Q1 2025 Olympic Steel Inc Earnings Call
Operator: Greetings and welcome to the Olympic Steel 2025 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the Olympic Steel 2025 first quarter 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. If anyone should require operator assistance. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
Operator: A question and answer session will follow the formal presentation.
Operator: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Richard Manson: At this time, I would like to hand the conference call over to Rich Manson, Chief Financial Officer at Olympic Steel. Please go ahead, sir. Thank you, operator.
Speaker Change: At this time I would like to hand, the conference call over to Rich Manson Chief Financial Officer at Olympic Steel. Please.
Please go ahead Sir.
Speaker Change: Thank you operator, welcome to Olympic Steel's earnings call for the first quarter of 2025.
Richard Manson: Welcome to Olympic Steel's earnings call for the first quarter of 2025.
Richard Manson: Our call this morning will be hosted by our Chief Executive Officer, Rick Marabito, and we will also be joined by our President and Chief Operating Officer, Andrew Greiff.
Speaker Change: Our call. This morning will be hosted by our Chief Executive Officer, Rick Mirabito and we will also be joined by our President and Chief operating Officer, Andrew Greiff.
Richard Manson: Before we begin, I have a few reminders. Some statements made on today's call will be predictive and are intended to be made as forward-looking within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and may not reflect actual results. The company does not undertake to update such statements, changes in assumptions, or changes in other factors affecting such forward-looking statements. important assumptions, risks, uncertainties, and other factors that could cause actual results to differ materially are set forth in the company's reports on Forms 10-K and 10-Q and the press releases filed with the Securities and Exchange Commission.
Speaker Change: Before we begin I have a few reminders. Some statements made on today's call will be predictive and are intended to be made as forward looking within the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 and May not reflect actual results the.
Speaker Change: The company does not undertake to update such statements changes in assumptions or changes in other factors affecting such forward looking statements.
Speaker Change: Important assumptions risks uncertainties and other factors that could cause actual results to differ materially are set forth in the Companys reports on forms 10-K, and 10-Q and the press releases filed with the Securities and Exchange Commission.
Richard Manson: During today's discussion, we may refer to Adjusted Net Income per Diluted Share, EBITDA, and Adjusted EBITDA, which are all non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures is provided in the press release that was issued last night and can be found on our website.
Speaker Change: During today's discussion we may refer to adjusted net income per diluted share EBITDA and adjusted EBITDA, which are all non-GAAP financial measures a reconciliation.
Speaker Change: Filiation. These non-GAAP measures to the most directly comparable GAAP financial measures is provided in the press release that was issued last night and can be found on our website today.
Operator: Today's live broadcast will be archived and available for replay on Olympic Steel's website.
Speaker Change: Today's live broadcast will be archived and available for replay on Olympic steels website.
Richard Manson: At this time, I'll turn the call over to Rick.
Rick Mirabito: At this time I'll turn the call over to Rick.
Richard Marabito: Thank you, Rich. And good morning, everyone. Thank you for joining us today to discuss Olympic Steel's 2025 first quarter results. I'll begin with a summary of our first quarter earnings. including our strong shipping start to the year despite a challenging macro environment for the steel. Then, Andrew will review our segment performance, and following that, Rich will discuss our financial results in more detail.
Rick Mirabito: Thank you rich and good morning, everyone. Thank you for joining us today to discuss Olympic Steel's 2025 first quarter results.
Rick Mirabito: I'll begin with a summary of our first quarter earnings results, including our strong shipping start to the year, despite a challenging macro environment for the steel industry.
Speaker Change: Then Andrew will review our segment performance and following that rich will discuss our financial results in more detail and then as always we'll open up the call for your questions.
Richard Marabito: And then, as always, we'll open up the call for your questions. So we've talked a lot in recent years about our strategy to build a stronger, more resilient Olympic steel, one that is positioned to deliver profitable results in any environment. Our first quarter performance, during a challenging time for the metals industry, reflects the success of these efforts and reinforces our strategy as we move forward. We reported strong shipments and first quarter sales of $493 million with net income of $2.5 All three of our business segments continue to deliver positive EBITDA. Our flat roll shipping volumes were up 24% sequentially and 6% over the prior year, hitting their highest levels since the third quarter of 2021, which was also the height of the post COVID pricing and demand.
Speaker Change: So we've talked a lot in recent years about our strategy to build a stronger more resilient to Olympic steel one that is positioned to deliver profitable results in any environment. Our first quarter performance during a challenging time for the metals industry reflects the success of these efforts and reinforce.
Speaker Change: Our strategy as we move forward.
Speaker Change: We reported strong shipments in first quarter sales of $493 million with net income of $2 $5 million.
Speaker Change: All three of our business segments continued to deliver positive EBITDA.
Speaker Change: Our flat rolled shipping volumes were up 24% sequentially and 6% over the prior year hitting their highest levels since the third quarter of 2021, which was also the height of the post COVID-19 pricing and demand market.
