Q1 2026 Reliance Inc Earnings Call

April 23, 2026

Speaker #1: First quarter 2026 earnings 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 during the conference, please press star 0 on your telephone keypad.

Speaker #1: Please note this conference is being recorded. I'll now turn the conference over to your host, Kim Orlando, with Investor Relations, please go ahead.

Speaker #2: Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's first quarter 2026 financial results. I am joined by Carla Lewis, president and chief executive officer, Steve Cook, executive vice president and chief operating officer, and Arthur Demian, senior vice president and chief financial officer.

Speaker #2: A recording of the call will be posted on the Investor section of our website at investor.reliance.com. Please read the forward-looking statement disclosures, included in our earnings release, issued yesterday, and note that it applies to all statements made during this teleconference.

Speaker #2: The reconciliations of the adjusted numbers are included in the non-GAAP reconciliation part of our earnings release. I will now turn the call over to Carla Lewis, president and CEO of Reliance.

Speaker #3: Good morning, everyone, and thank you for joining us to discuss our first quarter 2026 results. Reliance is off to a strong start to 2026, capitalizing on favorable market fundamentals with first quarter volumes, pricing, and earnings exceeding our expectations.

Speaker #2: If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to your host, Kim Orlando, with Investor Relations.

Speaker #3: Strong pricing and demand momentum continued to build throughout the quarter across our diversified product and end-market portfolio. Our first quarter-tons sold were a record and were up both sequentially and year-over-year.

Speaker #2: Please go ahead. Thank you, operator. Good morning and thanks to all of you for joining our conference call to discuss RELIANCE's first quarter 2026 financial results.

Kimberly Orlando: Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's Q1 2026 financial results. I am joined by Karla Lewis, President and Chief Executive Officer, Stephen Koch, Executive Vice President and Chief Operating Officer, and Arthur Ajemyan, Senior Vice President and Chief Financial Officer. A recording of this call will be posted on the investors section of our website at investor.reliance.com. Please read the forward-looking statement disclosures included in our earnings release issued yesterday, and note that it applies to all statements made during this teleconference. The reconciliations of the adjusted numbers are included in the non-GAAP reconciliation part of our earnings release. I will now turn the call over to Karla Lewis, President and CEO of Reliance.

Speaker #3: A result that's especially notable given the unusually strong tariff-driven demand pull forward in the prior year period. For the 13th consecutive quarter, we significantly outperformed broader industry shipments.

Speaker #2: I am joined by Karla Lewis, president and chief executive officer; Steve Cook, executive vice president and chief operating officer; and Arthur Ajemyan, senior vice president and chief financial officer.

Speaker #3: Average selling price per ton sold also rose over the prior quarter surpassing our expectations. Strong execution converted a 15% increase in sales driven by higher shipments and prices into significant operating leverage driving over 30% year-over-year growth in our non-GAAP pre-tax income and nearly 37% year-over-year growth in non-GAAP earnings per share to $5.16.

Speaker #2: A recording of this call will be posted on the Investor section of our website at investor.reliance.com. Please read the forward-looking statement disclosures, included in our earnings release, issued yesterday, and note that it applies to all statements made during this teleconference.

Speaker #2: The reconciliations of the adjusted numbers are included in the non-GAAP reconciliation part of our earnings release. I will now turn the call over to Karla Lewis, President and CEO of Reliance.

Speaker #3: As previously announced, we also secured two significant government contracts in the first quarter, to supply the Department of Homeland Security border wall and joint strike fighter projects through our AMI Metals Holy End subsidiary.

Speaker #3: Good morning, everyone, and thank you for joining us to discuss our first quarter 2026 results. RELIANCE is off to a strong start to 2026, capitalizing on favorable market fundamentals with first quarter volumes, pricing, and earnings exceeding our expectations.

Karla R. Lewis: Good morning, everyone, and thank you for joining us to discuss our Q1 2026 results. Reliance is off to a strong start to 2026, capitalizing on favorable market fundamentals with Q1 volumes, pricing, and earnings exceeding our expectations. Strong pricing and demand momentum continued to build throughout the quarter across our diversified product and end market portfolio. Our Q1 tons sold were a record and were up both sequentially and year over year. A result that's especially notable given the unusually strong tariff-driven demand pull forward in the prior year period. For the 13th consecutive quarter, we significantly outperformed broader industry shipments. Average selling price per ton sold also rose over the prior quarter, surpassing our expectations.

Karla Lewis: Good morning, everyone, and thank you for joining us to discuss our Q1 2026 results. Reliance is off to a strong start to 2026, capitalizing on favorable market fundamentals with Q1 volumes, pricing, and earnings exceeding our expectations. Strong pricing and demand momentum continued to build throughout the quarter across our diversified product and end market portfolio. Our Q1 tons sold were a record and were up both sequentially and year over year. A result that's especially notable given the unusually strong tariff-driven demand pull forward in the prior year period. For the 13th consecutive quarter, we significantly outperformed broader industry shipments. Average selling price per ton sold also rose over the prior quarter, surpassing our expectations.

Speaker #3: We were excited to win these contracts, which collectively represent up to approximately $3 billion in revenue and further reinforce Reliance's role as a trusted partner on critical U.S.

Speaker #3: Strong pricing and demand momentum continue to build throughout the quarter across our diversified product and end-market portfolio. Our first quarter-tons sold were a record and were up both sequentially and year-over-year.

Speaker #3: infrastructure and defense programs. These wins illustrate our ability to support large and complex projects by leveraging the scale, logistics capabilities, processing expertise, deep supply chain relationships, and existing operating infrastructure of the Reliance family of companies.

Speaker #3: Average selling price per ton sold also rose over the prior quarter surpassing our expectations. Strong execution converted a 15% increase in sales driven by higher shipments and prices into significant operating leverage driving over 30% year-over-year growth in our non-gap pre-tax income and nearly 37% year-over-year growth in non-gap earnings per share to $5.16.

Speaker #3: Our diversified platform allows us to concurrently meet the needs of large program partners as well as small order, quick-turn customers. As a reminder, our first quarter results did not include any contributions from the border wall contract.

Karla R. Lewis: Strong execution converted a 15% increase in sales driven by higher shipments and prices into significant operating leverage, driving over 30% year over year growth in our non-GAAP pre-tax income, and nearly 37% year over year growth in non-GAAP earnings per share to $5.16. As previously announced, we also secured two significant government contracts in Q1 to supply the Department of Homeland Security border wall and Joint Strike Fighter projects through our AMI Metals wholly-owned subsidiary. We were excited to win these contracts, which collectively represent up to approximately $3 billion in revenue and further reinforce Reliance's role as a trusted partner on critical US infrastructure and defense programs.

Karla Lewis: Strong execution converted a 15% increase in sales driven by higher shipments and prices into significant operating leverage, driving over 30% year over year growth in our non-GAAP pre-tax income, and nearly 37% year over year growth in non-GAAP earnings per share to $5.16. As previously announced, we also secured two significant government contracts in Q1 to supply the Department of Homeland Security border wall and Joint Strike Fighter projects through our AMI Metals wholly-owned subsidiary. We were excited to win these contracts, which collectively represent up to approximately $3 billion in revenue and further reinforce Reliance's role as a trusted partner on critical US infrastructure and defense programs.

Speaker #3: Our discipline capital deployment and strong cash profile give us the flexibility to execute on both our growth and stockholder return activities concurrently. In the first quarter, we generated strong operating cash flow even with a typical seasonal build in working capital.

Speaker #3: As previously announced, we also secured two significant government contracts in the first quarter to supply the Department of Homeland Security border wall and joint strike fighter projects through our AMI Metals Holy Own subsidiary.

Speaker #3: Our full year 2026 outlook for capital expenditures is approximately $300 million with a little less than half directed towards strategic growth investments that enhance our processing capabilities, strengthen our ability to serve customers, expand our footprint, and grow volumes in attractive markets.

Speaker #3: We were excited to win these contracts, to approximately $3 billion in revenue and further reinforce RELIANCE's role as a trusted partner on critical U.S.

Speaker #3: In the first quarter, we increased our dividend rate by 4% to an annualized $5 per share and repurchased 234 million of our shares. Our strong balance sheet and liquidity position remain key competitive advantages affording us the ability to invest in our business, pursue strategic acquisitions, and return capital to our stockholders while maintaining our disciplined approach to capital deployment.

Karla R. Lewis: These wins illustrate our ability to support large and complex projects by leveraging the scale, logistics capabilities, processing expertise, deep supply chain relationships, and existing operating infrastructure of the Reliance family of companies. Our diversified platform allows us to concurrently meet the needs of large program partners as well as small order quick turn customers. As a reminder, our Q1 results did not include any contributions from the border wall contract. Our disciplined capital deployment and strong cash profile give us the flexibility to execute on both our growth and stockholder return activities concurrently. In Q1, we generated strong operating cash flow even with a typical seasonal build in working capital.

Karla Lewis: These wins illustrate our ability to support large and complex projects by leveraging the scale, logistics capabilities, processing expertise, deep supply chain relationships, and existing operating infrastructure of the Reliance family of companies. Our diversified platform allows us to concurrently meet the needs of large program partners as well as small order quick turn customers. As a reminder, our Q1 results did not include any contributions from the border wall contract. Our disciplined capital deployment and strong cash profile give us the flexibility to execute on both our growth and stockholder return activities concurrently. In Q1, we generated strong operating cash flow even with a typical seasonal build in working capital.

Speaker #3: In summary, we are encouraged by rising customer optimism and activity across our broad end markets, with continued momentum in the infrastructure, data center, energy, and defense sectors.

Speaker #3: As we enter the second quarter, extending lead times at our mill suppliers also bode well for a continued strong pricing environment where access to metal becomes a strategic advantage.

Speaker #3: Reliance's unique scale and capabilities along with our domestic mill relationships and exceptional teams position us well to further capitalize on the opportunities ahead in 2026.

Karla R. Lewis: Our full year 2026 outlook for capital expenditures is approximately $300 million, with a little less than half directed towards strategic growth investments that enhance our processing capabilities, strengthen our ability to serve customers, expand our footprint, and grow volumes in attractive markets. In Q1, we increased our dividend rate by 4% to an annualized $5 per share and repurchased $234 million of our shares. Our strong balance sheet and liquidity position remain key competitive advantages, affording us the ability to invest in our business, pursue strategic acquisitions, and return capital to our stockholders while maintaining our disciplined approach to capital deployment. In summary, we are encouraged by rising customer optimism and activity across our broad end markets, with continued momentum in the infrastructure, data center, energy, and defense sectors.

Karla Lewis: Our full year 2026 outlook for capital expenditures is approximately $300 million, with a little less than half directed towards strategic growth investments that enhance our processing capabilities, strengthen our ability to serve customers, expand our footprint, and grow volumes in attractive markets. In Q1, we increased our dividend rate by 4% to an annualized $5 per share and repurchased $234 million of our shares. Our strong balance sheet and liquidity position remain key competitive advantages, affording us the ability to invest in our business, pursue strategic acquisitions, and return capital to our stockholders while maintaining our disciplined approach to capital deployment. In summary, we are encouraged by rising customer optimism and activity across our broad end markets, with continued momentum in the infrastructure, data center, energy, and defense sectors.

Speaker #3: I'll now turn the call over to our COO, Steve Cook.

Speaker #4: Thanks, Carla, and good morning, everyone. Our first quarter performance reflects strong execution across our operations and a continued commitment to safety and customer service.

Speaker #3: In the first quarter, we increased our dividend rate by 4%, to an annualized $5 per share, and repurchased $234 million of our shares. Our strong balance sheet and liquidity position remain key competitive advantages, affording us the ability to invest in our business, pursue strategic acquisitions, and return capital to our stockholders while maintaining our disciplined approach to capital deployment.

