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Form 8-K AZZ INC For: Oct 12

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October 12, 2021 6:11 AM EDT

AZZ Inc. Reports Results for Second Quarter of Fiscal Year 2022; Generates EPS of $0.76 and Revises Guidance

Company revises fiscal year 2022 guidance: Sales of $865 - $925 million, and earnings per share of $2.90 - $3.20, excluding potential acquisitions or divestitures

October 12, 2021 - FORT WORTH, TX - AZZ Inc. (NYSE: AZZ), a global provider of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services today announced financial results for the second quarter of fiscal year 2022, ended August 31, 2021.

Second Quarter Overview (references throughout are to adjusted amounts for FY2021)(1):
•Strong year-over-year financial results
◦Diluted earnings per share of $0.76, up $0.27, or 55%
◦Net income of $19.0 million, up $6.0 million
◦EBITDA of $36.7 million, up $6.0 million
◦Sales of $216.4 million, up 6.4% versus last year
•Metal Coatings segment versus same quarter, prior year:
◦Sales of $129.6 million, up 10.7%
◦Operating income of $31.6 million, up 17.3%
◦Operating margins of 24.4%, up 140 basis points
•Infrastructure Solutions segment versus same quarter, prior year:
◦Sales of $86.9 million, up 0.6%
◦Operating income of $7.0 million, up 129.6%
◦Operating margins of 8.1%, up 460 basis points
•Declared quarterly cash dividend in the amount of $0.17 per share of common stock
•Repurchased $15.0 million in shares during the quarter; year-to-date we have repurchased 416,279 shares of common stock, totaling $21.2 million

Management Discussion

Tom Ferguson, President and Chief Executive Officer of AZZ, commented, “We continue to build positive momentum in fiscal 2022 with strong operating performance in the second quarter, driven by sales increasing 6%, operating income up 37% and net income up 46%, compared to the same quarter last year. The strength of our businesses coupled with our teams executing at a high level are key drivers for our growth and improving profitability across all segments.”

“Our Metal Coatings segment delivered strong operating results with sales of $129.6 million, up 10.7%, and operating margin of 24.4%, up 140 basis points compared with the operating margin of 23.0% in last year’s second quarter. Segment level results were driven by improved market conditions in solar, agriculture, bridge and highway and OEM, along with managing the increasing costs of materials and labor, and delivering on several operational improvement initiatives.”
(1) See "Non-GAAP Disclsoures" section included in the attached Financial Tables for a reconciliation of non-GAAP Adjusted Earnings Measures for the three and six months ended August 31, 2020.


Mr. Ferguson continued, “During the second quarter, our Infrastructure Solutions segment generated sales of $86.9 million, up 0.6% and operating margin of 8.1%, an improvement of 460 basis points, compared to operating margin of 3.5% for the same period last year. Results were driven by continued electrical sales and operations improvement, coupled with the benefit from cost reduction actions taken last year in our WSI business. I would like to thank our employees for their hard work in delivering these results, managing COVID-19, and continuing to provide exceptional service to our customers.”

Second Quarter Results

For the second quarter of fiscal year 2022, the Company reported sales of $216.4 million compared to $203.4 million for the comparable period last year, an increase of 6.4%. Operating income increased to $26.5 million, or by $7.2 million, compared to $19.3 million during last year’s comparable three-month period. Net income for the current quarter increased $6.0 million to $19.0 million, or $0.76 per diluted share compared to $13.0 million, or $0.49 per diluted share for the same quarter in the prior fiscal year. The provision for income taxes of $4.9 million reflects an effective tax rate of 20.4% for the three months ended August 31, 2021, as compared to $3.8 million, or 22.7%, for the prior year comparable period. Bookings for the three-month period increased to $231.8 million, compared to $208.6 million for the same quarter last year. The book-to-sales ratio improved to 1.07, compared to 1.03 in last year’s comparable period. Backlog at the end of the second quarter was $201.5 million, a decrease of 4.3% as compared to backlog at the end of the same quarter in the prior year. The decrease in backlog versus prior year is largely attributable to the completion of large orders in China. Sequentially, backlog was up $15.4 million, or 8.3% from the period ended May 31, 2021.