Richard Marabito: You really saw an increase in demand about halfway through the quarter as customers reacted to the announced 25% steel and aluminum tariffs and contemplated the impact of potential reciprocal Andrew will talk more about this in a few moments. We continue to execute on our strategy to grow profitably by diversifying into metal-intensive end markets, expanding our fabrication capabilities, and focusing on a richer mix of higher-margin metals. Our commitment to M&A, to bolster these areas, has proven to be very effective. Our most recent acquisition, Metalworks, completed in late 2024, is off to an excellent start. As expected, it has been immediately accretive to our results.
Speaker Change: We really saw an increase in demand about halfway through the quarter as customers reacted to the announced 25% steel and aluminum tariffs and contemplated the impact of potential reciprocal tariffs.
Speaker Change: Andrew will talk more about this in a few moments.
Speaker Change: We continue to execute on our strategy to grow profitably by diversifying into metal intensive end markets, expanding our fabrication capabilities and focusing on a richer mix of higher margin metal products or.
Speaker Change: Our commitment to M&A to bolster these areas has proven to be very effective our most recent acquisition metal works completed in late 2024 is off to an excellent start as expected. It has been immediately accretive to our results.
Richard Marabito: Building on our successful track record of completing eight acquisitions over the past seven years, we remain committed to M&A as an ongoing source of growth for Olympic Steel. We are also committed to making key organic growth investments in our operations that will enhance throughput and safety, and Andrew will detail more about that in a few minutes. At the same time, we have demonstrated our operational discipline by staying focused on what we can control. We are closely managing our working capital and improved our inventory turns as we weather uncertain months. These efforts drove strong operating cash flow during the quarter, which resulted in a $37 million reduction in our debt.
Speaker Change: Moving on our successful track record of completing eight acquisitions over the past seven years, we remain committed to M&A as an ongoing source of growth for Olympic Steel. We are also committed to making key organic growth investments in our operations that will enhance throughput and safety.
Speaker Change: And Andrew will detail more about that in a few minutes.
Speaker Change: At the same time, we've demonstrated our operational discipline by staying focused on what we can control. We are closely managing our working capital and improved our inventory turns as we weather uncertain markets.
Speaker Change: These efforts drove strong operating cash flow during the quarter, which resulted in a $37 million reduction in our debt.
Richard Marabito: In addition, last week we announced the five-year extension of our $625 million asset-based revolving credit. This will continue to provide us with the flexible, low-cost capital to fund our continued growth, both organically and through activities. While tariffs have dominated the macroeconomic conversation, Olympic Steel is well-positioned to support increased manufacturing in the United States. Over 90% of our metal supply, and almost all of our sales, are domestically based. And our fabrication capabilities provide an excellent solution for OEMs looking to onshore, outsource, or simply expand their first stage of manufacturing in the United States. and our longstanding strong relationships with our domestic mills are also a real benefit in the current tariff.
Speaker Change: In addition last week, we announced a five year extension of our 625 million dollar asset based revolving credit facility. This will continue to provide us with a flexible low cost capital to fund our continued growth both organically and through acquisition.
Speaker Change: While tariffs have dominated the macroeconomic conversation Olympic steel is well positioned to support increased manufacturing in the United States over 90% of our metal supply and almost all of our sales are domestically based and our fabrication capabilities provide an excellent.
Speaker Change: Solution for Oems looking to onshore outsource or simply expand their first stage of manufacturing in the United States and our longstanding strong relationships with our domestic mills are also a real benefit in the current tariff environment as.
Richard Marabito: As we look ahead, we believe strongly in the Olympic Steel that we have been building.
Speaker Change: As we look ahead, we believe strongly in the Olympic steel that we have been building we remain confident in our ability to continue to drive profitable growth regardless of market conditions.
Andrew Greiff: We remain confident in our ability to continue to drive profitable growth regardless of market I'll now turn the call over to. Thank you, Rick, and good morning, everyone. It certainly has been an interesting time for the steel industry, with the number of dynamics shaping our current environment, most notably the tariffs on steel and aluminum imports. After the initial announcement of 25% steel and aluminum tariffs in January, hot roll pricing escalated quickly, increasing more than 30% during the quarter. As customers scramble to digest the news, spot orders increase significantly. During the first quarter of 2025, Olympic Steel had its strongest flat-rolled shipping volume since the third quarter of 2021, which was the peak of post-COVID demand.
Andrew Greiff: I'll now turn the call over to Andrew.
Andrew Greiff: Thank you Rick and good morning, everyone.
Andrew Greiff: But certainly it's been an interesting time for the steel industry with a number of dynamics shaping our current environment, most notably the tariffs on steel and aluminum imports.
Andrew Greiff: After the initial announcement of 25% steel and aluminum tariffs in January.
Andrew Greiff: Hot rolled pricing escalated quickly increasing more than 30% during the quarter.
Andrew Greiff: As customers scrambled to digest the news spot orders increased significantly.
Andrew Greiff: During the first quarter of 2025 Olympic steel had its strongest flat rolled shipping volume since the third quarter of 2021, which was the peak of post COVID-19 demand.