Speaker #4: I want to thank our teams for their hard work and discipline, which continue to differentiate Reliance in the marketplace. Turning to our demand and pricing trends, record tons sold increased 9.4% from the fourth quarter of 2025, exceeding our expectations of up 5% to 7%.

Speaker #4: Year-over-year, tons sold increased 2.7%, significantly outperforming the service center industry, which reported a decline of 5.1% over the same period. Our nearly 8 percentage point outperformance in the first quarter and sustained outperformance over 13 consecutive quarters reflects the advantages of our operational scale, commercial diversification, and unmatched processing capabilities.

Speaker #3: As we enter the second quarter, extending lead times at our mill suppliers also bode well for a continued strong pricing environment, where access to metal becomes a strategic advantage.

Karla R. Lewis: As we enter Q2, extending lead times at our mill suppliers also bode well for a continued strong pricing environment where access to metal becomes a strategic advantage. Reliance's unique scale and capabilities along with our domestic mill relationships and exceptional teams position us well to further capitalize on the opportunities ahead in 2026. I'll now turn the call over to our COO, Stephen Koch.

Karla Lewis: As we enter Q2, extending lead times at our mill suppliers also bode well for a continued strong pricing environment where access to metal becomes a strategic advantage. Reliance's unique scale and capabilities along with our domestic mill relationships and exceptional teams position us well to further capitalize on the opportunities ahead in 2026. I'll now turn the call over to our COO, Stephen Koch.

Speaker #4: Carbon volumes remained our primary growth driver, with particular strength in non-residential construction and manufacturing applications. Aluminum and stainless product volumes also contributed to year-over-year volume growth at higher per-ton profitability levels.

Speaker #3: RELIANCE's unique scale and capabilities, along with our domestic mill relationships and exceptional teams, position us well to further capitalize on the opportunities ahead in 2026.

Speaker #4: Our first quarter average selling price increased 5.3% from the fourth quarter of 2025, exceeding our expectation of up 3% to to 5%. Carbon steel, aluminum, and stainless steel product pricing all trended upward amid tight supply extending lead times and improving demand conditions.

Speaker #3: I'll now turn the call over to our COO, Steve Koch.

Speaker #4: Thanks, Karla, and good morning, everyone. Our first quarter performance reflects strong execution across our operations and a continued commitment to safety and customer service.

Stephen Koch: Thanks, Karla, and good morning, everyone. Our Q1 performance reflects strong execution across our operations and a continued commitment to safety and customer service. I want to thank our teams for their hard work and discipline, which continue to differentiate Reliance in the marketplace. Turning to our demand and pricing trends. Record tons sold increased 9.4% from Q4 2025, exceeding our expectations of up 5% to 7%. Year over year, tons sold increased 2.7%, significantly outperforming the service center industry, which reported a decline of 5.1% over the same period. Our nearly eight percentage point outperformance in Q1 and sustained outperformance over 13 consecutive quarters reflects the advantages of our operational scale, commercial diversification, and unmatched processing capabilities. Carbon volumes remained our primary growth driver, with particular strength in non-residential construction and manufacturing applications.

Steve Koch: Thanks, Karla, and good morning, everyone. Our Q1 performance reflects strong execution across our operations and a continued commitment to safety and customer service. I want to thank our teams for their hard work and discipline, which continue to differentiate Reliance in the marketplace. Turning to our demand and pricing trends. Record tons sold increased 9.4% from Q4 2025, exceeding our expectations of up 5% to 7%. Year over year, tons sold increased 2.7%, significantly outperforming the service center industry, which reported a decline of 5.1% over the same period. Our nearly eight percentage point outperformance in Q1 and sustained outperformance over 13 consecutive quarters reflects the advantages of our operational scale, commercial diversification, and unmatched processing capabilities. Carbon volumes remained our primary growth driver, with particular strength in non-residential construction and manufacturing applications.

Speaker #4: As Arthur will discuss in our outlook, we believe that these market dynamics will continue to support strong pricing in the second quarter of 2026.

Speaker #4: I want to thank our teams for their hard work and discipline, which continue to differentiate RELIANCE in the marketplace. Turning to our demand and pricing trends.

Speaker #4: Elevating the strategic advantage we hold in accessing metal from our domestic mill partners. Turning to our end markets, non-residential construction represented roughly one-third of our first quarter sales, primarily from carbon steel tubing, plate, and structural products.

Speaker #4: Record-tons sold increased 9.4% from the fourth quarter of 2025, exceeding our expectations of up 5% to 7%. Year-over-year, tons sold increased 2.7%, significantly outperforming the service center industry, which reported a decline of 5.1% over the same period.

Speaker #4: First quarter shipments remained strong, supported by data center and related energy infrastructure projects, continuing at a record levels along with overall strong demand in heavy civil and public infrastructure work.

Speaker #4: Our nearly 8 percentage point outperformance in the first quarter and sustained outperformance over 13 consecutive quarters reflects the advantages of our operational scale, commercial diversification, and unmatched processing capabilities.

Speaker #4: Our strong position in these markets outweighed lower activity in certain private non-residential construction markets. Our non-residential construction market participation is further strengthened by our involvement in the Department of Homeland Security border wall project, with activity commencing this month.

Stephen Koch: Aluminum and stainless product volumes also contributed to year-over-year volume growth at higher per ton profitability levels. Our Q1 average selling price increased 5.3% from the Q4 of 2025, exceeding our expectation of up 3% to 5%. Carbon steel, aluminum, and stainless steel product pricing all trended upward amid tight supply, extending lead times, and improving demand conditions. As Arthur will discuss in our outlook, we believe that these market dynamics will continue to support strong pricing in the Q2 of 2026, elevating the strategic advantage we hold in accessing metal from our domestic mill partners. Turning to our end markets, non-residential construction represented roughly 1/3 of our Q1 sales, primarily from carbon steel tubing, plate, and structural products.

Steve Koch: Aluminum and stainless product volumes also contributed to year-over-year volume growth at higher per ton profitability levels. Our Q1 average selling price increased 5.3% from the Q4 of 2025, exceeding our expectation of up 3% to 5%. Carbon steel, aluminum, and stainless steel product pricing all trended upward amid tight supply, extending lead times, and improving demand conditions. As Arthur will discuss in our outlook, we believe that these market dynamics will continue to support strong pricing in the Q2 of 2026, elevating the strategic advantage we hold in accessing metal from our domestic mill partners. Turning to our end markets, non-residential construction represented roughly 1/3 of our Q1 sales, primarily from carbon steel tubing, plate, and structural products.

Speaker #4: General manufacturing also represented about one-third of first quarter sales. Our participation in this market is highly diversified across products, industries, and geographies. Shipments grew year-over-year driven by strength in industrial machinery, including data center equipment, shipbuilding programs, military programs, consumer products, and construction machinery.

Speaker #4: Our first quarter average selling price increased 5.3% from the fourth quarter of 2025, exceeding our expectation of up 3 to 5%. Carbon steel, aluminum, and stainless steel product pricing all trended upward amid tight supply extending lead times and improving demand conditions.

Speaker #4: We are also capturing rising nuclear-related demand driven by emerging small modular reactor programs and data center energy requirements. Aerospace products account for approximately 10% of our first quarter sales.

Speaker #4: As Arthur will discuss in our outlook, we believe that these market dynamics will continue to support strong pricing in the second quarter of 2026.

Speaker #4: Commercial aerospace demand remains subdued as elevated inventories persisted across the supply chain, though we expect conditions to gradually improve in 2026 as OEMs work through a record backlogs and increase build rates.

Speaker #4: Defense and space-related aerospace programs remained robust during the quarter. Automotive, which we primarily serve through our toll processing operations, represented 4% of our first quarter sales.

Speaker #4: First quarter shipments remained strong, supported by data center and related energy infrastructure projects, continuing at record levels along with overall strong demand in heavy civil and public infrastructure work.

Stephen Koch: Q1 shipments remained strong, supported by data center and related energy infrastructure projects, continuing at a record levels along with overall strong demand in heavy civil and public infrastructure work. Our strong position in these markets outweighed lower activity in certain private non-residential construction markets. Our non-residential construction market participation is further strengthened by our involvement in the Department of Homeland Security border wall project, with activity commencing this month. General manufacturing also represented about 1/3 of Q1 sales. Our participation in this market is highly diversified across products, industries, and geographies. Shipments grew year over year driven by strength in industrial machinery, including data center equipment, shipbuilding programs, military programs, consumer products, and construction machinery. We are also capturing rising nuclear-related demand driven by emerging small modular reactor programs and data center energy requirements. Aerospace products accounted for approximately 10% of our Q1 sales.

Steve Koch: Q1 shipments remained strong, supported by data center and related energy infrastructure projects, continuing at a record levels along with overall strong demand in heavy civil and public infrastructure work. Our strong position in these markets outweighed lower activity in certain private non-residential construction markets. Our non-residential construction market participation is further strengthened by our involvement in the Department of Homeland Security border wall project, with activity commencing this month. General manufacturing also represented about 1/3 of Q1 sales. Our participation in this market is highly diversified across products, industries, and geographies. Shipments grew year over year driven by strength in industrial machinery, including data center equipment, shipbuilding programs, military programs, consumer products, and construction machinery. We are also capturing rising nuclear-related demand driven by emerging small modular reactor programs and data center energy requirements. Aerospace products accounted for approximately 10% of our Q1 sales.

Speaker #4: As a reminder, our toll processing volumes are excluded from our tons sold. Underlying demand has remained stable, supported by our recent capacity investments and our ability to quickly adapt to the variable demands of the automotive market.

Speaker #4: Lastly, we are seeing encouraging improvement in demand in the semiconductor market with momentum building in 2026. In summary, Reliance continues to be defined by our people, our strong domestic mill relationships, and our focus on delivering unmatched customer service.

Speaker #4: The strategic investments we've made across our footprint are generating tangible returns and are disciplined commercial and operational approach continue to drive the profitability that differentiates us.

Speaker #4: I'll now turn the call over to our CFO, Arthur, to review our financial results and outlook.

Speaker #5: Thanks, Steve. And thanks, everyone, for joining today's call. We delivered a strong first quarter with sales up 15% year-over-year on stronger than anticipated shipments and pricing.

Speaker #4: Commercial aerospace demand remains subdued, as elevated inventories persisted across the supply chain. However, we expect conditions to gradually improve in 2026, as OEMs work through record backlogs and increase build rates.

Stephen Koch: Commercial aerospace demand remained subdued as elevated inventories persisted across the supply chain, though we expect conditions to gradually improve in 2026 as OEMs work through record backlogs and increase build rates. Defense and space-related aerospace programs remained robust during the quarter. Automotive, which we primarily serve through our toll processing operations, represented 4% of our Q1 sales. As a reminder, our toll processing volumes are excluded from our tons sold. Underlying demand has remained stable, supported by our recent capacity investments and our ability to quickly adapt to the variable demands of the automotive market. Lastly, we are seeing an encouraging improvement in demand in the semiconductor market, with momentum building in 2026. In summary, Reliance continues to be defined by our people, our strong domestic mill relationships, and our focus on delivering unmatched customer service.

Steve Koch: Commercial aerospace demand remained subdued as elevated inventories persisted across the supply chain, though we expect conditions to gradually improve in 2026 as OEMs work through record backlogs and increase build rates. Defense and space-related aerospace programs remained robust during the quarter. Automotive, which we primarily serve through our toll processing operations, represented 4% of our Q1 sales. As a reminder, our toll processing volumes are excluded from our tons sold. Underlying demand has remained stable, supported by our recent capacity investments and our ability to quickly adapt to the variable demands of the automotive market. Lastly, we are seeing an encouraging improvement in demand in the semiconductor market, with momentum building in 2026. In summary, Reliance continues to be defined by our people, our strong domestic mill relationships, and our focus on delivering unmatched customer service.

Speaker #5: Our gross profit of $1.2 billion was up 23% compared to the fourth quarter of 2025 and up 13% compared to the first quarter of 2025.