Metal Coatings Segment

For the second quarter of fiscal year 2022, Metal Coatings segment sales increased 10.7% to $129.6 million and operating income increased 17.3% to $31.6 million compared to $117.0 million and $26.9 million, respectively, for the same period in the prior fiscal year. Operating margins for the quarter were 24.4%, an improvement of 140 basis points compared to operating margins of 23.0% generated in the second quarter of fiscal year 2021. Operating margin improvement was driven by both improved price realization in the current quarter, and a continued focus on operational excellence.

Infrastructure Solutions Segment

For the second quarter of fiscal year 2022, Infrastructure Solutions segment sales increased 0.6% to $86.9 million as compared to $86.3 million in the same quarter of the prior year. Operating income for the second quarter of fiscal year 2022 totaled $7.0 million, an increase of $4.0 million, or 129.6% compared to operating income of $3.1 million in the prior year quarter. Operating margins for the quarter were 8.1% an improvement of 460 basis points over operating margin of 3.5% generated in the second quarter of fiscal year 2021. The increase in net sales and operating income was primarily attributable to improving end market conditions for both our industrial and electrical products and services, both of which faced significant COVID-related headwinds in their end markets during the previous year.

Fiscal Year 2022 Guidance

Mr. Ferguson added, “Due to the continued operating performance in our segments, we have revised our previously issued fiscal 2022 sales and earnings per share guidance. We now anticipate annual sales to be in the range of $865 million to $925 million and earnings per share to be in the range of $2.90 to $3.20 per diluted share for fiscal year 2022. This compares to the previously issued guidance of sales in the range $855 million to $935 million and earnings in the range of $2.65 to $3.05 per diluted share for fiscal year 2022.”

“For the remainder of fiscal 2022, we remain highly focused on growing our Metal Coatings segment while focusing our Infrastructure Solutions team on continuing to improve profitability. The underlining fundamentals of our business remain strong, providing us the foundation to aggressively pursue growth opportunities that fit our strategic plan. As part of our corporate commitment to Trust, Respect, Accountability, Integrity, Teamwork and Safety (“TRAITS”), we continue to carefully manage our workforce to ensure a safe and healthy operating


environment, while leveraging our operational capacity to match our customers’ improved demand for our products and services.”


“We continue to actively pursue initiatives to enhance shareholder value, drive growth, and accelerate our strategy to become predominately a metal coatings company. We continue to explore a small number of specific opportunities related to Infrastructure Solutions, with increasing confidence that AZZ will be able become predominately a focused metal coatings company. We are a much stronger company today and well-positioned to meet the growing demands for infrastructure improvements in the U.S and globally,” concluded Mr. Ferguson.

Conference Call Details

AZZ Inc. will conduct a conference call to discuss financial results for the second quarter of fiscal year 2022 today, Tuesday, October 12, 2021, at 11:00 A.M. ET. Interested parties can access the conference call by dialing (844) 855-9499 or (412) 317-5497 (international). A webcast of the call will be available on the Company’s Investor Relations page at http://www.azz.com/investor-relations.

A replay of the call will be available for three days at (877) 344-7529 or (412) 317-0088 (international), confirmation # 10160370, or for 30 days at http://www.azz.com/investor-relations.

There will be a slide presentation accompanying today’s event. The Company’s slide presentation for the call will be available on the Investor Relations page at http://www.azz.com/investor-relations.

Non-GAAP Disclosures

In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”), the Company has provided adjusted operating income, adjusted earnings and adjusted earnings per share (collectively, the “Adjusted Earnings Measures”), which are non-GAAP measures. Management believes that the presentation of these measures provides investors with a greater transparency comparison of operating results across a broad spectrum of companies, which provides a more complete understanding of the Company’s financial performance, competitive position and prospects for the future. Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted operating income, adjusted earnings and adjusted earnings per share, to assess operating performance and that such measures may highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.