Andrew Greiff: And as you may recall, we still owned our former Detroit facility back then. increased shipping levels along with our end products business. drove strong performance in our carbon segment with EBITDA of $10.9 million. In addition, continued growth in our coated carbon steel product line, a higher margin product, had a positive impact on Also of note, we were recognized as a partner-level supplier for 2024 in the John Deere Achieving Excellence Program. This is John Deere's highest supplier rating. We are incredibly proud to receive this recognition from our longtime customer and respected global OEM. Congratulations to our entire team on this great achievement.
Andrew Greiff: And as you May recall, we still owned our former Detroit facility back then.
Andrew Greiff: Increased shipping levels, along with our end products businesses drove strong performance in our carbon segment with EBITDA of $10 $9 million.
Andrew Greiff: In addition continued growth in our coated carbon steel product line, a higher margin product had a positive impact on performance also of note. We were recognized as a partner level supplier for 2024, and the John Deere achieving excellence program. This is John Deere's highest.
Andrew Greiff: Playa rating, we are incredibly proud to receive this recognition from our longtime customer and respected global OEM congratulations to our entire team on this great achievement.
Andrew Greiff: The pipe and tube market, which typically lags our carbon performance by three to six months, experienced slower OEM orders, similar to what the carbon market experienced during the second half of 2024. However, the segment still delivered EBITDA of $6.4 million. We are confident the team's focus on sales growth, margin improvement, and fabricated product expansion will continue to drive positive results for this Specialty Metal segment, despite continually falling nickel surcharges, had a solid quarter, reporting EBITDA of $3.6 million. We continue to invest in the growth and expansion of specialty metals. In March, we opened our new facility in Houston.
Andrew Greiff: The pipe and tube market, which typically lags our carbon performance by three to six months experienced slower OEM orders similar to what the carbon market experienced during the second half of 2024. However, the segment still delivered EBITDA of $6 4 million.
Andrew Greiff: We're confident the teams focus on sales growth margin improvement and fabricated product expansion will continue to drive positive results for this business.
Our specialty metals segment, despite continually falling nickel surcharges had a solid quarter reporting EBITDA of $3 6 million, we continue to invest in the growth and expansion of specialty metals.
Andrew Greiff: In March we opened our new facility in Houston, The 105000 square foot facility will increase the action stainless Houston operations footprint by an additional 73000 square feet, expanding our distribution and fabrication capabilities in the southwest.
Andrew Greiff: The 105,000-square-foot facility will increase the action-stainless Houston operations footprint by an additional 73,000 square feet, expanding our distribution and fabrication capabilities in the Southwest. Our other planned capital investments remain on track, with most expected to become operational later this year or in early 2026. These include a new cut-to-length line at our Minneapolis Coil Facility to support our growing coated business. A new high-speed, light-gauge, narrow-width specialty metal slitter to expand our Berlin metal's unique slitting capacity outside Chicago. a new white metals cut-to-length line in Schaumburg, Illinois, in the automation of our Chambersburg fabrication operation. These investments will continue to expand our capacity and enhance our safety and drive efficiency in targeted growth areas of our business.
Andrew Greiff: Our other planned capital investments remain on track with most expected to become operational later this year or in early 2026.
Andrew Greiff: These include a new cut to length line at our Minneapolis coil facility to support our growing coated business.
Andrew Greiff: The new high speed light gauge narrow with specialty metal slither to expand our Berlin metals unique slitting capacity outside Chicago, a new white metals cut to length line in Schaumburg, Illinois, and the automation of our Chambersburg.
Andrew Greiff: <unk> operation.
Andrew Greiff: These investments will continue to expand our capacity and enhance our safety and drive efficiency in targeted growth areas of our business is.
Andrew Greiff: As Rick said earlier, we have built a more resilient Olympic Steel and we are confident in our strategy and position in the market. As always, we will continue to control what we can control, while many market inputs and macroeconomic variables will no doubt continue to change. We strongly believe the combination of these efforts keep us well positioned to continue to grow and deliver profitable results under all market conditions.
Speaker Change: As Rick said earlier, we have built a more resilient to Olympic steel and we are confident in our strategy and position in the market as always we will continue to control what we can control while many market inputs in macroeconomic variables will no doubt continue to change we.
Rich Manson: Strongly believe the combination of these efforts keep us well positioned to continue to grow and deliver profitable results under all market conditions now I will turn the call over to rich.
Richard Marabito: Now I'll turn the call over to Rick. Thank you, Andrew. As you have heard from Rick and Andrew, our team did an excellent job on the first quarter to navigate macroeconomic headwinds to deliver solid performance to the start of the year.
Rich Manson: Thank you Andrew as you have heard from Rick and Andrew our team did an excellent job on the first quarter to navigate macroeconomic headwinds to deliver solid performance to the start of the year.
