Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the Olympic Steel 2023 First Quarter Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.

At this time, I would like to hand the conference over to Rich Manson, Chief Financial Officer at Olympic Steel. Please go ahead.

Rich Manson

Thank you, operator. earnings the Steel's XXXX. quarter Olympic to call first for of Welcome

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

I begin, reminders. few a have we Before

changes factors results. Commission. to harbor Act differ Forms releases Some made actual provisions XX-Q such undertake not and Private Litigation could Reform in intended of cause assumptions XXXX Exchange the not are call as forward-looking filed or that and forward-looking uncertainties reflect XX-K and with to predictive results and will the in company statements other on made materially statements. risks, be within of to may changes Important today's statements, are reports press assumptions, and actual on does factors the be The set such Securities other the safe the Securities update and forth affecting company's in

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

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

Rick Marabito

an Andrew another strategy and for quarter to us highlights market Olympic quarter comments and driven our discuss to Steel results. provide begin each segment you, first review good Thank ongoing some Thank overview on company. strong strengthen our today's on Steel's Rich, and of call Then from conference diversify Olympic conditions. everyone. with will joining for by morning, XXXX you I'll

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

strong start. is to off year Our a

Olympic of slower reported balanced million metal and significantly seasonally year quarter, from quarter. three EBITDA million demand Steel first of segments. X% shipments distribution sales remained a with $XXX from our customer adjusted For the XX% the increasing all with fourth ago and $XX.X Overall from increasing of earnings steady

year. And on months six rolled as XXXX. accelerated to we of call, price as steel increases enter December was year, up of our the quarter, supply-driven of last XX% increases we hot the mentioned after from and At pricing the first began the declining in end of last see these we index prices, beginning

largest a as Metal for in X was Our Fab the history last Metal to in strengthen quarter acquisition of Steel. and the diversify the our strategy highlight and January Olympic success latest sixth in years, our the Fab second acquisition our represents in acquisition

capabilities venting product Products stainless primarily are and broadens facilities. and Kansas our offerings, recall, filtration and Wichita, and for aluminum As commercial residential, our and manufactured reach steel of in carbon two Fab producing by you'll products Metal geographic industrial applications. coated

segment, Metal start with the in in fast we're performance our of Carbon Included Fab. thrilled the

acquisition onetime synergies Fabs year. XXXX, expenses purchase the second the in first now we second earnings us the the will behind and of in see later, by of Metal and of in of highlight adjustments Rich will impacts followed benefit quarter accounting half meaningful the As the are quarter, beginning

to our successfully Olympic pursue team, strategy. well is remains and advance our integrating additional acquisition Fab While for identify opportunities positioned Steel Metal extremely that a priority

for strategic further the acquisitions model Olympic sustainable about prospects to to our executed with Steel with invest align deal, growth priorities. that capital line excited our incredibly build organic and And of Our business in in our and the We're with the long-term and automation have Fab credit balance borrowing Metal in we sheet now the of revolving conjunction record is strong. increase success. levels initiatives, future availability

We also Steel. our at DEI, website. highlights in be can The recently safety on ESG, our which our corporate report initiatives report, core progress Olympic value accessed responsibility and second issued our other

ahead, unsettled. understand picture that look macroeconomic the is As near-term we we

from we expect lot look first OEMs and the industrial a remain demand second However, steady, to our quarter. our quarter like

have Olympic cyclicality. team's resilient actions that the to consistent a performer We while stronger, of and demonstrated have diversify our us market navigating made grow and Steel more impacts

Andrew. with now turn I to So call over will the that,

Andrew Greiff

and Thank you, good Rick, morning, everyone.

solid start to noted, Rick steady our was As each first quarter with and from performance the the strong segments. a year of

and addition of at a quarter. combination pricing by Metal look for the shipment environment delivered carbon, volume improving and favorable strong Fab the increased of Now our performance with segment, starting a

results adversely for million as contributed segment Congratulations carbon enabled segment associated around onetime which work hard to $XX.X adjusted the EBITDA shipments positively by and Metal inventory and for the affected charges David outstanding not Gia the report impact of ago, we their rose X% management entire carbon the with not quarter. results does discipline include year from Although sold our tons a were Team's on to work and our performance Fab quarter. this do business. this acquisition, as

