Earnings call transcript Q4 2022

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Operator

Good morning. And welcome to the Olympic Steel 2022 Fourth Quarter and Full Year Final -- Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]

conference recorded. this reminder, a is being As I to at Rich like to Olympic conference over hand the Manson, would now Steel. Chief Financial Officer Please ahead, sir. go

Rich Manson

Thank call Steel’s and you, year to fourth full the quarter earnings XXXX. Operator. Welcome for Olympic

by Officer, morning Marabito; Officer, Andrew will be Greiff. hosted we President our Chief joined Executive Our call by be and our this also will Rick and Chief Operating

begin, Before a have I we reminders. few

within and call today’s be statements be Safe and are of on to Private Act forward-looking reflect Some intended Litigation made as results. the predictive will the provisions may Harbor Reform made actual Securities of not XXXX

other company does actual results that differ assumptions affecting and in other Forms could materially The changes to factors releases in XX-Q, forth and and are on undertake the and Exchange not with such reports forward-looking such press assumptions, the filed factors statements, changes Commission. Securities XX-K Important company’s in update cause or statements. set to uncertainties the risks,

can release website. archived financial the is in Steel’s night on Olympic for we A EBITDA measures. and comparable website. During today’s replay was which available most Today’s and found press share, per provided non-GAAP last issued and live measures broadcast to be financial EBITDA, be non-GAAP the our may income net that discussion, measures all will directly are of adjusted diluted these reconciliation on GAAP adjusted to refer the

turn the I over will this At Rick. time, call to

Rick Marabito

with another and for year XXXX. Olympic call Thank full results quarter discuss will Steel. fourth you, exceptional joining begin Olympic and you for us on Rich, good to an an today’s strong conference Thank and for morning, of everyone. year quarter overview I Steel’s

returns. journey market on comment offer share Andrew Olympic I details Then additional segment, consistently some to will our higher earn reflections outlook. strategic and on recent on also less our highlights review each cyclical want from and be successful Steel’s to acquisition

more in always, financial up will for that, will open Rich call our detail, the we as and Following results discuss then questions. your

performance year another Our fourth extraordinary capped off of Olympic for Steel. quarter

the we most in our weathered history, inflationary XXXX. steepest record year and on to the XXXX, behind Tube all-time second pressures, in both Pipe pricing, achieving faced with decline and only in Although company Specialty Metals combined and non-metal our deliver team profitable these profitability highs economic fastest challenges metals and segments with

These reduce to results the of our our show strategy cyclicality business is market impact in working. that

highlighted intentional is have past on we that build a resilient, to a delivering As higher initiated effort returns. more Steel we very diversified Olympic calls,

to acquisitions steps products diversify business organic higher into services segments. in deliberate taken three and have through our investments return We all and of targeted

higher assets our selling vision We longer investments. for that then Detroit for align utilizing also return and the no the divested proceeds operation with of company XXXX in our by

disciplines our face We efficient the returns, these have turnover while prices. did business, operational more inventory relentlessly improved and strengthened us declining this right-size profile. Together, to even market and to rapidly improve increased actions adhering capacity, our of profitability in made our our and our cost

sheet record the balance liquidity increased debt, to our higher XXXX, invest resulted of In future. our growth cash for and our also Importantly, return of providing our XXXX million increased $XXX improved we opportunities, reduction XX% in including Metal-Fab. purchase ability or flow in January

five history our Our years. acquisition our in and last acquisition largest second sixth in the

Metal-Fab expanded EBITDA double-digit record consistent an recession-resistant is Steel, adding to margins our growing of bringing portfolio. track perfect a fit of and products Olympic a catalog for

Olympic and welcome to Metal-Fab their to Andrew remarks. will We in and the are excited Steel about more Rich talk very family, Metal-Fab

opportunities and leverage strategy, to and meet actively return for align priority model. additional evaluate us integration of growth to organic expectations our allow the XXXX, our While a that continue acquisitions Metal-Fab with is our we business

strong a our in included XX% XXXX incidents. year-over-year with performance OSHA-recordable Additional reduction successes safety in

We diversity, also equity our inclusion and Responsibility plan. and our published first Report advanced Corporate

to of our proud We increased greater a also number have charities through Citizenship to are support initiatives. our Corporate

As ever. January, to asset-based $XXX capital our our our organic more $XXX upsized than $X.XXX. we million, simultaneously providing In Olympic while is revolver an increased growth through from Steel acquisitions resilient we further stronger with begin of expenditures, and dividend additional growth strategy shareholders and to robust execute million XXXX, rewarding quarterly

Steel reinforce team. Before incredibly I Andrew, want of the I over list am year, Forbes to Small-Cap call were America’s of I named Magazine’s we how a Earlier to turn the this Best companies. proud Olympic

highly of we the to a innovative, believe Steel repositioned metals growing have that that Olympic market I more business industry. is acquisitive as is resilient the recognizing cyclicality the

job our of operate continued to grow investments strategic business the efficiently continue way. finished, aid not in and automation But a with is in smart, we our will

We excited Steel. about of Olympic are future very the Andrew?