Richard Manson: Before I discuss the results in more detail, I want to remind you that comparisons are impacted by the November 2024 acquisition of Metalworks, whose results are included in the carbon segment. For the first quarter, net income total $2.5 million compared with $8.7 million in the first quarter of 2024. EBITDA in the first quarter was $16.1 million compared with $23.3 million in the prior year period. There was no LIFO adjustment in the first quarter of 2025 compared with $400,000 of LIFO expense in the first quarter of 2024. Consolidated operating expenses for the first quarter totaled $110.6 million compared with $103.2 million in the first quarter of 2024.
Rich Manson: Before I discuss the results in more detail I want to remind you. The comparisons are impacted by the November 2020 for acquisition of metal works with results are included in the carbon segment.
Rich Manson: For the first quarter net income totaled $2 $5 million compared with $8 $7 million in the first quarter of 2024.
Rich Manson: EBITDA in the first quarter was $16 1 million compared with $23 3 million in the prior year period there.
There was no LIFO adjustment in the first quarter of 2025, compared with $400000 of LIFO expense in the first quarter of 2024.
Rich Manson: Consolidated operating expenses for the first quarter totaled $110 $6 million compared with $103 $2 million in the first quarter of 2020 for our.
Richard Manson: Our first quarter 2025 operating expenses reflect the addition of metalworks, which does not report tons sold. Therefore, operating expenses per ton at the consolidated level and for the carbon segment will appear higher year over year.
Rich Manson: Our first quarter 2025 operating expenses reflect the additional metal works, which does not report tons sold.
Rich Manson: Therefore operating expenses per ton at the consolidated level and for the carbon segment will appear higher year over year.
Richard Manson: As a reminder, we do not report tons sold for Makola Industries, EZ Dumper, Metal Fab, Shaw Stainless, or the entire pipe and tube segment. Consolidated operating expenses for the first quarter include operating expenses associated with shipping 6% more volume year over year, $2.5 million of metalworks operating and acquisition related expenses, and half a million dollars of lower incentive expenses when compared with the first quarter of 2024. Our team's excellent working capital management drove strong operating cash flow, which enabled us to pay down debt by $37 million since year-end, lowering our total debt to $235 million at the end of the first quarter.
Rich Manson: As a reminder, we do not report tons sold for Mccullough industries, EZ dumper metal fab Shah stainless or the entire pipe and tube segment.
Rich Manson: Consolidated operating expenses for the first quarter include operating expenses associated with shipping, 6% more volume year over year to $5 million of metal works operating and acquisition related expenses.
Rich Manson: And half a million dollars of lower incentive expenses, when compared with the first quarter of 2024.
Rich Manson: Our team's excellent working capital management drove strong operating cash flow, which enabled us to pay down debt by $37 million since yearend lowering our total debt to $235 million at the end of the first quarter on.
Richard Manson: On April 22nd, we announced a five-year extension of our $625 million asset-based revolving credit facility. Immediately after the extension, we had approximately $269 million of availability under the facility, providing us with an excellent source of flexible, low-cost capital to fund strategic growth initiatives. Our capital expenditures totaled $8.8 million in the first quarter of 2025, compared to a depreciation of $6.5 million. We estimate that 2025 capital expenditures will be approximately $35 million as we continue to invest in automation and other growth initiatives that Andrew mentioned earlier. Our first quarter 2025 effective tax rate was 30.1% compared with 27% in the same period last year.
Rich Manson: On April 20, <unk>, we announced a five year extension of our $625 million asset based revolving credit facility.
Rich Manson: Immediately after the extension, we had approximately $269 million of availability under the facility, providing us with an excellent source of flexible low cost capital to fund strategic growth initiatives.
Rich Manson: Our capital expenditures totaled $8 $8 million in the first quarter of 2025 compared to depreciation of $6 $5 million.
Rich Manson: We estimate that 2025 capital expenditures will be approximately $35 million as we continue to invest in automation and other growth initiatives that Andrew mentioned earlier.
Rich Manson: Our first quarter 2025 effective tax rate was 31% compared with 27% in the same period last year, we expect our 2025 tax rate to approximate 28%.
Richard Manson: We expect our 2025 tax rate to approximate 28%. In addition, we paid a quarterly dividend of $0.16 per share in the first quarter. Our board of directors approved our next regular quarterly cash dividend of $0.16 per share, which is payable on June 16, 2025, to shareholders of record on June 2, 2025.
Rich Manson: In addition, we paid a quarterly dividend of <unk> 16 per share in the first quarter.
Rich Manson: Our board of Directors approved our next regular quarterly cash dividend of <unk> 16 per share, which is payable on June 16th 2025 to shareholders of record on June <unk> 2025.
Richard Manson: The company has now paid regular quarterly dividends dating back to 2006.
Rich Manson: The company has now paid regular quarterly dividends dating back to 2006.
Richard Manson: Before we open the call for your questions, I would like to thank the entire Olympic Steel team for all their efforts in the first quarter. It's because of the team's hard work and dedication that Olympic Steel remains in a strong operational and financial position and is equipped to manage through a challenging market environment while continuing to advance our strategy.
Speaker Change: Before we open the call for your questions I would like to thank the entire Olympic steel team for all their efforts in the first quarter, it's because of the team's hard work and dedication that Olympic steel remains in a strong operational and financial position and is equipped to manage through a challenging market environment, while continuing to advance our strategy.
