Reliance Steel & Aluminum Co. Aktie

Everyone, welcome. I'm Timna Tanners, Metals Mining, Building Materials Analyst here at Wells Fargo. It is my great pleasure to welcome today. We have from Reliance, both Karla and Stephen, CEO and COO, to talk to us today. And if you're not familiar with Reliance, they're a steel distributor and other metal distributor. We actually took the name to Reliance and took the steel out of your name.

So I'd like to kick it off there and ask you about how should we think about Reliance going forward? How could it grow maybe outside of steel? Or what's the opportunity broadly?

Yes. And thanks, Timna, for having us to the conference. And thanks to all of you for joining us. So we did -- for many years, we were Reliance Steel and Aluminum Co., which was kind of long and most people just called us steel and we'd have to remind them, we sell aluminum also.

And then over the years, meeting, quite honestly, with a lot of our investors they said you guys perform better than a lot of the other metals companies, but you trade consistently with them. So would you please lose the steel and aluminum. We think of you more as like an industrial distribution company, we'd like to comp you, we think you deserve a multiple closer to them.

So we did a couple of years ago, dropped the steel and aluminum and became Reliance, Inc. now. What will we do beyond the metal space, I think we are the most diversified metals processor and distributor currently, and that's part of our strategy because metal prices are volatile. The end markets we sell into are cyclical. So with that diversification, we think that helps mitigate some of that risk that's inherent in our markets. And so we try to be broad there.

I think where we've been growing more, not as much in products because we already carry most of the products, but we did buy a small nuclear focused company in Canada a few years ago, and introduced some new, more exotic products there, but it's at a smaller scale compared to the total, but really doing more value-added processing services for our customers is where I think we've kind of diversified and seen more opportunity over the last 8 to 10 years, customers are asking us to do more for them that they were doing in-house. The equipment that we use has better capabilities.

So I think more in the value add we can provide to our customers, probably a little more than in -- we think there's plenty to do in our core area of metal processing and distribution that we don't think we really need to branch out in a big way.

Got you. So how do you think about how far you want to go downstream before you run into some of the mills that are your suppliers? So they've kind of incurred a bit on what you've traditionally done, but there are so many opportunities for more metal bending, for painting, for coating, for -- right now, you do a lot of slitting and more processing and the toll processing. So where do you think about the opportunity set within all the different next steps with manufacturing? Or how far can you take the metal, I guess?

Yes. So we could go further downstream. But one of the things that we try to be very careful of is competing with our customers because we sell to a lot of subcontractor machine shop type companies. And so we don't want to disrupt our relationships and the business we already have there. But that's why I said a lot of customers are asking us, can you get some of this equipment, take care of my overflow or I want to go more to assembly, start doing -- I want to use Reliance to do this for me.

So we do worry about customer disruption. And we bought a couple of fabrication companies where we might take it to make some small components for OEMs. But typically, that's been in like out of the way geographic areas where we're not competing with our customers. And we've also seen, if we acquire a fabrication company, we issue a press release. And we tell everybody we did it, whereas if we just add a laser or a piece of equipment to an existing service center, it's a quieter way to enter that space. But again, trying not to disrupt our customers.

But I think more to -- you are focused on what the mills are doing in value add, I still think there's a pretty good differentiation in the types of services that we do because it's not just the processing we do generally, but it's also the order sizes, the logistics around being able to service the customer base that we service. And certainly, we do, do some big volumes in our toll processing operations. But we kind of try to focus on the hard-to-do stuff.

And so some of the areas, some of the mills have gotten into coating, painting, we knew they were going there. And even if we've seen acquisition opportunities there, we've kind of stayed away because they have new state-of-the-art equipment, and we don't want to go buy a company with small company with 30-year old equipment and try to compete with them. So I think they're finding their space, we're finding our space and we still work with the mills have good relationships and want to look at ways we can grow together.

Okay. Great. Let's explore -- Reliance is really, over the years, focused on the smaller customers and really thrived in that group. So on the one hand, I suppose, probably pretty nicely advantaged as being a large buyer from being able to secure metal, right? So steel has been pretty tight. I heard it's sold out, you said, maybe not quite, but close to sold out on beams, and plate seems like it's really strong. Those are 2 important areas for you. But on aluminum, we could see a shortage, I think, is a real risk, another service center mentioned that to me. So how are you doing in your ability to procure metals and supply? And how do you see that as a differentiator?

So when you get into market -- periods of market tightness, you want to make sure that you have good domestic relationships. You want to make sure that you get your fair share of material from your trusted suppliers. There will be points where customers will ask you for an outsized amount that they're not used to buying. And that's when customers get themselves in trouble, this pledging gets kind of a little bit out of whack. So we're really happy with the support we've received from our suppliers. If we need a little bit more, we need to break into schedule, they help us out. But I think that there's kind of good equilibrium where the market is transacting well.

You mentioned beams, beams have never been this high of a price and that has never been the lead times this far extended. But if something comes up where we need something, we have the luxury of moving tons around, shipping from one location to another, we're asking mills to help us sell.

So how tight is the market? I mean we see the lead time information for flat-rolled, but we don't have it on every smaller product like -- is there a mad scramble for tons out there? Or how would you describe it? And any granularity on the different products would be great.

I mean some days, it feels like there's a mad scramble. Yes, because demand is absolutely getting better and the mill tightness is real. Prices are at a great level. Everybody can make a fair profit. So there's opportunity, when there's opportunity, sometimes people get a little bit excited. So you just have to make sure you manage it. You have to make sure that you don't double order and get yourself in inventory trouble because lead times will always normalize over time. Prices will always regulate over time. But while you have these opportunities, you do have to capitalize on it, but make sure you be a good customer to your mills and a good supplier to your customers. As prices go up, you have to explain to them why it's going up and explain to them that they will have the metal so they can continue to run their businesses.

So beams are pretty full for the rest of the year, but you're getting what you need. How is the plate market? I know that's an important one for you on both steel and aluminum.

The plate market was kind of soft for a couple of years, and then it started to rebound with energy moving -- coming back and shipbuilding and tanks and different defense spending. So it's kind of moved into where it should be. It should be trading above hot-rolled coil and lead time should be extended and there's been a lot of investments from the domestic mills in plate and they deserve to get a fair return. So plate is one of the nice stories of 2026 because it was lagging for the last couple of years?

Yes, there are some plate price hikes, I think, over the last couple of days and maybe that just playing catch up to flat-rolled because they don't do like the $10 a week.

No, they've got a little bit -- they're getting a little stronger.

Yes, they've gotten a bit stronger, but you're right...

And they've gotten all the increases so far.

They've gotten all the increases, yes. Interesting. And then you don't do rebar. So then, it just flat-rolled galvanized margins are improving a little bit. It seems like flat-rolled seems kind of tight, but again, we're getting the product that you need, okay?

Yes. Yes.

What about aluminum. That's one or another service center, a large one here. It had mentioned to me that they were starting some holes. And even if it isn't here now, like how -- with the global dynamics in aluminum, I'm sure, you're well aware of with the smelters direct hit from missiles in Iran -- from Iran, like how secure is your aluminum supply? How is that structured?

Got it. So we feel like it's pretty secure. We're expecting some shortages maybe towards the end of the summer, but that's where you have to have ongoing conversations and understand what your mills position is. And you don't want to have a few weeks go by and be surprised. So you want to communicate with your customers and your mills to make sure that there's not a break in the supply chain.

And of your customers, are there some that maybe might have to not get aluminum? Or how do you -- when you talk about the dynamics of that expected shortage, how do you manage that? I don't know that I've seen this in my career where we just have that tight of an aluminum market.

We think that our customers are going to get the aluminum that they need. They might think that they need extra, but we'll get them what they need so they can keep running.

Okay. Very interesting.

Because we'll trade -- we'll move material from company to company or we'll go back -- we'll go around all of the different mills. But we're in constant communication to make sure our customers have what they need.

Do you think your smaller competitors are going to be in the same boat? Or do you think you're advantaged because of your larger size?

I mean, I think we are advantaged because of size but also we've been a very loyal company to a lot of most of our key suppliers, whether it's steel, aluminum, stainless steel. That's part of our strategy. And because it's not just about buying the most to get the best price. It's about being positioned to get the metal you need if and when you need it. And we -- we also -- we don't do a lot of returns. We don't do a lot of claims. We try to work well with all of our key suppliers. And in prior cycles, this could be a little different. But we've benefited from that long-term approach of working with the domestic suppliers.

Okay. Makes sense. On the demand side, I just want to back up because I think it's fascinating. Really the sentiment late last year was not very good. And it seems like now, to your point, like sentiment is pretty good, and I think the market wasn't prepared for it and not you guys, just broadly speaking, inventories, start of the year kind of low and now that that's partly where the market is a bit leaner now. What do you think flipped to that better demand story. Was it like one thing or just a number of different categories of better demand than expected?

I'll start and then you can chime in if you want. So I mean, I think there were a number of things. And at Reliance, like demand has been okay for us. And even a couple of years ago when interest rates started to increase, and nonresidential construction is the largest portion of our end market. We include infrastructure in there.

There was, I think, speculation that we were going to see a big dip in nonresidential construction activity, but we didn't. It held up. We were getting new projects. We're typically on the smaller projects. So I think that was healthier than some of the larger projects that were more interest rate sensitive. So nonresi held up for us and was a good market for us during that period. We saw blips in a couple of other markets.

But last year, our carbon end markets, and as you mentioned, we're bigger in plate and beams and tubing, a little more than the flat-rolled even though we're a big player in all of those areas. But demand for those products was there, which helped support pricing. It wasn't growing at a significant rate, but it was healthy and holding in. And aluminum and stainless, they were a little softer on the demand side. So when the tariffs were introduced, you didn't have as much strength behind the higher prices.

But going into the fourth quarter, we started to hear customers being a little more of an -- customers were pretty optimistic at the beginning of 2025, talking about reshoring, bringing supply chains closer but then with all the trade activity, there was so much uncertainty, people pulled back. So towards the end of last year, we started hearing more optimism from our customers. Q4, we actually had record shipments at Reliance. And so we were seeing some of that optimism, prices were starting to increase at the mill level. So then, you always get nervous. Are they pulling forward? What will Q1 be?

Q1, we had new record shipments. And so we think that our customers, in general, have settled into the fact that the tariffs are here. They're not going away in a day or a week, and they need to get on with their business. So generally, our customers are optimistic. There's big government spending out there. There's all the data centers. So a lot of positives on the demand side.

Did you want to supplement that or...

Yes. I mean, I think that service centers are kind of a nervous group to begin with, and we're always waiting for the sky to fall, and we want to manage our inventory. And when some of the prices of aluminum, other products got so elevated. You just buy a little bit less and less and then our customers always think that maybe tomorrow, they can buy a little bit better.

So once we got more confident our customers said, it's going to -- actually, the price is going to keep moving up. It's a good time to lock in some orders. I think that has -- this is real. The tariffs are real. So either get on board or getting a different business. And a lot of our competitors or peer groups, they're either didn't have the confidence to restock their shelves at certain prices or just a price to finance with the higher interest rates and higher metal prices. It's hard to have a full array of products. So I think that gives us a little bit of a competitive advantage. We never exited certain products, but we were just really conservative but now we're at more of a normal level at a higher price.

Yes. That's a good point, Steve, the balance sheet to, of course, load up on inventory or maintain inventory even at higher prices. And then...

Something you would take for granted sometimes.

Yes, yes. And we definitely heard some of the smaller service centers on the bemoan interest rate environment or a higher cost of storage and freight and all those things that are probably more manageable for a larger player.

So construction is your biggest end market. Interest rates are going the wrong direction. Is it going to hold up? Does it matter? I mean, it seems like so much is data centers, and that's holding up and you've got the border fence, of course, and that's literally locked in. And so like do you feel pretty comfortable with volumes even in a rising interest rate environment?

Yes. I mean, as interest rates may -- they may stay where they are, they may rise a little bit. I mean, I've read a couple of articles recently saying that some projects may get paused. But that happens all the time, and prices are higher. And then if you have the interest cost on it.

But again, I think for our businesses and the types of projects we participate in, we feel pretty comfortable, and that's what we do, right? There's always different factors, positive, negative affecting all of our different businesses. And we just tell our people to focus on their customers, service them well and be valued to them so that they're going to keep coming back to us.

And a lot of our customer base is also diverse because we're not selling direct to the OEM where if an OEM slows production of a certain piece of equipment, they just stop buying where we're selling to the machine shops and the subcontractors who, if all of a sudden, they lose a piece of business, they go find a different piece of business. And so they're still buying because they have to keep their small companies running and employ their people. So we feel like there's a kind of second level of diversification that we have through our customer base to go out and pick up new business.

I mean, interest rates are still historically low. So I mean, money can't be free forever. And I think that when there's a cost of money, I think people make better decisions with projects or investments that they make.

Those are fair points, but people who are a little younger, still looking at them relative to the recent...

Unfortunately, we know.

Yes. Unfortunately, we've got more gray here and we've seen the higher interest rates. How about some other end markets we talked about construction? What are you seeing in auto and energy maybe?

So in auto, we, again, the dynamics with the economy, interest rates, inflation, the theory that auto demand would slow and it may at a macro level, but our business is in -- we service the automotive industry, primarily through our toll processing companies. What that means is we do not take ownership of the metal.

Ownership, typically, our customer is the mill, the producer, and they make the agreement with the auto company. We purposely don't sell metal direct to the auto industry because the margin profile is usually pretty slim. But when you're just providing services on over 6 million tons of metal a year that with 65% of that going into automotive, the next biggest chunk into appliance that is a profitable business for us. And so we charge for the different services we provide for delivery, for the logistics around it, for storage of the metal.

And with that touching the automotive industry that way, we have not seen a significant slowdown in the business. Our we've continued to grow our capacity, adding lines and square footage for our tolling operations. They continue to fill it. Those companies we have doing that in that space are really good at what they do. One of the companies in the U.S., they're handling a lot of the aluminum for the surface exposed aluminum for the automotive industry. That's very difficult to process without causing issues, and they're really good at that, and that's where we've seen a lot of growth over the years on the aluminum side, still growing on the steel side, if they -- if one of our customers reduces volumes with us, we typically -- there's demand for our company to fill that line with a different customer opportunities. So we've been pretty steady with automotive on the tolling side.

And we have some operations in Mexico. There were a few platforms pulled from Mexico up if the companies had open capacity in the U.S. We did see a little bit of a shift since the tariffs went in. But Mexico is still pretty busy as well, but maybe a little more hesitant currently to make new investments until some of the trade policies further resolved.

We'll see what happens there. I'm not even going to ask you. I don't think there's any point. Yes, sorry, anybody wanted to hear that, but yes. Hey, the sexier end markets, the border fence, the data centers, and aerospace and semi. So starting with the border fence, it sounds like it's a little lower price point but stable or better margins. Is that right? Like what's -- how do you characterize that business?

So a very big chunk of business. We were awarded a contract. It's in 2 phases, not guaranteed, but we believe we have a high confidence level that they'll want to fill the $2.2 billion contract. It's good business. It's a lower price point just because of the product mix. So it's all -- it's carbon steel, primarily tubing. And so it's just based on the product mix. So that our average sell price will be at a consolidated level, will be a little lower. Our gross profit margin, the percent will be a little lower than the company-wide average. But there's a significant volume that -- with a very low operating cost. So we'll leverage that. And so bottom line, it's accretive at good levels to our bottom line profitability.

Okay. Good. Thank you for clarifying that.

Can I ask how we would characterize that? I mean we're pretty happy with that order. We're really happy that we found a few domestic suppliers, one of the best tube and hot-rolled coil suppliers in the world to support us for a long period of time. We had the facilities already in place. We have the people in place, the systems. The government is having us ship it to 10 different subcontractors along the border and for them to give -- have the confidence in us and we're delivering already in our suppliers are delivering. We think it's good for our whole team.

And that extends well into 2027 time-wise?

So Phase 1 is through June 30, 2027. That's like $1.4 billion. And then Phase 2 is like another $800 million that goes, I think, through the end of 2028.

Got it. Okay. So yes, well into that 2028 time frame. So you're busy with the border fence. How exposed are you to data centers?

We haven't been able to quantify it. But when -- like probably 2 years ago, our companies that sell product for nonresidential construction. So putting up the building, they started talking about data centers of being a hot piece of the market, and they were seeing a lot of activity.

But then we started last year, hearing almost every one of our companies talk about something they were doing for data centers. So selling aluminum and stainless, copper into the interior racking and closures, cooling systems. So we're touching it in a lot of ways, but we don't have a percent or a dollar amount that we've been able to identify, but it's definitely -- it's positive for us and everyone is talking about it, right?

It's been a good pull for the whole industry. And it looks like with all the announced projects that are out there, people are trying to lock in supply. We know it's not going to last forever, but -- and then also the energy needed around it. That takes a lot of metal as well. So selling into further build the grid, the grid and energy capabilities, we're participating in that quite a bit also.

Okay. Fair. And I like that you aren't making some number up. I feel like we're not sure where people's numbers come from. So that's totally fair. Last year, late last year, it looked like the mills were talking about a lot more volume, but that was more market share gains. And now and that's specific to mills. But now it does seem like the demand has caught up, so you're also getting some volume, but you didn't import before, so you're not like that much, right? So that doesn't really change for you all.

Yes. I mean -- yes. So the -- I would say the U.S. mills had more of a direct pickup in volume last year with the tariffs as import reduced because whoever those U.S. customers were that used to buy import, we're buying from them. A lot of that looks like it went mill direct. We think we picked up a little bit from that. But it was much more impactful at the producer level than at our level.

And the positive point of that is that our -- maybe the people in our space who would buy traditionally maybe 50% overseas, now that they have to shift more of that domestically. They're paying full price for that. They're not going to be heavily discounted. So they're going to be able to -- they're going to have to charge a fair price where we pride ourselves on a higher margin turning, they're going to have to get into that space. So it puts us more on a level playing ground.

Are you seeing much benefit from the derivative product tariffs? I mean, are we seeing much reshoring yet or early signs?

I mean, we've seen some reshoring and had been, but we think it's increased, again, I think I said earlier, with all the uncertainty around trade policy last year, even though our customers were talking about investing to be able to bring their supply chains closer. They were still a little hesitant to put the money in because can I do it in Mexico? Does it have to be in the U.S.? Is the tariff costs going away and then prices will come down for the equipment or the facilities that I need to purchase.

