivity margins and so on and so forth. And I guess my question is, as As you complete some of those projects and so on and improve the efficiency, what kind of improvement could we see in terms of the incremental margins once volume gets better at pre-code? How much better might those incremental margins be versus maybe where they were before? Any thoughts on that?

You know, there's a variety of things that particularly impacted. I mean, I think we, well, I know, we had done this presentation to try to explain how our fiscal year at AZZ kind of hits pre-coat pretty badly in terms of, and they used to have a better spread of profit margins across their quarters. You know, so this is inflicted by our fiscal year. But we're still committed to getting them to the 20% EBITDA margins, which means we need to get improvements pretty quickly. I think Kurt and the team, they've taken some good structural actions organizationally in terms of some of the plants that we're struggling with. I can't understate the impact of that customer inventory on pre-code. So most of that's gone. We've gotten rid of a lot, almost all of the outside warehouses that had to be leased to accommodate that. And you just think about the impact on their efficiencies. when you're having to go several miles down the road to an outside warehouse, move material, that creates time, cost, and some quality issues. That's pretty much gone. Returning to the 20% margins we've talked about, You know, obviously there's a lot of work that goes into that, but the vast majority of the actions to do it have been taken. So, you know, we're going to see that pretty quickly as we get into this year. Okay, okay.

And then secondly, the St. Louis facility, how quickly does that get up and going and begin to contribute to the bottom line?

You know, it gets up and going, but the construction is coinciding with the customer's demand for it as well. And I believe that's, you know, we're not going to see any measurable impact until 2025. Okay. Okay.

All right. Thank you. All right. Thanks.

Thanks.

The next question is a follow-up from John Franzrub of Sedodian Company. Please go ahead.

Yeah, guys. I think it seems like everyone's got a kind of good feel in the metal coatings business. But as far as pre-coat, if we kind of separate it into a tale of two halves for you guys on your calendar year, how much of revenue pre-coat will fall into the first half of the fiscal year versus the second half?

It's about 56%.

Yeah.

I think if you look at the seasonality charts, if you look over the five-year history, they tend to be, in our fiscal year, more heavily weighted in our Q1 and Q2 than if you were working days in Q3. And then, as Tom explained earlier, the slower fourth quarter seasonally.

Yeah, I think that's about right. 56-44, 57-43. And there's enough sensitivity in, you know, particularly in these days where it's harder to get skilled labor. So the tendency is to hold on to the capacity and drive through this. So, you know, you get that kind of movement in absorption levels. You get a lot of flow through pretty quickly when we get that kind of volume shift. Got it.

And in the fourth quarter, the margins that pre-code registered, How much was that normal seasonality impact versus the inventory rebalancing impact in the quarter? Do you have a sense of that?

Yeah, I'd say it's about 50-50 on seasonality. Because when you look at it, the revenue dropped, but, you know, not materially greater than normal. Mm-hmm. terms of the season and the rest was, you know, as I've toured the plants, you know, the constraints created by that phenomena and this move in between outside warehouses was just dramatic. I can't understate it. So the fact we're talking about that mostly being gone, that's why sequentially it's, you know, you're going to see a big pop quarter over quarter.

Great. And one last question. It looks like zinc's turning at the one-year low. So can you just talk about your thoughts about that and maybe why you didn't reassess your guidance in light of that?

Well, you know, we've talked about this before. We've pretty much separated as much as we can the our pricing from the cost of zinc. So, you know, we're focused on delivering the value that sustains the price levels. For us, it'll take another six months before this lower-cost zinc starts to hit our kettles. And so we're well into this year before we see any of the benefit of this lower-cost zinc hitting our kettles. You know, we'll take a look at that again as we get deeper into the year, but it's just that cycle of, call it six months on average, that in terms of the inventory in our kettles, that we've got to move first before we see the lower cost of that. And then two, we've got to make sure we can hold our prices and continue to offer the value services to sustain that.

Right, and who knows what the Zika looks like in six months, right? Yeah, exactly.

We've seen it move quite a bit, just within a quarter.

Yeah, yeah. Okay, guys, thanks for taking my follow-ups. Appreciate it. Thank you. Thanks.

The next question comes from Bill Baldwin of Anthony Baldwin Securities. Please go ahead.

Yeah, good morning, gentlemen, and thanks for taking my call. Sure, Bill. Just a quick... oversight on this new plant as far as looking at it from 10,000 feet. When that gets up and running, should that be accretive in the first full 12 months of operation as far as accretive to contribute to operating income?