About AZZ Inc.

AZZ Inc. is a global provider of galvanizing and a variety of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services to a broad range of markets, including but not limited to the power generation, transmission, distribution, refining and industrial markets. The Company’s Metal Coatings segment is a leading provider of metal finishing solutions for corrosion protection, including hot dip galvanizing, spin galvanizing, powder coating, anodizing and plating, to the North American steel fabrication industry. The Company’s Infrastructure Solutions segment is dedicated to delivering safe and reliable transmission of power from generation sources to end customers, and automated weld overlay solutions for corrosion and erosion mitigation to critical infrastructure in the energy and waste management markets worldwide.

Safe Harbor Statement
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. You can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Such forward-looking statements are based on currently available competitive, financial and economic data and management’s views and assumptions regarding future events. Such forward-looking statements are


inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Certain factors could affect the outcome of the matters described herein. This press release may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our products and services, including demand by the power generation markets, electrical transmission and distribution markets, the industrial markets, and the metal coatings markets. In addition, within each of the markets we serve, our customers and our operations could potentially continue to be adversely impacted by the ongoing COVID-19 pandemic, including governmental issued mandates regarding the same. We could also experience additional increases in labor costs, components and raw materials, including zinc and natural gas which are used in our hot dip galvanizing process; supply-chain vendor delays; customer requested delays of our products or services; delays in additional acquisition or disposition opportunities; currency exchange rates; availability of experienced management and employees to implement AZZ’s growth strategy; a downturn in market conditions in any industry relating to the products we inventory or sell or the services that we provide; economic volatility or changes in the political stability in the United States and other foreign markets in which we operate; acts of war or terrorism inside the United States or abroad; and other changes in economic and financial conditions. AZZ has provided additional information regarding risks associated with the business in AZZ’s Annual Report on Form 10-K for the fiscal year ended February 28, 2021 and other filings with the Securities and Exchange Commission (“SEC”), available for viewing on AZZ’s website at www.azz.com and on the SEC’s website at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. These statements are based on information as of the date hereof and AZZ assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Company Contact:
David Nark, Senior Vice President of Marketing, Communications and Investor Relations
AZZ Inc.
(817) 810-0095
www.azz.com

Investor Contact:
Joe Dorame, Managing Partner
Lytham Partners
(602) 889-9700
www.lythampartners.com






---Financial tables on the following page---


AZZ Inc.
Condensed Consolidated Statements of Income
(dollars and shares in thousands, except per share data)
(unaudited)
Three Months Ended August 31,Six Months Ended August 31,
2021202020212020
Sales216,447 203,372 446,273 416,664 
Cost of sales161,332 157,278 333,231 328,363 
Gross margin55,115 46,094 113,042 88,301 
Selling, general and administrative28,587 26,749 55,802 54,639 
Restructuring and impairment charges— 18,693 — 18,693 
Operating income26,528 652 57,240 14,969 
Interest expense1,754 2,470 3,451 5,104 
Other (income) expense, net918 92 (51)1,547 
Income before income taxes23,856 (1,910)53,840 8,318 
Income tax expense4,878 (120)12,525 4,567 
Net income$18,978 $(1,790)$41,315 $3,751 
Earnings per common share
Basic$0.76 $(0.07)$1.65 $0.14 
Diluted$0.76 $(0.07)$1.64 $0.14 
Diluted weighted average shares outstanding25,135 26,175 25,216 26,198 

AZZ Inc.
Segment Reporting
(dollars in thousands)
(unaudited)
Three Months Ended August 31,Six Months Ended August 31,
2021202020212020
Sales:
Metal Coatings$129,593 $117,037 $257,328 $236,027 
Infrastructure Solutions
86,854 86,335 188,945 180,637 
Total sales$216,447 $203,372 $446,273 $416,664 
Operating income:
Metal Coatings$31,589 $15,600 $63,165 $40,684 
Infrastructure Solutions
7,024 (4,310)16,648 (5,358)
Corporate(12,085)(10,638)(22,573)(20,357)
Total operating income$26,528 $652 $57,240 $14,969 