But I think we are seeing that. The derivatives -- it was a really good sign. We think when they put that in place and started putting derivative tariffs in place, but it's really confusing, to be honest. And so it's hard to tell you exactly what that direct benefit has been?

But it should be positive for the industry.

We'll stay tuned, maybe next year's conference. We'll have some more color on that. I want to talk about aerospace. I was told one time by somebody at your firm that your aerospace margins are like just really, really favorable. And this last couple of years, aerospace supply chains have been kind of destocking. So what are you seeing in terms of timing for a turnaround there?

Yes. So maybe to put that in context, too, back certainly pre-COVID and maybe even earlier than that's probably when you heard that because in our aerospace businesses, it's higher, like higher value per pound product. And at the pretax income margin level, our aerospace businesses did use to generate higher returns than a lot of our like carbon steel general line businesses. But with the dynamics that have happened in the market with carbon prices elevating, also with our carbon companies doing more value-added processing. That margin profile is more comparable because the carbons come up. So we don't have -- we used to talk about that, aero and energy, but we don't have as much differentiation anymore because of the improvement in the other parts of our business.

That being said, in aerospace, we do have a company or two that are selling like specialty products, a lot of stainless alloy products into aerospace that are very high per unit values. And when post-COVID, when there was a lot of scarcity, 80-week lead times, pricing was very good, margins were very good. That's come down a bit, and that's where we've talked about excess metal and the supply chain, the last couple of years for those products. And we are seeing that being worked down. And so we think, overall, the supply chain is getting healthier and we should start to see some improvement there.

That's a small part of the business. Our aerospace business, we also sell a lot of aluminum heat-treated plate. And that's been pretty consistent. Pricing generally holds up, the pricing is a little different. But we do anticipate with build rates at the airplane manufacturers increasing and they're working through their metal that will start to -- potentially the back half of this year, we'll start to see a little more activity. Anything you want to add?

I mean you said favorable margins. I mean that's a big investment in some of these products, like Karla said, 80-week lead times. You need to charge a fair margin to carry everything. You're going to sit on material for a long time. So heat-treated aluminum was on allocation. So to manage your order book, you need to charge a certain price to stop the panic buying in some cases.

Sure. Fair enough. All right. I don't know how we only have 2 minutes, and I didn't even get to talk to you about capital allocation, the Reliance opportunity there. That seems to me like, obviously, no one outside the firm is able to define what M&A you might have going on. But it's been a little bit of a lull, and it seems like sometimes that means you're ripe to do one, but just -- what's the -- in your words, obviously, what's the M&A set up here? How attractive are the opportunities, especially now that your multiple is pretty -- I don't think you're finding things at the same multiple that you're garnering. So like how does that change the dynamic for attractive opportunities?

Well, I would say, we're always ripe to do the right acquisition. We just have to find it and then we have to be able to agree upon the value with the sellers. And sometimes, our expectations are different than theirs. I think a lot because we look at it for the long term, and we're not paying off of trailing 12 months because we're in the industry. We understand the volatility that goes along with it.

But there are -- we've been actively looking at opportunities out there. We've put in some offers on some, but they got some higher offers from other people. Some of those, though the deals never -- haven't closed yet, so we might see those come back around.

But again, we don't want to -- we don't want to do a deal just to do a deal. It has to be the right long-term fit for the company. From our standpoint, just because our multiple is higher, that doesn't mean it increased the value of a target company. We still are looking at them consistently and at how we value them. But we're looking at stuff now. We'll continue to look at stuff. And hopefully, we'll find some good opportunity.

Is private equity that competing with you on some of those or other service centers or other industrial companies or all of the above?

All of the above, yes.

Okay. Cool. We'll stay tuned. I guess, we ran out of time. Thank you so much, really nice having you here.

Yes, thank you. Thanks, everyone.

Thank you.

Greetings, and welcome to the Reliance Inc. First Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Kim Orlando with Investor Relations. 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. I am joined by Karla Lewis, President and Chief Executive Officer; Steve 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.

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. 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. 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. 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 pretax income and nearly 37% year-over-year growth in non-GAAP earnings per share to $5.16. As previously announced, we also secured 2 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 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 U.S. 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.

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. Our disciplined 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.

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 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.

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. As we enter the second quarter, extending lead times at our mill suppliers also bode well for a continued strong pricing environment or 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, Steve Koch.

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. 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%. 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.

Carbon volumes remained our primary growth driver with particular strength in nonresidential construction and manufacturing applications. Aluminum and stainless product volumes also contributed to year-over-year volume growth at higher per ton profitability levels. 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. 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, elevating a strategic advantage we hold in accessing metal from our domestic mill partners.

Turning to our end markets. Nonresidential construction represented roughly 1/3 of our first quarter sales, primarily from carbon steel tubing, plate and structural products. 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.

Our strong position in these markets outweighed lower activity in certain private nonresidential construction markets. Our nonresidential 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 our 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. 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 first quarter sales. 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 record backlogs and increased 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 first quarter 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 demand of the automotive market. 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. 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.

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. 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. 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 year quarter. 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, 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.

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 the first quarter of 2025. 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 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. 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 pretax income to $354 million with an 8.8% pretax 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. 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 year 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 the first quarter 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 5x compared to 4.9x a year ago, 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. We have approximately $529 million remaining available under our current share repurchase program.

As of March 31, 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. 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 international trade policy and the conflict in the Middle East.

We anticipate second quarter 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 first quarter 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 first quarter 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.

[Operator Instructions] And our first question will come from Martin Englert with Seaport Research Partners.

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 2Q, given the improving broader price backdrop as well as volumes, do you think you're being conservative with the implicit 2Q 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?

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. 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. 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 just based on the product mix 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.

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. 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 will be something that's dilutive, but not added it to the bottom line?

Yes, I think that's right, Martin. It's -- 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 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 end markets we're selling into, 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.

Okay. So some transitory issues and I shouldn't say issues, but trends and 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, yes.

Correct. Yes.

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. And I think I've also heard like within oil and gas, maybe if you can 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.

Yes. 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. 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. 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, 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.

And Martin, I would add that from an end market perspective, we saw the ISM manufacturing index for 3 consecutive months, stay above 50%, and we saw that translate into some increased activity in the first quarter. So -- 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, 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 3 years. So there's some potential tailwinds there.

Yes. 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.

And our next question comes from Bennett Moore with JPMorgan.

Karla, Steve, Arthur, 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? And is the pricing structured such that if broader market pricing were to fall that you could actually offer down protection to gross margins in such a scenario?

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 start-up ramp-up phase. 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. 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. 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.

Understood. 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 bps still the right way to think about the margin impact and if possible, could you share what the -- what share of aluminum was in relation to the LIFO expense past quarter?

Yes. 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, 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. 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, 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. 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 that we then have to help cover our SG&A and other costs and contribute at a higher level to earnings dollars.

Yes, I was just going to say that we're on that moment, I'm despite the margin distortion that Karla mentioned, gross profit dollars are up year-over-year to the tune of almost 17%, 18%. So it shows that profitability has improved significantly on those sales is just to Karla's point, when you introduce a 50% tariff that creates some noise. And 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 1/3. So -- I mean, let's just say, prices level off and say 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 dynamics. So net-net, these tariffs have contributed to higher profitability across our product portfolio including aluminum.

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.

[Operator Instructions] We'll go next to Samuel McKinney with KeyBanc Capital Markets.

And we 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 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?

Yes. 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. But yes, 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 cost if demand is stronger. So yes, so we would agree with the way you're thinking about that, Sam.

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. 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?

Yes. So price is 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. We are doing some value-added processing, 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. 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 smaller than this, but a pretty decent-sized border wall. They called us the Sense 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. 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. We didn't have to go out and secure some of the new equipment or property to be able to service the project.

Yes. And I'd like to add to that, a majority of the products being shipped into our Apollo structural sections, but there's also a lot of sheet that we're utilizing one of our processing plants in Texas -- So like Karla mentioned, we have planned to set up all along the border. So 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.

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

Just a quick one on the current inorganic growth pipeline. Again, you have been a little bit since you guys have done pretty much meaningful acquisition, just wondering how the pipeline currently looks and how you're thinking of capital allocation between organic and inorganic growth going forward?

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. 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 where we've had a consistent appetite to acquire good companies. 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. Like I said, then there's valuation. So we've 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, to choose between our capital allocation priorities. We've been able to execute on the acquisitions we 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, and there's no change to that.

Appreciate that. And if I could just one more. Going out data center and energy infrastructure. Just real quick, what percentage of non-resi tonnage is data center-related how has that mix shifted year-over-year? And then within energy infrastructure, I guess, how much solar exposure do you guys have?

Yes. 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. Well, certainly, we often know what project is 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?

Yes. 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 no direct, which is consuming a lot of tube and hot-rolled coil, which is keeping the mill is already busy and keeping prices at a really good level for the market.

We take a follow-up question from Bennett Moore with JPMorgan.

I wanted to come back to the semiconductor markets real quick. And I'm wondering -- what sort of opportunities do you see to gain share, I guess, from foreign ship makers? And if you could remind us what that qualification process looks like and the timing to do so?

Yes. So -- we -- 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 that we're selling into the equipment, semiconductor chip equipment manufacturers. And that's where we've seen some positive activity. The last quarter or two, we've seen 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. And then our other kind of specialty semiconductor company. They do sell to the chip makers, equipment makers, they have locations in the U.S., South Korea and China. 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. And that's where we have seen pullbacks by a lot of those customers or just delays in building the chip plans, especially here in the U.S. 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. And we're expecting to start to see some increased activity for that company around the data center market in the near term.

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 within and already picking up some business.

And I guess I'll squeeze one more, if I can. I 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 the H1 is a little bit below?

So the -- we already have those programs -- 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, including the Joint Strike Fighter. So it will add but should not be a noticeable shift on any margin profile.

And we have a follow-up from Martin Englert with Seaport Research Partners.

For the DHS contract, any more you can share with the volumes associated with Phase 1 and the incremental volumes -- the rest of the contract, I guess, completes?

Yes. So Martin, we have not disclosed tonnage under that. We did disclose dollar amounts, which were Phase 1 and Phase 2, the total is $2.2 billion. Phase 1 is $1.4 billion, which runs through...

Mid-2027.

Yes, I think at the end of Q2, 2027.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Karla Lewis for closing comments.

Thank you, and thanks, 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. And I'd really like to thank our Reliance family for all that they did for a very strong first quarter we look forward to them doing throughout the rest of 2026 and doing it safely. 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 KeyBanks, Industrials and Basic Materials Conference. 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. Goodbye.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Good morning, everyone. This morning, we're starting with Reliance. And with us today is CEO, Karla Lewis. Karla, over to you.

Good morning, everyone. Thanks for joining us today, and thank you to BMO and Katja for inviting Reliance to the conference.

We're just going to kick it off with a really quick overview of who Reliance is. We're a metal service center and processor. Most diversified and largest company. We've been in business since 1939. We've grown through acquisitions, 76 acquisitions completed since our IPO in '94.

We think we have a bit of a differentiated approach with a really local focus where we are generally delivering to customers within a 200-mile radius. Decentralized operating model, putting decision-making close to the customer. We really focus on managing our inventory, strong pricing discipline and have limited contractual sales.

This shows our product diversification. Again, we believe, the most diversified in the industry. And that's on purpose, because not all metal prices go up and down at the same time and we sell into cyclical end markets, so we think the diversification is important.

Last year, $14.3 billion in sales, with an average order size of about $3,000. 40% of our orders: customer calls today, we deliver tomorrow. And that's really kind of our sweet spot that we think helps us drive up our gross profit margins, which you see here our trajectory over time, rising our gross profit margin. The sustainable part of that is really through doing increased levels of value-added processing.

Recently, we've, in the last few years, been focused on growth. And our people have really been out there taking market share, and we've been growing our tons shipped significantly more than the industry average. Countercyclical cash flows, so we seem to perform well with our model through different cycles.

As I mentioned, we continue to invest through both organic growth with capital expenditures and also through acquisitions, and also focus on returning value to our shareholders through both our dividend, which we just increased again for the 33rd time since our IPO, and also through share repurchases.

And just a visual of our stock price compounding above the S&P 500 over the years. And that's the intro.

Perfect. And if anyone has any questions, please send them in through the app. But maybe starting off with the current market conditions. Can you talk a bit about your major markets, what you're seeing, what your customers are saying?

Yes. As mentioned, we try to be diversified and sell into many different end markets. Many times, we don't know exactly where our product is going because we sell to a lot of subcontractors of the OEMs. We do some sales direct into OEMs, but a lot through small job shops and tiers 2 and 3.

Our largest end-market exposure is in nonresidential construction, which we would also throw infrastructure in there. For Reliance, similar to many other companies, data centers has been a big driver of demand for all of us.

And at Reliance, we have the part of the data center that would fit into the nonresidential construction part with the building, but we're also selling products that would go into the interiors of the building, also into the energy grid. We're selling tubing, we're selling to go into the racking on the interior. We're perforating metal for the enclosures around the servers. We have tubing for some of the cooling systems and some of our high-end liquid tubing that the water travels through for the coolants. We're selling copper into it. So we're touching data centers in many, many different ways with our diversified product mix.

But data centers in the nonres side. Infrastructure has been strong. We also have continued to see a lot of public infrastructure works with hospitals, airports, schools; that has stayed strong for us.

Reliance and service centers, typically, we're selling into like 5-story and below buildings. We're not doing the big high-rises. There's been a lot of bridge work. General manufacturing. There's a lot going on in the defense world. The government has been pretty active, and then a lot of related companies around that. We've seen consumer products come back a bit, industrial machinery, some of the heavy construction equipment. Ag continues to be weak, and we see that continuing to lag.

We also touch automotive through our toll processing companies. Toll processing means that we don't own the metal, so we don't take on any price risk. But we inspect and process and deliver a lot of metal into the automotive companies with the steel and aluminum producers as our customers. And we've seen auto holding up, at least for the part of the business that we have.

Aerospace, we sell a lot into aerospace. There has been a bit of an overhang in the supply chain for the last 1.5 years to 2 years. We are seeing that being worked out. And with build rates improving in 2026, we look for continued improvement in that end market as we continue through 2026.

And then also semiconductor, we touch. That had been a really hot market. It's, for us, it's been a little slower the last couple of years because again they also bought heavy coming out of COVID and so are still working through some of the metal that they have in their supply chains.

But overall going into 2026, our customers are optimistic. We're seeing a lot of activity, a lot of inquiries, a lot of big projects out there. Again, a lot of government and defense projects that are in the works. So we're excited about 2026.

And we do have a follow-up question from the audience on the semiconductor business. The question is, how big is your semiconductor business? And what kind of growth do you see this year and next year?

Yes. So for us, with semiconductor, we generally sell into kind of 2 different channels in semiconductor. One is really to the equipment makers. And that part of the business, we have seen a little bit of improved activity for certain types of metal. And what we're selling in there is a lot of like thick general engineering aluminum plate, is the main product we're selling.

There has been a shift of some of that business going overseas the last couple of years. And with the tariffs, maybe with the tariffs, I don't know these days, but some of that metal has not been coming back to the U.S. the way it had been. So that's keeping that, we think, from coming back more significantly than it might. But we do think that we'll continue to see modest improvement in 2026, but that's probably more towards the end of 2026, going into 2027. And I think semiconductor in total is a little less than 5% of our total revenue dollars.

And then we have a company that what they do for semiconductor is more in the project phase, when the semiconductor fab plants are being built, and then for repair and maintenance afterwards. And they're actually manufacturing the ultra-high purity gas systems that are kind of the plumbing within the fab plants that take the clean gases and filter those throughout the plant. And that, more specifically for us with the customers, with our largest customers in that space, they've had a lot of starts and stops and slowed a lot of their projects of building. So we're not certain when that comes back; it's somewhat customer-dependent.

And maybe shifting a little bit on the pricing side. The underlying commodity prices have mostly been moving higher. But there were some, I guess, challenges with pushing prices higher on the aluminum side. Is that behind you now? Are you able to fully push all the prices to your customers?

Yes. I mean 2025 was a unique environment, and we're really proud of what our people out in the field were able to do in that type of an environment. And on the carbon steel side, in early 2025, when the tariffs came in, our people executed really well and expanded gross profit margins, which is our typical model, because we have limited contractual sales, because it's kind of that next-day delivery.

Typically, we buy in the spot, we sell in the spot. So when the customer calls us with an order, we're pricing that order. And if there's an announced mill price increase, we pass that price increase -- we try to pass that price increase on right away. And so there's a lag before we get the higher-cost metal in. So typically, we can expand our gross profit margin when mill price hikes are announced.

And so we were able to do that primarily on the carbon steel side first half of 2025. But then the aluminum tariffs came in, and those -- the U.S. aluminum producers actually had to pay the tariffs. So their costs went up, our costs went up significantly. Customers were very aware. So on the aluminum side, we had more pushback because demand wasn't there. And that's what's important on the carbon side. We were able to get the higher margins because there was good underlying demand to help support that.

On the aluminum side, demand was weaker. So it's much more difficult to pass through a price increase when people aren't buying. And so we were not able to do our normal where we would push through the full price increase day 1 or even before we had the material. So we did see -- we didn't see the expansion in our aluminum margins and stainless steel also in the back half of 2025 the way we typically do.

By the end of the year, we had -- we're covering the higher cost, but prices keep going up too. The Midwest premiums at record levels, which is good for us. We're still making more gross profit dollars per pound on the aluminum we're selling, which is good for us. It's just when you do the math on the percent, it compressed a little bit.

And so coming into 2026, aluminum prices are still elevated, which is good for us. And we'll continue to push this through. We may not get the margin on top of the cost, but we'll get the -- we'll fully cover our costs. So we expect, and especially if demand improves, as we talked about aerospace and some of the other markets, we should see our margins come back to more normal levels.

And to your point on the margin side, right, currently staying towards closer the lower end of your sustainable range. When you look maybe even longer term -- in the past, we talked about adding more value-added processing that could support higher margin. Is that still a possibility over time that you could drive the sustainable gross profit margins higher?

