AZZ(AZZ) - 2025 Q4 - Annual Results

Financial Highlights AZZ Inc. reported record full-year sales and profitability for fiscal year 2025, with total sales reaching $1.58 billion, a 2.6% increase year-over-year, and adjusted diluted EPS grew 14.8% to $5.20, while the fourth quarter was impacted by inclement weather, leading to a 4.0% sales decline to $351.9 million, though net income still rose significantly Fiscal Year 2025 Full Year Highlights For the full fiscal year 2025, AZZ achieved a 2.6% increase in total sales to $1,577.7 million, driven by growth in both the Metal Coatings and Precoat Metals segments, with adjusted net income rising by 18.1% to $156.8 million, and adjusted diluted EPS increasing by 14.8% to $5.20, while the company also successfully reduced debt by $110.0 million, bringing net leverage below 2.5x | Financial Metric | FY 2025 | Change vs. FY 2024 | | :--- | :--- | :--- | | Total Sales | $1,577.7 million | ▲ 2.6% | | Metal Coatings Sales | $665.1 million | ▲ 1.4% | | Precoat Metals Sales | $912.6 million | ▲ 3.5% | | Net Income | $128.8 million | ▲ 26.8% | | Adjusted Net Income | $156.8 million | ▲ 18.1% | | GAAP Diluted EPS | $1.79 | ▼ 48.3% (due to preferred stock redemption) | | Adjusted Diluted EPS | $5.20 | ▲ 14.8% | | Adjusted EBITDA | $347.9 million | ▲ 4.3% | | Debt Reduction | $110.0 million | N/A | - The significant drop in GAAP diluted EPS to $1.79 was primarily due to a $75.2 million redemption premium payment on the Series A Preferred Stock[7] Fourth Quarter 2025 Highlights In the fourth quarter of fiscal 2025, total sales decreased by 4.0% to $351.9 million, primarily attributed to unfavorable weather conditions affecting both business segments, despite the sales decline, GAAP net income increased by 41.7% to $20.2 million, and adjusted net income grew by 7.9% to $29.6 million, with adjusted EBITDA margin remaining stable at 20.2% | Financial Metric | Q4 2025 | Change vs. Q4 2024 | | :--- | :--- | :--- | | Total Sales | $351.9 million | ▼ 4.0% | | Metal Coatings Sales | $148.4 million | ▼ 3.9% | | Precoat Metals Sales | $203.5 million | ▼ 4.1% | | Net Income | $20.2 million | ▲ 41.7% | | Adjusted Net Income | $29.6 million | ▲ 7.9% | | GAAP Diluted EPS | $0.67 | ▲ 19.6% | | Adjusted Diluted EPS | $0.98 | ▲ 5.4% | | Adjusted EBITDA | $71.2 million | ▼ 3.6% | - The decline in quarterly sales was primarily due to inclement weather impacting operations[7] Management Commentary CEO Tom Ferguson highlighted fiscal year 2025 as a success, with record full-year results and significant progress on growth initiatives, including the substantial completion of the Washington, Missouri greenfield project, significant debt reduction, and the full redemption of Series A Preferred Stock, expressing confidence in the company's ability to generate strong cash flow and drive long-term value, capitalizing on strong market positions - Fiscal 2025 marked the company's 38th consecutive year of profitability from continuing operations[9] - The company substantially completed its greenfield project in Washington, Missouri, while also significantly paying down debt[6] - AZZ fully redeemed its Series A Preferred Stock and successfully completed a secondary public offering of common stock[6] - The company plans to accelerate debt paydown with over $200 million in expected proceeds from the AVAIL transaction, anticipated to close in Q1 of fiscal 2026[8][15] Segment Performance For the full fiscal year 2025, both the Metal Coatings and Precoat Metals segments reported sales growth, driven by increased volume, with Metal Coatings benefiting from strength in renewables and utility markets, achieving a high EBITDA margin of 30.9%, and Precoat Metals also seeing higher volume drive its growth, though in the fourth quarter, both segments experienced sales declines due to unfavorable weather conditions Full Year 2025 Segment Results In fiscal 2025, the Metal Coatings segment's sales grew 1.4% to $665.1 million, with an EBITDA margin of 30.9%, driven by strong demand in renewables, utility, and