Andrew Greiff

Thank you, and everyone. morning, Rick, good

commitment Rick across Center Center Year Service Rick’s entire recognition Rick. Marabito the clear behalf Before named the acknowledge to the being a leadership our This want Congratulations, of as our I take XXXX dedication review Steel industry, News. enterprise. the Executive results, vision, by Olympic moment Metal inspirational to business his on family, colleague, during to to our of and tireless well period the stems as well-deserved from of transformation I

$XX strong the We We three with performance. the in finished year to all in in the million delivered the adjusted quarter EBITDA ended second ever now adjusted the pricing, EBITDA of face as half $XX.X over XXXX. delivered with segments and very Turning during metal quarter of our positive EBITDA, the quarter. fourth business largest another and million decline of we of steepest

macroeconomic pricing you Our fourth especially consider quarter metals when is and performance faced. the challenges we environment notable

in XXXX pricing, index fell XX%. ever we from experienced pricing drop XXXX, to the May as December carbon steepest hot-rolled the the During period

grade XXX, highest from our XX% The metals specialty to surcharge steel for dropped stainless product volume November. April

our such taken turnover more the to in of make have diversify disciplined inventory cyclicality is ability we profitable market while and remaining Our resilient conditions and direct our a perform under steps remain to management. result business to

manufacturing January provides a journey most management acquisition and to venting Metal-Fab are step our solid carbon growing products. ‘s Our team, in This accelerating end-use segments, coated, acquisition for platform air target and stainless our of strategic our addition in of in three and metal-intensive recent products expertise aluminum. strong and portfolio of filtration a of growth Metal-Fab XXXX. experienced was the catalog talented market and

earnings Metal-Fab model has that proven Olympic expect Metal-Fab’s synergies Steel. and session we lines capitalize on resistant operational the and and benefit commercial both to will product

our smoothly will business we has integration Metal-Fab forward The report to you Carbon progress. the continue running updating to segment. will on operate To-date, and as and our been to look

related and Coated coated a Products. grades industry Director In products commitment on position, role this of newly Tookey in of This galvanized, in grow Mike to Olympic our galvalume, automotive as Mike reinforcing the processes, products created and return steel. to flat-rolled is accelerating high aluminized galvannealed, of is seasoned diversify focus carbon including Further veteran, Steel. and will growth appointment

of Now for our highlights the segments.

and despite Pipe mentioned, delivering Rick flat Metals most was also steepest the price year Specialty both a Tube and profitable performance decline Carbon positive The noteworthy, As ever. in delivered carbon EBITDA our of segment history.

EBITDA an led decline throughout XXXX, quarter imports The coil segment, of Specialty fourth in spite earnings contributed increase the Metals in year. record the Andy surcharge the the considerable $X.X million in and a nickel of stainless of year in by steel Markowitz,

This fully Our specifically food to quarter industrial performing Bartlett, the underway of busy operational white trailer, XXXX. end remain facility appliance metals equipment truck second segment’s to in newest Illinois well during is manufacturers and and XX,XXX-square-foot forecast. users, be are and we expect

noted segment Rick quarter Tube EBITDA had earlier, and of as earnings contributed of Pipe record Zielinski in the The Bill XXXX, led year. and fourth by adjusted $X.X million a

in value-added continued Our tube investments fabrication increased business. has our

Des our be to will addition operational half announced of Moines, previously the XXXX. Iowa the expect second in We facility

achieving the is a The on and Gea, fourth Carbon through credit challenging management hard led of $XXX,XXX of segment’s of lead EBITDA we and which positive control, in Our EBITDA helped levels. to segment the the quarter expenses things team a the operating focused remains by contributed inventory marketplace. can work the the diligent for us team, David quarter, discipline

the products to on has increased XXXX slower fast in fourth increased. are shipments quarter as start a have customer pricing We metal all off and from seasonally

be expect increase beneficiary will infrastructure which for industry we the of steel in indirect forward, Looking be as good whole. an to the spending, a

