Azz Inc. · NYSE:AZZ
Azz — Sidoti March Small-Cap Virtual Conference 2023
27 slides from Azz's conference presentation, Mar 22, 2023
Slide 1: Investor Presentation
INVESTOR PRESENTATION INVESTOR PRESENTATION David Nark Philip Schlom Sidoti Conference March 22, 2023
Slide 2: Disclaimers
Disclaimers Cautionary Statements Regarding Forward Looking Statements — Certain statements herein about our expectations of future events or results constitute forward- looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995, including t
Slide 3: AZZ Snapshot
AZZ Snapshot By Sales By EBITDA AZZ is North America’s largest independent hot-dip galvanizing and coil coating solutions company with #1 positions in both markets 43% 45% 57% 55% $1.4bn LTM Sales ~$345mm LTM Metal Coatings Precoat Metals Adj. EBITDA Headquarters: Coil Employees: Metal ~24% LTM FORT
Slide 4: AZZ Provides Technologically Advanced Metal Coatings and Related Value-Added Services
AZZ Provides Technologically Advanced Metal Coatings and Related Value-Added Services Highly differentiated solutions provider distinguished by scale, technology, customer service, breadth of offerings and proprietary know-how Industry Leading Business Segments Why AZZ Irreplicable Footprint refle
Slide 5: Investment Thesis
North America’s largest independent hot-dip galvanizing and coil coating company Irreplaceable footprint provides cost advantages and enables service capabilities to customers Investment Diversified and resilient end markets with secular growth tailwinds Thesis Value-added tolling business model pro
Slide 6: Portfolio Transformation Creates a Focused Market Leader in Protective Coating Solutions
Portfolio Transformation Creates a Focused Market Leader in Protective Coating Solutions with High Margins AZZ in 20191 AZZ Today2 Acquisition 31% of ~$163mm Precoat ~$345mm 45% Adj. EBITDA1 Metals 55% Adj. EBITDA3 69% Divestiture of AZZ Infrastructure Solutions AZZ Precoat Metals Metal Coatings Met
Slide 7: #1 in Hot-Dip Galvanizing and Coil Coating Across Large and Diverse Served Markets
#1 in Hot-Dip Galvanizing and Coil Coating Businesses Across Large and Diverse Served Markets METAL COATINGS PRECOAT METALS Continuous coil coating with value-added Galvanizing, powder coatings, plating, shape correction, embossing, slitting, anodizing blanking Capabilities 20% 28% Market AZZ #1 AZZ
Slide 8: Scale and Proximity to Customers Drives Significant Cost and Service Advantages
Scale and Proximity to Customers Drives Significant Cost and Service Advantages North America’s Largest Independent Hot-Dip Galvanizing and Coil Coating Company Precoat Metals Locations (13) Metal Coatings Locations (46) INVESTOR PRESENTATION 8
Slide 9: Trusted Long-Term Partner to Large, Blue Chip Customer Base
Trusted Long-Term Partner to Large, Blue Chip Customer Base Select Customers 85%+ of Top 25 Customers’ Construction & Building Products Relationships Span 10+ Years HVAC and Appliances Growing Base of Over 3,000+ Customers (Haier) Transmission & Distribution Diverse Customer Profile, No Single Custo
Slide 10: Diverse and Balanced End Market Exposure
Commercial Machinery / Construction Industrial Agriculture Trans. Renewable/Utility Diverse and Balanced End Market Exposure Residential HVAC Infrastructure Appliance Bridge and Hwy Construction INVESTOR PRESENTATION 10
Slide 11: Secular Drivers Enhancing Outlook
INFRASTRUCTURE AND RENEWABLES INVESTMENT RESHORING MANUFACTURING Secular Drivers Enhancing Outlook PREPAINTED STEEL AND ALUMINUM MIGRATION CONVERSION FROM PLASTICS TO ALUMINUM INVESTOR PRESENTATION 11
Slide 12: Significant Macro Tailwinds from the American Infrastructure Investment and Jobs Act
Significant Macro Tailwinds from the American Infrastructure Investment and Jobs Act Roads, Bridges and Clean Energy and Power Water, Airports and Other Major Projects Investment: $110bn Investment: $65bn Investment: +$75bn Investment to repair over 45,000 bridges and 1 in 5 Investment in clean ener
Slide 13: Tolling Model Limits Metal Commodity Cost Exposure
Tolling Model Limits Metal Commodity Cost Exposure Limited Metal Commodity Exposure (% Indexed to 2014 price) Limited exposure to metal price 200 150 100 Value-added pricing model 50 Zinc ($/ton) Metal Coating Sales ($mm) 0 2014 2015 2016 2017 2018 2019 2020 2021 (% Indexed to 2012 price) Highly var