Speaker #4: Defense and space-related aerospace programs remain robust during the quarter. Automotive, which we primarily serve through our toll processing operations, represented 4% of our first quarter sales.

Speaker #5: On a FIFO basis, which is how we evaluate our ongoing performance, non-GAAP FIFO gross profit margin expanded to 30.1% compared to 28.5% in the fourth quarter of 2025 and was only slightly below 30.4% in the prior quarter.

Speaker #5: Our pricing discipline enabled us to pass through higher mill pricing on most products in the first quarter and expand margins. Higher than anticipated material costs resulted in the first quarter LIFO expense of $37.5 million.

Speaker #4: Lastly, we are seeing encouraging improvement in demand in the semiconductor market with momentum building in 2026. In summary, RELIANCE continues to be defined by our people, our strong domestic mill relationships, and our focus on delivering unmatched customer service.

Speaker #5: Above our $25 million estimate, prompting us to raise our full-year LIFO outlook to $150 million from the prior $100 million annual estimate. Accordingly, we expect LIFO expense of $37.5 million in the second quarter of 2026.

Stephen Koch: The strategic investments we've made across our footprint are generating tangible returns, and our disciplined commercial and operational approach continue to drive the profitability that differentiates us. I will now turn the call over to our CFO, Arthur, to review our financial results and outlook.

Steve Koch: The strategic investments we've made across our footprint are generating tangible returns, and our disciplined commercial and operational approach continue to drive the profitability that differentiates us. I will now turn the call over to our CFO, Arthur, to review our financial results and outlook.

Speaker #4: I will now turn the call over to our CFO, Arthur, to review our financial results and outlook.

Speaker #5: Thanks, Steve. And thanks, everyone, for joining today's call. We delivered a strong first quarter with sales up 15% year-over-year on stronger than anticipated shipments and pricing.

Arthur Ajemyan: Thanks, Steve, and thanks everyone for joining today's call. We delivered a strong Q1 with sales up 15% year-over-year on stronger than anticipated shipments and pricing. Our gross profit of $1.2 billion was up 23% compared to Q4 2024, and up 13% compared to Q1 2024. On a FIFO basis, which is how we evaluate our ongoing performance, non-GAAP FIFO gross profit margin expanded to 30.1%, compared to 28.5% in Q4 2024, and was only slightly below 30.4% in the prior quarter. Our pricing discipline enabled us to pass through higher mill pricing on most products in the first quarter and expand margins.

Speaker #5: I'd like to also briefly address the impact of incremental Section 232 tariffs on our gross profit margins and profitability. The 50% Section 232 tariffs have had the most impact on aluminum gross profit margin, as pricing for many common alloy aluminum products increased significantly without a corresponding significant increase in demand.

Speaker #5: Our gross profit of $1.2 billion was up 23% compared to the fourth quarter of 2025 and up 13% compared to the first quarter of 2025.

Speaker #5: On a FIFO basis, which is how we evaluate our ongoing performance, non-GAAP FIFO gross profit margin expanded to 30.1%, compared to 28.5% in the fourth quarter of 2025, and was only slightly below 30.4% in the prior quarter.

Speaker #5: Despite the moderate negative impact on the gross profit margin, our aluminum gross profit dollars are up about 18% compared to the first quarter of 2025.

Speaker #5: Overall, the current pricing environment is resulting in higher gross profit dollars across our product portfolio and contributing to improved profitability despite variation in margin performance for certain products.

Arthur Ajemyan: Higher than anticipated material costs resulted in the Q1 LIFO expense of $37.5 million, above our $25 million estimate, prompting us to raise our full year LIFO outlook to $150 million from the prior $100 million annual estimate. Accordingly, we expect LIFO expense of $37.5 million in Q2 2026. I'd like to also briefly address the impact of incremental Section 232 tariffs on our gross profit margins and profitability. The 50% Section 232 tariffs have had the most impact on aluminum gross profit margin as pricing for many common alloy aluminum products increased significantly without a corresponding significant increase in demand. Despite the moderate negative impact on the gross profit margin, our aluminum gross profit dollars are up about 18% compared to Q1 2025.

Speaker #5: Non-GAAP SG&A expense increased 6% compared to the first quarter of 2025, driven by higher incentive compensation from improved profitability; inflationary impacts on compensation. Related benefits; and higher variable warehousing and delivery costs associated with our increased tons sold.

Speaker #5: On a per-ton basis, non-GAAP SG&A expense increased 3% due primarily to higher incentive compensation. Our growth in shipments from continued market share gains and improved gross profit dollars drove improved operating leverage and resulted in a 33% year-over-year increase in non-GAAP pre-tax income to $354 million.

Speaker #5: With an 8.8% pre-tax income margin which was up 120 basis points. Our non-GAAP first quarter earnings for delivered share grew nearly 37% year-over-year to $5.16.

Speaker #5: Despite the moderate negative impact on the gross profit margin, our aluminum gross profit dollars are up about 18% compared to the first quarter of 2025.

Arthur Ajemyan: Overall, the current pricing environment is resulting in higher gross profit dollars across our product portfolio and contributing to improved profitability despite variation in margin performance for certain products. Non-GAAP SG&A expense increased 6% compared to Q1 2025, driven by higher incentive compensation from improved profitability, inflationary impacts on compensation and related benefits, and higher variable warehousing and delivery costs associated with our increased tons sold. On a per ton basis, non-GAAP SG&A expense increased 3% due primarily to higher incentive compensation. Our growth in shipments from continued market share gains and improved gross profit dollars drove improved operating leverage and resulted in a 33% year-over-year increase in non-GAAP pre-tax income to $354 million, with an 8.8% pre-tax income margin, which was up 120 basis points. Our non-GAAP Q1 earnings for diluted share grew nearly 37% year-over-year to $5.16.

Speaker #5: For reference purposes, LIFO expense per share amounted to $54 for the quarter compared to the $36 assumption in our guidance and $35 in the prior quarter.

Speaker #5: Stemming from higher than anticipated carbon steel and aluminum product cost increases, moving on to our balance sheet and cash flow. Cash flow from operations in the first quarter was approximately $151 million.

Speaker #5: Non-GAAP SG&A expense increased 6% compared to the first quarter of 2025, driven by higher incentive compensation from improved profitability; inflationary impacts on compensation and related benefits; and higher variable warehousing and delivery costs associated with our increased tons sold.

Speaker #5: Reflecting typical seasonal working capital build from increased shipment activity as well as the impact of higher metals pricing. Our inventory turn rate based on tons improved to approximately five times compared to 4.9 times a year ago.

Speaker #5: On a per-ton basis, non-GAAP SG&A expense increased 3%, due primarily to higher incentive compensation. Our growth in shipments from continued market share gains and improved gross profit dollars drove improved operating leverage and resulted in a 33% year-over-year increase in non-GAAP pre-tax income to $354 million.

Speaker #5: While accounts receivable DSO of $42 days was consistent with the prior year. During the quarter, we funded $64 million of capital expenditures, paid $67 million in dividends, and repurchased $234 million of our common stock at an average price of $299 per share.

Speaker #5: With an 8.8% pre-tax income margin, which was up 120 basis points, our non-GAAP first quarter earnings per diluted share grew nearly 37% year-over-year to $5.16.

Speaker #5: We have approximately $529 million remaining available under our current share repurchase program. As of March 31st, our total debt was $1.7 billion. Our leverage position remains very strong with a net debt to EBITDA ratio of 1, giving us substantial liquidity and flexibility to continue executing on our capital allocation priorities.

Speaker #5: For reference purposes, LIFO expense per share amounted to $54 for the quarter compared to the $36 assumption in our guidance and $35 in the prior quarter.

Arthur Ajemyan: For reference purposes, LIFO expense per share amounted to $0.54 for the quarter compared to the $0.36 assumption in our guidance and $0.35 in the prior quarter, stemming from higher than anticipated carbon steel and aluminum product cost increases. Moving on to our balance sheet and cash flow. Cash flow from operations in Q1 was approximately $151 million, reflecting typical seasonal working capital build from increased shipment activity as well as the impact of higher metals pricing. Our inventory turn rate based on tons improved to approximately five times compared to 4.9 times a year ago, while accounts receivable DSO of 42 days was consistent with the prior year. During Q1, we funded $64 million of capital expenditures, paid $67 million in dividends, and repurchased $234 million of our common stock at an average price of $299 per share.

Speaker #5: Stemming from higher than anticipated carbon steel and aluminum product cost increases. Moving on to our balance sheet and cash flow. Cash flow from operations in the first quarter was approximately $151 million.

Speaker #5: Looking ahead, we expect both demand and pricing to remain healthy in the second quarter of 2026, generally in line with Q1. Subject to ongoing risks from domestic and international trade policy and the conflict in the Middle East.

Speaker #5: Reflecting typical seasonal working capital build from increased shipment activity, as well as the impact of higher metals pricing. Our inventory turn rate, based on tons, improved to approximately five times compared to 4.9 times a year ago.

Speaker #5: We anticipate second quarter 2026 non-GAAP earnings for delivered share in the range of $5.15 to $5.35, up 16% to 21% year-over-year, including an estimated $37.5 million of LIFO expense or about $54 per diluted share.

Speaker #5: Please refer to our first quarter earnings release for further details on our Q2 outlook as well as anticipated contributions from the border wall contract.

Speaker #5: In closing, we're very pleased with our first quarter performance. Our solid volume growth, continued market share gains, and disciplined pricing supported improved operating leverage, and stronger earnings.

Arthur Ajemyan: We have approximately $529 million remaining available under our current share repurchase program. As of 31 March, our total debt was $1.7 billion. Our leverage position remains very strong with a net debt to EBITDA ratio of one, giving us substantial liquidity and flexibility to continue executing on our capital allocation priorities. Looking ahead, we expect both demand and pricing to remain healthy in Q2 2026, generally in line with Q1.

Speaker #5: This concludes our prepared remarks. Thank you again for your time and participation. We'll now open the call for your questions.

Speaker #1: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #5: Looking ahead, we expect both demand and pricing to remain healthy in the second quarter of 2026, generally in line with Q1, subject to ongoing risks from domestic and international trade policy and the conflict in the Middle East.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And again, that is star one if you would like to ask a question.

Karla R. Lewis: Subject to ongoing risks from domestic, international trade policy, and the conflict in the Middle East. We anticipate Q2 2026 non-GAAP earnings per diluted share in the range of $5.15 to $5.35, up 16% to 21% year over year, including an estimated $37.5 million of LIFO expense, or about $0.54 per diluted share. Please refer to our Q1 earnings release for further details on our Q2 outlook, as well as anticipated contributions from the border wall contract. In closing, we're very pleased with our Q1 performance. Our solid volume growth, continued market share gains, and disciplined pricing supported improved operating leverage and stronger earnings. This concludes our prepared remarks. Thank you again for your time and participation. We'll now open the call for your questions.

Arthur Ajemyan: Subject to ongoing risks from domestic, international trade policy, and the conflict in the Middle East. We anticipate Q2 2026 non-GAAP earnings per diluted share in the range of $5.15 to $5.35, up 16% to 21% year over year, including an estimated $37.5 million of LIFO expense, or about $0.54 per diluted share. Please refer to our Q1 earnings release for further details on our Q2 outlook, as well as anticipated contributions from the border wall contract. In closing, we're very pleased with our Q1 performance. Our solid volume growth, continued market share gains, and disciplined pricing supported improved operating leverage and stronger earnings. This concludes our prepared remarks. Thank you again for your time and participation. We'll now open the call for your questions.

Speaker #5: We anticipate second quarter 2026 non-GAAP earnings for diluted share in the range of $5.15 to $5.35, up 16% to 21% year-over-year, including an estimated $37.5 million of LIFO expense or about $54 per diluted share.

Speaker #1: And our first question will come from Martin Inglert with Seaport Research Partners.

Speaker #2: Hello. Good morning, everyone.

