Thank you, John, and thanks everyone for joining us today. I appreciate your interest in AZZ, and I know that we have, you know, very likely some current shareholders as well as maybe some folks that are new to the story and, maybe some that are, revisiting it, and it's been a while. In any case, it's great to see all of you, again, here in the presentation. I'll get started. We'll get this moved along real quickly. Just, if you're not familiar with AZZ or you've been away from it for a while, just wanna kinda give you a couple of high-level points, that I'll be hitting today. You know, we are a pure play metal coa tings provider in North America.
We are completely North American-focused with all locations now being in the U.S. and a few in Canada. What you'll see throughout my presentation today, we've been accelerating sales growth, improving margins. We've got a lot of secular drivers behind us that I'll get through, and we generate a tremendous amount of free cash flow, which I think is something that we all like. As you look at the story, and I'll talk about capital allocation, you'll see we're doing not one or two things, but all things, and we think pretty well. We're looking strategically again at M&A, staying within the swim lanes of our 2 segments, while managing leverage, looking at how we return capital to shareholders through both share repurchases and dividends. We'll talk about that a bit.
You know, I think all in all when you put this all together, it just makes for a really compelling investment story, and I think that's been recognized through the share appreciation we've seen over the past few years and more to come. Jumping into it real quickly, a high-level snapshot on the business. You can see the sales and adjusted EBITDA represented by the 2 pie charts in the middle. Again, on a trailing 12, $1.62 billion in sales, $399 million in adjusted EBITDA excluding corporate costs, and adjusted EBITDA margin of 24.7%. When you factor that in, corporate costs, which I've got a slide on that in a couple slides, it drops the margin down to 22%, so again, very strong even considering that.
We are based in Fort Worth, Texas, about 3,700 employees across our 46 metal coatings and 14 coil coating locations. One of the things that, again, if you've been part of our story, you know all about the strategic transformation that we've underwent and have now completed over the past few years, moving away from a very disparate business of electrical, industrial welding assets as well as the metal coatings business to, again, just a focused metal coatings company.
That's really set us up well now, I think, as a focused business, really positioned well for growth and taking advantage of a lot of, again, tailwinds in the markets and strategic initiatives as well as, you know, the focus on infrastructure build-out and data centers where, you know, again, we're ideally positioned as well. Couple of things. I think, you know, again, this is just sort of a check-the-box reasons to believe the story today as you're tuning in. There is several things as we went through that strategic transformation that we said we were going to do, and those were identified here on the slide.
You know, looking at the target leverage and debt reduction, we are now very comfortably at the low end of our range, our stated range of 1.5-2.5 times debt to EBITDA. We're sitting at 1.6 times debt to EBITDA at the end of our Q3. We are at the end of Q4 and have just started our new FY , so we'll have more updates on this as we get into our financial earnings call, which is scheduled here in 23rd of April, w e'll have results out on the 22nd. Cash generation, again, you can see the results there, very strong EBITDA, very strong EBITDA margins.
Again, when we look at acquisition policies, for the past 3 years we said we wouldn't do any acquisitions, until we got the debt to EBITDA leverage down to a comfortable spot. Once we did, we did complete an acquisition last year about midyear of Canton Galvanizing. We do have a robust pipeline. We've got more opportunities in there, opportunistically looking at closing a couple of deals this year as well. Dividends, we did increase the dividend, about 17%, from $0.17 to $0.20 last year. We are committed to taking a look at the dividend, and increasing it, commensurate with the growth in the business, as we go forward from this point on.
Share repurchases, we do have a 10b5-1 plan in place that will automatically, you know, buy in shares to offset dilution. Trailing 12-month share repurchases were $20 million in the past, like I said, trailing 12. We do have a $100 million stock authorization that we just received from the board in the past quarter. That will be, again, in place to help fund that 10b5-1 plan that will offset, you know, the equity comp grants and such. Opportunistically we will be buying in shares, you know, when we see pullbacks as well. Quick look at end markets, you can see 'em on the slide here. Construction, 56% makes up our biggest end market. It's broken down into 3 sub-markets, infrastructure, non-residential construction and residential construction.
