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During today's discussion, we may refer to adjusted net income per diluted share EBITDA, and adjusted EBITDA which are all non GAAP financial measures. A reconciliation of these non GAAP measures to the most directly comparable GAAP financial measures, is provided in the press release that was issued last night and can be found on our website. Today's live broadcast will be archived available for replay on Olympic Steel's website.
11m 37s
At this time, I'll turn the call over to Rick. Thank you, Rich, and good morning, everyone. Thank you for joining us today to discuss Olympic Steel's twenty twenty five first quarter results. I'll begin with a summary of our first quarter earnings results, including our strong shipping start to the year despite a challenging macro environment for the steel industry. Then Andrew will review our segment performance and following that, Rich will discuss our financial results in more detail. And then as always, we'll open up the call for your questions. So we've talked a lot in recent years about our strategy to build a stronger, more resilient Olympic Steel. One that is positioned to deliver profitable results in any environment. Our first quarter performance during a challenging time for the metals industry reflects the success of these efforts and reinforces our strategy as we move forward.
12m 36s
We reported strong shipments and first quarter sales of $493,000,000 with net income of $2,500,000 All three of our business segments continued to deliver positive EBITDA. Our flat roll shipping volumes were up 24% sequentially, and 6% over the prior year, hitting their highest levels since the third quarter of twenty twenty one. Which was also the height of the post COVID pricing and demand market. We really saw an increase in demand about halfway through the quarter, as customers reacted to the announced 25% steel and aluminum tariffs and contemplated the impact of potential reciprocal tariffs. Andrew will talk more about this in a few moments. We continue to execute on our strategy to grow by diversifying into metal intensive end markets expanding our fabrication capabilities, and focusing on a richer mix of higher margin metal products. Our commitment to M and A to bolster these areas has proven to be very effective. Our most recent acquisition, Metalworks, completed in late twenty twenty four, is off to an excellent start. As expected, it has been immediately accretive to our results. Building on our successful track record of completing eight acquisitions over the past seven years, we remain committed to M and A as an ongoing source of growth for Olympic Steel.
14m 13s
We are also committed to making key organic growth investments in our operations that will enhance throughput and safety, and Andrew will detail more about that in a few minutes. At the same time, we've demonstrated our operational discipline, by staying focused on what we can control. We are closely managing our working capital, and improved our inventory turns as we weather uncertain markets. These efforts drove strong operating cash flow during the quarter, which resulted in a $37,000,000 reduction in our debt. In addition, last week, we announced the five year extension of our $625,000,000 asset based revolving credit facility.
14m 59s
This will continue to provide us with the flexible low cost capital to fund our continued growth. Both organically and through acquisition. While tariffs have dominated the macroeconomic conversation, Olympic Steel is well positioned to support increased manufacturing in The United States. Over 90% of our metal supply and almost all of our sales are domestically based. And our fabrication capabilities provide an excellent solution for OEMs looking to onshore, outsource, or simply expand their first stage of manufacturing in The United States. [indiscernible] strong relationships with our domestic mills are also a real benefit in the current tariff environment. As we look ahead, we believe strongly in the Olympic Steel that we have been building.
15m 53s
We remain confident in our ability to continue to drive profitable growth regardless of market conditions. I'll now turn the call over to Andrew.
16m 4s
Thank you, Rick, and good morning, everyone.
16m 6s
This certainly has been an interesting time for the steel industry with a number of dynamics shaping our current environment, most notably the tariffs on steel and aluminum imports. After the initial announcement of 25% steel and aluminum tariffs, in January, hot roll pricing escalated quickly increasing more than 30% during the quarter. As customers scrambled to digest the news, spot orders increased significantly. During the first quarter of twenty twenty five, Olympic Steel had its strongest flat rolled shipping volume since the third quarter of twenty twenty one was the peak of post COVID demand. And as you may recall, we still owned our former Detroit facility back then. Increased shipping levels along with our end products businesses drove strong performance in our Carbon segment with EBITDA of $10,900,000 In addition, continued growth in our coated carbon steel product line a higher margin product had a positive impact on performance. Also of note, we were recognized as a partner level supplier for 2024 in the John Deere Achieving Excellence program. This is John Deere's highest supplier rating. We are incredibly proud to receive this recognition from our longtime customer and respected global OEM. Congratulations to our entire team on this great achievement.