Speaker #3: Good morning, Martin.

Speaker #4: Good morning, Martin.

Speaker #2: Some questions on the guidance here and just looking at the current quarter FIFO gross profit margins improved to about 30% from the 28.5% last quarter.

Speaker #2: Even accounting for the new DHS contract in the mix for Q2, given the improving broader price backdrop as well as volumes, do you think you're being conservative with the implicit Q2 FIFO gross margins and guidance, or are there other factors to be considering here, like a lagging catch-up in margins and the inflationary price factors with aluminum here?

Speaker #5: Please refer to our first quarter earnings release for further details on our Q2 outlook, as well as anticipated contributions from the border wall contract.

Speaker #3: Yeah. Hi, Martin. So on the guide for Q2 around gross profit margin, which we don't explicitly provide guidance on, Q1 was a good, strong pricing environment with a lot of products having price increases, which gives us an opportunity to drive our margins up a bit for temporary period.

Speaker #5: This concludes our prepared remarks. Thank you again for your time and participation. We'll now open the call for your questions.

Speaker #1: Thank you, we will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator 2: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Again, that is star one if you would like to ask a question. Our first question will come from Martin Englert with Seaport Research Partners.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Again, that is star one if you would like to ask a question. Our first question will come from Martin Englert with Seaport Research Partners.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #3: We expect some continued price improvement in Q2, but not to the level of Q1. So we will start to see the higher-cost metal hit the inventory and kind of normalize a bit towards we believe towards the end of the quarter.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And again, that is star one if you would like to ask a question.

Speaker #1: And our first question will come from Martin Inglert with Seaport Research Partners.

Speaker #3: So probably not stronger we have less upside than in Q1 from a price increase dynamic. And then on the border wall, the margins the gross profit margins will bring our consolidated number down a bit.

Martin Englert: Hello. Good morning, everyone.

Speaker #2: Hello, good morning everyone.

Speaker #3: Good morning.

Karla R. Lewis: Good morning, Martin.

Karla Lewis: Good morning, Martin.

Speaker #4: Good morning.

Stephen Koch: Good morning, Martin.

Steve Koch: Good morning, Martin.

Martin Englert: Some questions on the guidance here, and just looking at the current quarter, FIFO gross profit margins improved to about 30% from the 28.5% last quarter. Even accounting for the new DHS contract in the mix for Q2, given the improving broader price backdrop as well as volumes, do you think you're being conservative with the implicit Q2 FIFO gross margins and guidance, or are there other factors to be considering here, like a lagging catch-up in margins and the inflationary price factors with aluminum here?

Speaker #2: Some questions on the guidance here and just looking at the current quarter FIFO gross profit margins improved to about 30% from the 28.5% last quarter.

Speaker #2: Even accounting for the new DHS contract in the mix for Q2, given the improving broader price backdrop as well as volumes, do you think you're being conservative with the implicit Q2 FIFO gross margins in guidance or are there other factors to be considering here like a lagging catch-up in margins and the inflationary price factors with aluminum here?

Speaker #3: Just based on the product mix of what we're selling and the services we're providing. But as we mentioned, extremely low operating costs on on the volume there, which will help us leverage our expense line and give us very strong earnings from the border wall project.

Speaker #2: I guess looking another step ahead here and coming back to your comment on maybe by the end of the quarter, so not as much of a price increase or momentum quarter-on-quarter, but maybe things begin to normalize, relative to the inventory costs coming through.

Speaker #3: Yeah, hi Martin. So on the guide for Q2 around gross profit margin, which we don't explicitly provide guidance on, Q1 was a good, strong pricing environment with a lot of products having price increases, which gives us an opportunity to drive our margins up a bit for a temporary period.

Karla R. Lewis: Yeah. Hi, Martin. On the guide for Q2 around gross profit margin, which we don't explicitly provide guidance on, Q1 was a good, strong pricing environment with a lot of products having price increases, which gives us an opportunity to drive our margins up a bit for a temporary period. We expect some continued price improvement in Q2, but not to the level of Q1. We will start to see the higher cost metal hit the inventory and kind of normalize a bit, we believe towards the end of the quarter. Probably, not stronger. We have less upside than in Q1 from a price increase dynamic. And then on the border wall, the gross profit margins will bring our consolidated number down a bit, just based on the product mix of what we're selling and the services we're providing.

Karla Lewis: Yeah. Hi, Martin. On the guide for Q2 around gross profit margin, which we don't explicitly provide guidance on, Q1 was a good, strong pricing environment with a lot of products having price increases, which gives us an opportunity to drive our margins up a bit for a temporary period. We expect some continued price improvement in Q2, but not to the level of Q1. We will start to see the higher cost metal hit the inventory and kind of normalize a bit, we believe towards the end of the quarter. Probably, not stronger. We have less upside than in Q1 from a price increase dynamic. And then on the border wall, the gross profit margins will bring our consolidated number down a bit, just based on the product mix of what we're selling and the services we're providing.

Speaker #2: So looking further ahead, then does that offer some opportunity for some partial normalization in FIFO gross margins? Understanding that you'll have this contract in the mix and that'll be something that's diluted but not additive to the bottom line.

Speaker #3: We expect some continued price improvement in Q2, but not to the level of Q1. So we will start to see the higher cost metal hit the inventory and kind of normalize a bit towards we believe towards the end of the quarter.

Speaker #3: Yeah. I think that's right, Martin. That's the way the dynamics typically work. Pricing drives a lot of the margin upside and then to the extent it normalizes or comes down.

Speaker #3: But you also need to underlying demand there as well to support that, which we at this time feel really good about 2026 across demand across most of the products and markets we're selling into.

Speaker #3: Just based on the product mix of what we're selling and the services we're providing. But as we mentioned, extremely low operating cost on the volume there, which will help us leverage our expense line and give us very strong earnings from the border wall project.

Karla R. Lewis: as we mentioned, extremely low operating costs on the volume there, which will help us leverage our expense line and give us very strong earnings from the border wall project.

Karla Lewis: as we mentioned, extremely low operating costs on the volume there, which will help us leverage our expense line and give us very strong earnings from the border wall project.

Speaker #3: Which provides a good backdrop from a pricing standpoint. So it was good, strong price increases in Q1. We expect prices to remain at good levels.

Speaker #3: Just again, maybe not increasing at the same pace.

Speaker #2: I guess looking another step ahead here, and coming back to your comment on maybe by the end of the quarter, so not as much of a price increase or momentum quarter on quarter, but maybe things begin to normalize.

Martin Englert: I guess looking another step ahead here and coming back to your comment on maybe by the end of the quarter, so not as much of a price increase or momentum quarter on quarter, but maybe things begin to normalize relative to the inventory costs coming through. Looking further ahead then, does that offer some opportunity for some partial normalization in FIFO gross margins, understanding that you'll have this contract in the mix and that'll be something that's dilutive but net additive to the bottom line?

Speaker #2: Okay. So some transitory issues then or I shouldn't say issues, but transitory items sort of normalizing some of the pricing moving through the distribution channel as it relates to the cost pushing through.

Speaker #2: Relative to the inventory costs coming through. So looking further ahead, then does that offer some opportunity for some partial normalization in FIFO gross margins?

Speaker #2: Not too different than what we saw in recent quarters here given the inflationary impact of Q3, Q2 tariffs. Yeah?

Speaker #3: Correct. Yes.

Speaker #2: Understanding that you'll have this contract in the mix and that'll be something that's dilutive, but not additive to the bottom line.

Speaker #2: Okay. If I could, one more, I was just curious on your thoughts for it seems like areas of the defense are strong. Semiconductor improving, which I think it's been a while since we've seen any positive news on that front.

Speaker #3: Yeah, I think that's right, Martin. That's the way the dynamics typically work. Pricing drives a lot of the margin upside and then to the extent it normalizes or comes down.

Karla R. Lewis: Yeah, I think that's right, Martin. That's the way the dynamics typically work. Pricing drives a lot of the margin upside, and then to the extent it normalizes or comes down. But you also need the underlying demand there as well to support that, which we, at this time, feel really good about 2026 across demand across most of the products and end markets we're selling into, which provides a good backdrop from a pricing standpoint. With good, strong price increases in Q1, we expect prices to remain at good levels, just again maybe not increasing at the same pace.

Karla Lewis: Yeah, I think that's right, Martin. That's the way the dynamics typically work. Pricing drives a lot of the margin upside, and then to the extent it normalizes or comes down. But you also need the underlying demand there as well to support that, which we, at this time, feel really good about 2026 across demand across most of the products and end markets we're selling into, which provides a good backdrop from a pricing standpoint. With good, strong price increases in Q1, we expect prices to remain at good levels, just again maybe not increasing at the same pace.

Speaker #2: And I think I've also heard within oil and gas, maybe if you could just touch on the margin profile of these product lines that serve these end markets and potential mix implications as we're moving through 2026.

Speaker #3: But you also need the underlying demand there as well to support that, which we at this time feel really good about 2026 across demand across most of the products and markets we're selling into.

Speaker #3: Yeah. We don't really talk about how they affect gross profit Martin and it does vary, but it also depends how much value-add processing we're doing.

Speaker #3: Which provides a good backdrop from a pricing standpoint. So it was good strong price increases in Q1. We expect prices to remain at good levels, just again, maybe not increasing at the same pace.

Speaker #3: So you're right. Defense continues to remain strong across a lot of the different products we sell. Semi it's a small part of the business, but it has been lagging.

Speaker #2: Yeah. Okay, so some transitory issues and I shouldn't say issues, but transitory items sort of normalizing some of the pricing moving through the distribution channel as it relates to the cost pushing through.

Speaker #3: We not at a gross profit margin line, but we have talked about some of our niche semiconductor business being very high value types of products.

Martin Englert: Okay. Some transitory issues then. Or I shouldn't say issues, but transitory items sort of normalizing some of the pricing moving through the distribution channel as it relates to the cost pushing through. Not too different than what we saw in recent quarters here, given the inflationary impact of 232 tariffs, yeah?

Speaker #3: And that has been down, but we're happy to see some improvement beginning. But as far as at a consolidated level, nothing really to comment on as far as change in product mix or financial guidance.

Speaker #2: Not too different than what we saw in recent quarters here, given the inflationary impact of Q3, Q2 tariffs, yeah?

Speaker #3: Correct, yes.

Karla R. Lewis: Correct. Yes.

Karla Lewis: Correct. Yes.

Martin Englert: Okay. If I could, one more. I was just curious on your thoughts for. It seems like areas of the defense are strong, semiconductor improving, which I think it's been a while since we've seen any positive news on that front. I think I've also heard, like within oil and gas, maybe if you could just touch on the margin profile of these product lines that serve these end markets and potential mix implications as we're moving through 2026.

Speaker #5: And Martin, I would add that from an end market perspective, we saw the ISM manufacturing index for three consecutive months stay about 50. And we saw that translate into some increased activity in the first quarter.

Speaker #5: And we noted that in our release that the manufacturing end market, we saw increased year-over-year tons. So we're looking at that as a good tailwind.

Speaker #5: And we have a lot of different products with value-added processing that go into that end market, which as we all know, hasn't been doing really all that great for the past three years.

Speaker #3: Yeah, we don't really talk about how they affect gross profit margin by product. Martin and it does vary, but it also depends how much value-add processing we're doing.

Karla R. Lewis: Yeah. Well, we don't really talk about how they affect gross profit margin by product, Martin, and it does vary, but it also depends how much value add processing we're doing. You're right, defense continues to remain strong across a lot of the different products we sell. Semi, it's a small part of the business, but it has been lagging. Not at a gross profit margin line, but we have talked about some of our niche semiconductor business being very high value types of products, and that has been down, but we're happy to see some improvement beginning. As far as at a consolidated level, nothing really to comment on as far as change in product mix or financial guidance.