will optimistic first first half quarter business the likely Our remain rates XXXX. industrial into consistent of through expect and and the are build steady OEMs that

want Olympic to for their and year. thank work quarter outstanding Steel another entire team the to I hard and contributions

are proof that we said, working, our results strategy but Our as Rick job. is finished the haven’t

in purposeful way. move As in grow and forward the continue we and very will ahead, our we strengthen to a months business years

to I turn over call the Rich. Now, will

Rich Manson

Thank you, Andrew, everyone. good morning, and

fourth heard for you success shows Rick cycles. well As and performance we all market in full quarter from Andy, positioned are performance have our that year and

was EBITDA our $XXX history. the compared million, making second the net quarter XXXX. the XXXX in with $XX.X the Adjusted profitable of year, company’s $XX.X quarter, $X million fourth million million in year For quarter most and income full for the for totaled

Our $XXX reduction to total credit $XX quarter. includes was availability approximately or XXXX. of a the XX% million debt year-end, million. debt That $XXX by $XXX during At million decreased our at almost million fourth year-end

As our XXXX, from Rick noted additional earlier, asset-based million, million $XXX to revolver increased to providing January in we capital. $XXX access

providing availability Following and $XXX to through the million increased investments diversification growth our capacity remains significant Metal-Fab, capital of in in million us automation the and acquisition continue acquisitions, range, to drive new our efficiency. $XXX strategy with

capital increase XXXX, of pricing capital as the to increased has low we on their working quarter working expand needs balances from first December During our expect XXst. seasonally and metal needs

during do occurring the of in second we XXXX, half debt However, further expect year. primarily reduction the

quarter. XXXX million a when operating expenses fourth reduction or in the $X.X decrease million operating fourth totaled the of expenses for $XX.X to XXXX. quarter, expenses quarter year incentive performance-based the Consolidated Fourth included X.X% of quarter compared from million $X.X prior a

depreciation totaled into of slowed during were times compared million. $XX.X for projects lead those and XXXX, capital million, expenditures push projects the but Capital approved long utilization expenditure of to cash have Many XXXX XXXX. $XX.X

of a products. during equipment million and higher to new expenditures for XXXX organic and of have remain a growth $XX cash and long Lead the robust for for primarily capital we expenditure We times million. approximate of XXXX combination improvements, year plan and margin opportunities utilized $XX automation projects for equipment actual equipment over expect capital

in of the expected XXXX. XXXX. Our for tax corporate to The tax returns, -- credits the quarter of of for was were effective quarter federal recognition quarter XX.X%, of to during than of fourth rate the tax state compared XXXX higher which fourth XXXX related on our lower tax the rate quarter primarily and filed XXXX XX.X% the was fourth

to to We approximate rate XXXX rate tax expect XX% of our the effective historic XX%.

Looking are $XXX results. purchase multiple our include to of excited a adjusted The X.X XX-month paid times approximately forward, price million EBITDA. XXXX trailing Metal-Fab we in represents

of to inventory quarter adjustments, million approximately related acquired million first of expenses of amortization price intangible primarily fair $X XXXX, $X write-up and value to required fees, the expense deal During assets. certain to GAAP we of record market the expect the and purchase

will reported quarter Our strength the financial full Metal-Fab of power results begin of XXXX. second ‘s reflecting in earning the

last week, our $X.XX Board in And a per quarterly XX% increase from cash of $X.XX, Directors approved up our dividend just to share. regular

to We committed our our all are pleased shareholders and success delivering Steel’s remain Olympic value we to share with to stakeholders. of

paid We now have XX consecutive quarters. for dividends

want continue hard I strategy to for market work to closing, the of in and in and to us accomplishments our We add year. tumult their team to commitment In company my enable ongoing cycles. confident resilience strength success during of the will congratulations that all our the and our second especially remain our half our XXXX,

let’s open call questions. Now, the Operator, for

Operator

Capital from comes Markets. Thank [Operator question you. first Samuel Please KeyBanc proceed question. McKinney with Our with your Instructions]

Samuel McKinney

morning, Good Hi. guys.

Rick Marabito

morning, Good Sam.