AZZ Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
August 31, 2021February 28, 2021
Assets:
Current Assets(1)$329,039 $303,492 
Property, Plant and Equipment, Net202,220 205,909 
Other assets, net491,979 487,041 
Total assets$1,023,238 $996,442 
Liabilities and Shareholders’ Equity:
Current liabilities$118,991 $113,850 
Long-term debt due after one year, net182,451 178,419 
Other liabilities83,370 80,881 
Shareholders' equity638,426 623,292 
Total liabilities and shareholders' equity1,023,238 996,442 
(1) Includes assets held for sale of $5,758 and $3,684 as of August 31, 2021 and February 28, 2021, respectively.


AZZ Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Six Months Ended August 31,
20212020
Net cash provided by operating activities37,758 32,166 
Net cash used in investing activities(10,562)(10,531)
Net cash used in financing activities(26,348)(45,131)
Effect of exchange rates on cash(197)837 
Net increase (decrease) in cash and cash equivalents651 (22,659)
Cash and cash equivalents at beginning of period14,837 36,687 
Cash and cash equivalents at end of period15,488 14,028 





AZZ Inc.
Non-GAAP Disclosure
Adjusted Operating Income, Adjusted Earnings and Adjusted Earnings Per Share
(dollars in thousands, except per share data)
(unaudited)
In the second quarter of fiscal 2021, the Company developed and began the implementation of a plan to divest certain non-core businesses and later, divested several non-core businesses. During the six months ended August 31, 2021, the Company did not recognize any restructuring and impairment charges. The following tables provides a reconciliation for the three and six months ended August 31, 2021 and 2020 between the various measures calculated in accordance with GAAP to the Adjusted Earnings Measures (dollars in thousands, except per share data):


Three Months Ended August 31,Six Months Ended August 31,
2021202020212020
Metal Coatings Segment
Sales$129,593 $117,037 $257,328 $236,027 
Segment operating income (loss):
Metal Coatings, as reported$31,589 $15,600 $63,165 $40,684 
Impact of impairment— 11,324 — 11,324 
Metal Coatings, as adjusted$31,589 $26,924 $63,165 $52,008 
Operating income percent, as adjusted24.4 %23.0 %24.5 %22.0 %
Infrastructure Solutions Segment
Sales$86,854 $86,335 $188,945 $180,637 
Segment operating income (loss):
Infrastructure Solutions, as reported7,024 (4,310)16,648 (5,358)
Impact of impairment— 7,369 — 7,369 
Infrastructure Solutions, as adjusted$7,024 $3,059 $16,648 $2,011 
Operating income percent, as adjusted8.1 %3.5 %8.8 %1.1 %



Three Months EndedSix Months Ended
August 31, 2020August 31, 2020
AmountPer
 Diluted Share		AmountPer
 Diluted Share
Net income (loss) and diluted earnings (loss) per share$(1,790)$(0.07)$3,751 $0.14 
Adjustments (net of tax):
Restructuring and impairment charges:
Metal Coatings11,324 0.43 11,324 0.43 
Infrastructure Solutions7,369 0.28 7,369 0.28 
Subtotal18,693 0.71 18,693 0.71 
Tax benefit related to restructuring and impairment charges(3,930)(0.15)(3,930)(0.15)
Total adjustments14,763 0.56 14,763 0.56 
Adjusted earnings and adjusted earnings per share$12,973 $0.50 $18,514 $0.71 
(1) Earnings per share amounts included in the table above may not sum due to rounding differences.