Karla Lewis: Yeah. Well, we don't really talk about how they affect gross profit margin by product, Martin, and it does vary, but it also depends how much value add processing we're doing. You're right, defense continues to remain strong across a lot of the different products we sell. Semi, it's a small part of the business, but it has been lagging. Not at a gross profit margin line, but we have talked about some of our niche semiconductor business being very high value types of products, and that has been down, but we're happy to see some improvement beginning. As far as at a consolidated level, nothing really to comment on as far as change in product mix or financial guidance.

Speaker #5: So there's some potential tailwinds there.

Speaker #3: So, you're right—defense continues to remain strong across a lot of the different products we sell. Semi, it's a small part of the business, but it has been lagging.

Speaker #2: Yeah. It's nice to see some nascent signs of recovery with activity amongst the end users there. Congratulations on the results and the contract wins there.

Speaker #2: Thanks.

Speaker #3: Thank you.

Speaker #3: We're not at a gross profit margin line, but we have talked about some of our niche semiconductor business being very high-value types of products.

Speaker #1: And our next question comes from Bennett Moore with JPMorgan.

Speaker #6: Good morning, Carlos, Steve, Arthur. Thank you for taking my questions and congrats on the strong quarter. I guess I wanted to get a better idea of how we should think about the cadence of these DHS volumes ramping through throughout the year and is the pricing structured such that if broader market pricing were to fall, that these could actually offer downside protection to gross margins in such a scenario?

Speaker #4: And Martin, I would add that from an end market perspective, we saw the ISM manufacturing index for three consecutive months stay about 50. And we saw that translate into some increased activity in the first quarter and we noted that in our release that the manufacturing end market, we saw increased year-over-year tons.

Stephen Koch: Martin, I would add that from an end market perspective. We saw the ISM Manufacturing Index for three consecutive months stay above 50, and we saw that translate into some increased activity in Q1. We noted that in our release that the manufacturing end market, we saw increased year-over-year tons. We're looking at that as a good tailwind, and we have a lot of different products with value-added processing that go into that end market, which, as we all know, hasn't been doing really all that great for the past three years. There's some potential tailwinds there.

Arthur Ajemyan: Martin, I would add that from an end market perspective. We saw the ISM Manufacturing Index for three consecutive months stay above 50, and we saw that translate into some increased activity in Q1. We noted that in our release that the manufacturing end market, we saw increased year-over-year tons. We're looking at that as a good tailwind, and we have a lot of different products with value-added processing that go into that end market, which, as we all know, hasn't been doing really all that great for the past three years. There's some potential tailwinds there.

Speaker #3: Yeah. Good morning, Bennett. As far as the cadence on the border wall project, as we mentioned, we began shipping this month in April. And so we're still in a bit of startup ramp-up phase.

Speaker #3: So we included in our Q2 guide our current estimate of volume activity. In the quarter, we do expect that to increase as we move into Q3 and beyond as the program really gets up and running.

Speaker #4: So we're looking at that as a good tailwind. And we have a lot of different products with value-added processing that go into that end market, which as we all know, hasn't been doing really all that great for the past three years.

Speaker #4: So, there are some potential tailwinds there.

Speaker #3: But there's not a committed shipment schedule so it could vary from quarter to quarter. But we do anticipate higher activity as we move into Q3 than what we projected for Q2.

Speaker #2: Yeah, it's nice to see some nascent signs of recovery with activity amongst the end users there. Congratulations on the results and the contract wins there.

Martin Englert: Yeah, it's nice to see some nascent signs of recovery with activity amongst the end users there. Congratulations on the results and the contract wins there. Thanks.

Speaker #2: Thanks.

Speaker #3: Thank you.

Stephen Koch: Thank you.

Arthur Ajemyan: Thank you.

Operator 2: Our next question comes from Bennett Moore with J.P. Morgan.

Speaker #1: And our next question comes from Bennett Moore with JPMorgan.

Operator: Our next question comes from Bennett Moore with J.P. Morgan.

Speaker #3: And as far as the pricing, we can't get into the specifics on the pricing, but we do have the contract volume up to a certain dollar amounts over the period through 2027.

Speaker #5: Good morning, Carla, Steve, Arthur. Thank you for taking my questions and congrats on the strong quarter. I guess I wanted to get a better idea of how we should think about the cadence of these DHS volumes, ramping through throughout the year.

Bennett Moore: Good morning, Karla, Steve, Arthur, thank you for taking my questions and congrats on the strong quarter. I guess I wanted to get a better idea of how we should think about the cadence of these DHS volumes ramping throughout the year. Is the pricing structured such that, if broader market pricing were to fall, that these could actually offer downside protection to gross margins in such a scenario?

Speaker #5: And is the pricing structured such that, if broader market pricing were to fall, these could actually offer down protection to gross margins in such a scenario?

Speaker #6: Understood. Thanks for that color. Coming to aluminum, I mean, we've certainly seen another spike in pricing. I guess I'm just wondering if you're still able to cover your costs at this stage, is 50 bits still the right way to think about the margin impact?

Speaker #3: Yeah, good morning, Bennett. As far as the cadence on the border wall project, as we mentioned, we began shipping this month in April. And so we're still in a bit of startup ramp-up phase.

Karla R. Lewis: Yeah. Good morning, Bennett. As far as the cadence on the border wall project, as we mentioned, we began shipping this month, in April, and so we're still in a bit of startup ramp-up phase. We included in our Q2 guide our current estimate of volume activity in the quarter. We do expect that to increase as we move into Q3 and beyond as the program really gets up and running. There's not a committed shipment schedule, so it could vary from quarter to quarter. We do anticipate higher activity as we move into Q3 than what we projected for Q2. As far as the pricing, we can't get into the specifics on the pricing, but we do have the contract volume up to certain dollar amounts over the period through 2027.

Karla Lewis: Yeah. Good morning, Bennett. As far as the cadence on the border wall project, as we mentioned, we began shipping this month, in April, and so we're still in a bit of startup ramp-up phase. We included in our Q2 guide our current estimate of volume activity in the quarter. We do expect that to increase as we move into Q3 and beyond as the program really gets up and running. There's not a committed shipment schedule, so it could vary from quarter to quarter. We do anticipate higher activity as we move into Q3 than what we projected for Q2. As far as the pricing, we can't get into the specifics on the pricing, but we do have the contract volume up to certain dollar amounts over the period through 2027.

Speaker #6: And if possible, could you share what the share of aluminum was in relation to the LIFO expenses past quarter?

Speaker #3: Yeah. So Bennett, you're correct. I think the dynamics in aluminum in particular continue where we unlike this time last year, our companies now have been able to push through the 50% tariff to our customers.

Speaker #3: So we included in our Q2 guide our current estimate of volume activity in the quarter. We do expect that to increase as we move into Q3 and beyond as the program really gets up and running.

Speaker #3: But we're not necessarily getting a full margin on that 50% tariff cost. Which puts a little pressure on the overall gross profit margin from our aluminum products compared to periods where we did not have a 50% tariff that we had to cover and try to push to our customers.

Speaker #3: But there's not a committed shipment schedule so it could vary from quarter to quarter. But we do anticipate higher activity as we move into Q3 than what we projected for Q2.

Speaker #3: And as far as the pricing, we can't get into the specifics on the pricing, but we do have the contract volume up to certain dollar amounts over the period through 2027.

Speaker #3: And then you're right, it also gives us kind of a double hit on LIFO because LIFO in our view was not intended for periods with 50% tariffs.

Speaker #3: And so we have to take a LIFO charge on top of the tariff costs that we need to push through. So that does right now, while these 50% tariffs are in place and with the market where it is, it is a bit of a drag.

Speaker #5: Understood. Thanks for that color. Coming to aluminum, I mean, we've certainly seen another spike in pricing. I guess I'm just wondering if you're still able to cover your costs at this stage, is 50 bits still the right way to think about the margin impact?

Bennett Moore: Understood. Thanks for that color. Coming to aluminum, we've certainly seen another spike in pricing. I guess, I'm just wondering if you're still able to cover your costs at this stage. Is 50 bps still the right way to think about the margin impact? If possible, could you share what share of aluminum was in relation to the LIFO expenses this past quarter?

Speaker #3: We think that's transitory. And while we have these tariffs in place, however, the aluminum prices are significantly higher. So even though we're not getting the percentage margin on that, we are getting significantly higher gross profit dollars on our sales of aluminum.

Speaker #5: And if possible, could you share what the share of aluminum was in relation to the LIFO expenses past quarter?

Speaker #3: Yeah, so Bennett, you're correct. I think the dynamics in aluminum in particular continue where we unlike this time last year, our companies now have been able to push through the 50% tariff to our customers.

Karla R. Lewis: Yeah. Bennett, you're correct. I think the dynamics in aluminum in particular continue where we, unlike this time last year, our companies now have been able to push through the 50% tariff to our customers, but we're not necessarily getting a full margin on that 50% tariff cost, which puts a little pressure on the overall gross profit margin from our aluminum products compared to periods where we did not have a 50% tariff that we had to cover and try to push to our customers. You're right, it also gives us kind of a double hit on LIFO because LIFO, in our view, was not intended for periods with 50% tariffs, and we have to take a LIFO charge on top of the tariff cost that we need to push through.

Karla Lewis: Yeah. Bennett, you're correct. I think the dynamics in aluminum in particular continue where we, unlike this time last year, our companies now have been able to push through the 50% tariff to our customers, but we're not necessarily getting a full margin on that 50% tariff cost, which puts a little pressure on the overall gross profit margin from our aluminum products compared to periods where we did not have a 50% tariff that we had to cover and try to push to our customers. You're right, it also gives us kind of a double hit on LIFO because LIFO, in our view, was not intended for periods with 50% tariffs, and we have to take a LIFO charge on top of the tariff cost that we need to push through.

Speaker #3: That we then have to help cover our SG&A and other costs and contribute at a higher level to earnings dollars.

Speaker #5: And Bennett, we have.

Speaker #6: Thanks. So go ahead.

Speaker #5: Yeah. I was just going to say we're on aluminum. Despite the margin distortion that Carla mentioned, the gross profit dollars are up year over year.

Speaker #5: To the tune of almost 17, 18 percent. So it shows that profitability, it has improved significantly on those sales. It's just to Carla's point, when you introduce a 50% tariff, that creates some noise in the LIFO noise.

Speaker #3: And then you're right, it also gives us kind of a double hit on LIFO because LIFO, in our view, was not intended for periods with 50% tariffs.

Speaker #5: It's also substantial from aluminum. Last year, nearly half of our LIFO expense was related to aluminum. This year, it's tracking at a little less than half, maybe over a third.

Karla R. Lewis: That does, right now, while these 50% tariffs are in place and with the market where it is, it is a bit of a drag. We think that's transitory while we have these tariffs in place. However, the aluminum prices are significantly higher, so even though we're not getting the percentage margin on that, we are getting significantly higher gross profit dollars on our sales of aluminum that we then have to help cover our SG&A and other costs and contribute at a higher level to earnings dollars.

Karla Lewis: That does, right now, while these 50% tariffs are in place and with the market where it is, it is a bit of a drag. We think that's transitory while we have these tariffs in place. However, the aluminum prices are significantly higher, so even though we're not getting the percentage margin on that, we are getting significantly higher gross profit dollars on our sales of aluminum that we then have to help cover our SG&A and other costs and contribute at a higher level to earnings dollars.

Speaker #5: So I mean, let's just say prices level off and stay where they are. Come next year, you're not going to have that headwind from LIFO on aluminum that's contributing to this temporary margin compression dynamic.

Speaker #5: So net-net these tariffs have contributed to higher profitability across our product portfolio including aluminum.

Speaker #3: And on the LIFO side, just as a reminder, when we book expense, it increases our LIFO reserve that is then available to come back into income in future periods when prices come down.

Speaker #4: And Bennett, we.

Stephen Koch: Ben, we have-

Arthur Ajemyan: Ben, we have-

Bennett Moore: Thanks. Go ahead.