When you think about those 3, each one represents about a third of that 56%. Then you can see the percentages on all the other end markets here as well. Couple of things that I would just point out on the right, things that we are very enthused about include the investment and infrastructure. We're definitely a late cycle business when you think about things like IIJA and the infrastructure, you know, spend. A lot of people were talking about that, you know, a couple of years ago. We are now at that point where we're seeing the results of that, as our customers are getting orders for, you know, structural steel to be put in place and they need it galvanized.
Reshoring is certainly something in this environment that we're seeing and we're participating in with several manufacturing facilities either adding capacity or bringing capacity back online and working on projects. We'll talk a bit about the pre-painted steel and aluminum migration as I get further in the slides. Also the conversion from plastics to aluminum. I've got some talking points on that I'll share with you as well. And also the conversion to coil coating. All these things giving us a real positive view on the next FY . I mentioned IIJA again just sort of a tip of the hat to IIJA and again what we're seeing related to that. We're definitely seeing increased activity in roads, bridges and projects.
Certainly a lot of activity around power generation. We included clean energy in here because, you know, we thought we would see a pull in and a start to a slowdown on solar projects, and we're seeing quite the opposite. We're seeing many of our customers talk about backlogs that are extending beyond the expiration of the tax credits for solar in particular. That's really being driven by kind of that third bucket, the data center build-out. Data center projects are now looking for co-located power. Several, you know, power sources, including gas-fired turbines, are sold out for a number of years, so they're actually looking what else can they deploy to help with power generation needs, and they're kind of coming back to solar.
We're again opportunistic on all these things as we move forward. When you look at the business strategically, you know, why Metal Coatings and why Precoat and why are they together? I think a couple of things I would just point out to those again who are not familiar with the story. We are a tolling business, which means that we don't have the commodity risks associated with steel or aluminum because we don't buy those. Our customers buy those, and then they bring that steel or aluminum to AZZ to get either galvanized or roll coated on the Precoat side. Both businesses tolling businesses, we understand it very well. Also, I would say that, you know, because of that we're a very service-driven culture, really focused on quality, really focused on customer service.
We've invested in a number of tools to help us with that, which kind of leads me to the next slide when we talk about technology. We really have 2 homegrown proprietary apps in our business today. One, we call our Digital Galvanizing System, and for lack of a better word, it's the Domino's Pizza tracker that we've built, and it's giving our customers, you know, near real-time information on where their product is, if there's any delays or concerns, what those are. It allows us to take all the paper out of the process and move to, you know, a technology-based app. What you see on the picture there is an individual who is using a handheld scanner to measure the thickness of the zinc that we put on steel.
This is a big technological advantage for us. We capture that information, which is what he's doing on that tablet right there that you see. All that information is stored, so it helps us with quality, service, any kind of warranty issues. It also helps us share that information across our platform of plants so that everybody is, you know, producing the same quality product, and it helps us with zinc efficiencies. CoilZone on the Precoat side, very much a similar type of tool. A lot of integration with them. So they've got the tool seamlessly integrated through APIs and EDI with their customers.
That allows those customers to place orders, pick a coil, get it painted, and then on a completely seamless process. Then finally corporate, you know, we're looking at IT infrastructure and AI. We've been very prudent in terms of AI. We're not doing AI for AI's sake, but rather making sure that we've got the policies set and the policies in place, and then starting to roll it out in a very pragmatic approach, you know, starting with things like Microsoft Copilot and Teams and giving our folks access to it in a very regimented format and talking about the right ways and the wrong ways to make sure that we don't get into any issues. Quick little thing on R&D.
We have a longstanding partnership with Texas A&M. We've got several projects that we've worked on with them that have actually proven themselves out and that are in full deployment now and cascading across our plants. Most of those have to do with galvanizing because we do have a small hot-dip galvanizing kettle on site at Texas A&M that can test various processes. Then, if those pan out, we again implement those across the network. Sustainability, what I'll say is that, you know, galvanizing itself is a very essential as well as environmentally friendly process. We're using zinc as the main input for galvanizing, and again, that's a mineral and something that, you know, we take in vitamins.