17m 41s
The pipe and tube market, which typically lags our carbon performance by three to six months, experienced slower OEM orders, similar to what the carbon market experienced during the second half of twenty twenty four. However, the segment still delivered EBITDA of $6,400,000 We are confident the team's focus on sales growth margin improvement and fabricated product expansion will continue to drive positive results for this business. The Specialty Metals segment despite continually falling nickel surcharges, had a solid quarter reporting EBITDA of $3,600,000 We continue to invest in the growth and expansion of Specialty Metals. In March, we opened our new facility in Houston, 105,000 square foot facility will increase the Action Stainless Houston operations footprint by an additional 73,000 square feet expanding our distribution fabrication capabilities in the Southwest. Our other planned capital investments remain on track with most expected to become operational later this year or in early twenty twenty six. These include a new cut to length line at our Minneapolis coil facility to support our growing coated business a new high speed light gauge narrow width specialty metal slitter to expand our Berlin Metals unique slitting capacity outside Chicago a new White Metals cut to length line in Schaumburg, Illinois in the automation of our Chambersburg fabrication operation.
19m 28s
These investments will continue to expand our capacity and enhance our safety and drive efficiency in targeted growth areas of our business. As Rick said earlier, we have built a more resilient Olympic Steel and we are confident in our strategy and position in the market. As always, we will continue to control what we can control while many market inputs in macroeconomic variables will no doubt continue to change. We strongly believe the combination of these efforts keep us well positioned to continue to grow and deliver profitable results under all market conditions. Now, I'll turn the call over to Rich.
20m 12s
Thank you, Andrew. As you have heard from Rick and Andrew, our team did an excellent job on the first quarter to navigate macroeconomic headwinds, deliver solid performance to the start of the year. Before I discuss the results in more detail, want to remind you that comparisons are impacted by the November 2024 acquisition of Metalworks, whose results are included in the Carbon segment. For the first quarter, net income totaled $2,500,000 compared with $8,700,000 in the first quarter of twenty twenty four. EBITDA in the first quarter was $16,100,000 compared with $23,300,000 in the prior year period. There was no LIFO adjustment in the first quarter of twenty twenty five compared with $400,000 of LIFO expense in the first quarter of twenty twenty four. Consolidated operating expenses for the first quarter totaled $110,600,000 compared with $103,200,000 in the first quarter of twenty twenty four.
21m 10s
Our first quarter twenty twenty five operating expenses reflect the addition of metalworks, which does not report tons sold. Therefore, operating expenses per ton at the consolidated level and for the Carbon segment will appear higher year over year. As a reminder, we do not report tons sold for McCullough Industries EZ Dumper, Metal Fab, Shaw Stainless or the entire Pipe and Tube segment. Consolidated operating expenses for the first quarter include operating expenses associated with shipping 6% more volume year over year dollars 2,500,000.0 of metalworks operating and acquisition related expenses and $05,000,000 of lower incentive expenses when compared with the first quarter of twenty twenty four. Our team's excellent working capital management drove strong operating cash flow which enabled us to pay down debt by $37,000,000 since year end. Lowering our total debt to $235,000,000 at the end of the first quarter. On April 22, we announced a five year extension of our $625,000,000 asset based revolving credit facility. Immediately after the extension, we had approximately $269,000,000 of availability under the facility providing us with an excellent source of flexible, low cost capital to fund strategic growth initiatives. Our capital expenditures totaled $8,800,000 in the quarter of twenty twenty five compared to depreciation of $6,500,000 We estimate that 2025 capital expenditures will be approximately $35,000,000 as we continue to invest in automation and other growth initiatives that Andrew mentioned earlier.
22m 53s
Our first quarter twenty twenty five effective tax rate was 30.1% compared with 27% in the same period last year. We expect our 2025 tax rate to approximate 28%. In addition, we paid a quarterly dividend of $0.16 per share in the first quarter.
23m 11s
Our Board of Directors approved our next regular quarterly cash dividend of $0.16 per share, which is payable on 06/16/2025, to shareholders of record on 06/02/2025. The company has now paid regular quarterly dividends dating back to 02/2006. Before we open the call for your questions, I would like to thank the entire Olympic Steel team for all their efforts in the first quarter. It's because of the team's hard work and dedication that Olympic Steel remains in a strong operational and financial position and is equipped to manage through a challenging market environment while continuing to advance our strategy. Operator, we are now ready for questions. Please press 0 on your telephone keypad. Pressing your star keys. One moment, while we poll for questions. Thank you. Our first question is from Samuel McKinney with KeyBanc Capital Markets.
24m 28s
Hey, good morning, guys.
24m 30s
Good morning Good morning Sam.
24m 32s
Hey. Starting in carbon flat, volumes were up about 25% versus the fourth quarter. It's well ahead of your normal seasonality and the MSCI figures. We've been hearing a lot about pull forward demand during this earnings cycle. And I was curious if you frame up how much of that first quarter volume boost has to do with that?
24m 49s
Yes, Sam, this is Andrew. I would say a lot of it.
