AZZ Q1 2026 Earnings Report

AZZ EPS Results

• Actual EPS: $1.78
• Consensus EPS: $1.59
• Beat/Miss: Beat by +$0.19
• One Year Ago EPS: $1.46

AZZ Revenue Results

• Actual Revenue: $421,962.00 billion
• Expected Revenue: $435.91 million
• Beat/Miss: Beat by +$421,961.56 billion
• YoY Revenue Growth: +2.10%

AZZ Announcement Details

• Quarter: Q1 2026
• Date: 7/9/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 10, 2025
• Conference Call Time: 11:00AM ET

AZZ (NYSE:AZZ) (NYSE:AZZ) is a diversified global provider of metal coating and engineered services to a broad range of industrial markets. Through its Metal Coatings & Services segment, the company offers galvanizing, powder coating, electroplating and other specialty finishes that protect steel and fabricated metal components from corrosion and wear. These capabilities support customers in the construction, transportation, agricultural equipment, and heavy machinery sectors, among others.

The company’s Energy Infrastructure Solutions segment delivers electrical and mechanical equipment, specialized welding services and bespoke engineering solutions for energy transmission, distribution and generation applications. Products include insulating fittings, connectors, terminations and splice kits for high-voltage systems, as well as cryogenic valves and components used in liquefied natural gas facilities. AZZ’s value-added services also encompass field installation support, outage maintenance and turnkey project design.

Founded in 1951 and headquartered in Fort Worth, Texas, AZZ has grown both organically and through strategic acquisitions to broaden its technical expertise and geographic reach. Over the decades, management has emphasized innovation and process improvements, investing in state-of-the-art coating lines and automated manufacturing to meet evolving performance and environmental standards. Richard J. Hough serves as Chairman and Chief Executive Officer, guiding the company’s long-term strategy and operational execution.

With production and service facilities across the United States, Canada, Mexico, Europe and select locations in Asia, AZZ supports a geographically diverse client base. By combining its metal protection and energy infrastructure businesses, the company aims to deliver comprehensive solutions that enhance asset reliability and extend equipment life cycles in critical industrial applications worldwide.

AZZ Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: AZZ reported record Q1 sales of $422 million, adjusted EBITDA of $106.4 million (25.2% margin), and adjusted EPS of $1.78, reflecting 22% YoY earnings growth.
• Positive Sentiment: The company received $273 million in cash from its Avail JV divestiture, recorded $165.8 million in equity earnings, and used proceeds to pay down $285 million of debt, reducing net leverage to 1.7x.
• Positive Sentiment: AZZ commissioned its new aluminum coating facility in Washington, Missouri, shipped initial qualification orders, and expects positive gross margins in H2 2026 as volume ramps.
• Positive Sentiment: The acquisition of Canton Galvanizing in Ohio is immediately accretive, expands spin galvanizing capacity, and adds new customer relationships in a strategic market.
• Positive Sentiment: Management reiterated FY26 sales guidance of $1.625–$1.725 billion and adjusted EBITDA range of $360–$400 million, while raising EPS guidance to $5.75–$6.25.

Presentation

[Operator]

Good morning, and welcome to the AZZ First Quarter Fiscal twenty twenty six Results Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Sandy Martin of Three Part Advisors. Please go ahead.

[Sandy Martin, Managing Director at Three Part Advisors]

Good morning, everyone, and thank you for joining us today to review AZZ's first quarter fiscal twenty twenty six results for the period ended 05/31/2025. Joining the call today are Tom Ferguson, President and Chief Executive Officer Jason Crawford, Chief Financial Officer and David Nark, Chief Marketing, Communications and Investor Relations Officer. After today's prepared remarks, we will open the call for questions. Please note that the live webcast for today's call can be found at www.azz.com/investorevents. Before we begin, I want to remind everyone that our discussion today will include forward looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

[Sandy Martin, Managing Director at Three Part Advisors]

By their nature, forward looking statements are uncertain and outside the company's control. Except for actual results, AZZ's 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 latest annual report on Form 10 ks. These statements are not guarantees of future performance, reliance should not be placed upon them. Actual results could differ materially from these expectations. In addition, today's call will discuss non GAAP financial measures, which should be considered supplemental to and not a substitute for GAAP financial measures.

[Sandy Martin, Managing Director at Three Part Advisors]

We refer our shareholders to our reconciliations from GAAP to non GAAP measures, and those are contained in today's earnings press release. I would now like to turn the call over to Tom Ferguson.

[Thomas Ferguson, President & CEO at AZZ]

Thank you, Sandy. First, we at AZZ send our condolences to the families affected by the flash flooding throughout Central Texas. Having grown up in Austin, I river rafted the Guadalupe and camped along the banks often in my younger years. So I have a special place in my heart for folks affected throughout Central Texas, including friends and family. We are pleased to share our first quarter results.