It exists in people today, so again, very environmentally friendly process. On sustainability initiatives, reports, and tracking, we have been really punching above our weight class, I think, on reporting and sustainability. We do have. If you go to azz.com, you can find our sustainability report. We've been reporting, you know, Scope 1, Scope 2, Scope 3 type emissions and initiatives for some time. From a people standpoint, when you look at diversity, again, the organization itself is a very diverse organization with slightly more than 50% of the population qualified as diverse. Quick look at the exec team. Again, a very experienced team here. We've got Thomas Ferguson and Jason Crawford as CEO, CFO.
Brian, who's announced his retirement, will be replaced by Todd Bella, also announced as the COO of Metal Coatings. Jeff's been in place for quite some time now for COO of Precoat Metals. Then you can see myself, Tara, Haley, and Roy, other folks in the management team. Collectively, all been together for quite some time here at AZZ, and you know, the newest addition, I would say overall to the organization was Jason, who came to us through the Precoat acquisition. Even then, he had you know, 10+ years at Precoat prior to joining AZZ through the acquisition, and he's been here for another 4. Again, a tenured group that works really well together.
A quick look at corporate strategy, where we're heading. We put this out last year. We've got 3-year goals that we established. A couple of things there I talk about, we wanna grow organically, excluding M&A at 2x GDP. We think that that's very attainable, given what we're seeing in our end markets and in the business. We're gonna be very focused, as I mentioned, on M&A targets. We're looking at a few things with respect to EBITDA, ROIC, and leverage. You can see them listed there, and you know, that kinda all goes into the blender and comes out as, you know, a sales goal or target of, you know, $2 billion+ by FY 2028 , which would be next FY for us 'cause we just started FY 2027.
Moving the margin profile up above the 22% EBITDA margin, where we're at today, again, excludes the corporate costs. The point here being that we wanna grow the business and do that not at the sake of margin. I think that's the kind of the key message we're trying to convey here. On acquisitions, again, I mentioned we do have a robust pipeline. We've talked about how, you know, we've got about 68 different opportunities that we've taken a look at. We've got 13-ish under evaluation. We've closed the one last year, and again, opportunistically looking forward to getting a couple of deals done this year, as we've entered into our new FY. Pipeline looks great.
We're again very enthused about what we have and what we're working on and hope to be able to communicate more about that in the coming months ahead. Real quick look at metal coatings that segment. Again, this is a leading hot-dip galvanizing business, $720 million trailing 12-month sales. What we do is we do not fabricate any steel. Our customers do, and then they bring it to us to have it galvanized. Again, you can see the individual here in the picture that all the steel in the lay-down yard here, that happens to be at our Crowley, Texas facility.
You can see a number of monopoles, guardrails, a lot of infrastructure, you know, parts, pieces here in the lay-down yard that have already been galvanized, getting ready to ship. And what he's doing is, again, taking that mil-spec reading on every piece to make sure that, you know, we've got the right level of zinc applied to it. Market size, market share, you can see there, about a $2.5 billion market. We've got 27% share, and again, a little chart there that gives you an idea of what the EBITDA performance has been in the business over the past 5 years, since COVID. We'll kinda skip that, move on to. Again, here's the footprint. I mentioned all the locations in North America.
You can kinda see them here on the map. You can see our end markets as well for the segment. Construction's 28%, industrial's 20%, transportation's about 16%, electrical is 20%, and then other is just sort of a catch-all. Pretty evenly dispersed, you know, amongst these 5 end markets here. Again, you can see some of the key technology that we have. We have hot-dip galvanizing for large structures. We have spin galvanizing for small structures and parts, pieces. We do powder coating and anodizing plating in some of our locations as well. This is a quick look at the financials of the business on the metal coatings side.
Again, you can see a very consistent growth on both sales and adjusted EBITDA as well as the margin profile of the business there on the very bottom. Very strong margins for an industrial focused business. You know, last but not least on metal coatings before I jump into Precoat, you know, again, some of the tailwinds here. I mentioned the reshoring, you know, inorganic growth into white space on the M&A, and I'll talk a little bit more about that in a minute. You know, if we exhaust all those, we could potentially look at greenfield or brownfield plant expansions. We don't have any greenfield plant expansions currently in the budget for this FY.
