AZZ Inc. (NYSE:AZZ) Q3 2023 Earnings Call Transcript

Operator: Our next question comes from John Franzreb with Sidoti & Company. Please go ahead.

John Franzreb: Hi, guys. Thanks for taking the follow-up. Just a little bit of questions about the guidance here. has the nine month number at $3.52 (ph). And I believe on Page, was it 7, you have it at $3.89 and your guidance is $4.5 to $4.25. I just want to know if we can kind of reconciliate what the number is we should be using as a baseline number in relationship to your guidance because if we use that $3.89 number, it seems like a really sizable drop in the fourth quarter. Can you just help us there?

Philip Schlom: Yeah, I think, John, it’s a good question. And fourth quarter will be seasonally lower than the first nine months of the year. We’ve been working — we’ve had a lot of change in the operations with the acquisition of Precoat Metals and the divestiture of the controlling interest and avail or AIS infrastructure. And so some of those outlets don’t have fully updated numbers. So David’s been working with those outlets on getting better historical numbers, but $3.89 is where we’re bridging from for the guidance.

John Franzreb: So that suggests a number between $0.16 and $0.36 for the fourth quarter. Am I understanding that properly?

Tom Ferguson: Yeah. That’s the way it will flow. Obviously, it’s significantly lower volumes on the seasonality as we’ve talked about for — particularly for Precoat. On the Metal Coatings side, I think we will kind of see the tailing off of these high zinc costs, and we are doing everything we can to hold price and so yeah, this is the — probably our ugliest quarter. And then Q1, we get into the spring and build up into what I think going forward will traditionally be our strongest two quarters in the first half of the year.

John Franzreb: And I guess just a nagging question, what kind of share count are you using on that $3.89 and what are you thinking about for the full year? It’s kind of bounced around based on profitability, I guess, level?

Philip Schlom: It’s based on the dilutive and un-dilutive (ph) features, we’re using about 25 million shares in the calculation, John. In the fourth quarter to finish out on Tom’s question, what’s putting pressure as we seasonally have lower sales, and we do have the fixed cost of our interest on the debt and then the preferred dividends on our Blackstone preferred equity. So that’s what’s pushing a little pressure in that seasonally low fourth quarter.

Tom Ferguson: Well, we also had the unusually low tax rate in the third quarter. And so that starts to normalize or go back towards normal in Q4.

Philip Schlom: Yeah. We’d expect We’d expect taxes to normalize in the 24% range for fiscal ’24.