[Thomas Ferguson, President & CEO at AZZ]

Today, we reported record high sales, adjusted EBITDA and EPS for the quarter ended 05/31/2025, along with industry leading adjusted EBITDA margins of 32.9% for Metal Coatings and 20.7% for Pre Coat Metals. These positive operating results were driven by infrastructure related demand in key markets for our Metal Coatings segment, including construction, industrial and electrical transmission and distribution. Similarly, our PreCoat Metal segment experienced growth in construction, our largest market sector, as well as in the aluminum container market. We did take the opportunity during the quarter to restructure Metal Coating Surface Technologies platform. We closed one powder coating facility and divested a plating facility to better position the Surface Technologies platform to achieve greater than 20% EBITDA margins.

[Thomas Ferguson, President & CEO at AZZ]

For PreCo Metals, while sales were down slightly versus prior year due to lower volume, the team outperformed the market when compared to the National Coiters Association or NCCA. Importantly, precoat shipments were up for the quarter as its customers began to draw down their inventories from precoat warehouses. Dave will discuss industry trends in a moment. As we announced during the quarter, we monetized nearly all of the electrical products businesses that was held within our Avail joint venture and received $273,000,000 in cash during the quarter. As a reminder, Avail still owns and operates the WSI and Lighting businesses.

[Thomas Ferguson, President & CEO at AZZ]

Jason will walk through the details of the transaction in a moment. Our consolidated adjusted EBITDA for the quarter was over $106,000,000 representing an adjusted EBITDA margin of 25.2%. This is supported by higher EBITDA margins over the first quarter of last year in both segments. Additionally, we are excited to report our newly commissioned aluminum coating facility in Washington, Missouri shipped its first qualification orders during the quarter. As we ramp up sales at the new facility throughout the year, we expect operating leverage to continue to improve and we anticipate gross margins to turn positive in the second half of the year.

[Thomas Ferguson, President & CEO at AZZ]

We continue to invest in systems that enable us to improve productivity and better support our customers with AZZ's proprietary technology, specifically our digital galvanizing system or DGS platform, which serves all of our galvanizing plants and coil zone in our pre coat facilities. These technologies provide our customers with real time updates and enabled management to gain business intelligence further enhancing production efficiencies across our 46 metal coatings locations and 14 coil coatings facilities throughout North America. On July 1, we announced the acquisition of Canton Galvanizing located in Canton, Ohio. This acquisition is immediately accretive as it further scales our galvanizing business with predictable synergies. We will also benefit from gaining a new set of customers to serve in that market and the expansion of our spin galvanizing offerings.

[Thomas Ferguson, President & CEO at AZZ]

Our distinct competitive advantage is deeply rooted in high value, environmentally responsible solutions with nearly seven decades of technical expertise, customer centric, digital platforms and a network of strategically located facilities across North America. AZZ's long standing deep customer relationships combined with a culture of operational excellence position us well to sustain growth and add to profits and significant cash flows this year and for many years to come. I am incredibly proud of our progress and the accomplishments of the entire team. In fiscal year twenty fourteen, we initiated a strategy to drive greater operational and customer service excellence as well as to optimize the metal coatings business. The successful execution of this strategy has ultimately transformed the company through a series of strategic acquisitions and divestitures, which culminated in the pure play metal coatings company we are today.

[Thomas Ferguson, President & CEO at AZZ]

AZZ is a leader in the North American metal coatings market. And over the past twelve years, we have added over $1,000,000,000 in sales through the disciplined execution of our organic and inorganic growth initiatives and expanded our margins and doubled our EBITDA. Coming out of COVID, we shifted our strategy embarked on transforming AZZ into a pure play metal coatings company. A key part of our strategy included the acquisition of Preco Metals in 2022, which has outperformed our expectations. We are also proud of the significant progress achieved by monetizing a large portion of our Avail joint venture following Fernwa sale of legacy electrical businesses to nVent.

[Thomas Ferguson, President & CEO at AZZ]

This deal is a testament to the success of our long term strategy. I am very pleased with the strength of our team, our financial position as well as the trajectory of our business growth initiatives. With that, I will turn it over to Jason.

[Jason Crawford, CFO at AZZ]

Thanks, Tom. We are very pleased with our first quarter results, which align well with our full year fiscal financial guidance. We reported first quarter sales of $422,000,000 compared to $413,200,000 for the same quarter in the prior year. Total sales increased by 2.1% versus last year.

[Jason Crawford, CFO at AZZ]

Growth was driven by the Metal Coatings segment where sales rose 6% in Q1 due to higher steel volume processed offset slightly by lower mix related selling price. Pre Coop Metals outperformed the market despite sales from the quarter declining 0.8% as customers navigated through inventory challenges associated with tariff concerns, partially offset by an increase in the average selling price. The first quarter's gross profit was $104,100,000 or 24.7% of sales compared to $102,700,000 or 24.9% of sales in the prior year quarter. During the first quarter for metal coatings, we incurred a $3,800,000 restructuring charge related to the previously mentioned disposition of a small powder coating facility and a small plating facility. In the Precoat Metals segment, our new Washington, Missouri coil coating facility began production in the first quarter, which as planned created a slight drag in margins.