Yes. So we did -- we do talk about, and we had a slide on the intro, that as we've done more value-add processing, we've been able to drive our gross profit margin higher. And the sustainable part of that we did talk about being driven a lot by the increased levels of processing that we're doing, because the processing is not dependent on the metal price, the underlying cost of our metal. But when prices are higher and demand is strong, that also adds into our overall gross profit margin. But it's hard to quantify how much of that lift comes from the pricing environment.

But we do believe a 29% to 31% sustainable gross profit margin is our target on an annual basis. We did dip a little below that in 2025. No reason for a downgrade, of course, because we think that that's transitory. And we think some of the pressure on some of the higher-value products we have, particularly in aerospace and semiconductor that we talked about, were a little bit of a headwind on that margin. But long term, we still expect to be in that range. And we are continuing to invest in value-added processing equipment and expanding facilities.

In 2025, we increased our tons sold by over 300,000 tons. That's pretty significant in our space. And again -- and we were able to keep our gross profit margin up. Most of that growth was in carbon steel products where we did increase our gross profit margin. So we hear some questions, "Is Reliance going more after volume than after margin?" We're going after both. And we think, given the market in 2025, our people did a great job of balancing, maintaining the margin along with the growth.

We do have a question from the audience on the strategy to grow volumes. And it's how do you balance volume growth while also ensuring you're getting the full margin for the services you provide? And is there a willingness to trade margin for volume?

Yes. So again, as I just mentioned, our people in the field ask us, "Well, what do you want? Do you want volume or do you want margin?" And we want both, right? We think bottom line is growing our earnings dollars.

So there's some business that's good business, it might not be 32% gross profit margin, but it might be 27%. And it might be good, we're making profit dollars on that, so we should go after that business. Because we also have inflation impacting us, and so our costs are going higher. We need earnings dollars to be able to cover that.

So it's that balance of still going after good business, but there's good business out there at 27% margin, but you have to still be able to get 35% margins on some of your other products. And it will vary for us by company depending upon what their product mix is. Because not all markets, not our margin profiles are the same for the different products and end markets we sell into. So there's a lot to balance there. But we think bottom line for our shareholders, the more earnings dollars we can generate for you, the better. But it is still a strategy to focus on both volume and margin.

And then typically with -- on the -- when we see focus on growth on the upstream steel or aluminum side, it comes with a lot of CapEx spending. Will you have to spend more on CapEx in order to grow?

Well, I think we've done a really good job growing over the last couple of years. We had that one chart showing our tons shipped growth. We had record tons shipped in 2025. We have had kind of a higher-than-normal capital expenditure budget in 2023 and '24. It came down a little bit in '25. And our budget for 2026 is a little lower than it has been, but it still has a lot of growth opportunity, again, mainly through value-added processing equipment. We do have some greenfields and some expansions.

But we really have a focus this year on really making sure we're utilizing the spend of the last couple of years. And so that's really a focus for us. And we can do more with the equipment, with the spend that we've already incurred, and that's what we're really pushing our people to do.

But we will continue to grow, and our CapEx budget for 2026 is at $275 million. But as I mentioned earlier, there is a lot of customer optimism, a lot of jobs being quoted out there, that we're fully capable and willing to increase that budget if we see good opportunities brought to us by our customers. And that's really how our CapEx budget is built. It's from opportunities with customers, and we want to be there to support them in their growth.

And I think you mentioned the CapEx spending for this year. If I'm not mistaken, half of that is directed to growth, right? Can you maybe talk a bit about what type of projects, if there are larger projects that you're investing in?

Yes. So for Reliance, which is different than a lot of other companies here you'll talk to, a big CapEx spend for us is maybe $40 million. And that's buying property, building a new service center facility and putting equipment in it. I think our largest-ever CapEx spend was like $70 million.

If you're a producer or a miner, you're spending hundreds of millions to billions of dollars on a single item. We're buying saws for $600,000 or $100,000 each. We're buying a lot -- there's been a big advancement in both flat and tube laser processing equipment. Those pieces of equipment might be $1 million to $2 million. If we put in like a full slitting line for flat-rolled products, that might get up to $5 million to $6 million, maybe $10 million on the high side. So it's a lot of individual pieces of equipment that add up to that total.

And Karla, you spoke earlier about your diversified product mix. Are there any products that you would still like to grow more than others?

Well, we'd like to grow all of our products more as long as it's profitable business. And so with our service centers, it's not like a Walmart where everybody carries the same thing. Most of our service centers, we have 310-plus service center locations, predominantly in the U.S., North America range, but a few overseas.

And a lot of them specialize. Some sell primarily into the aerospace industry, and they have to have certifications for that. Some have auto certifications. We've got general line companies that sell into multiple different industries. Some focus more on nonresidential construction.

So there's typically -- even though we might have 3 to 10 locations in an urban area, there's still room for us to grow in certain products there. So we're very opportunistic and look to our people running our businesses to tell us what the customer need is in that area. And then we can grow organically, or we look at the acquisition opportunities that come before us and evaluate. But there's room to grow quite a bit more in most markets.

Maybe staying on the acquisition side, we've seen 2 larger deals announced or mergers announced. How do you think that impacts the industry? Is that a positive from your perspective? Or how are you looking at it?

Yes. So it should be a positive for the industry. Because what we look for -- we think we're pretty good at pricing discipline. Our gross profit margins are among the highest in the industry. But we do have competitors. And so typically, the fewer competitors, the more pricing discipline you see. So if those mergers result in better pricing discipline because of fewer players in the market, that would be something that we and everyone would benefit from.

Also when there are mergers like that, there is disruption. And so for Reliance, we also look at it as opportunity in a couple of other ways. One, that we might pick up some customers. We might pick up some good salespeople or employees with the disruption going on. And also with the 2 mergers that Katja is speaking about, that creates bigger, more diversified companies that might be more attractive acquisition targets for Reliance at some point in the future.

And then from your perspective, as you mentioned earlier, you -- historically, you've been very acquisitive. Can you talk about right now what you're seeing in the marketplace? Are there any good opportunities for you to grow through M&A?

Yes. So we did not complete any acquisitions in 2025. We completed 4 in 2024. But we were busy looking in 2025. So just because we don't complete any doesn't mean that we're not looking. Our appetite is still there. But as Reliance gets bigger and we continue to grow, and we have really solid management teams, we might be a little more selective sometimes.

But we really weigh the opportunities. And as I mentioned earlier, we grew our tons sold by over 300,000 tons last year. That's equivalent to doing an acquisition of a company of like $650 million plus. And we paid a lower price, so to speak, to grow those tons than if we would have paid a premium to acquire a company.

But that doesn't mean -- I mean, we still want to buy good companies that fit. But we are -- just because we didn't do any acquisitions last year doesn't mean we're not growing the company.

Maybe lastly, quickly on shareholder returns. How are you thinking about it this year and longer term?

Yes. So we do think about shareholder returns over the long term. And as I mentioned in the intro, we think we've been pretty active and pretty balanced. We've, as I mentioned, we've paid a quarterly dividend for, I think, 66 years now. We've increased it 33 times. We want -- we've never not paid our dividend and we've never decreased our dividend. So we want to consistently grow the dividend at a sustainable level.

And then we're opportunistic on our share repurchases. So we look at the market. And the one thing I think that's important at Reliance is we've been able to be very balanced with our financial strength. We don't have to pull back in shareholder returns to be able to do an acquisition. We're able to execute on all the good opportunities we see in front of us.

Perfect. Thank you so much, Karla.

All right. Thank you, everyone. Thank you, Katja.

Greetings, and welcome to the Reliance Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando with Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's Fourth Quarter and Full Year 2025 financial results. I am joined by Karla Lewis, President and Chief Executive Officer; Steve 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.

Good morning, everyone, and thank you for joining us to discuss our fourth quarter and full year 2025 results. In 2025, we demonstrated strong operational execution and continue to expand our market share, underscoring the strength of our business model amid a complex macroeconomic backdrop and competitive operating environment. Our commitment to smart profitable growth once again fueled strong results. In 2025, we increased our tons shipped by 6.2% and resulting in record tons sold of 6.4 million, outperforming the industry by over 7 percentage points, with our U.S. market share increasing to approximately 17% in 2025 from 15% in 2024.

In addition, we increased our tolling tons by 1.2% to 7.4 million customer-owned tons processed through our tolling operations. Our shipment growth was in carbon long and flat rolled products where we also increased our gross profit margin year-over-year. By continuing to focus on exceptional customer service, and maintaining our strong relationships with key domestic suppliers, we were successful winning new business, and we're able to better leverage our operating expenses over higher volumes leading to increased FIFO profits that further strengthen our long-term industry-leading position.

We increased our FIFO gross profit margin by 90 basis points in 2025 compared to 2024 through strong pricing discipline, mainly on increased mill prices for carbon products, supported by healthy demand. However, significant tariff-related aluminum cost increases were more difficult to pass through due to plentiful supply and soft demand, especially in our commercial aerospace and semiconductor markets.

Our 2025 non-GAAP gross profit margin of 28.8% is just outside of our estimated sustainable range, which we attribute primarily to tariff-driven annual LIFO expense of $114 million. We expect our gross profit margin to improve in 2026 as the impact of tariffs and trade uncertainty lessons, maintaining our annual range of 29% to 31%.

We increased 2025 non-GAAP FIFO pretax income by $80 million. However, full year 2025 earnings per diluted share declined 10.2% from 2024. Excluding the impact of significant LIFO adjustments in both periods, 2025, non-GAAP FIFO earnings per diluted share increased 13.5% year-over-year, thanks to the talented teams we have throughout the Reliance family.

Our strong cash flow generation continues to fuel profitable growth and deliver meaningful returns to our stockholders. In 2025, we generated $831 million in operating cash flow, which we redeployed into high-value initiatives, including investments in advanced processing equipment and other projects that support our long-term growth objectives.

For 2026, we're announcing a capital expenditure budget of $275 million as we focus on maximizing returns on the significant capital deployed in recent years.

Including carryover spending, we anticipate 2026 total CapEx spending of $300 million to $325 million, with approximately half directed toward growth initiatives.

Our scale, financial strength and operational capabilities position us to pursue compelling opportunities that may emerge in 2026, including acquisitions of well-run profitable businesses that broaden our footprint and strengthen our portfolio of metal solutions and through additional capital expenditure investments as attractive customer opportunities arise.

We also remain committed to returning capital to our stockholders, delivering $849 million in 2025 through dividends and share repurchases. We increased our dividend by 4% to an annual dividend rate of $5 per share in the 2026 first quarter.

In summary, Reliance's diversified business model and unrivaled scale helped to offset market-specific weaknesses and support stable performance through economic cycles. Our expansive capabilities and financial strength enable us to invest when others retreat, positioning us to capture market share and accelerate growth as markets stabilize and improve.

As we entered 2026 in a healthy demand and strong pricing environment, we are seeing increasing optimism from our customers and increasing activity around large-scale projects across several key end markets, including infrastructure, data centers, energy and defense.

Reliance has the capabilities, talent and capital to continue to grow both our core small order, quick turn business, while also winning new business from these larger projects. We are excited to continue delivering disciplined profitable growth in the year ahead.

I'll now turn the call over to our COO, Steve, who will review our demand and pricing trends.

Thanks, Karla, and good morning, everyone. I'd like to begin by recognizing our teams for their solid operating performance and continued commitment to safety. Our 2025 total recordable incident rate improved in 2025, reflecting the discipline and care they bring to serving our customers each and every day.

I also want to acknowledge our mill suppliers. When tariffs were imposed, our supply chain remained uninterrupted, which we attribute to our long-standing relationships with our mill partners and our disciplined supply chain strategy. Finally, we appreciate our customers, and we look forward to continuing to be their valued reliable metal solutions provider and supporting their growth and success in 2026 and beyond.

Turning to our demand and pricing trends. Fourth quarter tons sold declined 5.4% from the third quarter of 2025 and increased 5.8% from the fourth quarter of 2024, significantly outperforming the service center industry, which reported a decline of 1.2% over the same period last year, and exceeding our expectations of up 3.5% to 5.5%. Delivering this level of outperformance in a market shape by cautious buying and intense competition reflects the strength of our smart profitable growth strategy and the benefits of our continued investments.

Carbon volumes remain the primary driver of growth, particularly in the nonresidential construction and certain subsectors of manufacturing.

Our fourth quarter average selling price increased about 1% from the third quarter of 2025, exceeding our expectation of relatively flat pricing. Aluminum pricing continued its upward trend response to tariffs raising the Midwest premium. As Arthur will discuss in our outlook, we believe pricing for most products will improve in the first quarter of 2026.

Turning to our end markets. Nonresidential construction represented roughly 1/3 of our fourth quarter sales, primarily from carbon steel tubing, plate and structural products. Shipments remained strong in the fourth quarter, supported by overall demand in heavy civil and public infrastructure work, along with record levels of data center and related energy infrastructure builds. These areas of strength outweigh pockets of softness in private nonresidential construction, our broad participation and scale across a wide geographic footprint continue to support market share gains in this space.

General manufacturing, also about 1/3 of fourth quarter sales, remained highly diversified across products, industries and geographies. Shipments increased year-over-year, driven by strength in military, industrial machinery, including data center equipment, consumer products, rail and shipbuilding. We are also seeing higher nuclear-related demand tied to emerging small modular reactor activity and data center energy needs.

Our performance across key product groups and our ability to move quickly into emerging markets continue to differentiate Reliance in the important general manufacturing market segment.

Aerospace products accounted for approximately 10% of fourth quarter sales. Commercial aerospace demand remained subdued due to continuing elevated inventory levels in the supply chain, which we anticipate will gradually improve in 2026 as record OEM backlogs convert to increased build rates.

Defense and space-related aerospace programs remain consistent at strong levels throughout the fourth quarter. Automotive, which we primarily serve through our toll processing operations, and therefore, are not included in tons sold, represented about 4% of fourth quarter sales. Underlying demand has remained solid, supported by our recent capacity investments. Semiconductor market remained under pressure due to ongoing excess inventory in the supply chain during the fourth quarter.

Overall, our people, our strong mill relationships and our commitment to customer service continue to differentiate Reliance and support solid performance.

The capital investments we've made over the past several years are meaningfully contributing to our growth, and our commercial and operational discipline drive our industry-leading profitability.

I will now turn the call over to our CFO, Arthur Ajemyan, to review our financial results and outlook.

Thanks, Steve, and thanks, everyone, for joining today's call. We delivered a strong fourth quarter with record shipment levels, driving continued market share gains, improved profitability and solid cash flow. As Steve mentioned, volumes were strong and pricing improved 90 basis points sequentially, mainly due to tariff-driven increases in aluminum product pricing. Although we're able to pass through most of the tariff-driven aluminum cost increases during the quarter, ample supply limited the incremental margin benefit, resulting in modest near-term margin compression.

Higher-than-anticipated aluminum costs contributed to fourth quarter LIFO expense of $39 million, above our $25 million estimate, and increased full year LIFO expense to $114 million compared to a $100 million annual estimate. On a FIFO basis, which is how we measure our day-to-day performance, fourth quarter non-GAAP pretax income rose 28% year-over-year. This reflects the combined benefit of roughly 6% higher volumes and 6% higher selling prices, which more than offset the modest 30-basis-point decline in our non-GAAP FIFO gross profit margin.

Non-GAAP fourth quarter earnings per diluted share were $2.40, an 8% increase year-over-year. LIFO expense represented $0.56 per share for the quarter compared to the $0.35 per share assumption embedded in our guidance. Including the year-end LIFO and income tax true-ups, our results reflected a net unfavorable impact of $0.25 per share. Adjusting for these items, non-GAAP EPS would have been within management's guidance at $2.65.

For the full year 2026, we currently estimate LIFO expense of $100 million, mainly from higher carbon and aluminum product costs. Accordingly, we expect $25 million of LIFO expense for the first quarter of 2026.

Turning to expenses. Same-store non-GAAP SG&A expenses increased 6.7% in the fourth quarter and 4.4% for the full year compared to 2024, driven by inflationary wage adjustments and higher variable warehousing and delivery costs associated with our increased tons sold. We also incurred higher incentive compensation in both periods from improved FIFO profitability.

On a per ton basis, same-store non-GAAP SG&A expenses were down nearly 1% for the full year, highlighting the operating leverage generated by our growth strategy.

I'll now address our balance sheet and cash flow. We generated strong cash flow from operations in the fourth quarter of $276 million. Our ability to consistently produce strong operating cash flow across market cycles supports our disciplined and opportunistic capital allocation strategy. During the quarter, we funded $73 million of capital expenditures, paid $64 million in dividends and repurchased $200 million of our common stock at an average price of roughly $279 per share. During 2025, repurchases reduced our total shares outstanding by 4%. And we have about $763 million available for additional share repurchases under our current share repurchase program.

In addition, we increased our quarterly cash dividend rate by 4.2%. This marks our 33rd increase since our 1994 IPO to a current annual rate of $5 per common share.

At the end of the year, our total debt was $1.4 billion. Our leverage position remains favorable with net debt-to-EBITDA ratio of less than 1, providing significant liquidity to support continued execution of our capital allocation priorities.

Looking ahead, we expect healthy overall demand in the first quarter of 2026 in several key end markets, subject to ongoing domestic and international trade policy uncertainty. For the first quarter of 2026, we estimate our tons sold will be up 5% to 7% compared to the fourth quarter of 2025, which is consistent with seasonal trends and relatively flat compared to the first quarter of 2025, mainly due to tariff-related demand pull forward in Q1 2025.

We expect our average selling price per ton sold for the first quarter of 2026 will improve 3% to 5% compared to the fourth quarter of 2025 due to a healthy demand and higher mill pricing. As a result, we anticipate these dynamics will contribute to a modest improvement in FIFO gross profit margin in the first quarter. Based on these expectations, we anticipate first quarter 2026 non-GAAP earnings per diluted share in the range of $4.50 to $4.70, reflecting year-over-year growth of approximately 19% to 25% and inclusive of quarterly LIFO expense of $25 million or $0.36 per diluted share.

In summary, we are pleased with our strong organic growth, continued market share gains and disciplined pricing execution in 2025. While we experienced some temporary margin headwinds from tariff-driven cost increases and excess inventory in the supply chain for certain pockets of the commercial aerospace and semiconductor end markets, tariffs had had an overall positive impact on our business with higher selling prices supporting a meaningful year-over-year increase in FIFO profitability as 2025 progressed and as we head into 2026.

This concludes our prepared remarks. Thank you again for your time and participation. We'll now open the call for your questions. Operator?