Slide 14: Both Businesses Have Delivered Robust Top-line Growth and Profitability
Both Businesses Have Delivered Robust Top-line Growth and Profitability ($ in millions) Pro Forma Sales Pro Forma Adj. EBITDA1 Margin (%)1 21.1% 21.5% 24.2% 23.7% $1,449 $1,218 $1,060 $1,029 $343 $832 $294 $699 $561 $572 $224 $221 $155 $137 $86 $95 $499 $519 $617 $188 $457 $138 $126 $157 FY20 FY21 F
Slide 15: Mission-Driven, Experienced Management Team
Mission-Driven, Experienced Management Team Our Mission Create superior value in a culture where people can grow and TRAITS matter. We are diverse, collaborative, and service-minded, operating in a culture of TRAITS…Trust, Respect, Accountability, Integrity, Teamwork, and Sustainability Leadership H
Slide 16: Sustainability & ESG
Tracking energy, emissions, water usage and Environmental intensity Actively recycling zinc, aluminum and steel ~53% of our employee base is diverse Social Safety culture and training reduces workplace incidents through continuous improvement Sustainability & ESG Governance Gender and race diversity
Slide 17: Financial Overview
INVESTOR PRESENTATION Financial Overview 17
Slide 18: Premier Margin and Cash Flow Profile
Premier Margin and Cash Flow Profile 3-Year Median EBITDA Margin3 Key AZZ Value Drivers of Profitability 18% 14% 12% ✔ Differentiated solutions command strong 7% gross margins AZZ Coatings Service Centers Steel Mills ✔ Flexible, efficient operating model supports attractive EBITDA margin 3-Year Medi
Slide 19: Proven Resilience Through Challenging Cycles
Proven Resilience Through Challenging Cycles ($ in millions) Highly Variable Cost Structure Performed Well Through Global Financial Crisis ~25% Strong Recovery Modest Decline +15% CAGR $169 (9%) CAGR ~75% $140 $142 $127 $71 Fixed Variable $57 $102 $59 $42 Diverse End Market Exposure $51 $98 $81 $85
Slide 20: Rapid Deleveraging Profile
Rapid Deleveraging Profile Capital structure with no maturities until 2027 > 3⁄4 turn 4.25x reduction in net leverage since close Strong cash flow generation supports near-term deleveraging 3.4x priority 3.0x 3.0x Long-Term Target Range Business expected to generate 2.5x ~$200mm in free cash flow in
Slide 21: Our Capital Allocation Priorities
Our Capital Allocation Priorities High ROIC Reduce Acquisitions Return Investments Leverage Capital 3.0x leverage by Opportunistic, Committed to Organic growth February 2024 highly accretive sustaining bolt-on dividends Strategic acquisitions customer partnerships Productivity INVESTOR P
Slide 22: High ROIC Strategic Investment: New Precoat Coating Line
High ROIC Strategic Investment: New Precoat Coating Line In November 2022, AZZ announced the construction of a new aluminum coil coating line outside St. Louis, Missouri with an estimated completion date of August 2024 …Achieved While Still Meeting Compelling Strategic and Financial Investment… Dele
Slide 23: Fiscal Year 2024 Guidance
Fiscal Year 2024 Guidance Reiterates Previously Issued Comparative FY2023 Guidance FY 2024 Guidance FY2023 Guidance (Continuing Operations) (Continuing Operations)(1) Sales(2) $1.27 – $1.35B $1.27 – $1.35B $1.40 - $1.55B Adjusted $285 – $305M $245 – $275M $300 - $325M EBITDA(3) Adjusted Diluted $4.0
Slide 24: Current Strategy
1 Drive Organic Growth • Continued emphasis on customer service and quality • Invest in capacity to support specific customer demand 2 Sustain Target EBITDA Range • Metal Coatings EBITDA 25-30% • Precoat Metals EBITDA 20-22% Current 3 Optimize Corporate Structure With Simplified Metal Coatings Focus
Slide 25: Appendix
INVESTOR PRESENTATION Appendix 25
Slide 26: Q3 and YTD FY23 Adjusted Earnings Per Share (EPS)
Q3 and YTD FY23 Adjusted Earnings Per Share (EPS) ($ in thousands, except per share) Three Months Ended Nine Months Ended May 31, 2022 August 31, 2022 November 30, 2022 November 30, 2022 Per Diluted Per Diluted Per Diluted Per Diluted Amount Share 1 Amount Share 1 Amount Share 1 Amount Share 1 Net i
Slide 27: Divestiture of AZZ Infrastructure Solutions ("AIS")
Divestiture of AZZ Infrastructure Solutions (“AIS”) Allows AZZ to focus purely on Metal Coatings Transaction Overview Key Figures Divested legacy AZZ Infrastructure Solutions Segment $300M TEV (“AIS”) Sold to Fernweh Group LLC, a PE firm founded by McKinsey alums $228M 40% Stake AIS moved to D