[Jason Crawford, CFO at AZZ]

Without these two items, consolidated gross margins for the quarter would have been higher by 110 basis points compared to the prior year quarter. Selling, general and administrative expenses totaled $34,600,000 in the first quarter, which included a charge to the executive retiree long term incentive program its related acceleration of stock awards. This resulted in a non cash charge of $2,200,000 in the quarter. Excluding this add back, Q1 SG and A costs were 7.7% of sales, an improvement versus 8% of sales in the prior year quarter. Operating income for the quarter was $69,500,000 or 16.5% of sales compared to $69,700,000 or 16.9% of sales in last year's first quarter.

[Jason Crawford, CFO at AZZ]

Current quarter operating margins also compare favorably to prior year when you adjust for the items highlighted in gross margin And As Tom mentioned, Fernway, our 60% joint venture partner in Aaveel, divested the majority of its electrical products businesses in the quarter. As part of the divestiture, we received a cash distribution of $273,200,000 and we recorded $165,800,000 on the income statement as positive equity and earnings, which represented the excess distribution after writing off the total equity investment of $107,400,000 Total equity and earnings for the period were $173,500,000 representing Q1 equity and earnings of $7,700,000 plus the excess income from distribution of $165,800,000 Regarding the future estimates for equity and earnings in the JV, representing our 40% JV ownership interest in the remaining Avail businesses, we are currently forecasting a range of zero to a small plus or minus for the remaining quarters of this year. Interest expense for the first quarter was $18,600,000 down 4,200,000 from the prior year due to a combination of debt pay down and debt repricings. As the Avail funds were received in May, this had minimal impact on interest expense in the quarter.

[Jason Crawford, CFO at AZZ]

The current quarter's income tax expense was $54,900,000 reflecting an effective tax rate of 24.3%. This includes $42,500,000 of accrued taxes on the equity and earnings recorded in the period. Excluding the impact of equity and earnings, our effective tax rate would have been 22.2% compared to 22.4% in the prior year quarter. Reported net income for the first quarter was $170,900,000 compared to $39,600,000 for the prior year quarter. Since our non GAAP measure for adjusted net income excludes amongst other items, equity and earnings from the Avail divestiture of $165,800,000 AZZ reported adjusted net income of $53,800,000 or adjusted diluted EPS of $1.78 This compares favorably to the prior year's adjusted net income of $44,000,000 or adjusted diluted EPS of $1.46 On an adjusted basis, our first quarter earnings increased by 22.2% compared to the same period of the prior year. First quarter adjusted EBITDA was $106,400,000 or 25.2% of sales compared to $94,100,000 or 22.8% of sales in the prior year. This two forty basis point improvement in adjusted EBITDA margin was mainly driven by increased volume, productivity improvements and the performance in the quarter from the Avail JV. Turning to our financial position and balance sheet.

[Jason Crawford, CFO at AZZ]

For the first quarter, we generated cash flow from operations of $314,800,000 which included $273,200,000 from the Avail divestiture mentioned earlier. Under GAAP accounting, this JV distribution was recognized as a cash flow from operations. Our Q1 capital spending was $20,900,000 of which $3,200,000 related to the new Washington, Missouri facility. While in the quarter, we realized proceeds of $3,800,000 from the sale of certain property, plant and equipment. Proceeds from the Avail divestiture combined with free cash flow generation allowed us to pay down CAD 285,400,000.0 of debt in the quarter.

[Jason Crawford, CFO at AZZ]

With the paydown of debt and our continued financial performance, our credit agreement net leverage ratio improved to 1.7 times compared to 2.8 times in Q1 of last year. Our capital allocation strategy remains disciplined with a focus on debt pay down, investments in organic growth combined with strategic M and A as demonstrated by the bolt on acquisition announced in July 1. Additionally, as part of our capital allocation plans, we expect to pursue regular and opportunistic share repurchases under our current 10b5-one buyback plan in the current fiscal year. And finally, the Board approved an increase to our quarterly cash dividend from $0.17 per share to $0.20 per share, representing a 17.6% increase. With that, I'd like to turn the call over to David.

[David Nark, SVP - Marketing, Communications & IR at AZZ]

Thank you, Jason. In Q1, we continued to see the demand from infrastructure related project spending benefit AZZ across multiple end markets. Overall market strength continued in both construction and electrical driven by continued growth in submarkets including data centers, electrical transmission and distribution and solar power generation. This was somewhat offset by lower demand in end markets including industrial, particularly agriculture, transportation as well as appliance and HVAC. The aluminum transition in food and beverage packaging remains a key driver for growth in the business and we excited about our new Greenfield plant, which continues to ramp production.