[Operator Instructions] The first question is from Katja Jancic from BMO Capital Markets.

Maybe starting on the gross profit side. So you expect the margin to improve modestly in first Q, which I think, based on your guide, implies you will be getting kind of closer to the lower end of your sustainable range. How should we think about margin in the rest of the year? In other words, is there opportunity to further increase it? Or is this the new norm where you might be leaning more on the lower end of that range?

Katja, so from a gross profit margin standpoint, while we did have some headwinds during 2025 most specifically on the aluminum side with the tariffs driving up the price of the Midwest premium significantly. And typically, we can get ahead of those price increases, and it was more difficult given the reason for the price increase being tariff-driven, there was plentiful supply of inventory -- aluminum inventory available and demand was soft to okay. So typically, when you have price increases, they're driven by healthy increasing demand, and that wasn't the backdrop for the aluminum price increases also with stainless. So we had a little margin pressure there. But what we were really proud of were our teams on the carbon side who were both growing their tons sold significantly and getting ahead of the price increases because those increases, there was demand to support that.

And as we go into 2026 and towards the end of 2025, you saw continued price increases in certain of the carbon products that are strong, and we're seeing really good activity and increasing demand as we go into 2026 for those products. So that -- those are really good markets for us.

On the margin pressure on the aluminum, remember, costs continued to increase during Q4 for aluminum products, and our teams have basically caught up and they're able to pass through the increased cost from the tariffs. But given the demand outlook, which is improving a bit, we're still seeing some pressure on getting a premium on those tariff costs, but we think that's going to improve as demand improves for those products as we move through 2026. So while Q1 2026, we may be near the low end of the range as we see continued price increases, we would expect margins to trend up from that during the year as long as there's demand supporting the price increases.

And then you mentioned that the outlook on the demand side, at least right now, it seems still pretty healthy. But there are some potential tailwinds from lower interest rates and manufacturing activity seems to be picking up. How are you thinking about the kind of volume growth in the second half of the year, especially with you focusing on profitable growth?

Yes. So Katja, we do anticipate -- it's hard for us to look out a full year. It depends a lot of -- there are a lot of factors in the market that can change, but we are very positive at this point on 2026 based upon the quoting activity we're seeing right now. We are seeing -- especially on the carbon side, which is the majority of our volume, we are seeing, like I mentioned earlier, good activity. There are a lot of large projects out there in different areas. They're being quoted. There are purchase orders in place on some of that. We are seeing some of our customers on the carbon side buy a little heavier than they had historically. We think part of that is because they're coming off of low customer inventory levels, but also mill lead times are going out, which is always a positive sign. And people are looking to be able to secure the metal. I think with Reliance, we really appreciate our strong relationships with our domestic mill partners who are there to help support us to be able to get the metal to increase our shipments and support our customers.

The next question is from Martin Englert from Seaport Research Partners.

I wanted to touch on structural products. It was a larger portion of the mix in fourth quarter. Just can you provide an update regarding what you're seeing with demand and also remind us of the margin profile of these products. And how your demand typically compares to what's happening upstream at the mill level?

Martin, so for structural beams, we just experienced another price increase last week. The base price is the highest that's ever been been recorded. And that's due to demand throughout the nonres markets. Lead times are being pushed out. That's one of our larger products that we do stock. So we're seeing demand in public infrastructure, energy infrastructure and data centers. So our outlook for white flange beams and structural tubing is very bullish.

And can you remind us, generally, if there's any timing difference between when you see activity in the mill fee activity and just overall how the margin profile compares to the average margin for the group?

Yes. From your question on the lag from the mills, I mean, in general, on kind of the nonresidential infrastructure side, typically, we've seen about a 6- to 9-month lag on large projects in particular, but we are -- we seem to be participating a little more in those larger projects. We're not the prime on the large projects in most cases, but we are getting more meaningful share in some of those large projects. So could the lag be a little less now? Possibly, but that's kind of been the trend historically.

And from a margin side, we have healthy margins on our structural book of business. Years ago, people who followed us for a long time, we used to talk about higher return businesses in aerospace and energy and semiconductor. They have higher value products. But for the last few years with, I think, the pricing improvements we've seen generally in the market on the carbon side as well as our companies doing more value-added processing with the investments we've made to expand their capabilities, the carbon margins for most of our products are right up there, and we don't see the big difference. So a very good margin profile on our structural book of business.

Appreciate that color. Semiconductor's inventory overhang persisting here in the end market. When was the last time that there was an up cycle here, if you can remind me, and any signs or visibility as to when the inventory situation may abate and kind of how this cycle might -- down cycle might compare to other ones historically?

Yes. Well, Martin, if you all recall, I mean, semiconductor had been on an uptrend for quite some time. And I would say, through most of 2023, industry-wise, it was record level shipments in semiconductor. We were participating in that. We had really good years at record levels. We believe a lot of customers were very concerned about being able to secure the metal they needed with how strong the market was. And so they bought ahead quite a bit. And quite honestly, for us, some of our book of business in the U.S. is somewhat dependent on which customers you're with because some are participating in the AI upswing more than others.

So I would say, just being honest, we're a little behind on that side with certain parts of our customer base. But we have seen some slight improvement in some of the equipment makers, but we're expecting, late this year, we might see that inventory being worked through and start to see a bit of an improvement there.

The next question is from Phil Gibbs from KeyBanc Capital Markets.

Karla, you maybe just talk about the M&A environment. I know you weren't very active in 2025, but certainly a big part of your longer-term growth trajectory. So just curious in terms of what maybe out there? How is the valuations -- how are the valuations looking for some of the things that might be appealing to you all?

Phil, yes, on the M&A front, I guess, I would say I felt like we were active in 2025. We were looking. We were -- there were deals out there. We just didn't close any in 2025. So there are opportunities out there. There are some that are attractive to us. But to your question on valuations, we have to be able to agree upon that. And in some instances, we are others, there are some other companies who might be willing to pay more than we are. Maybe there's a strategic reason for them that's different from our view. And with the -- we are still very interested in acquiring the right companies and we're continuing to look at those and will complete where we think it's appropriate and we can agree on the valuation. But I'd also point out that 2025, our 6% tons growth over 2024, that was over 300,000 tons of incremental volumes we were shipping. And if you compare that to a dollar value if we acquired a company, that would be like acquiring a $650 million revenue plus company. And it was a significantly lower cost for us to to make some investments in facilities and processing equipment to be able to increase our volumes like that as opposed to paying a premium to buy a $650 million company out there through an acquisition.

And that doesn't mean that there aren't $650 million companies out there that we would want to acquire, but I just want to highlight the efforts that our teams made and the significance of being able to grow organically.

Thank you, Karla. And then on the gross margin piece, the 29% to 31%, just wanted to qualify that, that is a LIFO range that you all are talking about as being sort of your long-term sustainable range? And then also to that, any way to size up the drag on gross margins maybe in 2025 from the aerospace and semis headwinds, which doesn't sound like that it's all going to completely normalize this year, but maybe by 2027.

Yes, Phil. So on the gross profit margin, the 29% to 31%, that is an annual LIFO range. LIFO makes it less volatile than on FIFO -- on a FIFO basis. And as we mentioned, we did increase our FIFO gross profit margin in 2025 over 2024, again, a lot on the carbon side with great execution by our teams in the market, kind of I guess, somewhat unique, we would say, in 2025. Aluminum is typically around 15-ish percent of our sales, but it made up over half of our LIFO expense because those increased tariff costs also impact our LIFO adjustment. So we had kind of an outsized impact because of those tariffs. And as we said, if prices start to stabilize a little more on the aluminum side, we can catch up with our margins and maybe start to see some improvement there. But again, we feel strong with how our people are executing, but LIFO did have a big impact on 2025 from aluminum? Arthus, is there anything you would add?

Yes. I think, Phil, on the same thing kind of headed into 2026, the LIFO estimate, you have a fair amount of aluminum carryover, right? So the cost increases that happen in Q4, you're going to be receiving that material throughout '26. So again, we're going to have disproportionate contribution from aluminum to LIFO expense. So it's somewhat unique, like this is not a typical dynamic that we've experienced before this type of a mismatch from LIFO to the FIFO margin side. But nonetheless, we're executing really well.

I think the one nuance that perhaps kind of gets lost is aluminum prices have been going up. While there's been some slight margin compression, we're still realizing higher gross profit per pound. So from that perspective, overall profitability is improving from higher selling prices, it's just your mathematically experiencing some margin compression because, to Karla's point, on the cost increases, while there being passed through, we may not be able to get full margin on that as we would on other cost increases that are supported by solid demand.

And then anything you all could discuss on aerospace and semis in terms of maybe how much that's impacting the gross margins right now from a basis point perspective?

Good question, Phil. So I think there'd be a little bit of an overlap with aluminum. But if you look at aerospace and semiconductor, let's say, less than 15% -- 10% to 15% of overall sales and consolidated margin impact 50 basis points plus.

The next question is from Bennett Moore from JPMorgan.

In the context of the lower expected CapEx spend this year and notwithstanding the recent dividend, how might this directionally impact your appetite for share buybacks in '26?

Ben, I don't know that it significantly changes because we've consistently had an appetite -- strong appetite for acquisitions, for organic growth, for share buybacks and consistently increasing our dividend. So we continue to look for opportunities in all of those areas and not changed from the last few years. We've got the resources and the financial strength to execute in all of those areas. Our capital expenditure budget for 2026 is a little lower than the last few years, but we've had kind of outsized budgets the last couple of years. We've had some good greenfield projects in there. We've had a lot of investment in value-added processing equipment, which we're continuing to do, but we're really challenging our teams to look at the investments we've already made and make sure that we are maximizing the capabilities and the equipment that we buy now is much more technologically advanced, it can do things faster, it's increasing some of our productivity.

So we're really pushing our teams to maximize and look at what they have before we go out and spend more on additional capital. But that being said, the $275 million for this year, it's a good budget, it's rightsized. But as we've mentioned, there is a lot of activity as we -- from our customers as we go into 2026, and we are very open to increase our CapEx budget to support those customers and those opportunities if we see good profitable opportunities come in front of us. So that budget could increase as we go through the year given solid opportunities in front of us.

And then coming to SG&A per ton, I think it was up around 1.2% in the fourth quarter despite record shipments. So wondering if anything to flag here, maybe it was the incentive comp? And then do you expect that this year-over-year growth trend could reverse in the first quarter? And what's your confidence that, I guess, for the balance of the year, we can see this metric trend lower?

Yes. Good question. So at a high level, that's what we've been focusing on, right, leveraging our cost structure with our smart profitable growth strategy. I mean on a full year basis, SG&A per ton, I think, trended down roughly 1%. So that's basically being able to leverage our cost structure and drive incremental profit from the organic growth. I think quarter-on-quarter, Q4 to Q4, important highlight, from a FIFO perspective, profits were up nearly 28%. So yes, absolutely, there's going to be year-over-year some incentive comp that is associated with that, that's going to affect the comparability. But overall, yes, that is an area of focus. And every year, there's inflation, obviously, and that's something that we have to give our people wage increases, et cetera. But to the extent that we're leveraging our cost structure and focusing on growth and driving profitable growth that, that should work out the way we intended to be.

The next question is from Matt Dushkin from Wells Fargo.

Everyone, thanks for getting me in. Just curious, are you all seeing any substitution to or away from aluminum, we're just kind of wondering what the boots on the ground are seeing with all the price volatility and you guys play into both the aluminum and the steel markets?

Yes Matt, that is -- we have not seen that, at least not in a material way. Coming through, we know there's buzz about that out there, but we haven't seen any real impact in any of our markets from that. And as you commented on, we're in all markets. And so we're happy to support our customers in whatever products are the best use for their needs.

In some architectural usage, there have been substitution from copper to aluminum or other products, which isn't a huge part of our business, but the copper like has been substantial. So our customers are looking for more economical alternatives.

Okay. That's helpful. Yes, we've heard of from copper to aluminum. Just shifting over on the plate markets. We seem to be gaining a lot of momentum there. Can you provide any color on what's driving the relative strength versus other products? And whether or not you think it's underlying demand? Or is it more customer restocking right now?

So we're seeing customer restocking seeing mill price increases. We're seeing no lead times extended for the first time in quite some time. There's a lot of energy infrastructure, onshore wind, shipbuilding defense work that's driving up the price and demand. There's also recently with the hot-rolled portal market being pretty tight. There's been substitution from sheet to plate, which is usually like the sheet foot's more economic. So we think they only see something like that. We think that there's real demand behind it.

The next question is from Phil Gibbs from KeyBanc Capital Markets.

Just regarding headcount and hiring, Karla, can you describe the environment there? I mean, I know you guys grew your tonnage pretty solidly last year and seemingly have a reasonably positive outlook for your markets in 2026 as well. So just curious in terms of where you all stand on headcount or hiring, and what your intentions may be?

Yes. I think, at the end of 2025, our actual headcount was down a bit from the beginning of the year, up slightly during the year, which, again, I mentioned earlier the advancements in some of the equipment we use and our company is focusing on being more efficient we shipped 6% more tons, but had a pretty modest increase in headcount.

As far as being able to fill positions in hiring, I would say the labor market is a little better than it had been, certainly better than just after post-COVID. But a lot of our jobs in the warehouses, for drivers, those still take more time to fill. To get qualified people in, we have to do more training than we did 10 or 15 years ago as we're bringing people into into the workforce. So it's not easy. It's still -- maybe you get -- you end up with 1 good qualified person who stays out of 5 to 7 that you try out. But we're able, and I think, at Reliance, people like to work for a company that's growing and doing well. We try to treat our people well and pay them fairly, provide good benefits and do things to help give us an advantage in the market.

This concludes the question-and-answer session. I would like to turn the floor back over to Karla Lewis for closing comments.

Thanks again for joining our call today and for your continued support of Reliance. And before we close out today's call, I'd like to remind everyone that we'll be in Florida next week presenting at BMO's 2026 Global Metals, Mining and Critical Minerals Conference where we hope to meet with many of you there. But I'd also like to once again thank our teams throughout Reliance for all of your efforts that you do every day and for keeping our employees safe. And I also like to remind everyone that even though there were some headwinds in 2025 we're really proud of what Reliance and our team accomplished then. And we're really excited moving into 2026, a healthy demand environment, a lot of good large projects that we're seeing out there. that we've got the capabilities to participate in and strong pricing environment. So we're looking forward to 2026. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Good afternoon, everyone, and thanks for joining us today. I'm Mike Harris, and I'm honored to welcome Karla Lewis and she's the President and CEO; Steve Koch, who's the Executive Vice President and Chief Operating Officer of Reliance Inc., and that's the largest metal service center company in North America.

But before we get started, a couple of housekeeping items. I mean we are required to make certain disclosures in public appearances about Goldman Sachs' relationship with the companies we discuss. For disclosures relate to investment banking relationships, compensation received or 1% or more ownership. We're prepared to read aloud disclosures for any issuer form request.

However, these disclosures are available and our most recent reports available to U.S. clients on our firm's portal. Also, the second housekeeping item. I have a list of questions here for Karla and Steve. But if there are questions from the audience, we do have the latitude to take those. So just raise your hand if you have a question. So now that we have that out of the way. Again, Karla, Steve, thanks for joining us today. Why don't we stop right in and covers less ground as we can.

So to set the stage for those that may not be familiar with Reliance, why don't you give just a brief corporate overview, maybe talk about your position in the steel value chain, your value propositions, competitive advantages than maybe a key end market?

Okay. Great. Well, and first off, thanks, everyone, for joining us today. And Mike thanks to you and Goldman Sachs for inviting us here today. So a little bit about Reliance. As Mike said, we're the largest metal service center company in North America. We're about $15 billion in sales, about 320 locations, primarily the U.S., but a few international locations, as a metal service center company, what we do is we buy metal in large quantities from the producers of metal carbon, stainless, aluminum, specialty products. We warehouse that metal and then we sell it to our customers in smaller quantities. We do value-added processing on about 50% of the orders that we ship.

We are -- a little bit of our niche is we do focus on smaller order sizes so that $15 billion in total sales, our average order size is $3,000 in order. So we're doing a lot of transactions, 40% of those orders customer calls us today, we deliver it tomorrow and process to the size and shape that they prefer, if they're -- they're looking for us to do some of that value-added processing.

Reliance historically, we've bought domestically. So we have very strong relationships with the U.S. steel producers again, most diversified service center out there in terms of our products, our geographies and our end markets. We also operate in a very decentralized structure. We talk about putting decision-making as close to the customer as possible, because for our customer base relationships still really matter.

And we also think we do a better job managing our working capital making decisions on what we're buying, how we're selling it, what pricing to use by having that, again, in a decentralized manner close to the customer. So a little bit about Reliance.

Okay. Let's look a bit more at your end markets at this time. And I guess just how would you describe the current customer sentiment and maybe speak to the buying imperatives across each end market and throw in a couple of comments around your near-term outlook?

Yes. So when it comes to general end markets, customer sentiment, they've been dealing with some disruptions in the market this year with tariffs and some geopolitical issues. But for the most part, the end markets that we service -- nonresidential construction and general manufacturing, nonresidential construction demand has been pretty healthy for the last several years.

And going into 2026, we feel that demand is going to continue to be brisk. We service data centers, hospitals, schools, universities. And then the buzzword has been data centers, anybody you talk to about when we talk to our field operators, almost all of them are selling materials into data centers, whether it's the construction of data centers, whether it's the internal mechanisms, whether it's trays, racks, cooling systems.

So it depends with information you look at, but we think that has a good 5- to 10-year runway ahead of it. And then when you think about other end markets, general manufacturing, general manufacturing depends on which end of the market you're servicing. Demand has been relatively steady. Consumer products, rail, ship building, anything defense-related has been over the last 12 to 18 months has been -- demand has been very good and we looked into '26 and '27. We expect the same.

So that's general manufacturing, nonresidential construction -- we service auto through our toll processing for the most part, and our toll processing in 2025 was up over 2024, probably not a great indication of the auto market because our companies that service this end of the business. So we really specialize in really good at what they do, and they have a demand almost no matter what automotive is doing, they're pretty busy, and they're always -- customers are always looking to give us more business over there.