Pipe second results. profitable and and million. product driving is margin EBITDA Tube $XX.X on most The growth team's led ever, by fabricated contributing of positive improvement Bill Zielinski quarter focus had its

enhanced times capabilities investments to In and customers. fabrication to improve improve particular, the service speeds, to are leading laser lead the reduce segment's

Iowa for by groundbreaking May foot a with expansion of our year. be end square targeting the Moines, Des XX,XXX to also expectations the are operational We

of faced earning The to Andy margins. headwinds softer another by profitable and we Specialty $XX.X able volumes Metals, stainless were led lower steel million. post news leading is still to good quarter, industry-wide EBITDA Markowitz very

organically the to following completion, fabrication in metals new our second is quarter. fully in our of continue of the September XXXX.Our Bartlett, market high in the it white and divestiture operational will X-year a Illinois Detroit grow expect rose share of operation to facility we be We as aluminum near in

second first to demand Overall, quarter expect to steady, the remain we similar quarter.

to forecast. are Our and performing industrial continued show to backlog a OEMs solid

segments, Thank you team Food Southeast. the entire business a our another seeing transplant quarter. outstanding in to pickup truck Appliance automotive are customers for We in Equipment and and our trailer

the I'll turn Rich. call Now over to

Rich Manson

for was performances and in Thank to Steel, Andrew, credit our of morning, million, $XXX Fab in by revolving million availability in acquisition and resulting acquisitions for investments line you, our Olympic highlighted growth quarter increase segments, all good everyone. $XXX strong from our exciting organic the record successful in Metal and of an continued It opportunities.

which of distribution than year-over-year business. Carbon in keep and inclusion in make that tonsold Please segment, included Metal the results our does is mind will not first quarter more our our higher Fab XXXX Metal fab, returns comparisons difficult. report has typically in

adjusted that acquisition-related several there onetime in Additionally, are reconciliation. adjustments our we highlighted EBITDA

$X.X compared value with million $XX.X acquisition-related LIFO and No first for EBITDA of in totaled first was Fab's the inventory Metal $X.X of income quarter. Adjusted net to market GAAP quarter of was million the $XX.X quarter adjustment first adjustment or quarter, EBITDA million the Adjusted XXXX. excludes For for fair onetime XXXX. the million a $X.X expenses. recorded XXXX million

that XXXX. in and realizing our expect second We second begin the strength reflecting XXXX the quarter reported we the full Metal financial metal synergies be as earning begin will power the expect acquisition-related of of of Fab's us, behind half in to supply will results charges

XXXX $XXX million, since debt $XXX acquisition end the at Metal year-end and million Fab. quarter an increase which first the total $XX of of included the Our was of million

During in quarter. the resulting in reduction the a debt $XX cash during million quarter, we generated operations, $XX million from of

expect in second year. of debt during primarily We the occurring XXXX, half additional the reduction

end, drive quarter $XXX was At providing significant increased automation capital new availability investments continue our with to acquisitions, record a efficiency. in to us million, strategic credit and our capacity

the $XXX.X prior million $X.X higher Fab, $XX.X Metal the our totaled Mylan in operating Fab's the sale onetime an the of in including level quarter. Consolidated year Iowa Metal operating charges XXXX. expenses, The of quarter and increase million first on gain XX.X% quarter, or expense warehouse acquisition-related from that of reflects the absence the first addition million of of expenses the a occurred

first expenditures totaled $X.X million XXXX $X.X million. quarter for compared the depreciation of with Capital of

We capital to total expect million. $XX XXXX expenditures

XXXX Our of the tax in for first XX.X% the quarter to XX.X% effective compared of was quarter rate XXXX. first

previous quarter, increase dividend dividend from our the a of higher during paid Also, XX% per we $X.XX $X.XXX share. of cash the per quarterly share,

of we to holders X. XX of $X.XXX basis. Board the dividend regular quarterly Our June payable June to on approval, maintain of a Subject dividend approved to a on per Directors expect $X.XXX board share as

XX We quarters. paid consecutive have dividends for now

beyond are forward, diversification of we Steel. reported begin Fab's Metal excited in to and growth Looking of the our organic great with and confidence strength investments that Olympic Fab, from future will and continued reflect strategic our full The quarter gives Metal the the impact in success of financial the along power. us second results earning

Now the call questions. operator, let's for open

Operator

Capital with Samuel Markets. first Thank you[Operator is your question our question. you. with Instructions] from McKinney Thank proceed Please KeyBanc the line of And

Samuel McKinney

good Hi, morning.