Yeah, it will be in the first full 12 months of operation, yes, because the volumes are committed. you know there's a lot of testing that goes on to get it into full operation but once that that process is completed then uh the volumes ramp up fairly quickly and remind me tom what what's the scheduled date for beginning the testing and this type of thing as far as the plant beginning to operate it's uh you know we we I'm going to say it's early next year, as I'm thinking about it. I should have brought the schedule in with me, so I apologize.

Early fiscal 25? Yeah, early fiscal 25, I believe, is the current schedule for that, and it ramps up because it will require some FDA approval. That's what Tom was talking about, the testing. So we'll ramp up. If we get those approvals, we'll then ramp up to a full-year rate, which is accretive.

And would it be reasonable to assume that you'd be operating that close to the capacity that your demand allows you to by the second half of fiscal 25? Say, give you six months to ramp up. Is that sufficient, do you think?

I'd say it's going to be a little bit longer than that. Because part of this is, you know, also depending on how the customer demand ramps up with it. Right. I'd say more towards the latter part of the year.

Okay. Very good. Nice performance, too, with the latest quarter. Good job.

All right.

Thank you.

Thanks, Bill.

The next question comes from Brett Kearney of Gabelli Funds. Please go ahead.

Hi, guys. Good morning. Thanks for taking my question. Good morning, Brett. Good morning, Brett. Tom, you mentioned some of the fiscal support we've seen from the U.S. government, the tailwinds that provides for your businesses. I guess, you know, pretty familiar, and it feels like, you know, particularly on the galvanizing side, the funding sources behind that, you know, utility, CapEx budgets, we have good visibility of that, some of the municipal highway and bridge activity. It feels pretty good. How about... I guess fiscal support, how that plays into the pre-code metal side and how you were thinking about, you know, any dislocations that could happen from, you know, financing and the banking channel on that side of the portfolio.

That's a great question.

You know, I think on the pre-code side, you know, they have been impacted by some of the slower residential activity. But some of these underlying trends to convert to pre-painted aluminum and steel, I think, offset some of that. On the non-commercial investments, we're still seeing good activity there. And, you know, part of this is the, I guess technically we'll call it reshoring of manufacturing of things like chips and stuff. That's all good stuff. We're seeing several factories being constructed here in Texas, particularly. All of those use a ton of pre-painted sheet metal. So that kind of activity is continuing. I wish I had a better crystal ball how long that's going to continue with capital costs remain high. Right now, the outlook's fine. And hopefully we're also continuing to find new opportunities, which we talked about some of those, like the heavy gauge. Expanding that facility, that's a fairly big deal for us because that focuses more on infrastructure support, culverts and things like that. So, you know, we've been taking those steps, making those investments. And unless something dramatic happens, hopefully we continue to benefit from it at Pre-Code.

Excellent. And then we've talked about the favorable move in zinc prices, how those have probably peaked in your kettles. How are you thinking about, I guess, two pieces, one, you know, acid, energy, labor, the other portions of your cost base? And then I guess, you know, second question, kind of how's labor availability trending in a lot of the markets you're active in?

Yeah, this is kind of the – Generally, labor is still tight. So, you know, but we're down. I think at the peak, we probably had 400 openings for labor on any given day. We're probably down to a couple hundred, which is, you know, that's a level we can cover with overtime and extra shifts and things like that. We just went through our merit review process for the majority of the company. You know, it wasn't outrageous. We had made adjustments as the year went on to attract labor and retain labor. So we feel pretty good. You know, it's not a high ramp at this point in terms of increased costs on labor. We've done some things to retain labor better and manage it more efficiently. Pre-code uses more highly skilled labor. That's still tight. in certain parts of the country. But once again, we've implemented programs to attract and retain. In terms of the acid chemicals, some of the things that really impacted pre-coat was these additives and chemicals and things like that that were outside of paint. So that's why we kind of got behind the cost curve there towards the latter part of the year. On the metal coating side, We're doing a better – I mean, one of our big focuses is on acid and acid disposal and managing acid. So, even though costs are up on everything from wire to acid, we've been able to maintain the price curve, you know, and at least staying even with it. So – You know, our focus has been on availability and making sure we can service our customers when some of our competition can't. And we've been able to do all that.

Excellent. That's very helpful. Thanks so much, Tom.

All right. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Tom Ferguson for any closing remarks.

Well, thank you all for joining us today. I look forward to updating you on our first quarter results in just a few weeks, and I'm confident that fiscal year 2024 will result in further value creation as we capitalize on strong demand environment in ACC's diverse markets and the investments that we've made. Thank you very much.

The conference is now concluded. Thank you for attending today's presentation, and you may now