Azz Inc. · NYSE:AZZ
Azz — Sidoti Small Cap Virtual Conference December 2022
26 slides from Azz's conference presentation, Dec 7, 2022
Slide 1: Investor Presentation
INVESTOR PRESENTATION INVESTOR PRESENTATION David Nark Philip Schlom Sidoti Conference December 7, 2022
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 42% 45% 58% 55% $1.4bn LTM Sales ~$340mm LTM Post-Fab Metal Coatings Pre-Fab Coil Coating Adj. EBITDA Headquarters: Coil Employees: Meta
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 ~$340mm 45% Adj. EBITDA1 Adj. EBITDA3 Metals 55% 69% Divestiture of AZZ Infrastructure Solutions AZZ Pre-Fab Coil Coatings Post-Fab Me
Slide 7: #1 in Hot-Dip Galvanizing and Coil Coating Businesses Across Large and Diverse Served Markets
#1 in Hot-Dip Galvanizing and Coil Coating Businesses Across Large and Diverse Served Markets POST-FAB METAL COATINGS PRE-FAB COIL COATING Continuous coil coating with value-added Galvanizing, powder coatings, plating, shape correction, embossing, slitting, anodizing blanking Capabilities 20% 28% Ma
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 Pre-Fab Coil Coatings Locations (13) Post-Fab 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: 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) Sales ($mm) 0 2014 2015 2016 2017 2018 2019 2020 2021 (% Indexed to 2012 price) Highly variable cost str
Slide 13: Both Businesses Have Delivered Robust Top-line Growth and Profitability
Both Businesses Have Delivered Robust Top-line Growth and Profitability ($ in millions) Pro Forma Sales Pro Forma Adj. EBITDA1 Margin (%)1 21.1% 21.5% 24.2% 24.1% $1,398 $1,218 $1,060 $1,029 $337 $804 $294 $699 $561 $572 $224 $221 $150 $137 $86 $95 $519 $594 $157 $187 $499 $457 $138 $126 FY20 FY21 F
Slide 14: Mission-Driven, Experienced Management Team
Mission-Driven, Experienced Management Team Our Mission Create superior value in a culture where people can grow and TRAITS matter. We are diverse, collaborative, and service-minded, operating in a culture of TRAITS…Trust, Respect, Accountability, Integrity, Teamwork, and Sustainability Leadership H
Slide 15: Sustainability & ESG
Tracking energy, emissions, water usage and Environmental intensity Actively recycling zinc, aluminum and steel ~53% of our employee base is diverse Social Safety culture and training reduces workplace incidents through continuous improvement Gender and race diversity Governance All independent dire
Slide 16: Financial Overview
INVESTOR PRESENTATION Financial Overview 16
Slide 17: Premier Margin and Cash Flow Profile
Premier Margin and Cash Flow Profile 3-Year Median EBITDA Margin3 Key AZZ Value Drivers of Profitability 18% 14% 12% ✔ Differentiated solutions command strong 7% gross margins AZZ Coatings Service Centers Steel Mills ✔ Flexible, efficient operating model supports attractive EBITDA margin 3-Year Medi
Slide 18: Proven Resilience Through Challenging Cycles
Proven Resilience Through Challenging Cycles ($ 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 19: Rapid Deleveraging Profile
Rapid Deleveraging Profile Capital structure with no maturities until 2027 > ½ turn reduction 4.25x in net leverage since close Strong cash flow generation 3.6x supports near-term deleveraging priority 3.0x 3.0x Long-Term Target Range Business expected to generate 2.5x ~$200mm in free cash flow in f
Slide 20: 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 21: Precoat Sales Seasonality Based on AZZ Fiscal Year
Precoat Sales Seasonality Based on AZZ Fiscal Year By Half Year1 (Last 5 Years) By Quarter1 (Last 5 Years) H1 H2 Q1 Q2 Q3 Q4 Calendar Year Calendar Year 49% 51% Calendar Year 22% 27% 27% 24% Jan - Jun Jul - Dec Jan - Mar Apr - Jun Jul - Sep Oct - Dec AZZ’s Fiscal Year AZZ Fiscal Year 54% 46% AZZ Fis
Slide 22: Fiscal Year 2023 Guidance
Fiscal Year 2023 Guidance FY 2023 Commentary Growth of 18 - 22% on pro forma basis1 $1,275 - $1,325mm Estimated 10 - 16% in the second half of the year1 Sales Reported Sales $1,455 - $1,505mm1 Pro Forma Sales $285 - $305mm Growth of 35 - 45% on pro forma basis1 Estimated Adjusted Reported EBIT
Slide 23: Current Strategy
1 Drive Organic Growth • Continued emphasis on customer service and quality • Invest in capacity to support specific customer demand 2 Sustain Target EBITDA Range • Metal Coatings EBITDA 25-27% • Precoat Metals EBITDA 20-22% Current 3 Optimize Corporate Structure With Simplified Metal Coatings Focus
Slide 24: Appendix
INVESTOR PRESENTATION Appendix 24
Slide 25: Q2 and YTD FY23 Adjusted Earnings Per Share (EPS)
Q2 and YTD FY23 Adjusted Earnings Per Share (EPS) ($ in thousands, except per share) Three Months Ended Six Months Ended August 31, 2022 August 31, 2022 Amount Per Diluted Share 1 Amount Per Diluted Share 1 Net income (loss) available to common shareholders and $ (58,610) $ (34,533) diluted earnings
Slide 26: 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 $300mm TEV (“AIS”) Sold to Fernweh Group LLC, a PE firm founded by McKinsey alums $228mm 40% Stake AIS moved to
AZZ — Sidoti Small Cap Virtual Conference December 2022 on 6ix