Yes. So the toll process for the HVAC end market and appliance. And I guess the last aerospace, it's about 10% of our revenues. We service that through defense and through commercial. The defense has been strong. The demand has been good. We see that going into 2026. In commercial, there's been a little bit of an inventory overhang that we've been working with. Our inventory itself was kind of challenged in parts of 2025. But going into 2026, we think we're in pretty good shape there.

And then I guess just thinking a little longer term here, when you talk about the end market outlook, which are the markets do you see driving the most growth over the next 3 to 5 years? And maybe speak to what's driving that shifts in customer preferences or something supply chain related that would drive those higher growth?

Yes. So I think if you look around metal is used in many different things you see. So very diverse end-use applications. So we think we have opportunities to continue to grow. If you're looking at specifically, Steve touched on some of those markets, we think, again, data center builds there's still legs there. And it's not just the data center, it's the electricity needs that we have in the U.S.

We have a couple of companies that are focused on the nuclear space certainly, a lot of activity planned in the nuclear space to provide some of that needed electricity here in the U.S. and globally. Aerospace, the backlogs have been multiyear for quite some time. We just need the airplane manufacturers and the supply chains to keep up with that. And we have seen that improving.

So we're bullish on aerospace going forward for multi-years semiconductor, where we've struggled a bit this year and last or, again, coming out of COVID, semiconductor was wonderful at that time. But -- we believe a lot of our customers overbought their inventory, so they've been working through that excess inventory, but there is a lot of activity building new chip plans and just continuing need for chips going forward that we see that having good 3- to 5-year growth in those areas.

Steve mentioned on anything like military and defense related. The U.S. government has a lot of money that they're trying to put to work now. We're going to start building submarines in the U.S. again that we haven't done for a long time. We participate in those programs. There's a lot of rebuilding of munitions and other systems and just general spending going on by the U.S. government to restock pile, but also in Europe, there's -- it seems to be real planned interest in improving and increasing their defense spend.

So we're starting to hear of some inquiries related to that. So those are all multiyear types of projects that we're very positive on, and we think we are very well positioned to participate in all of those markets.

Okay. And then I guess, thinking in terms of portfolio gaps, are you targeting any new market segments, products or geographies? And maybe speak to how you think about when it's time to maybe double down on the existing portfolio versus pursuing something new?

So regarding our gaps on our portfolio, we're always looking at that. We're looking to see what the new end markets that are surfacing. We want to be out in front of that, and we want to make sure that we have equipment and we're able to service any of that new demand.

We talk -- we don't talk about flat-rolled a whole lot, but we do flat-rolled really well. We have high margins. We've been growing -- we've been expanding our footprint. Some of our specialty flat-rolled operations across the country, and we have very little market share there. So we are focused in that end market.

Okay. That's helpful. Then I guess just understanding that there's a little give and take. Can you describe how you balance maintaining that strong customer relationship with pricing power and maybe speak to how the current pricing power compares now to the same period a year ago?

When we think about pricing, it's really, really important as we've invested a lot of money in CapEx over the years. And we have the newest facilities and the best equipment, and we want to keep our people safe. There's a cost associated with that. So the pricing power is associated with educating our customers of what goes into our prices and what services we provide, but it also goes to the salespeople and the management team with what they bring to the table.

And if you invest and you don't charge the right amount for it, you're going to be upside down and all of that equipment is going to be just wasted -- a lot of wasted effort. So it's -- we have pricing power, but it's kind of a give and take and back and forth to make sure that the customer is satisfied with the -- what we're providing them and we're satisfied with the earning a fair margin.

Yes. And I would just add to that, I mean, with my description of the company. There are a lot of people, who don't have the assets and the resources in place other -- our competitors to be able to do next-day delivery the extent of processing capabilities we have exceeds that. And we really invest there because we like to pride ourselves on having the best customer service in the industry.

And it does -- to Steve's point, it does take investments for us to do that, but servicing our customers, there's value to that, and especially our smaller customers, a lot of these family-owned machine shops, the owner of the business is out with his production crew during the day. They're running the production lines, he comes in, in the afternoon, thinks about what he needs to keep his team busy the next day and feels confident that if he or she calls a Reliance company, they're going to have what I need.

It's going to be there when I need it, it's going to be the right quality and there's value in that. And that's where through customer service, we really want to drive that value to have the pricing power to be able to get the returns we're looking for on our investments.

Okay. And just sort of on clinical, it sounds like the value proposition is weighted more to service you provide versus the [ miles drove ]. But what do you do different that prevents the guy on the street from duplicating what you do or eventually catch it up?

Yes. And that's a good question. And I would say A lot of the acquisitions we've made over the years that's been part of Reliance's growth have been buying these good companies, small family-owned companies, who are usually kind of our best competitors in the local markets because they know how to service that market and other people and some -- some of the companies we actually own now have told us they tried to replicate what Reliance did.

There are others who talk about it publicly and say they've tried to replicate Reliance, but it's been difficult for them to do. And different reasons, I think, 1 again, you have to have the financial ability to put your assets close to the customer. So we are a little more asset heavy, some other larger service center companies. They try to go with, for instance, a regional approach.

And from L.A., so they maybe have a location in L.A., and they're trying to service all of California and east of California. So if someone in the Bay Area needs next-day delivery, they don't have the ability to do that. And they also are managing from a more regional, more centralized standpoint that the people doing the processing, for instance, or scheduling the logistics may not understand the true need of this individual customer, who's 1 of our top customers who we don't want to let down who needs the favor right now.

So that's -- we just see that for us and our focus on our customers and profitability like this decentralized network really gives us an advantage. We have a fleet of about 1,800 trucks we have on the road every day, delivering metal to our customers and there are other service center companies who -- they don't manage their own fleet or they only do what you would call a full truckload quantity.

So the truck goes from our service center location and delivers 1 order to 1 customer. Reliance trucks, we're putting 10 to 18 different orders on a truck. They're small orders. Our truck goes out if we need to reroute them because there's a -- 1 of our customers needs it faster we have the ability to do that because we're managing our own fleet.

So like that's 1 competitive advantage we have. And we're not aware -- although some individual small companies have that, we're not aware of other large companies, who really have the capabilities that we have to be able to deliver and being able to maintain different cultures and allow people to do things differently is a lot harder than you think. We've heard from companies who've maybe been acquired by others in our industry, that they -- the other companies, it's just really hard for them not to change too much because when we acquire a company, we're paying a premium for that company because we see value in what they've been able to build and the culture they have. So we don't want to destroy that value. We just want to build upon it. And again, I think it's easier said than done.

Okay. And then let's talk a little bit more about growth opportunities. And you pointed out, Reliance has grown both organically and inorganically. So just curious if you could describe your build versus buy valuation to determine when it makes sense to do a deal versus just investing more in internal growth?

Yes. And we really like to do and have been doing both of those over the years. When Reliance was a smaller company, we -- there were a lot of geographic areas or products that we didn't really have a presence in. And so the majority of our growth has been through acquisitions. Since our IPO in 1994, we've completed 76 acquisitions. We're always looking for good companies and we generally evaluate each company on its own merits to see how it fits within Reliance.

But we're looking for companies that are immediately accretive to earnings, have good management teams in place. Have a good reputation with their suppliers, their customers and also treat their employees well. So that's what we're looking for and we'll look at really any opportunity to see how that fits. So we did a lot of acquisitions.

And then I'd say for the last 10 years, we've probably put a little more emphasis on capital expenditures on organic growth. And a lot of that was because we started to have our customers ask us to do more value-add processing for them. A lot of our customers were looking to outsource that. They thought we could do it more efficiently they maybe wanted to focus on design and assembly and get out of some of the actual processing.

And so Reliance, we have the ability to fund that need -- and so we are -- we started buying the equipment to service those customers. We also, at the same time, we're seeing advancements in the technology, in the value-add processing equipment that we use. -- because for a long time, kind of the saw was the saw and then they became faster. They gave smoother finishes. We started to see a lot of advancement.

And so we were able to provide more value to our customer that with the newer equipment, we could maybe take out a step or 2 that our customers used to have to do in-house. So to Steve's point earlier, as long as we're pricing properly for that, we can demand a higher price from our customer because we're providing them that value. So -- we still do acquisitions. We still do organic growth.

I think we've invested about $1.5 billion over the last 6 or 7 years through capital expenditures, which includes some greenfields and maintenance items, but majority has been on value-added processing equipment to expand our capabilities to meet our customer needs.

So again, we're always looking for growth and expect to continue to do both acquisitions and organic. And I will say, though, there was a period where we would go out in greenfield and build new facilities, but that got a lot more expensive the last couple of years. So the dynamics weigh into is it better to buy a company that owns its real estate and has the existing facilities or do we want to go greenfield, different risk profiles on each 1 of those. And -- so there's not 1 answer to all. It's very specific to each opportunity.

So case by case.

Yes.

Yes. Okay. Speaking of acquisitions, how do you think the recent announcement of Ryerson and Olympic Merger could change the competitive landscape and maybe share your views on whether or not the industry is ripe for additional consolidation and why not?

Yes. So the last part of that question first, we do think it's ripe for continued consolidation. As I said, we've acquired 76 companies over the last 30 years, and we're still only 17% of the metal service center industry market. So still a lot of opportunity for us out there. The industry is made up of a lot of small and medium-sized companies.

So -- and we think consolidation from our view, is good for the industry. We think it makes it a little more disciplined because at the end of the day, we are all buying and selling commodity products specifically to the recent announcement, Mike referred to between 2 public service center companies. It makes sense to us. I think they're somewhat complementary to each other. Their profile is much more flat-roll weighted than reliances and they -- we bumped into them a little bit, but they tend to service a different part of the business than our sweet spot.

But to the extent that with the -- with those 2 companies combined, if it gives more discipline and they elevate their gross profit margin levels, their pricing discipline, that benefits reliance as well because we do still compete in the same industry. So we're hopeful that it brings a little more discipline to the industry.

Okay. And then I guess just beyond the current direct competition, what are emerging technologies of possible new market entrants or shifts in manufacturing processes, do you view it as a potential disruptor or maybe an opportunity for the metal service center industry in the coming years?

So we believe that it's always going to be local relationships, blocking and tackling, make sure that you get the material there on time. We have 2,000 salespeople 1,400 inside salespeople, 600 outside salespeople. So we think that the focus on the relationships will always be important.

But with data that is available, like Karla said, we bought 76 companies as we put all the data together, and we can identify opportunities to be more efficient or target certain customers or certain inventory positions. We think that data and being able to mine that data will be kind of a game changer for Reliance. All the automation that we're investing in, our CapEx was 2 years ago, $500 million, $400 million last year and this year, over $300 million.

Every piece of equipment we buy is making us our equipment faster, safer. We can move our workforce around to plug them into other areas, where they're needed. So we think that automation will be a game changer and a disruptor for the companies that can afford to invest in that. And the smaller to midsized companies that can't keep up with that, they'll find themselves falling behind.

And I think and everyone always today has to talk about AI as well. And we do think there will be a place for AI to help us improve how we do business. We don't know exactly what that looks like yet, we have a lot of kind of test cases going on in the company. We think our approach is not to try to come up with some grants solution and push it down, we think people doing the work are our best opportunity to learn and understand how could we integrate AI to help us do what we're doing better.

And so I'd say we're early in on that, but certainly expecting and looking for opportunities to utilize AI in our business.

And just for clarification, would you say more automation utilizing AI. Does that keep you ahead of the competition? Or is that just the cost of staying competitive?

It's probably a little of both. I think Reliance not just -- not do we only have the financial capability to invest if we believe it makes sense with all the different businesses we use and different ways of doing things. I think it gives us a lot more opportunity to understand different better ways of doing things just more schools of thought, diverse opinions and outlooks on how we could potentially utilize that.

I think just having that internal knowledge in the company should put us ahead of a lot of others. And we do have good IT resources and capabilities to be there to help support our efforts in those areas.

Okay. And then kind of in the same vein, I was just curious, what are your thoughts on the metals getting back into the distribution business? And maybe speak to what scenarios where that makes sense or not.

So I don't know that the environment is any different today than it has been for quite a few years. Historically, a few generations ago, the U.S. mills, most of them did own the distribution channel, and they purposely got out of that. And so that's why the metal service center industry exists. From our view, that producers are very good at producing metal.

And generally, their focus is on low-cost, high-volume production and we exist then to be able to be that channel between the mills wanting to operate in large quantities to our customers who are looking for frequent small order sizes, and we think that there's plenty of room for us to stay in our lane, the mills to be in their lane. There are other parts of the world where the mills do still control the distribution channel.

We don't operate for the most part in those areas because it's just too hard to compete against the producers. And there's some business, very high-volume business that in the U.S. where it does make sense, and the mills are servicing that directly. But there's a lot of other business, especially smaller orders, but also where they need value-added processing performed, and that's what we do.

And so again, we think that there's room for both of us there is some overstepping and conflict occasionally, but we don't see it being that much more than it has been. You do see announcements with some of the U.S. producers doing some downstream. For the most part, the types of downstream processing that they're doing so far are areas that we're not participating in. It's still kind of high-volume processing and -- so that works.

And there have been acquisition opportunities, for instance, in some coding businesses over the last few years. But we knew that certain mills we're investing more because they had announced they were going in that direction, and they're putting in brand-new equipment. So we have purposely not acquired those companies because we didn't -- it didn't look like a winning situation for us, so we stay away from those opportunities.

Mike, I think there's always been a healthy friction between service centers and mill suppliers. But I think the most important thing is you need to communicate with them, understand what they're looking for. They don't want to get large orders for 3 months and then nothing for 3 months. They need to keep their workflow steady. The labor is expensive. They need to buy the right inputs.

So I think that buying consistently from our mill suppliers, like I mentioned before, we're more than 95% domestically sourced. So if we can keep a steady cadence with them, steady order book -- they're not looking to get into our space. We're not looking to get into their space. And I think that as the mills continue to add capacity, we want to follow them. We want to know where they're going. We want to be alongside of them. We don't produce 1 ounce of metal and we don't plan on changing that.

So it's always been kind of a question always been kind of you lose an order you kind of complaint, but it goes back to just a healthy communication to stay in each other's like Karla said in each other's lanes.

Okay. We're under 5 minutes to go here. And I guess I'll pause and see if there are any questions from the audience anything top of mind that we may not have touched on not. I have -- I think we can squeeze 1 or 2 more in here. No questions?

Okay. So Karla, you guys have had a strong track record of returning capital to shareholders. Can you kind of outline your current capital allocation priorities, you balance organic growth, acquisitions, maybe shareholder returns and speak to how you evaluate that optimal mix to maximize long-term shareholder value?

Yes. So I mean, I think that if you look over the long term over the years, I think we've done a good job of that. If you look in our 31-year history, since our IPO, our stock price, our CAGR is over 15%. So we've steadily been in our view, returning value to our shareholders. When we look at capital allocation, we still think profitable long-term growth of the business is our #1 priority, whether that's through organic growth or through doing the right acquisitions.

So we are always looking for opportunities there. And then on the shareholder returns we've paid a dividend for -- quarterly dividend for over 65 years. We've never not paid the dividend, and we've never reduced the dividend. We don't have a formal dividend policy, but our practice is to try to increase it at least annually and keep it at a sustainable level so that we can be confident that we'll always be able to pay that share repurchases, opportunistic.

We look at what is going on in the market from a stock price perspective and we just opportunistically enter the market. We've repurchased quite a bit over the years. We're active in that. But I think the -- the good news about Reliance is that we're in a financial position for the last several years that we can execute on all 4 of those capital allocation buckets, wherever we think it makes sense, we have not had to forgo 1 of those buckets to do a different one. We've got the financial capability that when we see opportunities, we can execute on whatever we think makes the most sense.

Okay. We got 20 seconds. We only give you a 20-second elevated pitch?

Elevated pitch. We love Reliance. It's a great company. We're obviously undervalued. And we've been trying to move our multiple up, which we've had some success in -- but we do believe that there are a lot of tailwinds. We just don't know exactly when or what each of those catalysts are. But because we are so diversified and touch so many markets operating in a cyclical business with volatile pricing.

We do think that our scale and that diversification helps mitigate some of that risk. And we think we've got great teams in place in our large network, and we're just really excited about moving forward because, when those demand starts to improve. We're very well positioned to be there to act on that.

Okay. Well, thanks a lot Karla, Steve. I appreciate having you guys here today. Thank you guys for tuning in.

Thanks, everyone.

Good morning and thank you, everyone, for joining us. My name is Davis Sunderland. I cover sustainable energy and mobility here at Baird with my partner [indiscernible]. We're very happy to have the team from Reliance here, who's going to lead an oral presentation. I'm very happy to welcome Karla Lewis, President and CEO; and Steve Koch, EVP and Chief Operating Officer.

I'm going to turn it over to you, Karla, to just give a brief background of yourself, go through a few slides, and then we'll pivot to Q&A. If we have maybe, I don't know, half a time or so. It's a small enough room, don't be shy. Please feel free to raise your hand with questions, or if you would like, you can e-mail them to me at [email protected], and I can pass them along to the speakers.

So thank you again for being here. And with that, I will turn it over to you.

All right. Well, thank you, Davis, and thanks, Baird, for having us, and all of you in the audience for showing up this morning. So we'll try to give you a little background on Reliance before we go into questions.

So Reliance, we are in the metals space. We're the leading global diversified metal solutions provider, about $15 billion in annual sales, roughly. We've been around for over 85 years. Today, we have over 320 locations and sell 100,000 products to over 125,000 customers. So very diversified portfolio that we have.

And at Reliance, since our IPO in 1994, we've completed 76 acquisitions. These are a lot of the brand names of the companies we've acquired. And in our business, we still -- for us, it's still a local business where relationships matter. And when we acquire companies, we look to buy strong, well-run companies, good management teams that have strong brands in the marketplace. So that's one of the reasons why we leave these names in place. We try to buy good companies. We don't want to destroy the value once we've acquired them. And then this -- we talked a little bit about our differentiated approach at Reliance. In the metal service center world, it is a very fragmented industry, a lot of small companies. There are a few large national type service center companies out there. And they generally go after a bit of a different customer base than we do, although we do still service national accounts, we service large OEMs. But again, I talked about being local. So we really focus on a lot of the smaller companies in the local markets. So the diversification, we'll talk about a little more in a minute. The decentralized operating model, we think, is important for us to be close to our customers and put decision-making down there. With that, we also have to have strong pricing discipline. We're a very transactional company. We buy on the spot, sell on the spot. Our salespeople are deciding the price on almost every transaction. And we also do very little contractual sales, probably less than 3% of our revenue, and that's primarily on the aerospace side because we can work with our mill producers to help protect our margin on those longer-term orders with those types of products.