[David Nark, SVP - Marketing, Communications & IR at AZZ]

We will also continue to benefit from the execution of reshoring activity accelerated by invest in America initiatives and tariffs under the current administration, which we believe will be tailwinds for the domestic steel market as well as U. S. Manufacturing and warehousing. As we are busy and in active construction season, our teams are well positioned to execute for the remainder of the fiscal year. With that, I would now like to turn the call back over to Tom.

[Thomas Ferguson, President & CEO at AZZ]

Thanks, David. Fiscal year twenty twenty six is starting off with good momentum and our teams continue to focus on the disciplined execution of our strategic plan by growing via market share expansion and converting customers from post paint to prepay. As Jason discussed, our capital allocation playbook remains active with the recent acquisition on the metal coatings side, debt pay down and increase in our quarterly cash dividend and a plan to opportunistically repurchase our stock to offset dilution. We believe AZZ continues to be undervalued at nine to 10 times forward EBITDA, which gives us confidence to buy back our stock. Today, we are reiterating our sales and EBITDA guidance and are moving up our EPS guidance.

[Thomas Ferguson, President & CEO at AZZ]

We continue to believe that our fiscal twenty twenty six sales will be in the range of 1,625,000,000 to 1,725,000,000.000 and adjusted EBITDA will be in a range of $360,000,000 to $400,000,000 with the midpoint representing our best estimate. Regarding adjusted diluted EPS, we believe that $5.75 to $6.25 better reflects our current forecast, which means an increase of between 1020% over the fiscal twenty twenty five adjusted earnings. These numbers are supported by strength in demand forecasts and continued momentum in our operational performance. Our liquidity position and balance sheet are strong and flexible, particularly following our debt reduction in the first quarter. Also, are well positioned to pursue strategic growth opportunities, including our other capital allocation strategies as already discussed.

[Thomas Ferguson, President & CEO at AZZ]

To summarize, AZZ delivered a great start to fiscal twenty twenty six. Both metal coatings and precoat metals performed well with strong profitability and disciplined execution of our business strategy. Now, operator, we would like to open it up the call for questions.

[Operator]

We will now begin the question and answer session. And the first question comes from Ghansham Panjabi with Baird. Please go ahead.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Thanks, operator. Good morning, guys. Congrats on a strong start to your fiscal year 2026. I guess on that, if I remember correctly, during your 4Q quarter was impacted by some extent because of weather and some of the tariff uncertainty, etcetera. Did 1Q benefit from any sort of normalization in volumes accordingly?

[Thomas Ferguson, President & CEO at AZZ]

Yes, there was some. I'd say on the Metal Coatings side was where we were mostly affected by storms, weather, that kind of thing. And I'd say so about half of that was recovery from Q4 and the other half was pure organic growth.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Got it. Perfect. And then in terms of your prepared comments and also the press release you referenced, improved zinc utilization for Metal Coatings during the first quarter, obviously very, very strong performance for that segment from a margin standpoint. Can you just give us more specific color on what drove that? And also give us the volume numbers by segment specific to 1Q?

[Thomas Ferguson, President & CEO at AZZ]

Yes.

[Thomas Ferguson, President & CEO at AZZ]

I can talk to the first part. Yeah. I think what what the team's been doing, and we talk a lot about digital galvanizing system, developing the leadership bench, the playbooks we we have, the the training, the technical capabilities, engineering. You put them all together and we're in many parts of our particularly our galvanizing operations, we're pretty much nearing the theoretical zinc efficiency levels because and it's all those factors together, everything from digital tools, the training, experienced people, leadership and just managing a lot of the details really, really well. I think the team still feels like they got a little bit of room.

[Thomas Ferguson, President & CEO at AZZ]

But in terms of zinc efficiencies and productivity, we're getting to the close to perfection. Obviously, we still have opportunities on labor productivity, utilizing our assets efficiently, continuing to invest in things that will make us even more productive from those in those perspective and continuing to drive outstanding quality and service for our customers and meet lead the industry in terms of short cycle times. So I don't think we typically give volumes. I'm looking over at Jason and David.

[David Nark, SVP - Marketing, Communications & IR at AZZ]

Yes, we typically don't break out the volume number specific in the reporting.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Got it, try anyway. Okay. Thanks so much guys.

[Operator]

And your next question comes from Adam Thalhimer with Thompson Davis. Please go ahead.

[Adam Thalhimer, Director - Research at Thompson Davis & Co]

Hey, good morning guys. Congrats on the strong Q1.

[Thomas Ferguson, President & CEO at AZZ]

Thanks.

[Adam Thalhimer, Director - Research at Thompson Davis & Co]

I wanted to ask on the outlook for Precoat. You mentioned that customer inventory levels are higher than last year.