AZZ Inc. Q2 FY2022 Earnings Release Presentation October 12, 2021

 
Q2 FY2022 EARNINGS PRESENTATION Safe Harbor Statement 2 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. You can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Such forward-looking statements are based on currently available competitive, financial and economic data and management’s views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Certain factors could affect the outcome of the matters described herein. This presentation may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our products and services, including demand by the power generation markets, electrical transmission and distribution markets, the industrial markets, and the metal coatings markets. In addition, within each of the markets we serve, our customers and our operations could potentially be adversely impacted by the ongoing COVID-19 pandemic. We could also experience fluctuations in prices and raw material cost, including zinc and natural gas which are used in the hot dip galvanizing process; supply-chain vendor delays; customer requested delays of our products or services; delays in additional acquisition opportunities; currency exchange rates; adequacy of financing; availability of experienced management and employees to implement AZZ’s growth strategy; a downturn in market conditions in any industry relating to the products we inventory or sell or the services that we provide; economic volatility or changes in the political stability in the United States and other foreign markets in which we operate; acts of war or terrorism inside the United States or abroad; and other changes in economic and financial conditions. AZZ has provided additional information regarding risks associated with the business in AZZ’s Annual Report on Form 10-K for the fiscal year ended February 28, 2021 and other filings with the Securities and Exchange Commission (“SEC”), available for viewing on AZZ’s website at www.azz.com and on the SEC’s website at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward- looking statements, which are qualified in their entirety by this cautionary statement. These statements are based on information as of the date hereof and AZZ assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

 
Q2 FY2022 EARNINGS PRESENTATION Q2 FY2022 Segment Performance Update Total Q2 FY2022 Sales: $216.4 million Segment Updates Metal Coatings Segment $129.6 Infrastructure Solutions Segment $86.8 • Sales up over prior year, on strong demand from agriculture, recreation, solar, bridge and highway, and OEM end markets • Sales of over $257 million YTD, up 9.0% versus prior year • Overall segment sales flat due to: - protracted COVID disruptions in some international markets - SMS divested in 3rd quarter of last year • Electrical platform sales, bookings and backlog up over same quarter, prior year, on growing demand • Replacing China backlog with domestic orders 3 10.7% vs. Q2 FY2021 0.6% vs. Q2 FY2021

 
Q2 FY2022 EARNINGS PRESENTATION Sales Net Income Diluted EPS Q2 FY2022 Summary - Consolidated $203.4 $216.4 FY2021 FY2022 +6.4% • Higher Metal Coatings segment sales • Price realization • Electrical demand continues to grow • Metal Coatings strength • Businesses benefitting from realignment actions taken in prior year • Q2 FY 2021 adjustments included restructuring and impairment of $18.7 million, offset by tax benefits of $(3.9) • Improved earnings across platforms • Lower interest expense from lower rate financing in prior year • Share repurchases continue in FY2022 +46.3% (a) In $ millions, except per share amounts 4 -$1.8 $13.0 $18.9 FY2021(r) FY2021(a) FY2022 -$0.07 $0.49 $0.76 FY2021 (r) FY2021(a) FY2022 Legend: (r) – Reported (a) – Adjusted +55.1% (a)

 
Q2 FY2022 EARNINGS PRESENTATION Q2 FY2022 Segment Results – Metal Coatings • Segment sales up 10.7% from prior year quarter, driven by strong growth in several end markets including solar, agriculture, bridge and highway, and OEM • Overall segment operating margins of 24.4%, compared to 23.0% in the prior year a result of price, mix, and operational excellence • Increased costs in Galvanizing (zinc, labor, acid, energy) were offset by operating efficiencies, productivity and value pricing In $ millions except percentages Sales $117.0 $129.6 FY2021 FY2022 10.7% Operating Income 17.3%Key Statistics FY2021 Sales Organic Acquisitions FY2022 Sales $117.0 $129.6 $2.3 $10.3 Segment Summary: 5 $15.6 $26.9 $31.6 FY2021(r) FY2021(a) FY2022 Operating Margin 13.3% 23.0% 24.4% FY2021(r) FY2021(a) FY2022 140 bps Legend: (r) – Reported (a) – Adjusted