Operator: Operator, we are now ready for questions. Star 0 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing your star keys. One moment, please, while we poll for questions.
Rich Manson: Operator, we are now ready for questions.
Rich Manson: Please press star zero on your telephone keypad, a confirmation tone will indicate your line is another question queue. You May press star two to remove your question from the queue for participants using speaker equipment and may be necessary to pick up the handset before.
Rich Manson: Pressing your star Keys, one moment, please while we poll for questions.
Operator: Thank you.
Speaker Change: Thank you. Our first question is from Samuel Mckinney with Keybanc capital markets.
Samuel Mckinney: Our first question is from Samuel McKinney with KeyBank Capital Markets. Hey, good morning, guys. Good morning, ma'am.
Samuel Mckinney: Hey, good morning, guys.
Speaker Change: Good morning, Sam.
Andrew Greiff: Hey, starting in carbon flat, volumes were up about 25% versus the fourth quarter, well ahead of your normal seasonality and the MSCI figures. You know, we've been hearing a lot about pull-forward demand during this earnings cycle, and I was curious if you could frame up how much of that first quarter volume boost has to do with that. Yes, Sam, this is Andrew. I would say a lot of it. So traditionally, you know, our sales are, call it 65-35 from a contract versus spot. It was stronger this quarter on the spot side of it. So we certainly saw some great activity and some pull ahead relatively early in the quarter, and it really helped propel the strength of the carbon.
Speaker Change: Starting in carbon flat volumes were up about 25% versus the fourth quarter is well ahead of your normal seasonality and the MSCI figures, we've been hearing a lot about pull forward demand. During this earnings cycle and I was curious if you could frame up how much of that first quarter volume boost has to do with that.
Speaker Change: Yes, Sam this is Andrew.
Speaker Change: I would say a lot of it so traditionally.
Speaker Change: Our sales are call. It 65, 35 from our contract versus spot.
Speaker Change: It was it was stronger this quarter on the spot side of it. So we certainly saw some great activity.
Speaker Change: And some pull ahead relatively early in.
Speaker Change: In the in the quarter and really helped propel the strength of the carbon sales.
Rick Marabito: And I'd say, Sam, it's Rick. The other, I guess, way to look at it is. typically, and I think, Rich, you calculate. typically seasonally fourth quarter to first quarter were 10 to 12 percent up. That would kind of be a normal increase. So certainly, you know, we lapped that. We doubled it. And as Andrew said, a big piece of that extra was. Understood.
Speaker Change: I would say Sam it's Rick the other I guess the way to look at it is.
Speaker Change: Typically and I think rich you can calculate the number but typically seasonally fourth quarter to first quarter were 10% to 12% to 12% up that would kind of be a normal ins.
Speaker Change: Increase of certainly.
Speaker Change: We lapped that we double debt and as Andrew said, a big piece of that extra.
Speaker Change: Certainly in the spot business.
Speaker Change: Understood and then I know first quarter tends to be the strongest revenue quarter for pipe into giving given the rebates are you expecting that to hold true. This year off the $77 million baseline you set in the first quarter or could we see some improvement as the year progresses.
Samuel Mckinney: And then, I know first quarter tends to be the strongest revenue quarter for Pipe and Tube, given the rebates. Are you expecting that to hold true this year off the $77 million baseline you set in the first quarter? Or could we see some improvement as the year progresses? Yeah, Sam, so the pipe and tube segment didn't, certainly didn't see the same bump up in sales that the carbon segment saw. And that's primarily because they're more contractual based than spot based. And so as Andrew walked you through the increase in spot sales, you didn't see that in the pipe and tube segment.
Speaker Change: Yes, Sam so the pipe and tube segment didn't certainly didn't see the same bump up in sales at the carbon segment saw and that's primarily because theyre more contractual based than spot based and so as Andrew walk you through the increase in spot sales you didn't see that in the pipe and tube segment I think what they're seeing is kind of that continued malaise that we saw in the back half of 2002.
Rick Marabito: You know, I think what they're seeing is kind of that continued malaise that we saw in the back half of 2024 for the carbon segment for OEMs. And keep in mind, they basically lagged three to six months. And so right now, what we're seeing, I think the pipe and tube segment, you know, going into Q2 looks a lot like Q1. Okay.
Speaker Change: For for the carbon segment for Oems and keep in mind, they basically lag three to six months and so right now what we're seeing I think the pipe and tube segment going into Q2 looks looks a lot like Q1.
Speaker Change: Okay.
Samuel Mckinney: And then last one for me, given your five-year extension on that ABL, just talk us through your current appetite for M&A, any potential areas you're looking to bolster, and how does the marketplace look now compared to prior recent periods? Yeah, it's Rick, Sam, great question. Certainly, M&A continues to be one of the key pieces of our strategic growth for Olympic. We've talked a lot about that. That certainly remains. We're active looking. You are right. I think last call we had, I probably commented that we saw some of the inflow, the pipeline, in terms of candidates slow.