[Adam Thalhimer, Director - Research at Thompson Davis & Co]

You have Washington ramping up. And I'm curious if there's an impact of tariffs on imported pre painted steel. Just curious how that all rolls up in terms of your top line expectations at Precoat?

[Thomas Ferguson, President & CEO at AZZ]

Yeah. I'll give you some color on that. David may want to add something. But yeah. So yeah.

[Thomas Ferguson, President & CEO at AZZ]

Our our customer inventory. So when we talk about sales, we're talking about what we produce and how we recognize revenue. When we're talking about shipments, that's the shipments out of inventories in our warehouses for customers. So a couple of things. One, the inventories had ramped up as towards the end of the year.

[Thomas Ferguson, President & CEO at AZZ]

And in the first quarter, we had customers pulling inventory down, which we view as the true demand. Now overall, the markets are still generally down when you look at the NCCA or the MBNA. So we're down less than the overall market, but seeing we view it as a positive sign that the customers are pulling inventory, which says they've got demand. When it comes to the imports, we did see a ramp up coming into the year of imported pre paint in anticipation of the tariffs. And then since then, we've seen the drawdown.

[Thomas Ferguson, President & CEO at AZZ]

So we've seen those pre painted imports falling off pretty dramatically here the last few months. And I don't know if David wants to add anything to that.

[David Nark, SVP - Marketing, Communications & IR at AZZ]

I would just add, yes, a little more color on that. In May, the prepainted imports overall fell 38% year over year. There was a 50% drop in April. So collectively, on a calendar basis, it's about a 20% decline year over year, which really aligns with the team's expectations on what we imagined that the tariff impact would be. So as we roll forward, we think that, again, as we talked in our prepared remarks, that can provide a bit of a tailwind for the business as people will be sourcing steel locally.

[David Nark, SVP - Marketing, Communications & IR at AZZ]

And obviously, we're in a great position to coat that steel here in the domestic market.

[Adam Thalhimer, Director - Research at Thompson Davis & Co]

Good color. And then just quickly, the two small facilities that you disposed of during the quarter, do those volumes get shifted to another facility?

[Thomas Ferguson, President & CEO at AZZ]

Yes. One of them was over in Tampa, and we don't have any other facilities over there. But it was a small facility, keeping in mind that total Surface Technologies is 11.5% of our overall sales. So and then the other facility was it was plating. We'll pick up some of that.

[Thomas Ferguson, President & CEO at AZZ]

We've got facilities in the area. So not a tremendous impact on sales, but definitely, they were not profitable facilities. So an opportunity to clean that up, retain some of the volume and clearly drive improved profitability through that because we also took some G and A cost reductions as well to better align the overhead structure with the remaining volume. So just a good time to do it, and we've been at it for about three years, done what we could do. We still think there's opportunities in it, and but we want to get it up to where it's a more profitable contributor to the segment.

[Adam Thalhimer, Director - Research at Thompson Davis & Co]

Perfect. Thanks guys. I'll turn it over.

[Operator]

And your next question comes from Nick Giles with B. Riley Securities. Please go ahead.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thanks, operator. Good morning, everyone. Guys, really significant debt reduction in the quarter, which is great to see. You're now comfortably below two times. So just was hoping to go back to capital allocation.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

I mean, is it fair to assume we could see share repurchases kind of tick up in future quarters? Or what other considerations should we keep in mind? Thanks.

[Thomas Ferguson, President & CEO at AZZ]

Yes. We took the dividend up for the first time in a while. So we had a that was a fairly easy decision for us. In terms of share buybacks, as we've stated, we're committed to buying in. We have the approved $100,000,000 facility, I think we have roughly half of it left.

[Thomas Ferguson, President & CEO at AZZ]

So we've got plenty of room within the approved facility to acquire our stock or buy it back, and we're committed to doing that. I think we've as we've talked, we've got a full pipeline of bolt on acquisition opportunities. So we'd like to get another one or two closed, particularly on the metal coating side. We were really pleased at getting the Canton Galve deal done. We were a little rusty.

[Thomas Ferguson, President & CEO at AZZ]

It took us a little bit longer to close it than we probably would have liked, but I think we're all buffed back up and ready to remain active. So feel real good about that. And then, yes, we are kind of on the debt reduction side, pretty quickly approaching 1.5 times leverage, which is pretty is the low end of where we'd like to be. So yes, share buybacks, get some additional deals done, and we've got good investment strategies for CapEx to continue to improve our productivity and allow us to take share and expand our services. And then we're committed to every year now looking at the dividend.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

That's all great to hear. I appreciate that, Tom. My second one, just be great to hear more color on what you're hearing from a customer and project perspective, particularly on the back of the copper tariff announcements. So are you hearing any rumblings of timelines that could shift out? I know it's this is very recent, but just curious on your thoughts given how copper intensive some of your end markets are?