 
Q2 FY2022 EARNINGS PRESENTATION Q2 FY2022 Segment Results – Infrastructure Solutions • Backlog increasing on stronger U.S. domestic bookings as the Electrical Platform replaces China backlog • Q2 sales, excluding SMS divestiture, were up 4.3% • Electrical sales improved from same quarter, prior year, across many business units, including bus • Operating income benefitted from restructuring costs taken in the same quarter, prior year, related to COVID-driven downturn and slow oil and gas sector In $ millions except percentages Key Statistics FY2021 Book to Ship 1.03 to 1 Segment Summary: FY2022 Book to Ship 1.07 to 1 FY 2021 Sales $86.3 FY2022 Sales $86.9 6 Sales $86.3 $86.8 FY2021 FY2022 +0.6% Operating Income +129.6% Operating Margin +460 bps -$4.3 $3.1 $7.0 FY2021(r) FY2021(a) FY2022 -5.0% 3.5% 8.1% FY2021(r) FY2021(a) FY2022 Legend: (r) – Reported (a) – Adjusted

 
Q2 FY2022 EARNINGS PRESENTATION FY2022 – Updated Full Year Financial Guidance Key Drivers: Metal Coatings: • Volume/mix and steel availability for customers • Ability to realize price as production costs increase Infrastructure Solutions: • Refining end-market showing improvement • Orders for Electrical equipment strengthening • Managing labor availability Corporate: • Tax rate changes, and our ability to recognize planned tax savings in FY2022 • Continued low interest rate environment • Opportunistically repurchasing shares 7 Sales Earnings Per Share $855-935 $2.65- $3.05 In millions, except for EPS Updated RangePrevious Range $865 - $925 $2.90 - $3.20

 
Q2 FY2022 EARNINGS PRESENTATION Q2 FY2022 Consolidated Results In $ millions, except for EPS and percentages Q2 FY 2022 Q2 FY 2021 Reported Q2 FY 2021 Adjusted % Change, vs. Prior Year (a) Sales $216.4 $203.4 $203.4 6.4% Gross Profit $55.1 $46.1 $46.1 19.6% Gross Margin 25.5% 22.7% 22.7% 280 bps Operating Profit $26.5 $0.7 $19.3 37.1% Operating Margin 12.3% 0.3% 9.5% 280 bps EBITDA $36.6 $12.0 $30.7 19.1% Net Income $19.0 $(1.8) $13.0 46.3% Diluted EPS $0.76 $(0.07) $0.49 55.1% Diluted Shares Outstanding 25,135 26,175 26,175 -3.9% 8 Legend: (r) – Reported (a) – Adjusted

 
Q2 FY2022 EARNINGS PRESENTATION FY 2022 Year-to-date Cash Flow Highlights In $ millions, except for percentages YTD FY 2022 YTD FY 2021 (a) YTD FY 2021 (r) Cash flows used in operating activities $37.8 $32.2 $32.2 Less: Capital Expenditures $(13.1) $(19.3) $(19.3) Free Cash Flow $24.7 $12.9 $12.9 Net Income $41.3 $3.8 $18.5 Free Cash Flow / Net Income 59.8% 339.5% 69.7% Acquisition of Subsidiaries, net of cash acquired $0.0 $0.0 $0.0 Dividends $8.5 $8.9 $8.9 Share Repurchases $21.2 $6.4 $6.4 9 Legend: (r) – Reported (a) – Adjusted

 
Q2 FY2022 EARNINGS PRESENTATION Capital Allocation Focused on Growth $5.1 $0.0 $15.0 $4.3 Capital Expenditures Acquisitions Share Repurchases Dividends Capital Expenditures Acquisitions Share Repurchases Dividends Q2 2022 Capital Deployment In $ millions • Safety, Health and Environmental • Facility maintenance • Product/technology growth initiatives • $5.1M in quarter; $14.0M YTD • Full year estimate $35.0M • No year-to-date acquisitions • Active portfolio of opportunities • Repurchased $15.0 million in outstanding common stock in the quarter and $21.2 million year to date • Approved second quarter FY2022 dividend Gr ow th Sh ar eh ol de r R et ur n 10