Speaker #5: Thanks. Go ahead.

Speaker #4: Yeah, I was just going to say we're on aluminum despite the margin distortion that Carla mentioned. Gross profit dollars are up year over year.

Stephen Koch: Yeah, I was just going to say that on aluminum, despite the margin distortion that Karla mentioned, the gross profit dollars are up year-over-year to the tune of almost 17% to 18%. It shows that profitability has improved significantly on those sales. It's just to Karla's point, when you introduce a 50% tariff, that creates some noise. The LIFO noise is also substantial from aluminum. Last year, nearly half of our LIFO expense was related to aluminum. This year, it's tracking at a little less than half, maybe over a third. Let's just say prices level off and stay where they are. Come next year, you're not going to have that headwind from LIFO on aluminum that's contributing to this temporary margin compression dynamic. Net-net, these tariffs have contributed to higher profitability across our product portfolio, including aluminum.

Arthur Ajemyan: Yeah, I was just going to say that on aluminum, despite the margin distortion that Karla mentioned, the gross profit dollars are up year-over-year to the tune of almost 17% to 18%. It shows that profitability has improved significantly on those sales. It's just to Karla's point, when you introduce a 50% tariff, that creates some noise. The LIFO noise is also substantial from aluminum. Last year, nearly half of our LIFO expense was related to aluminum. This year, it's tracking at a little less than half, maybe over a third. Let's just say prices level off and stay where they are. Come next year, you're not going to have that headwind from LIFO on aluminum that's contributing to this temporary margin compression dynamic. Net-net, these tariffs have contributed to higher profitability across our product portfolio, including aluminum.

Speaker #6: Carlo, Arthur, thank you. I'll get back in the queue.

Speaker #3: All right. Thanks, Bennett.

Speaker #1: And again, that is STAR 1. If you would like to ask a question, we'll go next to Samuel McKinney with KeyBank Capital Markets.

Speaker #4: To the tune of almost 17, 18 percent. So it shows that profitability has improved significantly on those sales. It's just, to Karla's point, when you introduce a 50% tariff, that creates some noise in the LIFO noise.

Speaker #7: Hey, good morning.

Speaker #3: Good morning.

Speaker #7: I know we've talked about the rapid rise in aluminum pricing being a drag on gross margin, just given it's been tough to get ahead of that.

Speaker #7: And I know tariffs are still impacting that market. But am I wrong in my thinking that the first quarter sequential gross margin expansion does seem to reflect a better job of navigating that market versus the back half of last year?

Speaker #4: It's also substantial from aluminum. Last year, nearly half of our LIFO expense was related to aluminum. This year, it's tracking at a little less than half, maybe over a third.

Speaker #3: Yeah. I think that's fair. And again, we want to be clear it's a drag on the gross profit margin percent, but not on the gross profit dollars.

Speaker #4: So I mean, let's just say prices level off and stay where they are. Come next year, you're not going to have that headwind from LIFO on aluminum that's contributing to this temporary margin compression dynamic.

Speaker #3: that correctly, that I think incrementally each quarter coming out of Q2 last year when the tariffs hit, we've made progress. Against that, as we talked about, overall demand improving a bit too, including for some of the aluminum products.

Speaker #4: So net-net these tariffs have contributed to higher profitability across our product portfolio including aluminum.

Speaker #3: And on the LIFO side, just as a reminder, when we book expense, it increases our LIFO reserve that is then available to come back into income in future periods when prices come down.

Karla R. Lewis: On the LIFO side, just as a reminder, when we book expense, it increases our LIFO reserve that is then available to come back into income in future periods, when prices come down.

Karla Lewis: On the LIFO side, just as a reminder, when we book expense, it increases our LIFO reserve that is then available to come back into income in future periods, when prices come down.

Speaker #3: So that helps us on passing through costs if demand is stronger. So yeah, so we would agree with the way you're thinking about that, Sam.

Speaker #7: Okay. And then on the border wall contract, you're expecting it to be a solid earnings contributor despite the relatively lower selling price versus the rest of your business.

Speaker #5: Karla, Arthur, thank you all. Get back in the queue.

Bennett Moore: Karla, Arthur, thank you. I'll get back in queue.

Speaker #3: Thanks, Bennett.

Karla R. Lewis: Thanks, Matt.

Karla Lewis: Thanks, Matt.

Speaker #1: And again, that is STAR 1. If you would like to ask a question, we'll go next to Samuel McKinney with KeyBanc Capital Markets.

Operator 2: Again, that is star one, if you would like to ask a question. We'll go next to Samuel McKinney with KeyBanc Capital Markets.

Operator: Again, that is star one, if you would like to ask a question. We'll go next to Samuel McKinney with KeyBanc Capital Markets.

Speaker #7: When you talk about the operating network, if you could just discuss with us some of the operating levers you think you can pull as these tons grow over the course of this year and probably into next.

Speaker #6: Hey, good morning.

Samuel McKinney: Hey, good morning.

Speaker #3: Good morning.

Karla R. Lewis: Morning.

Karla Lewis: Morning.

Speaker #3: Yeah. So right, prices, lower on those products, but with the services that we're providing, which a lot of that on these on the tons for the border wall, it's a lot of storage, handling.

Speaker #6: I know we've talked about the rapid rise in aluminum pricing being a drag on gross margin, just given it's been tough to get ahead of that.

Samuel McKinney: I know we've talked about the rapid rise in aluminum pricing being the drag on gross margin, just given it's been tough to get ahead of that. I know tariffs are still impacting that market. Am I wrong in my thinking that the Q1 sequential gross margin expansion does seem to reflect a better job of navigating that market versus the H2 of last year?

Speaker #6: And I know tariffs are still impacting that market. But am I wrong in my thinking that the first quarter sequential gross margin expansion does seem to reflect a better job of navigating that market versus the back half of last year?

Speaker #3: We are doing some value-added but our operating costs are pretty low based on the volume that the kind of SG&A percent is lower than it is in the rest of our business.

Speaker #3: Yeah, I think that's fair. And again, we want to be clear it's a drag on the gross profit margin percent, but not on the gross profit dollars.

Karla R. Lewis: Yeah, I think that's fair. Again, we want to be clear, it's a drag on the gross profit margin percent, but not on the gross profit dollars. Yeah, you're thinking about that correctly, that I think incrementally each quarter coming out of Q2 last year when the tariffs hit, we've made progress against that. As we talked about overall demand improving a bit too, including for some of the aluminum products, so that helps us on passing through costs if demand is stronger. Yeah. We would agree with the way you're thinking about that, Sam.

Karla Lewis: Yeah, I think that's fair. Again, we want to be clear, it's a drag on the gross profit margin percent, but not on the gross profit dollars. Yeah, you're thinking about that correctly, that I think incrementally each quarter coming out of Q2 last year when the tariffs hit, we've made progress against that. As we talked about overall demand improving a bit too, including for some of the aluminum products, so that helps us on passing through costs if demand is stronger. Yeah. We would agree with the way you're thinking about that, Sam.

Speaker #3: But yeah, you're thinking about that correctly, that I think incrementally, each quarter coming out of Q2 last year when the tariffs hit, we've made progress against that.

Speaker #3: So at these volumes, low-cost structure, it's a good driver to earnings. Plus, one of the reasons we believe that Reliance was awarded this contract and by the way, back in 2008, our AMI business secured a smaller than this, but a pretty decent-sized border wall.

Speaker #3: As we talked about, overall demand is improving a bit too, including for some of the aluminum products. So that helps us on passing through costs if demand is stronger.

Speaker #3: So yeah, so we would agree with the way you're thinking about that, Sam.

Speaker #3: They call it the fence then contract. And they performed very well under that. This is much larger in scale with the tonnage and a short time period to be able to provide these services.

Speaker #6: Okay. And then on the border wall contract, you're expecting it to be a solid earnings contributor despite the relatively lower selling price versus the rest of your business.

Samuel McKinney: Okay, on the border wall contract. You're expecting it to be a solid earnings contributor despite the relatively lower selling price versus the rest of your business. When you talk about the operating leverage, if you could just discuss with us some of the operating levers you think you can pull as these tons grow over the course of this year and probably into next.

Speaker #3: And we need multiple locations to store and provide the logistics under the contract to really meet their requirements. And with the Reliance network of companies, our AMI company is working with other Reliance companies utilizing some of their property, which also keeps our costs lower.

Speaker #6: But when you talk about the operating network, if you could just discuss with us some of the operating levers you think you can pull as these tons grow over the course of this year and probably into next.

Speaker #3: Yeah, so right, prices, lower on those products, but with the services that we're providing, which a lot of that on these on the tons for the border wall, it's a lot of storage, handling.

Karla R. Lewis: Yeah. Right. Prices lower on those products, but with the services that we're providing, which a lot of that on the tons for the border wall, it's a lot of storage handling. We are doing some value-added processing. Our operating costs are pretty low based on the volume that the SG&A percent is lower than it is in the rest of our business. At these volumes, low cost structure, it's a good driver to earnings. Plus, one of the reasons we believe that Reliance was awarded this contract, and by the way, back in 2008, our AMI business secured a smaller than this, but a pretty decent size border wall. They called it the Fence then, contract, and they performed very well under that. This is much larger in scale with the tonnage and a short time period to be able to provide these services.

Karla Lewis: Yeah. Right. Prices lower on those products, but with the services that we're providing, which a lot of that on the tons for the border wall, it's a lot of storage handling. We are doing some value-added processing. Our operating costs are pretty low based on the volume that the SG&A percent is lower than it is in the rest of our business. At these volumes, low cost structure, it's a good driver to earnings. Plus, one of the reasons we believe that Reliance was awarded this contract, and by the way, back in 2008, our AMI business secured a smaller than this, but a pretty decent size border wall. They called it the Fence then, contract, and they performed very well under that. This is much larger in scale with the tonnage and a short time period to be able to provide these services.

Speaker #3: We didn't have to go out and secure some of the new equipment or property to be able to service the project.

Speaker #3: We are doing some value-added processing, but our operating costs are pretty low based on the volume. The kind of SG&A percent is lower than it is in the rest of our business.

Speaker #4: Yeah. And excuse me, I'd like to add to that. The shipped are hollow structural sections, but there's also a lot of sheet that we're utilizing one of our processing plants in Texas.

Speaker #4: It's furloughed. So like Carla mentioned, we have plants set up all along the be shipping products out of Texas and out of California. We really appreciate all of the support we've received from our domestic mill suppliers because as everybody knows, supplies are a little bit tight right now.

Speaker #3: So at these volumes, low-cost structure, it's a good driver to earnings. Plus, one of the reasons we believe that Reliance was awarded this contract—and by the way, back in 2008, our AMI business secured a smaller than this, but a pretty decent size border wall.

Speaker #4: Hot-rolled coil is on limited availability. And we're able to get as much as we need to meet our customers' demands.

Speaker #3: They called it the fence then contract. And they performed very well under that. This is much larger in scale with the tonnage and a short time period to be able to provide these services.

Speaker #7: Well, thank you. I appreciate all the color on that contract. And best of luck.

Speaker #4: Thank you.

Speaker #3: Thank you.

Speaker #1: We'll go next to Nick Cash with Goldman Sachs.

Speaker #8: Hi. Thank you so much for taking my question. Just a quick one on the current inorganic growth pipeline. Again, I've been a little bit since you guys have done pretty much any meaningful acquisition.

Speaker #3: And we need multiple locations to store and provide the logistics under the contract to really meet their requirements. And with the Reliance network of companies, our AMI company is working with other Reliance companies, utilizing some of their property, which also keeps our costs lower.

Karla R. Lewis: We need multiple locations to store and provide the logistics under the contract to really meet their requirements. With the Reliance network of companies, our AMI company is working with other Reliance companies, utilizing some of their property, which also keeps our costs lower. We didn't have to go out and secure some of the new equipment or property to be able to service the project.