[Thomas Ferguson, President & CEO at AZZ]

Yes. That one we don't have much input on because it is so recent. I would say prior to that, we were hearing positive things. Getting the tax cuts approved so that, that becomes predictable for projects companies. Still love to see a Fed rate cut.

[Thomas Ferguson, President & CEO at AZZ]

I think a lot of our customers are it's just project viability. It would improve it slightly. But I think the reshoring, a lot of the data data centers, just continued expansion, infrastructure as we saw in the first quarter, particularly on the metal coating side, it's all pretty positive. But the more settled with the big beautiful bill or whatever they're calling it these days, the more things are settled, the more opportunity. I just read in The Wall Street today, the administration reducing a lot of the environmental holds and things like that to streamline permitting.

[Thomas Ferguson, President & CEO at AZZ]

That's all positive. But we will, over the next couple of weeks, be checking with customers on what this latest news may mean. I'm not sure that I would not see it as a significant impact on the kinds of projects that we're looking at.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Got it. Well, guys, great work again, and keep it up.

[Thomas Ferguson, President & CEO at AZZ]

Thank you.

[Operator]

And your next question comes from Daniel Rizzo with Jefferies. Please go ahead.

[Daniel Rizzo, Analyst at Jefferies]

Hey guys. Thank you for taking my question. So outlook, I mean, was a pretty solid quarter and you raised your EPS guidance. I was just I was a little surprised if you didn't raise EBITDA as well. I don't know, it just seems like things are going fairly well.

[Daniel Rizzo, Analyst at Jefferies]

And I don't know if you're just seeing a lot of uncertainty or what would cause you to trigger to be a little more, I guess, little more positive with EBITDA and sales as well? Or what's causing maybe some hesitance?

[Thomas Ferguson, President & CEO at AZZ]

I think on the sales side, we're just continuing to the tariff uncertainty just continues to make us a little cautious. You know, since we don't have backlogs, we're just basically we've got great customer relations and talking about their future plans and what they're doing, which I just alluded to, which is relatively positive going forward. But the fact that there's still that tariff uncertainty, what does it mean? So we're cautious on the sales side. We've got lots of levers to pull on the EPS side, so that's why we get more confident on that.

[Thomas Ferguson, President & CEO at AZZ]

EBITDA, just keep in mind that with the Avail transacting the electrical businesses that so we're going to lose EBITDA from what was equity income, but we're getting interest savings offsets that. So that's in the $10,000,000 $12,000,000 $13,000,000 range, they offset. So that's a headwind for EBITDA, but a tailwind for EPS. It's and that's about as far as we've calculated at this point.

[Daniel Rizzo, Analyst at Jefferies]

Thanks. That's actually very helpful.

[Daniel Rizzo, Analyst at Jefferies]

And then if we think about the margin improvement you've kind of done already and what we expect going forward, I assume that a lot of what's going forward is going to come from just better throughput. Or I mean, are there additional levers you can pull? Or as we just look for volume improvements to kind of drive most of that?

[Thomas Ferguson, President & CEO at AZZ]

Yes. You got a couple of things going on. On the Precoat side, we do have the new facility ramping up. As I've talked about previously, we view for that ramp really to hit in the second half and then as we finish the year in the fourth quarter. So that's volume and EBITDA flow through that we were anticipating.

[Thomas Ferguson, President & CEO at AZZ]

On the we will have the addition now of not that it's huge, but it's a typical site from the Cam and Galp acquisition, hopefully get another one done. And then it's just the typical organic growth continuing to drive on market share. The levers that we will always focus on is related to operational excellence, how we manage our expenses, keeping things tight as the year plays on plays out and seeing where tariffs go. So we feel like we've got good levers. We'll based on could talk about the fact we may be out repricing our debt again.

[Thomas Ferguson, President & CEO at AZZ]

There's things that we've got that should be positive going forward from an EPS perspective. And we'll pull all those levers as we go forward. Jason, if Thank you. You want to

[Daniel Rizzo, Analyst at Jefferies]

All right. And then final question, just when we look at M and A and your activity, should we think about it like we just saw where like there's like site additions and maybe some smaller tuck ins? Or are there things that are not necessarily transformative, but are there bigger things out there that could be added to the network?

[Thomas Ferguson, President & CEO at AZZ]

Yes. From the Metal Coatings side, it's mostly the one offs that we have in the pipeline right now. There's a couple of multi site things, six, seven, eight sites out there that if they come available, we'll obviously be very interested and believe we have good relationships in both those cases. But we can't predict when that would happen. What we can predict is the one offs that were that are in the pipeline now.

[Thomas Ferguson, President & CEO at AZZ]

And can we get those closed? Can we get the right deal done? On the precut side, it's typically if we can buy a line from somebody, otherwise, which would be the smaller side. But if we could and then it's gonna get bigger. But by by bigger, there's, you know, same thing.