24m 53s
So traditionally, our sales are call it 60 fivethirty five from a contract versus spot. It stronger this quarter on the spot side of So we certainly saw some great activity and some pull ahead relatively early in the quarter and it really helped propel the strength of the carbon sales.
25m 21s
And I'd say, Sam, it's Rick. The other I guess, way to look at it is typically, and I think Rich, you calculate the number, but typically seasonally fourth quarter to first quarter were what? Yeah, percent to 12%. 10 to 12%. Percent up. That would kind of be a normal increase. So certainly, we lapped that, we doubled it. And as Andrew said, a big piece of that extra was certainly in the spot business.
25m 50s
Understood. And then I know first quarter tends to be the strongest revenue quarter for Pipe and Tube given the rebates. Are you expecting that to hold true this year off the $77,000,000 baseline you set in the first quarter? Or could we see some improvement as the year progresses? Yes, Sam. So the Pipe and Tube segment didn't certainly didn't see the same bump up in sales at the Carbon segment saw. And that's primarily because they're more contractual based than spot based. And so as Andrew walked you through the increase in spot sales, you didn't see that in the pipe and tube segment. I think what they're seeing is kind of that continued malaise that we saw in the back half of 2024 for the carbon segment for OEMs and keep in mind, they basically lag three to six months. And so right now what we're seeing, I think the pipe and tube segment, going into Q2 looks a lot like Q1.
26m 39s
Okay.
26m 42s
And then last one for me. Given your five year extension on that ABL, just talk us through your current appetite for M and A, any potential areas looking to bolster? And how does the marketplace look now compared to prior recent periods?
26m 55s
Yeah, it's Rick, Sam. Great question. Certainly, M and A continues to be one of the key pieces of our strategic growth for Olympic. We've talked a lot about that. That certainly remains. We're active [indiscernible] You are right. I think last call we had, I probably commented that we saw some of the inflow, the pipeline in terms of candidates slow, Certainly that kind of continued through the first quarter, but I tell you in April, we've started to see a return of potential sellers and candidates who are really interested in dialoguing. So it's going to continue to be, you see our track record we've done eight and seven years. So it's going to continue to be a big piece of our growth strategy going forward. We'd anticipate really continuing on the pace that you've seen us do over the last five to seven years.
28m 1s
Okay. Would you be disappointed if you didn't get a deal done this year?
28m 7s
You like repeating that line I use.
28m 9s
Yeah, I would. I think, certainly, I think we're trying to do at least one a year and have been successful doing that. And I don't see why we wouldn't continue at that pace.
28m 23s
Okay. Thanks, guys. Good luck. Thanks, Sam. Thanks.
28m 30s
Our next question is from Dave Storms with Stonegate. Hey, good morning, everyone. Thanks for taking the questions.
28m 40s
Want to circle back to pipe and tube and maybe a sense of what the outlook might be beyond 2Q. Mentioned obviously that it lags.
28m 50s
Are you seeing buying patterns that might indicate more of a muted response relative to carbon flats? Or do you think it'll be more of a trapped and slingshot situation where the market realizes that they need to kinda get ahead of some of those. No, I think we'll see a more traditional year for pipe and tube. I think the area that we will see continued opportunity is going to be onshoring opportunities. So couple of areas that pipe and tube has been very strong certainly with data centers, It's a big part of their growth. But really with the onshoring opportunities on both our flat roll and our pipe and tube is really where we expect to see some great opportunities through 2025 and probably beyond and we're well prepared for it. With CTI and now CTB, we can really service fabrication customers who've got 20 high speed sophisticated tube lasers, really positioned well in the Southwest. In our traditional Chicago tube and iron facilities, Chicago, Minneapolis, Locus, as well as some others are really positioned well in flat roll side of it, the same thing. We've invested as you know, a lot in the flat roll side of our fabrication.
30m 6s
Couple specific facilities are Beaufort, Georgia and our Bartlett, Illinois facilities. But also in Bettendorf, Chambersburg, in Mount Sterling, On the flat roll side, put a lot of money into the fabrication in our anticipating as we have seen some great opportunities that we've seen really in the last thirty days for big growth there. That's fantastic color. Thank you. And then just one more for me. Just would love to get your thoughts on your working capital and maybe inventory management to try to cover for the 10% of metal supply that that's not domestic? Any thoughts there would be great.
30m 45s
Yeah, I'll touch the working capital and then I'll let Andrew talk about the supply base. So Dave, yes, we do we did take that down $37,000,000 in Q1 and part of that was taking inventory down I would expect to see maybe a modest decrease in debt during Q2, but I'm not expecting a whole lot As we've been talking on these calls, we really expect the large reduction in debt to come in the back half of the year and we see no reason why by year end we couldn't be back down in the low 200s in terms of borrowing on our debt. So Andrew, I'll let you talk about the supply base.