And then to come back to the diversification. So this slide shows we've strategically grown in a decentralized way by product, by end market, by geography. We think that's important because in our world, we can't control underlying metal prices coming from the mills. So we pass those through -- we pass the price on with a markup to our customers. So if we're all in aluminum, we're all in carbon flat-rolled, our earnings results, we believe, would be much more volatile. So that's why we try to have this diversification across our products and then also by end markets because, again, we sell into cyclical end markets, so we'd like to have a more balanced approach. And I'm sure in Q&A, we'll talk a little more about some of our major end markets. And you'll see then they don't do the same thing at the same time.

Our product mix generally reflective of the overall metal consumption in the U.S., about a little over half of our sales in carbon products [indiscernible] for us is compared to most other metal service center companies, we're a little lighter on flat-rolled products than a lot of the other companies out there. And that's kind of been on purpose. That's generally the most competitive part of the market. We are a large player there, but we try to balance it with other products like plate and specialty long products.

And also geographically, we're primarily in the U.S. We do have some operations in Canada and Mexico. And then a couple of smaller -- generally smaller locations outside of the U.S. And that's generally a pretty targeted approach, where we're going after more specialty products and specialty end markets. So outside of North America, we're participating in aerospace, semiconductor and energy because we feel we can get the returns for those types of products in those markets. Some markets are structured differently, and it's hard to hit our profit return metrics there.

And then we talk about, again, with the differentiation of Reliance. As I mentioned, we're a very transactional business. As I said, $15 billion in sales, average order size, $3,000 an order. So we're doing a lot of transactions. So 40% of those orders, customer calls us today, we deliver it tomorrow. We are currently processing -- doing some level of value-add processing on 50% of the orders we're shipping, again, including some of those next-day orders. Not every service center company can do that. This kind of goes back to our decentralized structure, having assets and people close to our customers allows us to be able to provide this level of service, and we think it makes sense. It takes a little more assets in the decentralized model, but as long as we get paid for it, as long as our customers see value and us being able to service them like this, so this is where majority of our customer base are small machine shops, fabricators. This afternoon, they'll come in and call and tell us what they need tomorrow, and we'll have it to them in the morning. So they're not as price-sensitive as a big OEM, who's buying thousands of tons of metal on an order. And so that's kind of the -- where we focus.

This is showing our gross profit margins. That's really where our people can control their pricing, and how much they can earn on an order. And so this shows how we've stepped up over the years. We used to be about 25% to 27% gross profit margin. Currently, our target range is 29% to 31%. We've been able to grow that primarily by doing more value-added processing for our customers. What we charge there is not subject to fluctuations in metal prices. So it's a little more sustainable. About 10 years ago, we saw improvements in the technology of the processing equipment we use, since started investing more heavily in that. And with that, we used to process about 30% of our orders, as I said, we've grown that to 50% now. And with that, we also had to train our sales people to understand the increased value they provide their customers and to price for that.

And then this slide talks about smart profitable growth. And during that time where we were adding all this processing equipment, we were really messaging to our people to focus on the highest priced -- the highest margin orders out there. And we intentionally gave up some volume to do that. But what we found was we maybe gave up a little too much volume in some of our locations. So about 2 to 3 years ago, we started the smart profitable growth strategy, saying don't go after every ton, but we are leaving some volume out there that is profitable. It may not be a 40% gross profit margin, but 27% is putting dollars towards your bottom line. During the wonderful pricing environment we had for a few years, it was okay to give up some tons, but we knew prices would come down. So this year, our team has done a great job winning business through their customer service and their relationships, year to -- through 9/30/2025, our tons sold are up 6%, whereas the industry is down 3%. So we are out there taking share. That's given us extra profit dollars that are helping cover our expenses, and so we're getting some leverage on our OpEx there.

And this chart just shows Reliance's performance on gross profit and EBITDA compared to other metals companies and also the industrial distribution companies. So for years, we consistently outperformed the other metal service center companies. And really through some of our long-time investors years ago, they said they looked at us more like an industrial distribution company and felt that we deserved a multiple more -- closer to the industrial distributors, so we've made progress and with the margin profile and have seen a bit of an improvement in our multiple, which we think we deserve.

Countercyclical cash flows. So Reliance has again been been profitable. We've grown those profits post COVID. It's a higher pricing environment, so we have higher earnings, higher cash flows. But countercyclical, if we see a dip, we manage our working capital. So our accounts receivable, mainly our inventory. We consistently focus on our inventory turnover rate and try to buy what we're shipping basically. And it's important to manage your inventory in our business. And we continue to invest in the growth of the company as we mentioned earlier, significant investment in -- through capital expenditure and organic growth, primarily in value-added processing equipment, but also adding some locations, expanding locations. And again, the 76 acquisitions since we went public in '94. It's an opportunistic approach. We don't set targets. Our CapEx really comes from our customers asking us to do more. And then the acquisitions we don't set targets because we don't want to do a bad deal. We want to do the right deals.

And then also on shareholder returns, we've paid a regular quarterly dividend for 66 years now. We do not have a set policy. We like to be flexible, but we generally try to increase the dividend annually and then also opportunistically enter the market to repurchase our shares. And we're proud of the -- of our stock performance over the last 30 years since we did our IPO.

And with that, turn over to Davis.

Great. Thank you, Karla. Maybe you mentioned at the very beginning that we go back to end markets. I think that's probably one of the best places to start. Wondering if we could just dive in and talk a bit about where you're seeing strength, where there may be some weakness relative to the last few years. I mean then we can jump off from there.

Last night, we were downtown with bunch of our local operators, and we said, let's talk about the hot end markets and maybe not so hot end markets, but you can't mention data centers. So we went around the table and everyone mentioned data centers. So I would say that continues to be one of the hotter markets and the trends and weaker markets, ag and HVAC and a couple of other firearms came up. But for the most part was at the end market, we serve almost all of the markets, and they're steady, but there's some that are really high, like infrastructure data warehouse, et cetera.

Step in kind of a tangent to data centers. There's a lot of supporting infrastructure that goes into that as well. Our coverage is sustainable energy mobility. All of our stock charts look about the exact same, and there's been a lot of growth in things like trackers for utility-scale solar and batteries and other types of energy-related infrastructure. And one of the themes that we've seen is that deal sizes are getting larger. Is this something that you guys are seeing? And if you could expand a bit more on what you're seeing from the, I guess, support infrastructure side, that would be helpful.

Yes. I mean I think we -- that's exactly true with the data centers initially when we were hearing from some of our companies about some strength and participation in data centers. It was more kind of our structural steel type companies, people selling metal into the building, right? And now we talk to -- almost all of our companies are touching the actual data center, a lot of interior racking enclosures for servers. We do like perforated metal. There's copper bus bar, there's tubing for the cooling systems, and then there's also the electrification going on to be able to supply the energy, and we've got a couple of small nuclear companies itself. They're not nuclear. They sell into how many different products are feeding into that. And like -- and sometimes we don't even know what people are doing with our metal. But data center certainly has been positive for us and for the industry. I think one of the examples, one of our people gave last night was they're selling like hot rolled steel and for big tanks that are going underground to hold diesel fuel, just because the data centers need backup power sitting there available just in case they had an issue.

The only thing worse than beating a dead horse is being the wrong dead horse. So I don't want to belabor this point, but just on data centers and the growth opportunity. And I guess looking forward for how long this cycle may be if you want to term it that way. I'm wondering if you could just give your thoughts on if we're in the first inning, in the middle of the game or coming to the end as it relates to this type of infrastructure spend around data centers.

Well, it sounds like we're probably early based on all of the announced builds. Probably, it's not going to go on as strong as they say for as long as they say. I mean, that's generally what we see in different cycles. There are a lot of announcements and optimism upfront. But we think -- I mean, we think we're still pretty early, and I'd say, at least a few more years worth of good, solid growth.

Sure. Maybe pivoting a little bit looking at the policy backdrop. And I don't think certainty is a word that anyone would use to describe last year or maybe the next few who knows. But just wondering how you've been impacted by tariffs, how that plays into your pricing and just supply strategy broadly, and then maybe we can go for a few from there.

Yes. So typically, in the metal space, and I kind of mentioned this in my comments, the mills, the producers of the metal, whether it's carbon aluminum, stainless, they set the price, so we buy from them. But where they set the price is dependent on market fundamentals. A lot of times we'll have producers announce a price increase, but the price never changes. They're either trying to set a bottom, or they attempt to price increase. But if demand is not there, if the market doesn't accept it, then it doesn't go through, and then they're still just dealing transactionally with us. But generally, with tariffs and in 2018, Section 232 came into play for metals and that was a really positive pricing environment for us because there was underlying demand that people wanted to buy metal. So we were able to pass through the increased cost of the metal even though the domestic producers price didn't go up, there was less import coming in. But generally, with tariffs, we mark up not just the underlying cost of the metal, but tariffs, nickel surcharges. We look at the total cost of -- our cost of the metal and then we mark that up. So if tariffs -- if it causes the price to go up $100, we're going to try to get $130 for the extra tariffs. So we pass it through plus a markup. So generally, like we said, we're able to expand our gross profit margins when the mills announced price increases because with our customer base, we try to pass through the increase before we get the higher cost metal in our inventory. In 2025, first quarter was really nice. And there was a lot of buying activity. People are trying to get ahead of the tariffs, but also there were a lot of foreign mills shipping metal into the U.S. to also get the metal here before the tariffs took effect. But we had heavy buying. Carbon prices were going up, customers were paying it kind of prices for carbon peaked in April and then they came down pretty quickly because everyone had already bought their metal. And there was a metal sitting at the U.S. mills, a lot of metal with docs that had come in. So mills increased their prices, but there wasn't -- there weren't people there to buy it. So we weren't able to pass through the higher cost in the way we have in previous markets. So our margin got pinched a little bit, still higher dollars. There have been some aluminum increases. They are paying the tariffs there. We've been able to increase our prices on the aluminum and stainless price increases. But instead of being able to capture it all at once, we've had to incrementally step up our prices to catch up with the higher cost, which is a little different than the cycles we've seen previously, but it's really because that underlying demand isn't there. As I mentioned, metal service center industry shipments are down 3%, which shows you demand's okay out there.

Obviously, a global operation, global market. I mean you had a good slide showing just geographic breakdown of end markets. I wonder if there have been any changes policy related to tariff or others that have changed this mix regionally in a material way, or if you anticipate any changes looking forward just as it relates to business planning, and how long these tariffs or other policy changes may linger?

Well, since we're 95 -- at least 95% domestically sourced. At first, we were wondering what all the craziness was about because we had our supply coming in on a regular basis, then with the domestic producers has less import, it's coming and raising their price and we like, okay, there's something directionally changing here, which is a good thing. And then the steel derivatives, which keep adding and adding, adding, we're starting to hear from our customers more and more, where we might have a customer who's globally located. So they're bringing more to North America and more to the United States. So they're asking for more quotes, more shifts. They're running more shifts. So we need to, first of all, decide is this something that's going to be longer term. Like you said, consistencies day-to-day. But we feel like there's going to be a good run. And our customers as they entrench back in the United States, we feel like we're -- because we've invested so much money, we feel like we're ready to take on the demand.

I believe it was shortly before the conference last year or maybe it was 2 years ago that you guys did the rebrand. Is that last year?

[p id="9512864" name="Karla Lewis" type="E" />

It was 3 years ago.

Maybe a few years ago, I guess...

2 or 3.

Okay.

2 years ago.

My question stemming from that is just moving into more adjacent metals and other products, how that has been, I guess, looking back and then looking forward, how that mix again may shift?

Yes. So at Reliance, we're -- I think our people are really good at running metal service center companies and doing more value-add servicing their customers. And we think there's still a lot of opportunity for us to grow both organically and through acquisitions in that space. We'll see some acquisition opportunities that are a little adjacent, a little outside of what we do. And they're not that attractive to us. We've always said if something goes wrong, we need to be able to fix it. So we need to understand the businesses that we acquire. But we certainly do look at broadening our products or product mix at our existing locations. We have our locations, working together more now. So they have a broader depth of -- types of metal that they can sell. And I think it's really more on the value-add processing where we see continued opportunity to do more for our customers. And the more than metal is really about the fact that we're not just like a commodity metal provider, that we are trying to provide solutions for our customers through the processing that we do for them through the logistics, the just-in-time supply chain management. There's just more to it than just selling a hunk of metal.

How much of a change in your order book or pipeline, however you want to define it, have you seen from customers taking advantage of funds through things like formerly IRA, now big beautiful bill, CHIPS Act, Infrastructure Act, different funds available through those programs.

Well, they don't ever do it as fast as we would like them to. But I think on the inflation reduction when that was first announced, we saw activity under that build quicker than we typically see. And certainly then under the IRA or in CHIPS Act, there were a lot of announcements, a lot of starts. I think on the alternative energies that started -- that was funded through tax credits. So we saw activity faster, we think, because they didn't have to wait for approval from the government. They were able to spend the money and then get the tax credit on the back end. The Infrastructure Act, we have seen some good bridge work, but I think there's still quite a bit there that we haven't seen yet. The CHIPS Act, it's been -- there certainly is building going on. There's been some stop and start and pushouts of projects. I don't know, Steve if...

Yes. And we've -- in 2025, saw more bridge work, more tunnel, more airport, a lot more activity. So we think it's going to kind of continue into the coming year.

Sure. Maybe a couple -- please.

Do you think the 50% processing [indiscernible] is a good number or [indiscernible].

So we love to increase it and take it higher. We've had record CapEx the last couple of years, and so we still have some of that coming online, but through acquisitions and our organic growth, we're continuing to grow both sides of our business. So the non-value-add processing, the distribution, we're continuing to grow as well as the processing. So -- and with the volumes we have now, it takes a bit to move that number. But -- and the other thing on the value-add processing are 50%, the best way we've -- that's the best way we've seen to track it is a number of orders. But some of the changes we're seeing is now with some of the equipment we have. We might be doing 2 or 3 different processes on that order, but it's only counting as one, or it might be more complex. So hopefully, we can charge a little more for that order even though the 50% may not move.

Maybe a couple on capital allocation and just blending into '26 outlook. I guess, first, just started M&A, which obviously has been a very important part of the story. Could you talk to the integration of any big larger acquisitions that have been more recent. And then maybe looking forward, your appetite for more, what type of businesses you would look for in that type of outlook, I suppose.

Yes. I mean so far in 2025, we have not completed any acquisitions. We have completed 4 acquisitions in early 2024. I think they're all moving along well. I don't know, Steve, if you want to comment on any of those.

Yes, we -- in 2024, we were pretty active. In 2025, we've not seen many good opportunities. But I'd say that in 2024, we bought an energy company in Texas specialty plate house, which we've -- that integrations gone really well. We bought a flat-rolled company outside of Cleveland, which that acquisition is. There's going to be some more mill capacity coming on board in that vicinity, will probably really ramp up in the next couple of years. Then in the Southeast and South Central, where there's a lot of growth, we bought a company with 3 locations, that integration's been adding to some of our existing customer base.

Sure. And then maybe just the second part about appetite for more, it sounds like maybe there aren't as many near-term opportunities, but your willingness to approach more M&A?

We're always willing. We just have to see the right opportunities out there. So we're continuously looking at the teasers that come in, we maintain relationships throughout the industry. And it's really when is that seller going to be ready. I mean, there are some companies that's been over 30 years, we've been talking to them. And they're not there yet, right? Playing golf with them next week, right, trying to -- still trying to get there. But we're seeing a decent level of activity. But again, we have to make sure it's the right company that fits Reliance, that fits our profile. There are companies maybe 15 years ago, we would have absolutely gone after this company, but now Reliance has a bigger footprint. A lot of our companies have elevated their game. And so maybe that company isn't as attractive to us anymore as they would have been 15 years ago. We will grow organically, but we still want to buy good companies. Now we've got the balance sheet to do it. And well -- whenever we find -- and we'd like to find bigger ones, but it's just it's -- our universe is made up of a lot of small- and medium-sized companies, especially the ones that fit Reliance.

Sure. I think maybe a minute left.

Process for M&A, any thoughts on two of your public [indiscernible]

I knew somebody was going to ask that question, we're on webcast, right? I mean I think for each of those companies, it probably makes sense for them to put together. And we certainly do compete against each of them in certain pockets of our business. But generally, they're targeting large volume, national contract-type accounts, they have gotten more into fabrication. But they're going to do what they're going to do, and we're going to keep doing our thing, and it might create some opportunities for us if there's disruption while they're combining.

I think we'll leave it there in the interest of time. Thank you very much, guys.

All right. Thank you.

Greetings, and welcome to the Reliance Inc. Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions]

It's now my pleasure to turn the call over to Kim Orlando with ADDO Investor Relations. Kim, please go ahead.

Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's third quarter 2025 financial results. I am joined by Karla Lewis, President and Chief Executive Officer; Steve 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.

Good morning, everyone, and thank you all for joining us today to discuss our third quarter 2025 results. We delivered another solid quarter amidst market uncertainty, reflecting the strength and adaptability of our business model and solid execution across the Reliance family of companies. Our third quarter results demonstrate how Reliance's scale, diversification and high-performing management teams combine to deliver strong financial performance and capture market share in a uniquely challenging environment.

Our tons sold were a third quarter record and outperformed the industry by approximately 9 percentage points, increasing our U.S. market share to 17.1%, up from 14.5% in 2023 due to our Smart profitable Growth strategy. Driven by our high levels of customer service and broad inventory and processing capabilities, we offset declining industry shipment trends by winning new business opportunities that also better leverage our operating expenses and meaningfully contributed to our overall profitability.

Trade policy uncertainty and readily available inventory are causing buyers to be hesitant, creating an extremely competitive market. In this environment, it is more difficult to immediately increase selling prices to fully offset mill price increases. These factors have contributed to short-term gross profit margin headwinds in the past 2 quarters.

In addition, the aerospace and semiconductor markets that we serve, which have high-value specialty products that typically contribute meaningfully to our profits, continue to underperform due to excess inventories within the supply chains. We are confident, however, that the underlying margin profile of our consolidated business remains solidly intact, and we maintain our long-term annual sustainable gross profit margin range of 29% to 31%.