 
Q2 FY2022 EARNINGS PRESENTATION 11 Metal Coatings Segment  Fabrication activity remains solid for Q3; some customers experiencing intermittent steel shortages. Active hurricane season in gulf states having some effect on customers  Zinc cost in our kettles continues to rise Infrastructure Solutions Segment  Industrial platform • Fall turnaround season underway; Craft deployed - opportunity of increased scope of work from some sites • Pandemic-related travel constraints persist in some international markets  Electrical platform • Continued focus on sales/front end effectiveness and operations improvements • Order intake consistent, and improving Corporate  Continue to monitor cash flow, customer credit, expenses and ensure effective capital deployment Key Indicators

 
Q2 FY2022 EARNINGS PRESENTATION • The previously announced board-led strategic review of our portfolio and capital allocation is complete • With respect to strategic alternatives for AIS, we continue to explore a small number of specific opportunities with the expectation that AZZ will become a focused metal coatings company • Infrastructure Solutions is focused on operational performance to its FY2022 Plan • Specialty Welding will grow through leveraging the international footprint and improved North American turnarounds, offering the best customized welding technology • Electrical businesses will continue to focus on improving profitability through business process alignment, and on market growth • Long term strategy to continue to grow Metal Coatings organically and with a robust acquisition program, while targeting sustainable 21-23% Operating Margins • Focus on operating excellence and providing outstanding customer service • Assumes continued inorganic growth in Galvanizing and Surface Technologies Strategic Direction 12

 
Q&A

 
Appendix and Additional Information

 
Q2 FY2022 EARNINGS PRESENTATION • In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), AZZ has provided EBITDA, which are non-GAAP measures. Management believes that the presentation of these measures provides investors with a greater transparency comparison of operating results across a broad spectrum of companies, which provides a more complete understanding of AZZ’s financial performance, competitive position and prospects for the future. Management also believes that investors regularly rely on non-GAAP financial measures, such as EBITDA, to assess operating performance and that such measures may highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. Non-GAAP Disclosure of EBITDA 15

 
Q2 FY2022 EARNINGS PRESENTATION Non-GAAP Disclosure of Consolidated EBITDA 16 In millions Consolidated Q2 FY 22 Consolidated Q2 FY 21 GAAP Net Income $19.0 $(1.8) Adjustments to reconcile GAAP to non- GAAP Financial Measures Interest Expense $1.7 $2.5 Income Tax Expense $4.9 $(0.1) Depreciation and Amortization Expense $11.0 $11.4 Total Adjustments $17.6 $13.8 Non-GAAP EBITDA $36.6 $12.0 Legend: (r) – Reported (a) – Adjusted Current Year vs. Prior Year As Reported Fiscal 2021 (prior year) As Reported to As Adjusted $(millions) except share information As Reported Adjustment F/N As Adjusted Sales $ 203.4 $ 203.4 Gross Profit 46.1 46.1 Gross Margin 22.7% 0.2 SG&A 44.2 17.5 (1) 26.7 Loss on Sale 1.2 1.2 (2) - Operating Profit 0.7 19.3 Operating Margin 0.3% 9.5% Other (income) / expense, net 0.1 0.1 Interest 2.5 2.5 Tax (0.1) (3.9) (3) 3.8 Net Income (1.8) 13.0 Diluted shares outstanding 26,175 26,175 Diluted EPS $ (0.07) $ 0.49 Deprreciation and Amortization 11.4 11.4 EBITDA 12.0 30.7 Footnotes: (1) - Impairments of $17.5M include $10.1M in the Metal Coatings SEgment and $7.4M in the Infrastructure Solutions Segment. (2) - $1.2M relates to the Metal Coatings Segment loss on the disposal of the GalvaBar (3) - $3.9M tax adjustment is the tax benefit of the $18.7M in disposals and impairments.

 

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