Speaker Change: And then last one for me given your five year extension on that ABL, just talk us through your current appetite for M&A any potential areas youre looking to bolster and how does the marketplace look now compared to prior recent periods.
Rick Mirabito: Yeah, It's Rick Sam Great question.
Speaker Change: Certainly M&A continues to be.
Speaker Change: One of the key pieces of our strategic growth for Olympic We've talked a lot about that.
Speaker Change: That certainly remains.
Speaker Change: Active.
Speaker Change: Looking.
Speaker Change: You're right I think last call. We had I'd probably commented that we saw some of the inflow of the pipeline in terms of candidates slow.
Speaker Change: Certainly that kind of continued through the first quarter, but I would tell you in April we have started to see a return of.
Rick Marabito: Certainly that kind of continued through the first quarter, but I tell you in April, we've started to see a return of potential sellers and candidates who are really interested in dialoguing, so it's going to continue to be, you know, you see our track record, we've done eight in seven years, so it's going to continue to be a big piece of our growth strategy going forward. We anticipate really continuing on the pace that you've seen us do over the last several years.
Speaker Change: Potential sellers and candidates who are really interested in dialogue and so.
Speaker Change: It's going to continue to be you know you see our track record we've done eight in seven years, so it's going to continue to be.
Speaker Change: Big piece of our growth strategy going forward, we'd anticipate really continuing on the pace that you've seen us do over the last five to seven years.
Speaker Change: Okay would you be disappointed if you didn't get a deal done this year.
Samuel Mckinney: Would you be disappointed if you didn't get a deal done this year? You like repeating that line I use. Yeah, I would. I think, you know, certainly I think we're trying to do at least one a year and have been successful doing that and I don't see why... we wouldn't continue.
Speaker Change: You like repeating that line I use yeah.
Speaker Change: Thanks, Scott certainly I think.
Speaker Change: We're trying to do at least one a year and have been successful doing that and I don't see why.
Speaker Change: We wouldnt continue at that pace.
Samuel Mckinney: Okay, thanks guys. Good luck. Thanks, Sam.
Speaker Change: Okay. Thanks, guys. Good luck, thanks, Sam Thanks.
Dave Storms: Our next question is from Dave Storms with Stonegate.
Dave Storms: Our next question is from Dave storms with Stonegate.
Dave Storms: Hey, morning, everyone. Thanks for taking the question. I wanted to circle back to pipe and tube and maybe a sense of what the outlook might be beyond 2Q. You mentioned, obviously, that it lags, but are you seeing buying patterns that might indicate more of a muted response relative to carbon flats, or do you think it'll be more of a draft and slingshot situation where the market realizes that they need to kind of get No, I think we'll see a more traditional year for Pipe & Tube. I think the area that we will see continued opportunity is going to be on-shoring opportunities.
Hey, good morning, everyone. Thanks for taking my questions.
Dave Storms: Alright.
Dave Storms: Wanted to circle back to pipe and tube and maybe a sense of with outlook might be beyond two Q.
Dave Storms: You mentioned, obviously that it lags.
Dave Storms: Are you seeing buying patterns that might indicate more of a muted response relative to carbon flats or do you think it'll be more of a.
Dave Storms: Trapped in slingshot situation, where the market really.
Dave Storms: But they need to kind of get ahead of some of those.
Dave Storms: No I think we will see we will see a more traditional year for pipe and tube I think the area that we will see.
Dave Storms: <unk> opportunity is going to be onshoring opportunities. So couple of areas that pipe and tube has been very strong certainly with data centers.
Rick Marabito: So, a couple of areas that Pipe & Tube has been very strong, certainly with data centers. It's a big part of their growth. But really with the on-shoring opportunities on both our flat roll and our pipe and tube is really where we expect to see some great opportunities through 25 and probably beyond and we're well prepared for it. You know, with CTI and now CTB, we can really service fabrication customers. We've got 20 high-speed sophisticated tube lasers really positioned well in the Southwest. Our traditional Chicago tube and iron facilities, Chicago, Minneapolis, Locust, as well as some others are really positioned well and our flat roll side of it, the same thing.
Dave Storms: It is a big part of their growth.
Dave Storms: But really with the onshoring opportunities on both our flat roll and our pipe and tube is really where we expect to see some great opportunities.
Dave Storms: Through 'twenty, five and probably beyond and we are well prepared for it with CGI and now CTV we.
Dave Storms: We can really service fabrication customers who've got 20 high speed sophisticated tube lasers.
Dave Storms: Really positioned well in the southwest.
Dave Storms: Traditional Chicago tube and iron facilities, Chicago Minneapolis locus.
Dave Storms: As well as some others are really positioned well in our flat roll side of it the same thing so we.
Rick Marabito: So we've invested, as you know, a lot in the flat roll side of our fabrication. A couple of specific facilities are Beaufort, Georgia and our Bartlett, Illinois facilities, but also, you know, in Bettendorf and Chambersburg and Mount Sterling. On the flat roll side, we put a lot of money into the fabrication and are anticipating, as we have seen, some great opportunities that we've seen really in the last 30 days for big growth there.