construction markets, while the Precoat Metals segment's sales increased 3.5% to $912.6 million, with EBITDA up 6.9% to $179.0 million, both attributed to higher volume | Segment | FY 2025 Sales | YoY Change | FY 2025 EBITDA | EBITDA Margin | | :--- | :--- | :--- | :--- | :--- | | Metal Coatings | $665.1 M | ▲ 1.4% | $205.4 M | 30.9% | | Precoat Metals | $912.6 M | ▲ 3.5% | $179.0 M | 19.6% | - Metal Coatings' sales growth was driven by increased hot-dip galvanizing volume from strength in renewables, utility, and construction markets[10] Fourth Quarter 2025 Segment Results During the fourth quarter, the Metal Coatings segment's sales fell 3.9% to $148.4 million due to weather-related volume decreases, though its EBITDA margin improved to 29.2% from cost efficiencies, while the Precoat Metals segment's sales declined 4.1% to $203.5 million, impacted by weather and lower demand in the transportation market, with its EBITDA margin remaining flat at 17.8% | Segment | Q4 2025 Sales | YoY Change | Q4 2025 EBITDA | EBITDA Margin | | :--- | :--- | :--- | :--- | :--- | | Metal Coatings | $148.4 M | ▼ 3.9% | $43.2 M | 29.2% | | Precoat Metals | $203.5 M | ▼ 4.1% | $36.2 M | 17.8% | - Metal Coatings' EBITDA margin increased by 60 basis points YoY due to lower operating and SG&A costs, despite lower sales[13] Financial Condition and Capital Allocation AZZ generated strong operating cash flow of $249.9 million in fiscal 2025, enabling a debt paydown of $110.0 million and bringing net leverage below 2.5x, returning $23.1 million to shareholders via dividends, with capital expenditures totaling $115.9 million, including $52.8 million for the new Missouri facility, and for fiscal 2026, capex is projected to be $60-$80 million, with cash flow and proceeds from the AVAIL transaction prioritized for further debt reduction - Generated $249.9 million in cash from operations for fiscal 2025[15] - Reduced debt by $110.0 million, resulting in a net leverage ratio below 2.5x trailing twelve months EBITDA[15] - Capital expenditures were $115.9 million, with $52.8 million allocated to the greenfield facility in Washington, Missouri[15] - Fiscal 2026 capital expenditures are guided to be between $60 million and $80 million[15] Fiscal Year 2026 Financial Outlook AZZ has reiterated its financial guidance for fiscal year 2026, projecting sales between $1.625 billion and $1.725 billion, anticipating Adjusted EBITDA to be in the range of $360 million to $400 million, with Adjusted Diluted EPS forecasted between $5.50 and $6.10, based on an expected effective tax rate of 25% and specific EBITDA margin ranges for its segments | Metric | FY2026 Guidance | | :--- | :--- | | Sales | $1.625 - $1.725 billion | | Adjusted EBITDA | $360 - $400 million | | Adjusted Diluted EPS | $5.50 - $6.10 | - Guidance assumes an annualized effective tax rate of 25% and excludes any potential M&A activity[17] - Assumed EBITDA margin ranges are 27-32% for the Metal Coatings segment and 17-22% for the Precoat Metals segment[22] Consolidated Financial Statements The consolidated financial statements detail AZZ's performance for the fiscal year and fourth quarter ended February 28, 2025, highlighting a year-over-year increase in full-year sales and operating income, a strengthened balance sheet with reduced long-term debt and increased shareholders' equity, and consistent positive cash flow from operations Statements of Income For fiscal year 2025, sales increased to $1.58 billion from $1.54 billion in the prior year, operating income grew to $236.4 million, and net income rose to $128.8 million, though a significant one-time redemption premium of $75.2 million on Series A Preferred Stock reduced the net income available to common shareholders to $52.4 million | (In thousands) | Year Ended Feb 28, 2025 | Year Ended Feb 29, 2024 | | :--- | :--- | :--- | | Sales | $1,577,744 | $1,537,589 | | Gross Margin | $382,680 | $363,461 | | Operating Income | $236,364 | $221,600 | | Net Income | $128,833 | $101,607 | | Net Income to Common Shareholders | $52,435 | $87,207 | Balance Sheets As of February 28, 2025, AZZ's total assets stood at $2.23 billion, with long-term debt reduced to $852.4 million from $952.7 million a year prior, and a notable change was the elimination of $233.7 million in Mezzanine equity following the redemption of the Series A Preferred Stock, which contributed to a significant increase in Shareholders' Equity to $1.05 billion | (In thousands) | As of Feb 28, 2025 | As of Feb 29, 2024 | | :--- | :--- | :--- | | Total Assets | $2,227,101 | $2,195,505 | | Long-term debt, net | $852,365 | $952,742 | | Mezzanine equity | $— | $233,722 | | Shareholders' Equity | $1,045,495 | $700,769 | Statements of Cash Flows For the fiscal year ended February 28, 2025, AZZ generated $249.9 million in net cash from operating activities, a slight increase from the prior year, with net cash used in investing activities at $115.0 million, primarily for capital expenditures, and net cash used in financing activities at $138.7 million, reflecting debt repayments and shareholder returns | (In thousands) | Year Ended Feb 28, 2025 | Year Ended Feb 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $249,909 | $244,468 | | Net cash used in investing activities | $(114,997) | $(95,064) | | Net cash used in financing activities | $(138,695) | $(147,888) | Non-GAAP Financial Measures Reconciliation This section provides reconciliations of non-GAAP measures such as Adjusted Net Income, Adjusted EPS, and Adjusted EBITDA to their closest GAAP equivalents, which management believes offer greater transparency into the company's core operating performance by excluding items like intangible asset amortization, certain legal costs, and non-recurring events, also detailing the calculation of the net leverage ratio Adjusted Net Income and Adjusted EPS Reconciliation For fiscal year 2025, GAAP Net Income of $128.8 million was adjusted for items including the $75.2 million preferred stock redemption premium, $23.1 million in intangible asset amortization, and $9.9 million in legal settlements, resulting in an Adjusted Net Income of $156.8 million, which translated to an Adjusted Diluted EPS of $5.20, compared to the GAAP EPS of $1.79 | (In thousands, except per share) | Year Ended Feb 28, 2025 | | :--- | :--- | | Net income available to common shareholders (GAAP) | $52,435 | | Total adjustments | $103,167 | | Amortization of intangible assets | $23,111 | | Legal settlement and accrual | $9,949 | | Retirement and other severance expense | $3,741 | | Redemption premium on Series A Preferred Stock | $75,198 | | Tax impact of adjustments | ($8,832) | | Adjusted net income (non-GAAP) | $156,802 | | Diluted EPS (GAAP) | $1.79 | | Adjusted diluted EPS (non-GAAP) | $5.20 | Adjusted EBITDA Reconciliation Adjusted EBITDA for fiscal year 2025 was $347.9 million, an increase from $333.6 million in the prior year, with the calculation starting with GAAP Net Income and adding back interest, taxes, depreciation, and amortization, as well as adjustments for legal settlements ($9.9 million) and severance expenses ($3.7 million) | (In thousands) | Year Ended Feb 28, 2025 | Year Ended Feb 29, 2024 | | :--- | :--- | :--- | | Net income (GAAP) | $128,833 | $101,607 | | Interest expense | $81,282 | $107,065 | | Income tax expense | $41,850 | $28,496 | | Depreciation and amortization | $82,205 | $79,423 | | Legal settlement and accrual | $9,949 | $17,043 | | Retirement and other severance expense | $3,741 | $— | | Adjusted EBITDA (non-GAAP) | $347,860 | $333,634 | Debt Leverage Ratio Reconciliation The company's net leverage ratio improved significantly, decreasing from 2.9x at the end of fiscal 2024 to 2.5x at the end of fiscal 2025, achieved through a combination of debt reduction and an increase in Adjusted EBITDA as calculated per the company's credit agreement | (In thousands, except ratio) | As of Feb 28, 2025 | As of Feb 29, 2024 | | :--- | :--- | :--- | | Consolidated indebtedness | $894,227 | $989,430 | | Adjusted EBITDA per Credit Agreement | $358,058 | $339,250 | | Net leverage ratio | 2.5x | 2.9x |