31m 22s
No, I think our inventories are at appropriate levels. I think as you saw on the MSCI MR report, a lot of the service centers were were sitting with too much inventory coming into 2025. I think we are in really good position continue to be as into the second quarter and expect that the will be relatively stable as we head into the the balance of the year. I think we are well positioned because we're the majority of our material comes from the domestic supply. Tariffs really are not going to impact us relative to that side of it. And we think that there's fine availability domestically to support our growth.
32m 7s
Fantastic. Thank you very much and good luck. In 2Q. Thanks, guys. Our next question is from Chris Sakai with Singular Research. Yes, hi. Good morning. [indiscernible] Just had a question on carbon flat.
32m 29s
Looks like operating expenses took a jump up from last year. Was that from [indiscernible] And how are you managing that going forward?
32m 41s
Yeah, Chris, really caused by two things. One being the acquisition Metalworks, remember that occurred in November of twenty twenty four. So you're comparing Q1 versus Q1, there's about $2,500,000 extra operating expenses that weren't there last year. But associated with a great growth company in metal works. And then we shipped quarter over quarter, we're 24% up in volume and 6% in volume up year over year. And so those tons have to be processed, those tons have to be shipped and that's really what you're seeing an increase in warehouse and processing and then an increase in distribution expense. Associated with that volume growth. And we continue to monitor our expenses on a same store basis What we continue to see is our inflation adjusting volume is essentially in the low single digits as far as inflation goes, say 1% to 2%. That's after giving people a 3% cola raise at the beginning of the year. So, think the operating expenses on a same store basis continue to be managed very well.
33m 47s
Okay, thanks for that. And then with all the tariffs talk, you know, how is that affecting your M and A strategy? It hurting it or helping I'd tell you really not an impact directly. You know we are we are domestic based. All of our acquisitions have been in The U. S. At this point. We're not really looking at foreign acquisitions. What would tell you is the tariff impact really has a greater impact on our fabricating business. And Andrew talked about that. I mean, are exceptionally well prepared should the big bet that this administration is doing on bringing back manufacturing to The United States actually takes place. We're exceptionally positioned to take advantage of that. So I think from an M and A front, you'll continue to see us do what we've done in the past, which is find service center distribution businesses that are very successful. And then just as importantly, continue to buy end manufacturing companies. So really the tariff impact, I'd tell you, has more of I think more of an impact on the core business going forward than really impact on M and A. And as I stated earlier, I think there was a little trepidation as the year started.
35m 20s
In terms of the capital markets and M and A. And that's probably why we saw a little bit of a slowdown in the pipeline. But I think as companies are getting a little more used to and hate to say used to [indiscernible] changes out of DC, but I think people are getting a little more comfortable and we're seeing more certainly more companies come into the pipeline.
35m 46s
Do you think that the tariffs will increase competition for acquisitions?
35m 55s
Yeah, I do. I mean, I think if if this plays out as planned, And we continue to build our manufacturing base in The United States. I could certainly see some others choosing to grow more quickly through an M and A route versus a capital expenditure investment route. So I think that is that sort of one stream where you may see M and A increase.
36m 29s
Okay, great. Thanks.
36m 32s
Thank you. Thanks, Chris.
36m 36s
Thank you. There are no further questions at this time. I'd like to hand the floor back over to Richard Maravito for any closing comments.
36m 45s
Thank you, operator, and thank you, everyone, for joining us today on our call. We certainly appreciate your continued interest in Olympic Steel. And look forward to speaking with you again next quarter. Have a great day, everyone. Bye bye.
37m 2s
This concludes today's conference. May disconnect your lines at this time. Thank you for your participation.
Key Insights
Olympic Steel reported Q1 2025 sales of $493 million and net income of $2.5 million, with all three business segments delivering positive EBITDA; flat roll shipping volumes were up 24% sequentially and 6% year-over-year, reaching their highest levels since Q3 2021.
The company attributed strong Q1 demand to customer reactions to newly announced 25% steel and aluminum tariffs, which led to increased spot orders and a significant boost in flat rolled shipping volumes.
The recent acquisition of Metalworks (completed in late 2024) was immediately accretive to results, contributing to higher operating expenses but supporting the company’s ongoing M&A-driven growth strategy; management remains committed to at least one acquisition per year.
Strong operating cash flow enabled a $37 million reduction in debt during the quarter, lowering total debt to $235 million; the company also extended its $625 million revolving credit facility for five years, with $269 million of availability as of the call.
Capital expenditures for 2025 are estimated at approximately $35 million, focused on automation and capacity expansion; the company expects its effective tax rate for 2025 to be about 28% and will continue its regular quarterly dividend of $0.16 per share.