Again, something that we will remain focused on if we don't see any opportunities through the M&A pipeline. All right, Precoat. Switching gears here a little bit to our other segment. Similar layout on the slide, kinda going left to right. $896 million in sales for the trailing twelve. You can see the input is a little bit different. We're taking in steel and aluminum from our customers, running that through a continuous process, a very highly automated roll coating process. Again, a larger market size here, $4 billion and slightly lower share at 23%. Again, a number one share position relative to our competitors.
In both cases, metal coatings and Precoat, we are the number one provider, and our nearest competitor's roughly half our size. Kinda jumping ahead again to the map. All the locations you'll see here, again, are sort of Texas and to the east. That's by design. Most of your locations in terms of metal processing as well as the production of steel and aluminum generally tend to be in these same places. These plants generally tend to be located near steel mills, steel service centers, et cetera, or ports and waterways. That's a little bit different than our metal coatings business. That tends to be located geographically more dispersed and nearby metal fabricators. On this slide, you can see the end markets as well on the top.
Construction is a big one. It's again broken out into sort of 3 categories. You have the ag market, then you have commercial, and then residential construction, sort of a third represented by that 79%. Appliance and HVAC, container, we'll talk more about that in an upcoming slide. Transportation, which is largely RVs and buses for us. A quick look at the financial performance for Precoat. Again, a similar kinda growth trajectory that you saw for the metal coatings business over the past 5 years.
You know, one of the things that as we think about the future and growing into the future that we're pretty excited about is the Washington, Missouri plant that we completed last year on time, on budget. We do have a contracted run rate sales of $50 million or more for this FY that we've just recently entered with a customer that we have a long-term contractual take-or-pay contract with. That take-or-pay contract is for 75% of the capacity for this plant. It's a long-term customer that we've been working with, not a new customer. They added additional aluminum capacity, manufacturing capacity at their facility, and we made this investment to keep up with their growth. Pretty excited about it.
Again, it should be adding $50 million incrementally this year, as compared to last year, and you know, margins that are on the higher end of the range for metal or for Precoat Metals. Some strategic drivers for them. Again, tailwinds include reshoring the plastics to aluminum. That's helping out in the beverage space. Again, you can see some of the other things that we're working on, getting folks focused on leveraging pre-painted steel in their manufacturing process as compared to painting it themselves. Inorganically targeting some captive coil lines that are out there.
These are old lines that are within customers' manufacturing processes today that operate at, you know, a rate of 1/4 the speed of ours, and we can go in and work with some of them very selectively and help them convert out of that line, and then leverage AZZ Precoat Metals, and then we get a long-term customer. When you put those two together, you know, what the business kinda looks like is this. Again, you get a very consistent top-line growth as well as a nice CAGR around the adjusted EBITDA line as well.
One unique slide that we have in our deck that, you know, not too many people have, we get the question a lot, so I included it, is, you know, how does the business perform, you know, if there's a cycle and, you know, we start to see things, you know, slow down? This is, you know, emblematic of what we saw back in the big, you know, cycle in 2008, you know, when we had the financial crisis. You can see the metal coatings business in particular grew right through the cycle. Precoat Metals had a little bit of a drop in 2009 and then a strong recovery the following year.
We often get asked, you know, why did Metal Coatings grow through the cycle, and again, the growth, although relatively nominal, through 2008 through calendar 2010, is really driven by the fact that, you know, the business is focused on infrastructure, it has utility exposure to it, and those businesses generally tend to be very stable, even through cycles. Again, capital deployment, we'll kinda talk about that. On the left side of the slide here, you can kinda see where we were when we did the Precoat acquisition 4 years ago. It spiked our debt-to-EBITDA leverage up to 4.3 times. We have drastically reduced that to the 1.6 times was where we were at the end of Q3.
Again, a stated range of 1.5-2.5 times is where we'd like to operate the business. You know, we have very strong free cash flow generation. We also have a $400 million revolver that's largely untapped, so you know, if those opportunities presented themselves, you know, we can certainly grow the business. We've got enough dry powder to do that through both, again, pulling on the revolver and then paying it down through the strong free cash flow of the business. Not looking to really spike it up above 3 times. We would have to do something, you know, a deal that would be, you know, in the neighborhood of an $800 million deal or a collection of 800.