Karla Lewis: We need multiple locations to store and provide the logistics under the contract to really meet their requirements. With the Reliance network of companies, our AMI company is working with other Reliance companies, utilizing some of their property, which also keeps our costs lower. We didn't have to go out and secure some of the new equipment or property to be able to service the project.

Speaker #8: Just wondering how the pipeline currently looks and how you're thinking of capital allocation between organic and inorganic growth going forward.

Speaker #3: Yeah. Hi, Nick. From a kind of acquisition pipeline, I'd say it remains pretty consistent with what we've talked about the last few quarters. There are opportunities out there.

Speaker #3: We didn't have to go out and secure some of the new equipment or property to be able to service the project.

Speaker #6: Yeah, and excuse me, I'd like to add to that. The majority of the products being shipped in are hollow structural sections, but there's also a lot of sheet that we're utilizing at one of our processing plants in Texas.

Stephen Koch: Yeah, excuse me, I'd like to add to that. A majority of the products being shipped are hollow structural sections. There's also a lot of sheet that we're utilizing, one of our processing plants in Sinton, Texas. It's Feralloy. Like Karla mentioned, we have plants set up all along the border. We're going to be shipping products out of Texas and out of California. We really appreciate all of the support we've received from our domestic mill suppliers, because as everybody knows, that supply is a little bit tight right now. Hot rolled coil is on limited availability, and we're able to get as much as we need to meet our customers' demands.

Steve Koch: Yeah, excuse me, I'd like to add to that. A majority of the products being shipped are hollow structural sections. There's also a lot of sheet that we're utilizing, one of our processing plants in Sinton, Texas. It's Feralloy. Like Karla mentioned, we have plants set up all along the border. We're going to be shipping products out of Texas and out of California. We really appreciate all of the support we've received from our domestic mill suppliers, because as everybody knows, that supply is a little bit tight right now. Hot rolled coil is on limited availability, and we're able to get as much as we need to meet our customers' demands.

Speaker #3: And we see it kind of steady stream as we have for the last year or so. Some companies we like so we're always looking at what's out there.

Speaker #6: It's furloughing. So like Carla mentioned, we have plants set up all along the border so we're going to be shipping products out of Texas and out of California.

Speaker #3: And evaluating how they might fit into Reliance then, of course, we have to see if we can agree upon valuation with the sellers. And we've had a consistent appetite to acquire good companies.

Speaker #6: We really appreciate all of the support we've received from our domestic mill suppliers because as everybody knows that supplies a little bit tight right now.

Speaker #6: Hot-rolled coil is on limited availability and we're able to get as much as we need to meet our customers' demands. Well, thank you. I appreciate all the color on that contract and best of luck.

Speaker #3: We just it's somewhat dependent on who's ready to sell their companies because a lot of the companies in our space are privately owned family companies.

Speaker #3: And so we wait for them to be ready to sell. Like I said, then there's valuation. So we've no change in our appetite for that.

Samuel McKinney: Well, thank you. I appreciate all the color on that contract, and best of luck.

Speaker #5: Thank you.

Stephen Koch: Thank you.

Steve Koch: Thank you.

Speaker #3: Thank you.

Karla R. Lewis: Thank you.

Arthur Ajemyan: Thank you.

Speaker #1: We'll go next to Nick Cash with Goldman Sachs.

Operator 2: We'll go next to Nick Cash with Goldman Sachs.

Operator: We'll go next to Nick Cash with Goldman Sachs.

Speaker #3: But we've also been in a strong financial position for the last few years where we haven't had to choose between our capital allocation priorities.

Speaker #7: Hi. Thank you so much for taking my question. Just a quick one on the current inorganic growth pipeline. Again, I've been a little bit since you guys have done pretty much any meaningful acquisition.

Nick Cash: Hi. Thank you so much for taking my question. Just a quick one on the current inorganic growth pipeline. Again, it's been a little bit since you guys have done any pretty much meaningful acquisitions. Just wondering how the pipeline currently looks and how you're thinking of capital allocation between organic and inorganic growth going forward.

Speaker #3: We've been able to execute on the acquisitions we'd like while at the same time continuing to grow organically. And providing strong returns to our shareholders to our through our consistently increasing dividend as well as I think a reasonable level of activity on our share repurchases.

Speaker #7: Just wondering how the pipeline currently looks, and how you're thinking of capital allocation between organic and inorganic growth going forward?

Speaker #3: Yeah. Hi, Nick. From a kind of acquisition pipeline, I'd say it remains pretty consistent with what we've talked about the last few quarters. There are opportunities out there and we see it kind of steady stream as we have for the last year or so.

Karla R. Lewis: Yeah. Hi, Nick. From a kind of acquisition pipeline, I'd say it remains pretty consistent with what we've talked about the last few quarters. There are opportunities out there, and we see a kind of steady stream as we have for the last year or so. Some companies we like. We're always looking at what's out there and evaluating how they might fit into Reliance. Of course, we have to see if we can agree upon valuation with the sellers. We've had a consistent appetite to acquire good companies. It's somewhat dependent on who's ready to sell their companies because a lot of the companies in our space are privately owned family companies. We wait for them to be ready to sell. Like I said, then there's valuation.

Karla Lewis: Yeah. Hi, Nick. From a kind of acquisition pipeline, I'd say it remains pretty consistent with what we've talked about the last few quarters. There are opportunities out there, and we see a kind of steady stream as we have for the last year or so. Some companies we like. We're always looking at what's out there and evaluating how they might fit into Reliance. Of course, we have to see if we can agree upon valuation with the sellers. We've had a consistent appetite to acquire good companies. It's somewhat dependent on who's ready to sell their companies because a lot of the companies in our space are privately owned family companies. We wait for them to be ready to sell. Like I said, then there's valuation.

Speaker #3: And then there's no change to that.

Speaker #8: Appreciate that. And if I could just one more. You called out data center and energy infrastructure. Just real quick, what percentage of non-RESI tonnage is data center related?

Speaker #3: Some companies we like so we're always looking at what's out there. And evaluating how they might fit into Reliance. Then, of course, we have to see if we can agree upon valuation with the sellers and we've had a consistent appetite to acquire good companies.

Speaker #8: And how does that mix shifted year over year? And then within energy infrastructure, I guess, how much solar exposure do you guys have?

Speaker #3: Yeah. So Nick, unfortunately, I mean, we wish we could give you that number. But with the customers that we sell to because we're not typically selling direct into the OEM or the project, we're selling to fabricators and contractors with multiple projects.

Speaker #3: We just—it's somewhat dependent on who's ready to sell their companies, because a lot of the companies in our space are privately owned family companies, and so we wait for them to be ready to sell.

Speaker #3: Well, certainly, we often know what project it's going into. We don't have a good way to quantify. But I think we've been seeing increasing activity for data center and Steve, I don't know if you have anything to add on that or on solar.

Speaker #3: Like I said, then there's valuation. So, we've had no change in our appetite for that. But we've also been in a strong financial position for the last few years, where we haven't had to choose between our capital allocation priorities.

Karla R. Lewis: No change in our appetite for that, but we've also been in a strong financial position for the last few years where we haven't had to choose between our capital allocation priorities. We've been able to execute on the acquisitions we'd like, while at the same time continuing to grow organically and providing strong returns to our shareholders through our consistently increasing dividend as well as, I think, a reasonable level of activity on our share repurchases. There's no change to that.

Karla Lewis: No change in our appetite for that, but we've also been in a strong financial position for the last few years where we haven't had to choose between our capital allocation priorities. We've been able to execute on the acquisitions we'd like, while at the same time continuing to grow organically and providing strong returns to our shareholders through our consistently increasing dividend as well as, I think, a reasonable level of activity on our share repurchases. There's no change to that.

Speaker #4: Yeah. So Nick, unfortunately, we don't have a lot of direct exposure to the solar market. But our suppliers are mill suppliers have a lot of the they're getting it mill direct.

Speaker #3: We've been able to execute on the acquisitions we'd like, while at the same time continuing to grow organically, and providing strong returns to our shareholders through our consistently increasing dividend, as well as, I think, a reasonable level of activity on our share repurchases.

Speaker #4: Which is consuming a lot of tube and hot-rolled coil, which is keeping the mills very busy and keeping prices at a really good level for the market.

Speaker #8: Fair enough. Appreciate the color. I'll pass it on. Thank you.

Speaker #4: Thank you.

Speaker #1: We'll take a follow-up question from Bennett Moore with JPMorgan.

Speaker #3: And then there's no change to that.

Speaker #7: Appreciate that. And if I could just ask one more. You called out data center and energy infrastructure. Just real quick, what percentage of non-RESI tonnage is data center related, and how has that mix shifted year over year?

Nick Cash: Appreciate that. If I could, just one more. You called out data center and energy infrastructure. Just real quick, what percentage of non-resi tonnage is data center related, and how has that mix shifted year over year? Within energy infrastructure, how much solar exposure do you guys have?

Speaker #7: Thanks for taking my follow-up. I wanted to come back to the semiconductor wondering what sort of opportunities do you see to gain share, I guess, from foreign chip makers?

Speaker #7: And then, within energy infrastructure, I guess, how much solar exposure do you guys have?

Speaker #7: And if you could remind us what that qualification process looks like and the timing to do so.

Speaker #3: Yeah. So, Nick, unfortunately—I mean, we wish we could give you that number—but with the customers that we sell to, because we're not typically selling direct into the OEM or the project, we're selling to fabricators and contractors with multiple projects.

Karla R. Lewis: Yeah. Nick, unfortunately, we wish we could give you that number, but with the customers that we sell to, because we're not typically selling direct into the OEM or the project. We're selling to fabricators and contractors with multiple projects. While certainly, we often know what project it's going into, we don't have a good way to quantify. But I think we've been seeing increasing activity for data center. Steve, I don't know if you have anything to add on that or on solar.

Karla Lewis: Yeah. Nick, unfortunately, we wish we could give you that number, but with the customers that we sell to, because we're not typically selling direct into the OEM or the project. We're selling to fabricators and contractors with multiple projects. While certainly, we often know what project it's going into, we don't have a good way to quantify. But I think we've been seeing increasing activity for data center. Steve, I don't know if you have anything to add on that or on solar.

Speaker #3: Yeah. So I think we've talked different times before on the call, Bennett. So from our semiconductor exposure, for the most part, while there are a lot of ancillary things around it, but we're selling into the equipment semiconductor chip equipment manufacturers.

Speaker #3: Well, certainly, we often know what project it's going into. We don't have a good way to quantify, but I think we've been seeing increasing activity for data center, and Steve, I don't know if you have anything to add on that or on solar?

Speaker #3: And that's where we've seen some positive activity. The last quarter or two, we see that improving. And there have been some shifts by those customers to foreign locations.

Speaker #5: Yeah. So Nick, unfortunately, we don't have a lot of direct exposure to the solar market, but our suppliers, our mill suppliers have a lot of the they're getting it mill direct, which is consuming a lot of tube and hot-rolled coil, which is keeping the mills very busy and keeping prices at a really good level for the market.

Stephen Koch: Yeah. Nick, unfortunately, we don't have a lot of direct exposure to the solar market, but our suppliers, our mill suppliers, they're getting it mill direct, which is consuming a lot of tube and hot-rolled coil, which is keeping the mills very busy and keeping prices at a really good level for the market.

Steve Koch: Yeah. Nick, unfortunately, we don't have a lot of direct exposure to the solar market, but our suppliers, our mill suppliers, they're getting it mill direct, which is consuming a lot of tube and hot-rolled coil, which is keeping the mills very busy and keeping prices at a really good level for the market.

Speaker #3: We do have a location in Singapore that helps support some of our customers over there in that market as they've shifted a little more there.

Speaker #3: And then our other kind of specialty semiconductor company they do sell to the chip makers. The equipment makers, they have locations in the US, South Korea, and China.