Rick Marabito -

Sam. Morning,

Samuel McKinney

had I spot rise. tends weeks, it recent months in pricing book. a heavy run HRC It contract the price that. a has you recent the before lag in Although slowed had significant know to

So what first in are in flat pricing was quarter? sequentially for the for basically the second quarter your after expectations carbon it

Rick Marabito -

a Yes, question, it's Sam. great

So index we seen pricing bit. come the few little you've expect you've off as certainly - weeks, in past seen, a

you off You've second than But the lag. index through softness is said, certainly We we'll that seen the think come as see little more futures come quarter. we as price. a there a

then margins there. So and pricing the hold goes where we will through see from that quarter, anticipate second we'll

Samuel McKinney

and pricing metals up sequentially. you. in slightly then Thank slightly Okay. specialty And volumes were down was

us earlier first more call, in expecting the but those shipments dynamic You mentioned in volumes and and walk through second stainless from specialty metals directionally, the quarter? quarter during could if just you what you're dynamics the the

Rick Marabito -

a Yes. Well, of - Sam. expectation the things, couple

months. first X seen inventory the to a report, the a service you've another about steady the you We So IMR levels hand now of pretty months and down come on from are were course to look we coming first, at a We've as lead relatively role next second seen reduction quarter. down MSC anticipate come X from probably times about the month the into certainly high going will inventory as drop centers at take bigger the the month, imports stainless over into right half. play are mills that, that

pick have equipment from Our the major up. customers food started of side it to

a that be as we coming been which second business will our what bit well. of big has little trailer, And a there improved. automotive the very of has in So We've part that better bit participate another volume we're seen quarter, steady. we little truck is uptick into think doing

a more bit quarter first come look will we quarter second in second would inventory the little that quarter. will think be better line would on that and everybody the than anticipate through levels the I certainly as So much

Samuel McKinney

the second in Okay. half. the historical quarter earnings night Is expect there of synergies you me, and should have the second to see sort Thank we that mentioned you. impact metal the any you lastly expect to effect your to it in full the fab And earnings then the you for that release in that way of up And expect to numbers? to overall provided track just March? last frame

Rich Manson

it's Rich. Yes. Sam,

a filed using think historical X-K is that from the financials in was good point. starting I the March

that think the the the won't charges two in two quarter things I you the that biggest see earnings are release. we identified in onetime second

resulted of deal-related you write-up million to have cost have you the million to and $X.X $X.X expenses. inventory goods want want So of sold, that that higher of that in

the And segment, million Carbon to the clear, center. just cost the be affected $X.X Zoot affected the million $X.X

I So a charges. not is first said those just look have the second lot going in the we as onetime quarter going quarter, think to to you're comments, like

Rick Marabito

on of in the And think times, beginning quarter, going the back commented half third then carbon of of Sam, a couple we're some bring And start to of year, I we excited pretty supply synergies we're side. we to we those. by think, about the see the

in of boost half be back will the fabs a little that metal performance. terms So power in

Samuel McKinney

me. Good for guys. Thanks, Okay. it luck. That's

Rick Marabito

you. Thank

Operator

from line Dave your proceed question Our Capital. is next Stonegate the with question. Please Storms of with

Dave Storms

Morning.

Rick Marabito

morning, Good Dave.

Dave Storms

one. quick a one, First

Just because in expansion, correct? associated with an any the won't that, that's be with downtime groundbreak Iowa May there

Rick Marabito

expansion, XX,XXX effect to year-end, and XXXX. That's an should effect than additional be but expect we in It it that XXXX. operational purely feet, probably have correct. more more That of square is XXXX see by just in would

Rich Manson

the expand Right. while don't back in half disruption anticipate any we we construct But building. and no, the

Dave Storms

That's perfect.

just warehousing in? kind per [ph] new and kind climbing. that distribution, on Is Thank this number live on to is any seems repreve And you. of Or there that on there? Okay. we the for green of normal keep tonnage just cost then shoots the

Rich Manson

Dave, it's Rich.

effect tons the more businesses report don't is side. the we've in that really, kind recent on acquired So manufacturing years sold. the They're of of

of denominator operating And if a to the so that going expense happens what you're have number same using you're those dividing tons, tons you're higher into.