A collection of deals that would equal $800 million to get, you know, over 3x debt-to-EBITDA. Again, plenty of opportunity, plenty of dry powder without having to worry about debt-to-EBITDA. Kind of the focus of the year for capital allocation on the right, in no particular order, strategic M&A, as I mentioned. We're looking at bolt-on acquisitions. We wanna stay within our lane, do acquisitions in metal coatings and in Precoat Metals, that makes sense, where we can either fill in white space collectively, maybe add to what we do today. For instance, look at that Canton acquisition that we did last year, that was largely for smaller structures.
It allowed us to, you know, provide that service in that area where we already had a galvanizing facility, but it was more purpose-built for larger structures. That allowed us to kind of expand our footprint and our presence there. High ROIC investments, again, we'll look at those in that context of M&A and as well as organic opportunities. We'll maintain the leverage rate, and again, returning capital to shareholders. We're gonna do that through 2 ways. One is the very consistent dividend that we've provided to our customers. Since 1990 we've been a consistent dividend payer.
We will now begin to increase that as we increase the business and see you know the business perform better and better. Then as I mentioned earlier, shareholders, we'll do some share repurchases and return capital to shareholders that way. I think when you look at AZZ, one of the questions I often get, and I'm sure John gets as well, is you know who to comp us against. You know because we don't have very many you know pure play direct competitors in the market you really have to look at either coatings providers, building products, service centers or steel mills.
When you kind of rack and stack those, again which is what we've done here for you can see that, you know, our revenue growth, our EBITDA margin, and our net working capital to sales, have really outperformed just about everybody else out there, that you might compare us against. That brings me to my final slide, and that's guidance. You know, the guidance for the past year is listed here. FY 2026 is in our rearview mirror, and then FY 2027 guidance, you can see listed here as well.
Okay, with that, let's do a quick Q&A, and I just wanna get a quick point out. David, you mentioned that you don't, you're a tolling company, but you do have a variable and relatively significant input cost in zinc.
Yeah.
You know, zinc prices have been winding down this year. Increased supply, lower demand in China has been the primary drivers. Maybe just talk to the audience about the potential swings in zinc inputs and how that plays with your margins in your biggest business. Most profitable business, I'm sorry.
Yeah, sure thing. As you mentioned, zinc is the number one cost component for our metal coatings business. You know, I've been here now for almost 15 years. I've seen zinc swing from as low as you know $0.80 up to $2 at the start of the Russo-Ukrainian War. Zinc has been you know operated within that range ever since then. We've seen a general up until most recently a general increase over the past year in the price of zinc. Couple of things on kinda how we maintain that and can protect margins. Keep in mind it's a short cycle business, so we are quoting our customers prices that are good for 30 days.
Generally, what we'll do is we'll be giving somebody a quote, and we might quote it, and galvanize it within the same week. We have real good understanding of, you know, the input costs as a result. Most of the zinc, to your point, John, that we purchase, we bought it 6 months ago, so we know what that cost was, and we use a FIFO accounting method, you know, to account for that. It makes it very difficult for us, almost impossible to get really kind of behind the cost curve as a result. We stay on top of it, that way we can adjust pricing. We don't have long-term contracts with customers.
In the past when we've seen a spike in zinc, we have put in a zinc surcharge so we can, you know, stay ahead of it that way and keep on top of any inflationary expectations with zinc. Then similarly on the other side when we see zinc prices come down, if we have a zinc surcharge in, we can take the zinc surcharge off. If there's not a zinc surcharge in and prices are coming off, we do our best to maintain the price because we do have, you know, other inflationary costs, you know, with labor and other things. Most of the time our customers aren't paying much attention, you know, as we are to zinc.
They're more concerned about turnaround times and quality than, you know, the price of zinc. We don't get into too many, you know, zinc specific questions with customers.
I'm sure freight costs can be an issue sometime in the near future, but we are out of time. David, thank you for the expansive overview of the company. Looks like things are really, you know, going in the right direction. We appreciate you being here at Sidoti & Company and hope you have a great balance of your day.
Great. Thanks, John. Take care.
Thanks, sir.
Thanks, everyone.
Bye now.