Financial Data and Key Metrics Changes - Total sales increased by 2% to $417.3 million from $409 million in the prior year period [9] - Adjusted earnings per share rose by 13.1% to $1.55 compared to $1.57 in the prior year [13] - Operating cash flow improved by 23%, reflecting disciplined execution [4] - Consolidated adjusted EBITDA for the quarter was $88.7 million, with a margin of 21.3%, down from 22.5% in the prior year [13][14] Business Line Data and Key Metrics Changes - Metal Coatings segment achieved a sales increase of 10.88%, driven by higher volumes and infrastructure-related spending [9] - Precoat Metals' sales declined by 4.3% due to a weaker end-market environment, particularly in building construction, HVAC, and appliance end markets [9][10] - Metal Coatings margins were 30.8%, slightly down due to a mix shift towards lower-margin markets [4] Market Data and Key Metrics Changes - End-market sales for utilities increased by 19%, while consumer sales rose by 7.6% [18] - Construction sales were up by less than 1% compared to the same quarter last year [18] - The demand outlook for Precoat's end markets remains mixed, with ongoing tariffs contributing to customer hesitation on non-infrastructure-related projects [6] Company Strategy and Development Direction - The company is focused on technology upgrades, including migrating data systems to Oracle and exploring AI opportunities [8] - AZZ is pursuing strategic growth opportunities through capital allocation strategies and evaluating bolt-on acquisitions to extend market leadership in metal coatings [23] - The company anticipates multi-year tailwinds from infrastructure spending, particularly in energy and power generation capacity [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of core markets and growth potential for galvanized steel in construction and industrial projects [4] - The company reiterated guidance for total sales in the range of $1.625 billion to $1.725 billion for the fiscal year 2026 [21] - Management remains optimistic about the operational performance and cash generation capabilities despite potential market choppiness [22] Other Important Information - Interest expense for the quarter was $13.7 million, significantly improved from the prior year due to debt paydown and repricing [12] - The effective tax rate decreased to 21.9% from 25.6% in the prior year, attributed to increased R&D tax credits [13] - The company plans to buy back $20 million of its shares, indicating confidence in its stock value [88] Q&A Session Summary Question: Can you provide more color on Precoat market share gains? - Management noted that share gains were due to reduced pre-painted imports because of tariffs, with a 3% to 4% market share increase offsetting a 9% to 10% market decline [26][27] Question: What are the expectations for Precoat Metals' segment volumes in the back half of the year? - Management indicated that sustaining market share gains and ramping up the Washington facility would be key, with expectations of a rebound in construction [30][31] Question: What would take you to the higher end of the adjusted EBITDA guidance range? - The biggest impact on EBITDA guidance is the loss of AVAIL equity income, with potential upside from operational improvements and market conditions [35][36] Question: Can you provide an update on the M&A pipeline? - Management confirmed a healthy M&A pipeline with nine good opportunities, focusing on bolt-on acquisitions that align with strategic goals [54] Question: What are the expectations for interest expense for the fiscal year 2026? - Management expects interest expense to improve in Q3 and Q4 due to debt paydown and favorable repricing [66] Question: What is the outlook for equity in earnings from unconsolidated subsidiaries? - Management guided for zero equity income from AVAIL for Q3 and Q4, with potential for slight positive contributions in Q4 [68]