Our scale, product and end market diversity and exceptional customer service, including next-day delivery and extensive value-added processing capabilities, were instrumental in our outperforming our competition and capturing significant market share. Overall, non-GAAP earnings per diluted share of $3.64 were within our expectations and guidance for the quarter.

Our capital allocation strategy is designed to drive growth and deliver strong returns to our stockholders. We generated approximately $262 million in operating cash flow in the third quarter, that we strategically redeployed into high-value initiatives, including investments in advanced processing equipment and other projects that strengthen our long-term growth platform. Our 2025 capital expenditure budget remains at $325 million, with more than half directed towards growth initiatives.

Including carryover spending, we expect total cash outlays between $340 million and $360 million in 2025. Our strong financial position also affords us the flexibility to pursue M&A opportunities that enhance our geographic reach, expand our value-added capabilities and strengthen our margin profile.

At the same time, we remain committed to returning capital to our stockholders. During the quarter, we returned $124 million through dividends and share repurchases. Our year-to-date repurchases total more than 1.4 million shares, reflecting our balanced approach to growth and shareholder value creation.

In summary, our teams navigated the quarter exceptionally well, keeping our people safe while managing market dynamics with discipline and focus. Our primarily domestic supply chain and strong relationships with our U.S. mill partners provide Reliance a distinct competitive advantage, while our nimble operating model, solid balance sheet and diversified product mix continue to underpin strong and consistent performance. These same strengths also position us favorably to capitalize quickly as market activity rebounds.

Looking ahead, we remain focused on investing for growth and delivering value to our customers and stockholders, supported by our consistently strong cash generation.

I'll now turn the call over to our COO, Steve Koch, who will review our demand and pricing trends.

Thanks, Karla, and good morning, everyone. I want to begin by recognizing our teams across the organization for their strong execution in the third quarter, delivering outstanding service to our customers, navigating ongoing macro challenges with discipline while maintaining the relentless focus on safety.

Looking at our demand and pricing trends. Third quarter tons sold were consistent with the second quarter of 2025, surpassing our expectations of down 1% to 3%. Our tons sold increased 6.2% compared to the third quarter of 2024, significantly outperforming the service center industry, which reported a decrease of 2.9% in the same comparative period. Our outperformance of the industry demonstrates our ability to gain share in a demand environment constrained by market uncertainty through our Smart Profitable Growth strategy and the contributions of our continued investments in growth.

Consistent with our outlook, our third quarter average selling price remained steady compared to the second quarter of 2025, even as tariff-related momentum quickly leveled off. Pricing upside from certain aluminum and stainless steel products was offset by pricing pressure on [ most carbon ] steel products as well as stainless steel products sold into the aerospace and semiconductor industries.

Through industry overbuying in the first quarter of this year in advance of the tariffs as well as [ rarely ] available inventory at domestic mills and depots, pricing for most products has been declining since April, resulting in a very competitive market, which when combined with stable to declining end demand has pressured our gross profit margins. As Arthur will expand upon when reviewing our outlook, we believe pricing for most products has now stabilized entering the fourth quarter. Our teams navigated these market dynamics very well while maintaining discipline in pricing and strong customer service levels.

Turning to our key end markets. Nonresidential construction represented roughly 1/3 of our third quarter sales, comprising carbon steel tubing, plate and structural products. Shipments for these products were [ seasonally ] strong in the third quarter and increased compared to the third quarter of last year, driven by strong demand in public infrastructure work, including civil projects, schools, hospitals and airports, as well as ongoing data center construction. Our scale and broad geographic footprint enable us to capture growth across these key areas.

General manufacturing, also about 1/3 of third quarter sales, is highly diversified across geographies, products and industries. Shipments in this market also increased year-over-year as military, industrial machinery, consumer products, shipbuilding and rail sector shipments were seasonally strong and showed solid year-over-year growth. Relative weakness in agricultural machinery continued. Our sustained outperformance across key product groups in general manufacturing highlights the versatility and competitive advantage for our diversified business model as well as our ability to grow with both new and existing customers in an uncertain macroeconomic environment.

Aerospace products comprised approximately 9% of total sales in the quarter. Demand on the commercial side was down slightly due to pent-up inventory in the supply chain, while demand in defense and space-related aerospace programs remain consistent at strong levels.

Automotive, which we primarily service through our [ toll ] processing operations and are not included in our tons sold represented about 4% of our third quarter sales. Our processed tons improved over the third quarter of 2024 supported by our investments in capacity expansion.

Semiconductor market remained under pressure from ongoing excess inventory in the supply chain during the third quarter.

In summary, I thank our team for their strong, focused and safe execution in uncertain and volatile market conditions. The scale and diversity of our product offerings and value-added processing capabilities, combined with dependable customer service, continue to win Reliance new business and new customers and increase our market share. To reiterate what Karla said, we are well positioned to capitalize and improve on our already strong results as market activity rebounds.

I will now turn the call over to our CFO, Arthur Ajemyan, to review our financial results and outlook.

Thanks, Steve, and thanks, everyone, for joining today's call. We were pleased to report third quarter non-GAAP earnings per diluted share of $3.64, consistent with both our expectations and the third quarter of 2024.

Of particular note, the third quarter of 2024 benefited from $50 million of LIFO income, compared with $25 million of expense this quarter, which equates to a $1.03 per share unfavorable year-over-year LIFO impact. I'll circle back to LIFO, but first, I'd like to expand on a couple of points that Karla Steve mentioned: gross profit margin headwinds and market share gains.

Trade policy uncertainty has contributed to temporary headwinds to gross profit margins since May of this year for most carbon steel products. Tariffs initially drove rapid price increases for carbon steel products, which slightly elevated carbon steel margins. But without a corresponding increase in demand and plenty of inventory availability in the supply chain, we encountered a very competitive pricing environment, which led to third quarter margin decline for carbon products from somewhat elevated level in the first half.

In addition, ongoing excess inventories within the aerospace and semiconductor supply chain continue to pressure prices and margins across a range of stainless steel and aluminum products. In sum, gross profit margin associated with less than 10% of our sales has contributed to consolidated margin compression. We expect this pressure to ease as we move through 2026.

Finally, the impact of our LIFO accounting method also contributed to margin pressure this quarter. Since LIFO is applied on a pro rata basis, we continue to carry LIFO expense through 2025 that reflected cost increases that occurred earlier this year. This [ level effect ] tends to smooth out on an annual basis though. For the full year 2025, we are still expecting $100 million of LIFO expense.

Turning to organic growth. Our teams have done an outstanding job winning new business and growing with existing customers. We tend to outperform industry shipment trends at wider margins during uncertain times. The incremental volume of over 100,000 tons for the third quarter and over 300,000 tons for the year so far in 2025 has allowed us to meaningfully contribute to our overall profitability.

On a FIFO basis, our gross profit margin was 29% in the third quarter, up from the third quarter of 2024, and our FIFO pretax income increased 30%.

Looking at expenses, our same-store non-GAAP SG&A expenses were up 4.8% for the quarter and 3.6% for the 9-month period compared to the same prior year period, due to inflationary wage adjustments and higher variable warehousing and delivery costs to support our increased tons sold. We also saw higher incentive compensation in the third quarter due to a 30% increase in FIFO profitability.

On a per ton basis, our same-store non-GAAP SG&A expenses were slightly lower in both the third quarter and the first 9 months of 2025 compared to the same period in 2024, demonstrating the operating leverage achieved through our Smart Profitable Growth strategy.

I'll now address our balance sheet and cash flow. We generated approximately $262 million in operating cash flow in the 2025 third quarter, which reflected a working capital investment due to seasonally strong net sales. We continue to generate strong cash flow from operations throughout market cycles that we redeploy to execute our opportunistic capital allocation strategy. We use that cash to fund $81 million in capital expenditures, pay $63 million in dividends and repurchase $61 million of our common shares at an average price of approximately $288 per share. Year-to-date, our repurchases have reduced total shares outstanding by 2%, and we have approximately $964 million available for further repurchases under our $1.5 billion share repurchase plan that we refreshed in October 2024.

As previously announced, on August 14, 2025, we borrowed $400 million under a term loan agreement maturing in August 2028, and used the proceeds to retire of senior notes due August 15, 2025. As of September 30, our total debt was $1.4 billion, including $238 million in borrowings on our $1.5 billion revolving credit facility. Our leverage position remains favorable with a net debt-to-EBITDA ratio of less than 1, providing significant liquidity to continue executing our capital allocation priorities.

Looking ahead, we anticipate overall demand in the fourth quarter will remain stable across our diversified end markets, subject to ongoing domestic and international trade policy uncertainty. Accordingly, we estimate our tons sold will be up 3.5% to 5.5% compared to the fourth quarter of 2024. And consistent with seasonal trends, down 5% to 7% compared to the third quarter of 2025.

We anticipate our average selling price per ton sold for the fourth quarter of 2025 will stay relatively flat compared to the third quarter. As a result, we anticipate flat to slightly improved FIFO gross profit margin in the fourth quarter.

Based on these expectations and consistent with typical sequential seasonality, where we experience approximately 20% to 25% decline in earnings per share in the fourth quarter, we anticipate Q4 non-GAAP earnings per diluted share in the range of $2.65 to $2.85, inclusive of quarterly LIFO expense of $25 million or $0.35 per diluted share.

This concludes our prepared remarks. Thank you again for your time and participation. We'll now open the call for your questions. Operator?

[Operator Instructions] Our first question today is coming from Katja Jancic from BMO Capital Markets.

Maybe starting on the gross margin. So I understand that right now, the environment is such that it's resulting in gross margin compression. But is any of this compression attributable also potentially to your focus on growing volumes?

Katja, from a gross profit standpoint, I mean, we've tried to, in our remarks and the release, give enough context to help everyone understand the uniquely challenging market that we've been in the last couple of quarters. And what really said a lot to me in recently speaking with a couple of our people who run some of our typically higher-performing Reliance companies who've been in the business 30 to 40 years, they commented that they've never seen a market quite like the one we've been operating in the last 2 quarters with the pricing strength coming from tariffs without the underlying demand to follow it. And that's what we think is a little unique in the current environment.

We think our teams have done exceptionally well in winning business. And they are getting price increases from some of the mill increases that are coming through on products, more so in some products than others, just not at the rate that Reliance has experienced in more normal periods where there was demand pull forward.

But we do think that, that is temporary. We also tried to highlight, in particular, there's been a drag on margins for some of our special -- high-value specialty products that we sell into aerospace and semiconductor. We're bullish on both of those markets long term. There's just been a little pain, and it has a bit of an outsized impact on our gross profit margin that we've been experiencing the last couple of quarters.

But as far as our Smart Profitable Growth strategy that we've been pushing the last couple of years, that we think our teams have executed really well on, it means grow your tons with good profitable business and keep our gross profit margin in that sustainable annual range of 29% to 31%. We said there may be quarters where we dip down, which we experienced in this quarter, which there's a little bit of the LIFO timing that Arthur explained that impacts that.

But the tons we're going after, we certainly have picked up tons in the flat-rolled space, which those margins aren't always as high as some of the other products that we sell. So could there be a little bit of impact from that? But overall, the end game is the right end game in our view because this is profitable business that's adding to our earnings, it's helping leverage our SG&A expenses, and we're really happy with the additional profit that those tons are bringing to us.

So it's not the reason that our margin dipped down. It could be a factor to a certain extent. But there are other -- it's more of the market and a couple of those specialty lines for us having the bigger impact.

Okay. Maybe when I look at your inventory level on your balance sheet, it seems like they're moving higher a little bit. I wouldn't expect this to be the case in this environment. Can you maybe talk a little bit about what's going on there?

So part of that is pricing. Because as we mentioned, there have been mill price increases, so that's part of the dollars increasing. But we also have our tons up, and we buy based on what we're shipping. And so I think we might have a slight uptick in tons as well, but it's ripe for the market. And I think we've seen many of our competitors pulling back a bit from having inventory on hand, and this is allowing us to win some business and better service our customers.

Next question is coming from Timna Tanners from Wells Fargo.

I wanted to follow up, if I could, on the inventory side. I know you said ongoing -- I think the quote I have was ongoing excess inventory was pressuring margins -- contributing to the margin pressure. And another mill CEO this week said destocking was over. So I'm just trying to get a sense of, how close are we to putting that in the rearview mirror? When do you think we could switch to seeing appropriate levels of inventory? And did you mean that from your competitors or from your customers, I guess?

Yes. So Timna, more at both the mill and the service center level in Q2 and Q3. There was a lot of inventory at the beginning of the year. We think a lot of service center companies were buying heavy to get in front of the tariffs, whether that was coming through import or domestic buys. So we believe service centers have been trying to work down that inventory.

We do believe those inventories have come down. We're not going to say if destocking is over. We don't talk about destocking and restocking in our company. We talk about buying what we need based on our shipment levels. But we are starting to see lead times for certain products go out a bit, which is a positive sign.

Are we at an inflection point? Potentially. If we're not there, we're probably closer than we were. And when we were talking about the impact on gross profit margin from the competitive environment with a lot of inventory, that was really talking about Q2 and Q3 and the markets we were in every day. So we do see momentum [indiscernible] gross profit margin troughed in Q3 based on the factors we see today. So I would say we probably generally agree with that comment, but probably just wouldn't say it is strongly as others.

Fair enough. I want to ask on the comment about winning new business. How does Reliance win new business? Is it execution? Is it price? Is it a little of both?

Well, hopefully, it's execution and not price. That's the strategy. And we have changed our message starting a couple of years ago and set specific targets with certain of our Reliance companies where we felt that they could grow their tons in a profitable way and ask them to execute on that. And it's really them calling on customers, maybe their customers they had not been calling on.

Prior to that, maybe they're going back after some business they used to have. We also have much more expanded processing capabilities. We can do a lot more for our customers now with the investments that we've made in that equipment.

And so it's really going back out educating our customers and then getting their orders and proving ourselves. We think that -- we think we provide among the highest levels of customer service in the industry. And that's why typically, once our companies can get their foot in the door with business and show our customers how well we can service them, we expect to retain most of that business that we've earned during these last couple of quarters.

Our model, though, does fit with the market that we've been in, where it's been competitive, people have been hesitant to buy too much inventory because of the tariff uncertainty and falling prices in certain products, our ability to service small orders on a just-in-time basis is a positive in that type of market environment. So we probably won some business because some customers' buying patterns changed a bit. But I think we should be able to hold on to a lot of that business that we were able to win during the last couple of quarters.

Okay. I appreciate it. And I want to squeeze in one more if I could. I'm going to dare to ask a question about LIFO. But it's kind of bizarre to see continued LIFO expense at the same time as you're talking about prices having drifted lower recently. So I guess just at a high level, when do we clear the decks and start to have like a neutral LIFO environment? It sounds like you're still expecting continuation into Q4. But is it getting to a point where we run through that and start to see LIFO income or at least no LIFO impact?

Yes, Timna, good question. So LIFO is an annual estimate. So I guess, the way you're thinking about it, a lot of the cost increases if you step back or look at the year, happened in the first half of the year. But because it's an annual estimate, we applied it pro rata. So you're right. And intuitively, when you look at Q3 and you say there's LIFO expense, it's essentially associated with cost increases that are in the rearview mirror.

But again, because the accounting method is pro rata, you're effectively spreading that equally throughout the year. So as we head into 2026 and costs are relatively flat, then essentially LIFO expense is in the rearview mirror.

And just as a reminder, Timna, when we're in more normal times with pricing moves based more on the supply-demand dynamics and prices are going up because of demand and that creates LIFO expense, we're happy to incur LIFO expense in that type of environment. But again, it's been a bit of an atypical environment the last couple of quarters.

Your next question is coming from Phil Gibbs from KeyBanc Capital Markets.

The semis infrastructure and aerospace pieces specifically certainly been noting excess inventories for most of 2025. And I know Timna made a general question about excess inventory in the supply chain. But those markets specifically, are you anticipating that those begin to turn around or levelize sometime in 2026?

Yes. And Phil, maybe we want to make sure too that we're clear, these are -- in those markets, we're talking in particular about the high-value products. These are the products you've heard us start talking about the end of last year -- well, actually for the last couple of years, coming out of COVID, we saw lead times move to 80 -- 50 to 80 weeks, which we had never seen before. And the whole industry saw that.

We do think there was some general overbuying in both the aerospace and semiconductor market of some of these products because there was just concern about availability. And so we've just seen the supply chain working through those products. There are pockets where you start to see some improved demand. So we don't think it's getting worse today. We think it's getting better, but it's -- for certain products, it's just going to take some time. So we commented as we go through 2026, we think we'll see continued improvement in the supply chain working itself down for those products.

Phil, I would say that if you think about the aerospace inventory, from a Reliance point of view, we're probably in the seventh or eighth inning of kind of getting our inventory under control and in a good position to start restocking in the first quarter of 2026. But the overall industry and our competitors and some of our customers, they're probably more in the fifth and sixth inning. But I think we're in good shape, but we're still going to have to deal with the market dynamics of the reality of there's a lot of inventory.

And on the CapEx side, I think you said around $350 million in cash CapEx this year. What should we anticipate for 2026? Because I know you've been kind of on an above trend for the last several years as you've invested in your capabilities and made more acquisitions.

Yes, Phil, that is our current estimate for this year. We're working on our 2026 CapEx budget as we speak. It, we believe, will be probably below what our 2025 number was. We've had some record years in the last few years. And it's been good investments for us, but we are pushing our people to really utilize the equipment that we have better, how can we maybe share some of that equipment within the Reliance network and just really pushing for better utilization of the investments we've already made.

But we will continue. We do continue to see growth opportunities and we will have some growth initiatives in our CapEx in 2026. We'll give you that number in February, but probably directionally lower than our budget of $325 million in 2025. And remember, there will be carryover. Some of these projects are multiyear projects. So the cash outlay might be more consistent with this year just because of some of the carryover coming into 2026.

And the last question, just on taxes. So I know there's been the Big Beautiful Bill and half a dozen other things that seemingly are changing cash tax rates and effective tax rates for companies, but is your cash tax rate for this year and next year relatively aligned with the effective rate? Or is it somewhat below?