Speaker #7: Fair enough. Appreciate the color. I'll pass it on. Thank you.

Nick Cash: Fair enough. Appreciate the color. I'll pass it on. Thank you.

Speaker #5: Thank you.

Stephen Koch: Thank you.

Steve Koch: Thank you.

Speaker #1: We'll take a follow-up question from Bennett Moore with JPMorgan.

Operator 2: We'll take a follow-up question from Bennett Moore with J.P. Morgan.

Operator: We'll take a follow-up question from Bennett Moore with J.P. Morgan.

Speaker #3: But they also a big portion of their business also sells into the building kind of the interior plumbing of the chip facilities as they're being built.

Speaker #6: Thanks for taking my follow-up. I wanted to come back to the semiconductor markets real quick, and I'm wondering what sort of opportunities you see to gain share, I guess, from foreign chip makers?

Bennett Moore: Thanks for taking my follow-up. I wanted to come back to the semiconductor markets real quick. I'm wondering, what sort of opportunities do you see to gain share, I guess, from foreign chip makers? If you could remind us what that qualification process looks like and the timing to do so.

Speaker #3: And that's where we have seen pullbacks by a lot of those customers or just delays in building the chip plants especially here in the US.

Speaker #6: And if you could remind us what that qualification process looks like and the timing to do so.

Speaker #3: Yeah, so I think we've talked different times before on the call, Bennett. So from our semiconductor exposure, for the most part, while there are a lot of ancillary things around it, we're selling into the equipment semiconductor chip equipment manufacturers, and that's where we've seen some positive activity.

Karla R. Lewis: Yeah. I think we've talked at different times before on the call, Bennett. From our semiconductor exposure, for the most part, while there are a lot of ancillary things around it, but we're selling into the semiconductor chip equipment manufacturers, and that's where we've seen some positive activity. The last quarter or two, we've seen that improving. There have been some shifts by those customers to foreign locations. We do have a location in Singapore that helps support some of our customers over there in that market as they've shifted a little more there. Then our other kind of specialty semiconductor company, they do sell to the chip makers, the equipment makers. They have locations in the US, South Korea, and China. A big portion of their business also sells into the building, kind of the interior plumbing of the chip facilities as they're being built.

Karla Lewis: Yeah. I think we've talked at different times before on the call, Bennett. From our semiconductor exposure, for the most part, while there are a lot of ancillary things around it, but we're selling into the semiconductor chip equipment manufacturers, and that's where we've seen some positive activity. The last quarter or two, we've seen that improving. There have been some shifts by those customers to foreign locations. We do have a location in Singapore that helps support some of our customers over there in that market as they've shifted a little more there. Then our other kind of specialty semiconductor company, they do sell to the chip makers, the equipment makers. They have locations in the US, South Korea, and China.

Speaker #3: But that's a good market for us. And that company of ours has had there's a lot of interest they've been working on some capabilities to sell more into the data center market.

Speaker #3: And we're expecting to start to see some increased activity for that company around the data center market in the near term.

Speaker #3: The last quarter or two, we see that improving. And there have been some shifts by those customers to foreign locations. We do have a location in Singapore that helps support some of our customers over there in that market as they've shifted a little more there.

Speaker #4: And as far as qualifications go, a lot of our customers who had moved over to Asia and they're moving back because of the onshoring coming back, we're already certified with them.

Speaker #4: And already picking up some business.

Speaker #7: Thanks for that. And I guess I'll squeeze one more if I can. Wanted to ask about the second contract, the defense contract, I think for a Lockheed programs.

Speaker #3: And then our other kind of specialty semiconductor company—they do sell to the chip makers, the equipment makers. They have locations in the US, South Korea, and China.

Speaker #7: Upsize renewal here. But are you able to help contextualize what the margin profile looks like for this contract relative to the overall business given the DH-1 is a little bit below?

Speaker #3: And but they also a big portion of their business also sells into the building kind of the interior plumbing of the chip facilities as they're being built.

Speaker #3: So the we already have those existing programs under contract with Lockheed Martin. And so there's no significant change in impact of the new contract when it begins in 2027.

Karla Lewis: A big portion of their business also sells into the building, kind of the interior plumbing of the chip facilities as they're being built. That's where we have seen pullbacks by a lot of those customers or just delays in building the chip plants, especially here in the US. That's a good market for us, and that company of ours, there's a lot of interest. They've been working on some capabilities to sell more into the data center market. We're expecting to start to see some increased activity for that company around the data center market in the near term.

Speaker #3: And that's where we have seen pullbacks by a lot of those customers or just delays in building the chip plants, especially here in the US.

Karla R. Lewis: That's where we have seen pullbacks by a lot of those customers or just delays in building the chip plants, especially here in the US. That's a good market for us, and that company of ours, there's a lot of interest. They've been working on some capabilities to sell more into the data center market. We're expecting to start to see some increased activity for that company around the data center market in the near term.

Speaker #3: We do expect about 10% higher volumes it's a larger contract. With multiple programs in it, including the joint strike fighter, so it will add.

Speaker #3: But that's a good market for us. And that company of ours has had—there's a lot of interest, they've been working on some capabilities to sell more into the data center market.

Speaker #3: But should not be a noticeable shift on any margin profile.

Speaker #7: Understood. Thank you for all the color and best of luck.

Speaker #3: And we're expecting to start to see some increased activity for that company around the data center market in the near term.

Speaker #3: Yeah. Thanks, Bennett.

Speaker #1: And we have a follow-up from Martin Englert with Seaport Research Partners.

Speaker #4: For the DHS contract, any more you can share with the volumes associated with phase one and the incremental volumes if the rest of the contract, I guess, completes?

Speaker #5: And as far as qualifications go, a lot of our customers who had moved over to Asia and they're moving back because of the onshoring coming back, we're already certified with them.

Stephen Koch: As far as qualifications go, a lot of our customers who had moved over to Asia and they're moving back because of the onshoring coming back. We're already certified with them and already picking up some business.

Steve Koch: As far as qualifications go, a lot of our customers who had moved over to Asia and they're moving back because of the onshoring coming back. We're already certified with them and already picking up some business.

Speaker #5: And already picking up some business.

Speaker #6: Thanks for that. And I guess I'll squeeze one more if I can. Wanted to ask about the second contract, the defense contract. I think for a Lockheed program's upsize renewal here, but are you able to help contextualize what the margin profile looks like for this contract relative to the overall business given the DH-1 is a little bit below?

Bennett Moore: Thanks for that. I guess I'll squeeze one more if I can. Wanted to ask about the second contract, the defense contract, I think for Lockheed programs. Upsized renewal here, but are you able to help contextualize what the margin profile looks like for this contract relative to the overall business, given that the DHS is a little bit below?

Speaker #3: Yeah. So Martin, we have not disclosed tonnage under that. We did disclose dollar amounts, which for phase one and phase two, the total is 2.2 billion dollars.

Speaker #3: Phase one of that is phase one's 1.4 billion. Which runs through.

Speaker #3: So we already have those existing programs under contract with Lockheed Martin, and so there's no significant change in impact of the new contract when it begins in 2027.

Karla R. Lewis: We already have those existing programs under contract with Lockheed Martin, and so there's no significant change in impact of the new contract when it begins in 2027. We do expect about 10% higher volumes. It's a larger contract with multiple programs in it, including the Joint Strike Fighter. It will add, but should not be a noticeable shift on any margin profile.

Karla Lewis: We already have those existing programs under contract with Lockheed Martin, and so there's no significant change in impact of the new contract when it begins in 2027. We do expect about 10% higher volumes. It's a larger contract with multiple programs in it, including the Joint Strike Fighter. It will add, but should not be a noticeable shift on any margin profile.

Speaker #7: End of 2027.

Speaker #3: Mid yeah. I think the end of Q2, 2027.

Speaker #4: Okay. Thank you. Appreciate it.

Speaker #3: Yep.

Speaker #7: Yep.

Speaker #3: We do expect about 10% higher volumes. It's a larger contract with multiple programs in it, including the Joint Strike Fighter, so it will add, but should not be a noticeable shift on any margin profile.

Speaker #1: And this now concludes our question and answer session. I would like to turn the floor back over to Carla Lewis for closing comments.

Speaker #8: Thank you. And thanks to everyone for joining us today and for your continued support of Reliance. In summary, just a reminder of Reliance's unique scale, diverse portfolio, financial strength, domestic mill relationships, and expanding service capabilities that enable us to support our customers reliably and to capitalize on the significant opportunities ahead in 2026.

Speaker #6: Understood. Thank you for all the color and best of luck.

Bennett Moore: Understood. Thank you for all the color and best of luck.

Speaker #3: Yeah. Thanks, Bennett.

Karla R. Lewis: Yeah. Thanks, Bennett.

Karla Lewis: Yeah. Thanks, Bennett.

Speaker #1: And we have a follow-up from Martin Inglert with Seaport Research Partners.

Operator 2: We have a follow-up from Martin Englert with Seaport Research Partners.

Operator: We have a follow-up from Martin Englert with Seaport Research Partners.

Martin Englert: For the DHS contract, any more you can share with the volumes associated with phase one and the incremental volumes, if the rest of the contract, I guess, completes?

Speaker #8: For the DHS contract, any more you can share with the volumes associated with phase one and the incremental volumes if the rest of the contract, I guess, completes?

Speaker #8: And I'd really like to thank our Reliance family for all that they did for a very strong first quarter. What we look forward to them doing throughout the rest of 2026 and doing it safely.

Speaker #3: Yeah. So Martin, we have not disclosed tonnage under that. We did disclose dollar amounts, which for phase one and phase two, the total is 2.2 billion dollars.

Karla R. Lewis: Yeah. Martin, we have not disclosed tonnage under that. We did disclose dollar amounts, which, for phase one and phase two, the total is $2.2 billion. Phase one of-

Karla Lewis: Yeah. Martin, we have not disclosed tonnage under that. We did disclose dollar amounts, which, for phase one and phase two, the total is $2.2 billion. Phase one of-

Speaker #8: So again, appreciate all of our employees throughout Reliance. And before we wrap up, I also want to note that we'll be in Boston next month for KeyBank's industrials and basic materials conference.

Speaker #3: Phase one of.

Arthur Ajemyan: 1.4.

Steve Koch: 1.4.

Speaker #8: 1.4.

Karla R. Lewis: Phase one is $1.4 billion.

Karla Lewis: Phase one is $1.4 billion.

Speaker #3: Phase one’s $1.4 billion, which runs through.

Speaker #6: End of 2027.

Speaker #8: And in June, we'll be at the Wells Fargo industrials conference in Chicago. And we look forward to connecting with many of you there. Thanks again, everyone.

Speaker #3: Yeah. I think the end of Q2 2027.

Speaker #8: Okay. Thank you. Appreciate it.

Speaker #3: Yep.

Speaker #6: Yep.

Speaker #8: Goodbye.

Speaker #1: And this now concludes our question and answer session. I would like to turn the floor back over to Carla Lewis for closing comments.

Speaker #9: Thank you. And thanks to everyone for joining us today and for your continued support of RELIANCE. In summary, just a reminder of RELIANCE's unique scale, diverse portfolio, financial strength, domestic mill relationships, and expanding service capabilities that enable us to support our customers reliably and to capitalize on the significant opportunities ahead in 2026.

Speaker #9: And I'd really like to thank our Reliance family for all that they did for a very strong first quarter, what we look forward to them doing throughout the rest of 2026 and doing it safely.

Speaker #9: So again, appreciate all of our employees throughout RELIANCE. And before we wrap up, I also want to note that we'll be in Boston next month for KeyBank's industrials and basic materials conference.

Speaker #9: And in June, we'll be at the Wells Fargo Industrials Conference in Chicago, and we look forward to connecting with many of you there. Thanks again, everyone.

Speaker #9: Goodbye.

Q1 2026 Reliance Inc Earnings Call

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