[Thomas Ferguson, President & CEO at AZZ]

There's a couple of multisite opportunities out there that, you know, those those would be bigger, they're going to take a little bit longer. So I think if to see those, it'd be towards the end of this year, getting into next year before we would be looking at those kinds of things or actively pursuing them. But there are some out there. So and we'd like to think they're nicely placed in our pipeline as we continue to generate cash at the levels we're doing.

[Daniel Rizzo, Analyst at Jefferies]

All right. Thank you very much.

[Thomas Ferguson, President & CEO at AZZ]

And I will add one other thing. David had just shown the Dodge Momentum Index is showing up 7%. So things are trending in a positive way.

[Daniel Rizzo, Analyst at Jefferies]

Thank you.

[Operator]

And your next question comes from Mark Reichman with Noble Capital Markets. Please go ahead.

[Mark Reichman, Senior Research Analyst at Noble Capital Markets]

I was just curious, in the past you've kind of described the bolt on acquisitions as those with kind of revenue in the 10,000,000 to $20,000,000 range and EBITDA in the 3,000,000 to $4,000,000 range. I was just wondering is Canton, does that match pretty much that profile or was it on the smaller side? And because that asset was relatively new, are there meaningful opportunities to improve the economics once integrated?

[Thomas Ferguson, President & CEO at AZZ]

Yes, that's a great question. It's within the range, but on the lower side of that range you just gave in the 10,000,000 to $20,000,000 it was nicely profitable. So it's definitely not a fixer upper, very nice business with a good customer base that so, you know, can we add some we will drive some margin improvement using DGS. We've got a good sales team in the area, things like that. So we would hope to grow it quickly out of the box and improve the margin somewhat.

[Thomas Ferguson, President & CEO at AZZ]

But it was already in a very nice profit range.

[Mark Reichman, Senior Research Analyst at Noble Capital Markets]

Thank you. And then second question, I guess really last question is, the pre top metals sales were down relative to the prior year period. And I was just wondering if you could kind of provide your expectations for the pre top metals segment in terms of maybe sales growth or margin given that there's some moving pieces there with the Washington, Missouri facility coming online and expected to operate at slightly higher margin?

[Thomas Ferguson, President & CEO at AZZ]

Yes. I think as we talked, the precoat has been more affected by tariffs and some moving pieces when it comes to imported, painted metal and stuff like that. So their volumes were affected, but I think the thing I would point to, their margins were up, and that just demonstrates the variability of their cost structure. They like on the metal coating side, they can adapt their cost quickly due to the variability of it and sustain their margins. And so we look for them to continue that discipline focus and adjust as volumes play out.

[Thomas Ferguson, President & CEO at AZZ]

So as the new facility ramps up, we're this is first quarter was test qualifications, things like that, finalizing the equipment performance. This quarter, we'll start to ramp some volume up. And then as we get into the third quarter, we start to get into a pretty good level of contribution in fourth quarter. We're hoping to be at almost normal run rates. It's a lot of moving pieces, so I don't want to oversimplify that.

[Thomas Ferguson, President & CEO at AZZ]

But so far, everything has been tracking really well. The team has been doing a great job of bringing up a large complex facility. Jason, I don't know if you want to add something to that.

[Jason Crawford, CFO at AZZ]

No, no. I think you highlight the two main points there, which greater margins and smaller volumes, so businesses doing all the right things. Q1 was a fairly disruptive quarter just in terms of the volumes associated with the import material coming in and some build ahead in terms of the tariff impact. So we see that starting to come back out of the system as we enter Q2 and going forward.

[Mark Reichman, Senior Research Analyst at Noble Capital Markets]

Well, that's great and very helpful. Thank you very much.

[Thomas Ferguson, President & CEO at AZZ]

Sure.

[Operator]

And your next question comes from Jon Braatz with Kansas City Capital. Please go ahead.

[Jonathan Braatz, Partner at Kansas City Capital Associates]

Good morning, everyone. A question for David. David, you mentioned a couple of pieces of the Metal Coatings business being strong, is solar and electrical. And I guess with the passage of the big deal and maybe the solar subsidies easing, what do you how do you look at the outlook for the solar piece of that of the Metal Coating business? And maybe also, they're talking about copper tariffs going up 50%. Any thoughts on how that might impact the business?

[David Nark, SVP - Marketing, Communications & IR at AZZ]

Yes, sure thing. As you look at it, we with respect to the first part of the question, I think what we're seeing and are going to expect to see is that there'll be a pull forward of some of these projects, specifically the solar projects. Those will need to as they look at the what's happened with the big beautiful bill and some of the cuts that have happened, those need to get from planning into production within the next twelve months. And then they need to be completed within by 2027. So we do think that a lot of the solar projects that are in the pipeline are going to get pulled forward as a result.