Rich Manson

morning. Good

Samuel McKinney

you and your both in more talk for for in you through and from thanks, the the the color earlier. almost seeing Carbon a February? fourth through demand quarter, Andrew, major volumes us are Specialty little and can industrial what on OEMs But Decrease in on pricing color side

Rick Marabito

We looks but they and have it like to pretty of months, remain that, a are the first quarter seeing right quarter, Happy is to pace, say, since would good continuing this through we second OEMs year. The that been not industrial the last I XX are What Sure. Sam. Yeah. really to the steadiness. steady. see XX balance months now, at do and only through

we for good, so backlogs are they are talking tough that are year a and very steady. the backlogs primarily are years to they the pretty been hitting into getting labor. past same about really have of but half a and think very forecast issues this time supply right bullish the for about their But are where now some I year. having at certainly They going industrials on we are two this chain

Samuel McKinney

spot to rise Okay. pricing. in Thanks. book have a heavy the I know pretty contractual that you tends lag

the given rising the a standpoint market, from first HRC So what seeing? in you pricing quarter, are

Rick Marabito

perfectly. Well, it I think, said you

to a we numbers as So seeing quarter or started will and there. spot we for it the certainly weeks any will see will take quarter probably have contractual our spot first changes in there business, start before two rise into have three late second the lag be starting rise the to we prices seen we last weeks. But

Samuel McKinney

guys Okay. managing you through and cutting half. in And terms then deleveraging did M&A? in those to XXXX, the planning are levels talk debt in us job strategy in XXXX further is you the Can a in of great almost how you get much what

Rich Manson

the Sure, along inventory has inventory on focus Sam. all It’s been turns. think really Rich. And I on

strive demand turn our set And X so be our to and level to are by the going inventory we levels times. of just customers

of look that you mean working now, half And futures, at debt suggest is comments less pricing would with curve that, in capital less. the the if to futures latter would so XXXX than is the which my respect are

expect capital you as decrease. come in would debt half down So see back to the needs working

respect then to open with M&A, growth organic we And M&A, to well remain opportunities. as as

As we still are I after looking Metal-Fab at with $XXX comments, the in deal even million. excess in our the mentioned of of upsizing ABL, availability my

to So opportunities will we any that get products. into return help us open remain higher

Samuel McKinney

and increase pressures the to drove And you. XXXX. was inflationary been fourth Can Thank through have XX% as talk aiding sales range what are a me. of one in Okay. in first XX% It then through quarter. more for which sticky? last closer percent was of you me months nine OpEx the that what and the

Rich Manson

in a the of slower operating Sure, It’s have a fourth to Rich. you fourth seasonally I quarters. in quarter so the quarter is higher other And and expenses think seeing Sam. you are are level just compared going what the sales percentage to always

down quarter for of are kind were year. we and that XXXX about incentive, adjust the versus saw performance quarter fourth fourth we X% out the we from XXXX you based, early about a the saw when basically million and down that’s Year-over-year, $X of incentives of inflation what in

between everything. tracking inflationary we and I the the that pressures and X% quarters year still for were We have of X.X% first three think on

As it point that today out be decreasing. would to seems than that that cost people, But buy you year to nothing you a always rate that, I tell there’s doesn’t inflation did I ago. more of

Samuel McKinney

for it right. Thanks, All That’s guys. me.

Andrew Greiff

Thanks, Sam.

Operator

your with is with Dave question Stonegate. from proceed next Our Storms Please question.

Dave Storms

taking Thank Good my you and morning. thank you, everyone, for question.

demand Just I side. could wondering if the with start

any passed mentioned of Is the demand is powder year that still the from dry You that or demand I strong last Infrastructure was our and was there OEMs really end some markets. is any that still, guess, of what tied Bill from side? to there

Rick Marabito

No.

And of the that talk is to-date stand the seen the second powder. we but some not the into seeing as half think get will will. start But I there’s think, seeing really think of we certainly indirectly. dry is side, probably year, this that we impact this don’t anything are anticipation Dave, have it, would out. we yet. I more really the anticipation we certainly, I they on industrial about

Dave Storms

you still Perfect. the with again targeting the to that? revolver are do $XXX now down soon Thank of that’s you. half put mentioned going I again And that, put decreasing too is number past, does in -- you or or that kind get Metal-Fab XXXX. that number to that shift goal Is increase to be of you second a your know level. the think goal million to acquisition around it to trying the get In your to debt you start

Rich Manson

Yeah. Rich. David, it’s

that. to it’s number think I too soon a a put on little

of end on kind Obviously, increases. working where the driver really pricing draw at of does pricing be beginning price how have announced here of year, will have mills kind I going stainless the of on and to of now, the of depending capital. year. up year you what lot rest of compared the the a pay And think biggest price or that’s right hot-rolled determine down where the the to much a ends that

Obviously, So the I upon it’s metal stay would goes of year. you, tell pricing tuned. where rest dependent heavily