Dave Storms: <unk> invested as you know a lot in the flat roll side of our fabrication.
Dave Storms: A couple of specific facilities are Buford, Georgia, and our Bartlett, Illinois facilities, but also in Bettendorf and Chambersburg Mount Sterling.
Dave Storms: On the flat roll side.
Dave Storms: We've put a lot of money into the fabrication and are anticipating as we have seen some great opportunities that we've seen really in the last 30 days for some big growth there.
Dave Storms: That's fantastic, Colin. Thank you.
Speaker Change: That's fantastic color. Thank you and then just one more for me.
Dave Storms: And then, just one more from me. Just would love to get your thoughts on, you know, your work in capital and maybe inventory management to try to cover for the 10% of metal supply that's not domestic. Any thoughts there would be great.
Speaker Change: Just would love to get your thoughts on your working capital and maybe inventory management to try to cover for the temporary sentimental supply, but that's not domestic any thoughts there would be great.
Rick Marabito: Yeah, I'll touch the working capital and then I'll let Andrew talk about the supply base. So Dave, yeah, we did take that down $37 million in Q1, and part of that was taking inventory down. I would expect, you know, see maybe a modest decrease in debt during Q2, but I'm not expecting a whole lot. As we've been talking on these calls, we really expect the large reduction in debt to come in the back half of the year. And we see no reason why, you know, by year-end we couldn't be back down in the low 200s in terms of borrowing on our debt.
Speaker Change: Yes, I'll touch the working capital and then I'll, let Andrew talk about the supply base. So Dave Yes, we do we did take that down $37 million in Q1, and part of that was taking inventory down I would expect to see maybe a modest decrease in debt during Q2, but I'm not expecting a whole lot as we've been talking on these.
Speaker Change: Calls, we really expect the large reduction in debt to come in the back half of the year and we see no reason why by yearend and we couldnt be back down in the low two hundreds.
Speaker Change: In terms of borrowing on our debt and so andrology.
Andrew Greiff: And so, Andrew, I'll let you talk about the supply base. No, I think our inventory is at appropriate levels. I think, as you saw on the MSCI Mara report, a lot of the service centers were sitting with too much inventory coming into 2025. I think we are in really good position to continue to be into the second quarter and expect that, you know, the supply will be relatively stable as we head into the, you know, into the balance of the year. I think we are well positioned because the majority of our material comes from the domestic supply.
Speaker Change: Talk about the supply base. So I think our inventories are at appropriate levels.
Speaker Change: I think as you saw in the MSCI Mar report a lot of the service centers, where we're sitting with too much inventory coming into 2025, I think we are in really good position continued to be us.
Speaker Change: Into the second quarter and expect that the supply will be relatively stable as we head into the.
Speaker Change: To the balance of the year I think we are well positioned because we're the majority of our material comes from the domestic supply. So tariffs really are not going to impact us relative to that side of it.
Andrew Greiff: So tariffs really are not going to impact us relative to that side of it. And we think that there's fine availability domestically to support our growth.
Speaker Change: And we think that there is fine availability domestically to support our growth.
Speaker Change: That's fantastic. Thank you very much and good luck in Q2.
Dave Storms: Thank you very much and good luck in 2Q.
Speaker Change: Sure.
Speaker Change: Thanks.
Chris Sakai: Our next question is from Chris Sakai with Singular Research. Yes, hi. Good morning. Morning, Mark. Just had a question on carbon flat. Looks like operating expenses took a jump up from last year. Was that from acquisitions? And how are you managing that going forward? Yeah, Chris, really caused by two things. One being the acquisition of Metalworks. Remember, that occurred in November of 24. So when you're comparing Q1 versus Q1, there's about $2.5 million extra operating expenses that weren't there last year, but associated with a great growth company in Metalworks. And then we shipped, you know, quarter over quarter, we're 24% up in volume and 6% in volume up year over year.
Speaker Change: Our next question is from Chris Sakai with singular research.
Chris Sakai: Yes, hi, good morning.
Speaker Change: Good morning progress.
Speaker Change: Just had a question on carbon flat.
Speaker Change: It looks like operating expenses.
Speaker Change: Took a jump up from four last year.
Speaker Change: It was that was that from acquisitions and <unk>.
Speaker Change: How are you managing that going forward.
Speaker Change: Yes, Chris really caused by two things one being the acquisition of metal works remember that occurred in November of 24, So when you're comparing Q1 versus Q1, theres about $2 $5 million extra operating expenses that weren't there last year, but associated with a great growth company and metal works and then we shift.
Speaker Change: Quarter over quarter were 24% up in volume and 6% in volume up year over year and so those those tons have to be processed those tons have to be shipped and thats really what youre seeing an increase in warehouse and processing and then an increase in distribution expense associated with that volume growth and we continue to monitor.