[David Nark, SVP - Marketing, Communications & IR at AZZ]

So that could provide some tailwind again for the business in the shorter term.

[Thomas Ferguson, President & CEO at AZZ]

Yes. And I'd also add that our electricity demand is going to continue to go up with the addition of all these data centers. And so it's going to have to be electricity of some kind that comes into place, whether that's new gas turbine plants or other things. So all of and as long as it uses steel that we can galvanize or paint, we're good with it.

[Jonathan Braatz, Partner at Kansas City Capital Associates]

Okay. Tom, not that it's a big deal, but the remaining interest in your joint venture, Industrial Lighting, but does that also include the Welding business?

[Thomas Ferguson, President & CEO at AZZ]

Yes. It does include the Welding Solutions Inc, which is the WSI business, which is a bigger piece of it.

[Jonathan Braatz, Partner at Kansas City Capital Associates]

Okay. Now did they not have exposure to the nuclear industry?

[Thomas Ferguson, President & CEO at AZZ]

They do.

[Thomas Ferguson, President & CEO at AZZ]

They do. At one time, that was almost half the business. It's a smaller piece now, but it's still a good solid piece and that has lots of opportunities.

[Jonathan Braatz, Partner at Kansas City Capital Associates]

Okay. I mean, can it move the needle for you?

[Thomas Ferguson, President & CEO at AZZ]

I think right now the Avel team's focus is on supporting the TSAs with the nVent for the divested business, not that they're not paying attention to WSI and and Lighting. But I think, you know, there there is that opportunity, and I know they are focused on it. I think we've got a board meeting coming up here in another month, so we'll get better color on that. But, I yes, no, there's that used to be a very profitable piece of the business if you go back a decade or so.

[Jonathan Braatz, Partner at Kansas City Capital Associates]

Yes, yes. Okay. All right. Thank you very much.

[Thomas Ferguson, President & CEO at AZZ]

Sure thing.

[Operator]

And your next question comes from Gerry Sweeney with ROTH Capital. Please go ahead.

[Gerry Sweeney, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Good morning, everyone. Most of my questions are asked. Just one quick one and probably an easy one. But just with the Canton acquisition spin galvanizing, I think you mentioned when you announced that expands that type of business. Just curious if the spin galvanizing side, you can leverage some of your existing customers and sort of what is the potential revenue capacity at the Canton facility?

[Thomas Ferguson, President & CEO at AZZ]

Yeah. We've we've got a facility in in the in the vicinity within a few miles, which is a larger much larger kettle structural does a lot of structural work. You know, so we'll we'll be operating those two plants, optimizing what customers we can bring in and just viewing it as a broader set of capabilities and capacities. So yes, I think between the two, we're the team will focus on optimizing the capacity utilization. There are some customers, including some vertically integrated customers for for camp galvanizing, which will be additional customer base for us at our existing site.

[Thomas Ferguson, President & CEO at AZZ]

So it's a fun one. But these things, if we can pick up another 5,000,000 or $6,000,000 of incremental volume across the whole thing, so not

[Gerry Sweeney, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Not huge.

[Thomas Ferguson, President & CEO at AZZ]

Nothing yes, not huge. But like I said, fun and getting back in the bolt on acquisition game just makes us feel good and getting another flag planted and another one under our belt. So hopefully, when we get a couple more done.

[Gerry Sweeney, MD & Senior Research Analyst at Roth Capital Partners, LLC]

It gets cobwebs out, as you said. So I appreciate it and congrats on a nice quarter. Nice start to the year.

[Thomas Ferguson, President & CEO at AZZ]

All right. Thank you.

[Operator]

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

[Thomas Ferguson, President & CEO at AZZ]

Thank you, operator. Thank you all for joining us today. As you know, we continue to believe we've got an outstanding business, tremendous cash flows that we intend to utilize well and deploy to continue to grow this business to buy back stock as we move forward and continue to invest in acquiring businesses that we think we can drive great synergies and become a great piece of our platform. We feel well positioned for this year and believe we're off to a great start, looking forward to finishing up the second quarter and talking to you all in just a couple of months. Thank you very much.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Thomas Ferguson, President & CEO
• Jason Crawford, CFO
• David Nark, SVP - Marketing, Communications & IR

Analysts

• Sandy Martin, Managing Director at Three Part Advisors
• Ghansham Panjabi, Senior Research Analyst at Baird
• Adam Thalhimer, Director - Research at Thompson Davis & Co
• Nick Giles, Senior Research Analyst at B.Riley Securities
• Daniel Rizzo, Analyst at Jefferies
• Mark Reichman, Senior Research Analyst at Noble Capital Markets
• Jonathan Braatz, Partner at Kansas City Capital Associates
• Gerry Sweeney, MD & Senior Research Analyst at Roth Capital Partners, LLC