Dave Storms

With I a more, fee, transportation one big was around especially And you. already. I lot Last if think are there you bit pricing. talk Thank see little headwind diesel prices of you a starting come on touched Perfect. your a and that down will that expectations quarter-over-quarter, around to quarter, inflation could. to starting diesel do being we abate drive hopefully? know lower, inflation cost even

Rich Manson

Yeah.

again. Rich Dave, So, it’s

XXXX But a say still on QX first from too transportation quarter, million we of we I XXXX. more comment after end early on And prices to quarter. a the is that than little can it’s XQ toward you I to So of lull bit a basis, tell going the of of kind the pressure down that spike same certainly for expensive is me the for want saw saw expenses. that, of about quarter. there the $X again, kind what third volume fourth

has Pricing down. come

ancillary will to all I primarily remain would things around that continue levels. optimistic come down. But the high be distribution, other labor So at

I down so see area things the of the a is that still we tell transportation probably pressure pricing wouldn’t one-for-one as transportation comes the you all inflation. see biggest on we And the of inflationary it’s

Dave Storms

Very all. you. Thank That’s helpful.

Rick Marabito

Thanks, Dave.

Operator

question with Sakai your with Singular proceed from Our Chris comes Research. Please question. Instructions] [Operator next

Chris Sakai

Rich and Rick. Hi, Good morning.

Rick Marabito

Good morning, Chris.

Rich Manson

Hi. Thank you, Chris.

Chris Sakai

Products. a question on the in gross had I What Tubular improvement was and just margin driving that? Pipe and

Rich Manson

one have there is thing of The Rich. kind to you of out it’s that LIFO. Chris, Yeah. big adjust

million. expense in in the the of versus of fourth quarter was I to And the want of quarter income XXXX $XX $X so fourth XXXX. swing say there substantial million bit a LIFO was LIFO little or like a

think, percentage pretty you consistent. of there, factor a on basis, I it’s kind if So out that

Chris Sakai

some future geography for light shed vertical there? goes Okay. any and And acquisitions. Can far you as as

Rick Marabito

Rick. It’s Chris. Sure, Yeah.

are really sure our we to dividend. I to execute through both have thing As on remain increased plans and we like And to is, earlier, shareholder got think, acquisitions growth Rich returns as said said, just of to through one Rich plenty acquisitive. going an continue reiterate, liquidity CapEx, through for

Metal-Fab I continue you look will at geography, to example. think, was if we our Specifically, perfect look a

a mean geography. terms with has do the We in have that product, nothing of I pushed little further west. but to

you that’s as locations reach. look that’s about map, -- of in when about And physical our far we as terms at

the a to states Certainly, certainly large have to some we the we others. and the are kind looking plain area of of actively So country marketplace grow. is grow, the Texas the of to an part west Southwest

In of of Metals side, the terms growth. the mentioned That’s area growth for certainly has have past Products, look Specialty terms us. acquisition organic and a we to in grow in been on we an would area aluminum

in use terms of and and I that’s perfect we high to is then, if terms do companies, for power And think, processing good are us. a to relationships to or of to are purchasing return looking we to the of well Olympic able Steel Metal-Fab find in Olympic attractive acquired, What strength fits add depth to really run, of and really example. that we our is very certainly, companies

Metal-Fab So and great we think that. really example some a -- what is commercial and terms of I talked synergies the about in of of

Chris Sakai

on comment are valuations seeing are for you how companies? you Can

Rick Marabito

Yeah.

paid typically service on businesses of times to gave that. in center I a EBITDA multiple average distribution a valuations on where Metal-Fab EBITDA. of you we color think, little today it, Rich X based cycle bit I our typically, X.X% the the call times X are upon, acquisition, range for type

typical, that that’s kind right of pretty that general So range. fit into But Chris.

EBITDA bit cycle but multiples, at be in the a a think range have happening what’s could little general point the and/or seen. I costs maybe financing time the we different, that’s in with given

Chris Sakai

answer. Okay. Thanks the for

Rick Marabito

welcome. are You

Rich Manson

Thanks, Chris.

Operator

question-and-answer have back like Rick the the would end call Marabito comments. I closing to for now session. We of to the reached turn

Rick Marabito

excited much so take certainly joining in our We XXXX thank hope you for the in continued Olympic about of appreciate today, and you I the your us you we comments interest are Steel. Thank away on Steel. And all future of today. call how Olympic through

to look forward day. Thank speaking you certainly have good with we and soon. a you again So

Operator

today’s conference. concludes This

time at lines you may this thank participation. disconnect your for we and You your

Olympic Steel (ZEUS) 24 Feb 232022 Q4 Earnings call transcript