AZZ Inc, a leading provider of galvanizing and metal coating solutions in North America, reported its financial results for the first quarter ended May 31, 2024. The company demonstrated strong revenue growth but faced challenges impacting its earnings per share (EPS).
Company Overview
AZZ Inc is a provider of galvanizing and a variety of metal coating solutions and coil coating solutions to a broad range of end markets in North America. In its Metal Coatings segment, the company offers metal finishing services to protect against corrosion, such as hot dip galvanizing, spin galvanizing, powder coating, anodizing, and plating. The Precoat Metals Segment offers aesthetic and corrosion-resistant coatings for steel and aluminum coils.
Performance and Challenges
AZZ Inc reported total sales of $413.2 million for Q1 FY25, a 5.7% increase compared to the prior year. This exceeded the analyst estimate of $402.05 million. However, the company reported a GAAP loss of $1.38 per diluted share, significantly missing the estimated earnings per share of -$0.73. The net loss to common shareholders was $36.8 million, primarily due to a $75.2 million redemption premium payment on the Series A Preferred Stock.
Financial Achievements
Despite the challenges, AZZ Inc achieved several financial milestones. The company reported an adjusted net income of $44.0 million, up 31.9% from the previous year, and an adjusted diluted EPS of $1.46, up 28.1%. EBITDA for the quarter was $94.1 million, representing 22.8% of sales, compared to $85.4 million or 21.8% of sales in the prior year.
Income Statement Highlights
| Metric | Q1 FY25 | Q1 FY24 |
|---|---|---|
| Total Sales | $413.2 million | $390.9 million |
| Net Income | $39.6 million | $28.5 million |
| Adjusted Net Income | $44.0 million | $33.4 million |
| Adjusted Diluted EPS | $1.46 | $1.14 |
Segment Performance
The Metal Coatings segment reported sales of $176.7 million, a 4.7% increase, driven by increased volume and zinc productivity. The segment's EBITDA margin improved to 30.9%. The Precoat Metals segment saw sales rise by 6.5% to $236.6 million, with an EBITDA margin of 20.2%, up 80 basis points from the prior year.
Balance Sheet and Cash Flow
AZZ Inc generated $71.9 million in operating cash flow, which supported a debt reduction of $25.0 million, resulting in a net leverage ratio of 2.8x. The company also completed a secondary public offering of common stock, raising $308.7 million to fully redeem the Series A Preferred Stock.
Commentary
"We are very pleased with our first quarter sales of $413 million and adjusted EPS of $1.46, fueled by strong topline growth of 5.7% over the prior year. Both segments performed well, delivering organic sales expansion of 4.7% for Metal Coatings and 6.5% for Precoat Metals." - Tom Ferguson, President, and Chief Executive Officer of AZZ.
Analysis
AZZ Inc's performance in Q1 FY25 highlights its ability to drive revenue growth despite facing significant one-time costs. The company's strong cash flow generation and strategic debt reduction efforts position it well for future growth. However, the substantial redemption premium payment impacted the bottom line, leading to a GAAP loss. Investors should monitor the company's ability to sustain its revenue growth and manage costs effectively in the coming quarters.
For more detailed insights and financial data, visit the full 8-K filing.
Explore the complete 8-K earnings release (here) from AZZ Inc for further details.