like looks it so it's And rising.

exact remember number. - So pointed out as were the can't we the we up in comments, roughly I

quarter of and first of million I of around versus it of Metal XXXX Fab, expenses think $X.X first for of XXXX. the deal-related then the $XX of accounted are gain million items the the the million sale was in expenses. Iowa That's the absence expenses warehouse which quarter on in that $X.X XXXX, the increase Those operating in that three explain Mylan entire expenses. operating reduced occurred that

expenses we're operating X so of come kind as through comfortable the the are. so. We're we've seeing where And months or down actually last seen quarter-over-quarter inflation

that's businesses tons reflect expenses sold. manufacturing issue the higher don't operating that So I think reflect you're that that comparing

Dave Storms

That's very then And me, I for helpful. Thank if more you. one could.

You mentioned down. industry-wide coming as of kind your levels

industry-wide as how into of curious you changing going capacity XXXX Just and and about see maybe through even how the to you forward think XXXX? that rest

Rick Marabito

X if sides. it Well, you at a take from look

half that the much in second we a mill mills getting up product today. more shape have better going capacity, behind seem little of side, to from been be and coming So in carbon some year, in the online a see of the

will the year. we product more available half So of that second there'll be anticipate in the

On mill domestic performing aluminum well. really and the stainless is side,

You'll it. mills see very bit the are of thing more side and producing a same certainly Aluminum mills. and see some on on we'll little well. the imports aluminum import the

to is challenges probably customers, the the seen. industrial going way backlogs. more on is chain than the From It's see we've today it to much the that having certainly labor customers issues labor pretty are you're their And from and into issue. with centers raw the supply but the an material, OEMs trying that eat service now

Dave Storms

helpful. Thank you. very That's

Operator

from of Sakai line Chris is question with Please Research. next the The Instructions] proceed Singular question, with [Operator you. your Thank

Chris Sakai

morning. good Hi,

Rick Marabito

Morning, Chris.

Chris Sakai

on and pipe light that? margin some shed what and you in the Can expansion tube drove

Rick Marabito

on really gross you're yield the quarters, but that pipe results investment for great commenting margin. tube in question. to this Chris, Yes, are And starting and our assets and business, the more several fabrication-type been in we've seeing the value-add

add, several very of strategy higher the have to portion and I a tube So equipment. pipe the growing, over it's of really bit our to little value-add the and Also, intentional tends return. a to might a the result continue last years of expand is business stainless it

reasons. would primary be those So two the

Chris Sakai

can acquisitions Okay. Fab your acquisition? comment the for Great. on Metal after And appetite more you

Rick Marabito

of we to the our continue at of Yes. Certainly, Yes. Chris. Thanks, pillars one growth look acquisitions as strategy.

acquisition, even an exceptionally sheet. Rich think I and news the at as Meta the prepared we're availability I now mentioned as good after in record remarks balance is did well. have Fab The strong

So capacity to plenty we've do of got that.

at now. acquisitions. every what in strategic just It's of continue look do we We to part strategically day and our right operations

that So us to last on the the we've over X expect forward you path going been should years acquisitions. continue much on

was big Metal Obviously, Fab one. a

Andrew very projects months, going that the It's organic of integration the it's after But is you've growth with tremendously. in together a highlighted are Fab, on which, acquisitions smooth seen very driver a transition. been by aspects growth to X the focused really of earlier. going we're So very, some to be us, as way, continue for X or Metal

Chris Sakai

Okay, thanks for the answers.

Rick Marabito

welcome. You're

Operator

time, the our reached end this At question-and-answer you. session. of Thank we've

the Marabito to closing for Rick floor remarks. I'll back Now turn

Rick Marabito

much, our for Well, your and on call thanks morning. We very Olympic continued appreciate thank interest certainly us joining Steel. this in you

participating thank day. excited start a of Olympic to a York we about Sidoti KeyBanc the have be late again & Company And New XX May to great series want Virtual KeyBanc June. Conference conclude, will forward all just in Steel and that's XXXX. the and talking to Microcap Boston The Conference, soon. We and look We're to with you, City the really in I on Thank on team Industrials XX. and May future, in Roundtable great you for in our

Operator

today's conclude conference. will This

for your participation. at You may lines this time. Thank your you disconnect

Olympic Steel (ZEUS) 5 May 232023 Q1 Earnings call transcript