Richard Manson: And so those tons have to be processed, those tons have to be shipped. And that's really what you're seeing an increase in warehouse and processing, and then an increase in distribution expense associated with that volume growth. And, you know, we continue to monitor our expenses on a same store basis. You know, what we continue to see is our inflation, you know, adjusting for volume is essentially, you know, in the low single digits, as far as inflation goes, you know, say 1% to 2%. And that's after giving people a 3% COLA raise at the beginning of the year.
Speaker Change: Our expenses on a same store basis, we continue to see is our inflation adjusting for volume is essentially in the low single digits as far as inflation goes, let's say, 1% to 2% and thats after giving people a 3% Cola raise at the beginning of the year. So we think the operating.
Chris Sakai: So we think the operating expenses on the same store basis continue to be managed very well. Okay, thanks for that.
Speaker Change: <unk> on a same store basis continued to be managed very well.
Speaker Change: Okay. Thanks for that and then.
Rick Marabito: And then with all this tariff talk, you know, how is that affecting your M&A strategy? Is it hurting it or helping it? I'd tell you really not an impact directly. You know we are domestic-based. All of our acquisitions have been in the U.S. at this point. We're not really looking at foreign acquisitions. What I would tell you is the tariff impact really has a greater impact on our fabricating business and Andrew talked about that. I mean we are exceptionally well prepared should the big bet that this administration is doing on bringing back manufacturing to the United States actually takes place.
Speaker Change: With all of the.
Speaker Change: Core Park.
Speaker Change: How is that affecting your M&A strategy is it hurting or helping them.
Speaker Change:
Speaker Change: I'd tell you really not an impact directly you know we are.
Speaker Change: We are domestic based all of our acquisitions have been in the U S. At this point, we're not really looking at foreign acquisitions, what I would tell you is as the tariff impact really has a greater impact on our fabricating business and Andrew talked about that I mean, we are exceptionally well.
Speaker Change: <unk> prepared should the big bet that this administration is doing on bringing back manufacturing to the United States actually takes place.
Rick Marabito: We're exceptionally positioned to take advantage of that. So I think from an M&A front you'll continue to see us do what we've done in the past which is find service center distribution businesses that are very successful and then just as importantly continue to buy and manufacture. So really, the tariff impact, I tell you, has more of a, I think, more of an impact. you know, the core business going forward than really impact on. And as I stated earlier, I think, you know, there was a little trepidation as the year started in terms of the capital markets and M&A, and that's probably why we saw a little bit of a slowdown in the pipeline.
Speaker Change: We're exceptionally positioned to take advantage of that so I think from an M&A front youll continue to see us do what we've done in the past which is.
Speaker Change: Find service center distribution businesses that are very successful and then just as importantly continue to buy and manufacturing companies.
Speaker Change: So.
Speaker Change: So really the tariff impact I would tell you is more of a I think more of an impact on the core business going forward, then really impact on M&A.
Speaker Change: And as I stated earlier I think there was a little trepidation as the year started.
Speaker Change: In terms of the capital markets and M&A and that's probably why we saw a little bit of a slow slowdown in the pipeline, but I think as companies are getting a little more.
Rick Marabito: But I think as companies are getting a little more used to, and you hate to say used to, the changes out of D.C., but I think people are getting a little more comfortable and we're seeing more. Certainly more companies come into the.
Speaker Change: <unk> and you hate to say use due to.
Speaker Change: The changes out of DC, but.
Speaker Change: I think people are getting a little more comfortable and we're seeing more <unk>.
Speaker Change: Certainly more companies come into the pipeline.
Rick Marabito: Do you think that the tariffs will increase competition for acquisition? Um, yeah, I do. I mean, I think if, if This plays out as planned, and we continue to build our manufacturing base in the United States. I could certainly see some others choosing to... grow more quickly through an M&A route versus a capital expenditure investment route. So I think that is, that's sort of one stream where you may see. Okay, great. Thanks. Thank you.
Speaker Change: Do you think.
Speaker Change: The tariff will.
Speaker Change: Increased competition for acquisition.
Speaker Change: Okay.
Speaker Change: Yeah, I do I mean I think.
Speaker Change: If if this plays out as as planned and we continue to build our manufacturing base in the United States I could certainly see some others choosing to grow more quickly through an M&A route versus a capital expenditure.
Speaker Change: Your investment route so I think that is that sort of <unk>.
Speaker Change: One stream, where you may see M&A increase.
Okay, great. Thanks.
Chris Sakai: Thank you thanks, Chris.
Speaker Change: Thank you there are no further questions at this time I would like to hand, the floor back over to Richard Mirror Marino for any closing comments.
Operator: There are no further questions at this time.
Richard Marabito: I'd like to hand the floor back over to Richard Marabito for any closing comments. Thank you, operator, and thank you, everyone, for joining us today on our call. We certainly appreciate your continued interest in Olympic Steel and look forward to speaking with you again next quarter. Have a great day, everyone. Bye-bye.
Richard Marino: Thank you operator, and thank you everyone for joining us today on our call. We certainly appreciate your continued interest in Olympic steel and look forward to speaking with you again next quarter have a great day, everyone Bye bye.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.