Yes, Phil. So I mean, you can look at our tax rate for the most part, it's -- we're a full rate taxpayer. I think as far as the new tax bill, yes, it is definitely -- especially the bonus depreciation, that's going to help lower our cash taxes paid. We're currently estimating the impact, but that could be an incremental reduction of cash taxes, probably into $30 million to $40 million range. So that's kind of the extent of the impact at the moment that we've estimated. .

Your next question is coming from Bennett Moore from JPMorgan.

If I could circle back real quick on the aero comment, I think from Steve. It sounds like you're expecting maybe restocking could emerge as soon as the first quarter. Is there any difference there between the aluminum and stainless side just given some commentary for some other players this morning and Boeing moving to 42 a month as of Friday?

Yes. Bennett, so from I think Steve's comment, again, he was talking specifically about Reliance's inventory position. And remember, we're talking about these specialty alloy steels, titanium, specialty aluminum products. So it's not impacting all of our aerospace inventory and aerospace business. We've seen relatively steady activity with like the aluminum plate and some of the other products that we consistently sell into aerospace.

This is a pocket of our inventory that we were talking about that -- I commented earlier we're long-term bullish on aerospace. Increased build rates absolutely could help that supply chain excess inventory get worked through faster. So that's all positive for Reliance and for the industry if we realize increased build rates.

Yes. We're in really good shape regarding our [ heat treated ] aluminum with the 2x and the 7X for aerospace. We're a little more challenged with some of the specialty long products that we're working through.

All right. And then turning to the steady pricing guidance, if I could kind of dig into some of the puts and takes here. I mean it seems like flat steel is looking pretty steady. I think you made some similar comments. But we have seen [ the tinted ] plate price hikes over the past few weeks with some success. Structural sounds pretty strong and the Midwest premium reached a record high over this past week. So could you walk us through kind of the puts and takes there?

So from the [indiscernible] beam point of view, the lead times have been extended and demand has been strong for most of the year, actually probably the last 12 to 18 months. We do appreciate the plate increase that was announced recently, because there was a continuous sliding of some of those products. So we believe that that stopped some of the bleeding, and we are looking for more of an uptick in the fourth quarter going into 2026.

Whereas merchant bar increased, that we think is going to take hold. And just in general, there's been some hold in some of the tubing mills. And overall, looking for brighter days in some of the carbon products.

And I would comment too, you mentioned aluminum, Bennett, on the common alloy aluminum, and we did get our prices up in Q3 based on those price increases, some pretty high levels on the Midwest spot, which are good for us, and we're passing through. But I think with the trade uncertainty and not knowing when and what some of those final agreements might be, there's overall some hesitancy of stocking up too much on inventory in case there is a trade action related to the aluminum product.

That's great color. And if I could squeeze one more in maybe just on M&A. We saw some activity from peers this past month. Just hoping to get your latest read on the M&A landscape, valuations, if you're seeing any new opportunities emerge.

Yes. So we're continuing to see a pretty steady flow of opportunities. We have commented the first quarter -- the fourth quarter of last year, we think, because of the elections, and first quarter of this year, it has slowed a bit. But the market's been -- picked back up to what we would call fairly normal levels and has stayed there. So we continue to look at opportunities as they become available, think about where we might want to be growing.

So we think it's a decent M&A environment. I think valuations are generally reasonable. Each opportunity is a little different depending on what the sellers are looking for. But we're pleased with the level of activity we've been seeing.

Your next question is coming from Mike Harris from Goldman Sachs.

Quick question. As you work through the gross profit margin headwinds, are there any SG&A leverage you can pull to help protect the operating margin?

Yes. So I think, Mike, that's something we're focused on every day and pushing our people to be focused on. We have been talking more internally and pushing our people to really look for efficiencies in their operations, in their warehouse activities. We have reduced our head count even with higher tons being shipped over the last couple of quarters. So that's a focus, again, like I said, that we're always looking at.

We look -- we have several different locations. They don't all perform at the same levels. So we are continuously looking at any underperforming assets. How do we make changes there? Sometimes we combine locations. We'll close small locations. That's kind of constant activity that we're doing. And also with our Smart Profitable Growth strategy, we are getting better leverage off of the fixed cost component of our costs.

I don't know, Arthur, anything you would add?

Yes. No, great color, Karla. And Mike, yes, we actually peak head count in Q2, and we've trended down. And that's part of the efforts that Karla mentioned around rationalizing our operations.

I think the service levels in this environment are important, and our market share gains have had a lot to do with our service levels. So it's important to be really thoughtful about maintaining those and not just go in and reduce head count for the short term, but in the long term really impact our service levels.

So we're being very thoughtful methodical as we're navigating this environment and really growing the business, getting new customers going with existing customers. We've had some really good success with that, and we're looking forward to continue that.

Okay. Great color, guys. And then I guess just on the market share gain that you pointed out, going from 14.5% up to like 17.1%. Just curious as to how much of that would you attribute to organic versus inorganic growth.

Yes. So certainly, Mike, we have had a few acquisitions over the last couple of years for in 2024. That is part of that. But -- and we called out our same-store and our consolidated shipment trends. But the majority has been organic growth, both, again, investments we're making in some greenfields, some expansions, our increased value-added processing we're able to do. But really just our salespeople looking for more opportunities and going after good business that's out there that maybe we haven't been servicing the last few years. So we're really proud of what our teams have done going out aggressively but aggressively through service, not through price, getting that increased business. .

Yes. That majority is organic, so.

Okay. Great. And then just last one, if I could. If we look at the third quarter shipments, were there any, I guess, major onetime items in there or perhaps any pull-forward sales that you would call out?

No, there's nothing there we would call out, Mike. I mean when your average order size is in order, it's hard to get that one big order so that really moves the needle. So I think it was just pretty broad-based. .

Your next question is coming from Martin Englert from Seaport Research Partners.

For nonresidential construction, it seems reasonably good. I'm curious how much of this activity do you think is related tied to AI, data centers, semiconductor build-outs, kind of that camp of activity?

Yes. Martin, it's hard for us to quantify just based upon the diversification we have within our companies and then the customers that we're selling into. And I think we commented on this last quarter, almost every one of our Reliance businesses is touching the data center trend and build, including the build of the electrification to support that with many, many different products, right? It's not just building the shell of the facility, it's a lot of the internal racking and enclosures and equipment. It's cooling systems. It's, again, the grid.

So we're touching it. And it's been very positive for the industry that the data center trend is strong right now. But for us to quantify that, we think it will continue to grow. You can look at all the estimates out there of the builds that are being announced, and that will continue. So that's all very positive for us, but difficult for us to quantify specifically.

And if the government shutdown continues for an extended period, does this pose any risk to any programs you might have exposure to or anything within defense spending?

There's nothing that we're aware of that's impacted us directly today. We're on -- I think the programs we're on are pretty solid programs, that we expect to continue. But certainly, there, like with anyone else, there could be some fallout if this continues. But it's not something that we've heard any warnings from any of our companies about any of the programs they're on.

Your next question is coming from Lawson Winder from Bank of America.

May I ask about capital return, and I guess, really in the context of capital allocation? One might expect that as the shares were a little bit weaker during the quarter, it might present an attractive opportunity, perhaps allocate more of your capital to the share buyback as opposed to less and maybe direct that away from other opportunities. I mean so how do you think about that in terms of return on your dollars in buying back shares versus investing in the rest of the business? And how should we think about that going forward?

Lawson, we think buying Reliance stock is always a good decision, no matter what the price level is. But we do look at that, we do look at what the market value is, and adjust our activity accordingly. We've been active the last few quarters. The exact volumes vary a bit. But we look to be in the market, we look to buy at attractive levels. We've got the balance sheet and the ability. We look at it as a pretty low-risk use of our capital when we're investing in Reliance by repurchasing our shares. And yes, it could be more attractive at different price levels, the same, I think, as for the general market.

Okay. That's helpful context. Can I also ask you, are you being impacted by, any way, by the aluminum supply disruption in New York State?

Yes. So we do, in our toll processing businesses, directly, we do work with the mill, that I think you're referring to there specifically. And it has created some disruption in the market that was not expected. And we are working closely with our mill suppliers as well as the end users of the metal, the automakers and others, to try to do whatever we can. We try to be a problem solver for them, whether it's storing metal for them, processing metal for them, actually leveraging the whole Reliance company to see if we can source the metal and fill some holes through some of the other Reliance businesses.

So definitely a collaborative effort within Reliance trying to help that particular mill and its customers, as well as the overall industry because it's having a much broader impact on multiple end-use customers and different mills. So we're just trying to do what we can to help lessen the disruption for those impacted.

Is it materially -- or material enough for Reliance that that could show up on your cost item or impact profitability?

No. And the good news with our tolling operations, if they do lose some processing business to this particular mill, they generally have more demand than they can accommodate that they can process metal for some other customers and end-use applications.

Okay. Great. And can we maybe talk a bit about seasonality or can you give us some perspective on that? I mean we've talked for a number of quarters about kind of negative impacts of seasonality on the business. In Q1, we saw seasonality benefit Reliance. When you think about the business today, and looking out to Q1, I mean, overall, across the business line, should we be looking at a recovery in Q1? Or how are you thinking about seasonality going forward from here?

Yes. Lawson, as much as anything is kind of normal in our business, the last few years hasn't been that much normal. But in the service center business, our activity is really based on shipping days and it's based on the number of shipping days that our customers are open. So the normal seasonality is Q1 and Q2 are our 2 strongest shipping quarters.

They're usually fairly even, but there can be a little, give or take. But the first 2 quarters of the year are our strongest. Q3 typically trends down a bit because a lot of big OEMs will do shutdowns for planned shutdowns during the summer in industries that we're selling into. Also a lot of the smaller customers, there are vacations and things going on where small businesses will shut down for a week or 2. So we generally see probably a 3% to 5% falloff in our shipping volumes in Q3 versus Q2.

I think the fact that our Q3 '25 shipments were equal with Q2 '25 is a big positive and again shows how our businesses, the Reliance businesses, are going out and winning business from others. And the fact that there was no dip in our shipment levels -- because the industry, I think will see -- did have the normal seasonality. And then Q4, with the holidays, that's usually another 5% to 7% reduction in shipment levels from Q3, just again because of customers being shut down more days, us being shut down a couple of days for the holidays. And then you see the bounce-back in Q1 when there are just more shipping days, people are back to kind of full staffing moving into the year. So we certainly expect that to happen.

I would comment, and when people look at seasonality, I just talked about shipment levels, but that obviously trickles down to earnings. And we -- our guide for Q4 earnings per share, typically, we've been down -- earnings per share from Q3 to Q4 dips about 20% to 25%, which is consistent with our guide. However, it was not reflected in the consensus numbers that were out there. So we ask that people putting those numbers out there do steady history and pick up on some of those trends and react accordingly.

Thank you. We've reached end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Well, again, we'd like to thank everyone for joining the call today and your continued support of Reliance. In particular, we'd like to thank all of the Reliance family members for continuing to operate safely and for all that you're doing in these challenging market times, and the successes that we've had. We're very proud of what you're accomplishing out there.

And also before we close out the call, I'd like to remind everyone that we'll be in Chicago next month, presenting at Baird's Global Industrials Conference. And we hope to meet with many of you there. Thank you, and goodbye.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Good afternoon, everybody. My name is Albert Realini. I work on the Jefferies Equity Research team covering the Metals & Mining sector. Today, we have the pleasure being joined by Reliance Inc. We have CEO, Karla Lewis; and COO, Stephen Koch. The format today is we're going to open up with a brief presentation from Karla on Reliance, and then we'll open it up to Q&A in the room.

All right. Thank you. Thanks, Albert, and thanks to Jefferies for having us here, tell you a little bit about our company. So at Reliance, we're a metal service center company. So primarily processing and distribution of metals. We were founded in Los Angeles in 1939. So we've been around over 85 years. We currently have about 320 locations, predominantly in the U.S., North America, but we do have some international locations. We've grown quite a bit over the years with a focus on being diversified, selling over 100,000 metal products to over 125,000 customers. We kind of operate ourselves, and I'll talk a little more about this as we go along in a decentralized manner and a lot through acquisitions. So we do keep the brand names in place. And so a lot of people don't know who Reliance is. They know our -- from a market standpoint, they know more who are -- they know more who our individual companies are that they're buying from every day. We think there's value in the companies we acquire. And we talk about our differentiated approach, we think, is a little different than some of the other larger service center companies. As I mentioned, we really focus on diversification. I think we have probably the broadest product diversification. Also we sell into most end markets, most things use metals, have metals as some part of their component and also look for that geographic diversification. I mentioned our decentralized operating model. We still think that we're -- our industry, it's more of a local business, relationships matter. We try to be close to our customers and put the decision-making close to the customers. We think we can service them better. and also drive our profitability a little more that way. We talk about as-needed inventory. So a lot of our customers looking for small quantities quickly. We try to educate our salespeople to understand the value they're providing to their customers, not take advantage from our customers but make sure we're charging for that and monitor our pricing and gross profit margins very closely. We generally buy in the spot, sell in the spot. We have very limited long-term contract business in the -- where we'll do long-term multiyear businesses primarily in our aerospace where we -- the producers will lock into a multiyear sell price. And so then we can lock into that with our customers. We do have some kind of quarterly pricing agreements with certain portions of our customer base, but the majority is transactional spot pricing and we do continue to try to grow organically. I think we've been the lead in dollars spent with our capital expenditure budget for quite a few years now. When we're identifying -- our people in the field are identifying opportunities for us to do more for our customers, and we've got the ability and the desire to invest in that.

I talked about our diversification. So if you look at these graphs, it kind of shows our end market, so general manufacturing, non-res construction and then transportation are 3 kind of major end markets that we service with a lot of diversity selling into a lot of different customers and end markets within that, again, spread out by region.

Commodity we're a little over half carbon steel and then about 15% stainless and 15% aluminum. We have toll processing as part of our business. In that business, we're -- it's only 4% of our sales dollars, but we're actually processing about 6 million tons of metal a year. But we don't take ownership of the metal, where the -- primarily the mill owns the metal, and then we don't take on the price risk for that metal, typically selling to auto and appliance from our toll processing business. And then to the right, the by product, you can see that we certainly do flat-rolled in there, but carbon steel, structural, tubing and plate or some of our biggest commodity items.

If we move -- we also -- with our model, we really do focus a lot on smaller customers with small order sizes, which we think is possible because of our decentralized model. So $15 billion in revenue, $3,000 average order size. We're doing a lot of transactions at our locations every day. 40% of those orders, customer calls today, we deliver tomorrow. About -- we've grown to about 50% of our orders today have some form of value-added processing performed. With that increased value-added processing that we're performing. Historically, we would do about 40% of our orders but our gross profit margins were kind of in the 25% to 27% gross profit margin range. So we've steadily increased that, and we think it's sustainable from doing more value-added processing that we're now in a 29% to 31% gross profit margin range.

And then more on the financial side, our model, we think, allows us to have very strong and consistent cash flows even in down markets. So somewhat of a countercyclical cash flow generation. And we've -- with our increased size, increased earnings, our cash flows have also expanded in recent years.

And on this chart, what we're showing here is Reliance in the orange, our gross profit margin, pretty comparable and consistent and at the level of industrial distribution companies. And then it's a bit above the service center peers and then the mill peer group. And then to the right, our EBITDA margin, again, towards the top, mill is doing a little better than us in recent years. And we've actually started to outperform in certain periods, the industrial distributors. So kind of the point here looking at us from a valuation standpoint, potentially driving to a multiple closer to the industrial distribution companies.

And from an investment standpoint, we like to grow, as I mentioned, kind of a leader on the CapEx side. Since -- in the last 5 years or so, we've put about $1.8 billion into CapEx, about half of that or more every year is growth related and the majority of that going into value-added processing equipment, which is allowing us to grow that gross profit margin. Also pretty acquisitive. We've completed -- since our IPO in 1994, we've completed 76 acquisitions. Those were all those companies named on that earlier slide that I showed. And last year, in 2024, we acquired 4 companies. We're always looking for good companies that we think are a good fit within Reliance, but we don't set targets because we don't want to do a bad deal but we think -- we only represent 16% of MSCI shipments today. It's still a very fragmented industry. So we think there's still a lot of opportunity for us to continue to grow through acquisitions as well as organically.

And then on a shareholder return perspective, we've paid regular quarterly dividends for 66 years. We don't have a formal dividend policy, but we want to consistently increase our dividend at a sustainable level. We've never not paid our dividend, and we've never reduced our dividend. So -- and we'd like to keep doing that going forward.

And then also from a share repurchase standpoint, we opportunistically entered the market and in the last 5 years, have repurchased about $3.2 billion of our shares. And this just shows our stock price, our trading history for the last 31 years which we're proud of what we've been able to do and look to continue to do more. So that's a little bit about Reliance.

Thank you for that, Karla. And if anybody has any questions, feel free to raise your hand. I will come give a mic over to you. But maybe I'll start with just high level, on kind of the state of steel demand currently in the U.S. it seems many in the market have been waiting a while for rate cuts and maybe some more certainty with policy. But just the state of demand and if possible, if you can maybe quantify what you think is -- has been, I guess, more of the driver in terms of the increase in HRC pricing and maybe your realized pricing versus from demand or the benefit of tariffs?

Yes. So I think the -- I wish I had a really good answer to that and knew exactly what was going on. We do -- from a demand standpoint, I would say, overall, we've seen over the last 1.5 years or so, fairly steady overall demand levels with a little more strength in some areas than others. We do think that the uncertainty in the market due to the trade policies is holding buyers back. It's holding back business owners making decisions. We do think once we get -- people get a little more certainty and they feel more confident making those investment decisions and also if we get -- when we get interest rate reductions, we think that could spur a little more demand, which could -- should help with the pricing. But Steve, maybe you can talk a little more about demand?

Sure. For the most part, demand has been steady for the past several quarters and non-res has been driving that demand. It wouldn't be a conference without mentioning data centers. I mean, we touch data centers, the construction of them and the infrastructure in and around data centers. And also we service the health care, schools, hospitals, universities, a lot of infrastructure play for bridges, tunnels, airports, rail stations. So overall, non-res has been a bright spot for Reliance over the last several quarters, and we look forward to servicing these markets into 2026.

General manufacturing, it's been spotty, there's been some real strong spots for us, if anything defense, military related, machine shops or shipbuilding or submarines, et cetera. I mean there's going to be a buildup -- a rebuilding up our stockpiles as far as our defense business for many, many years to come, and I think we're positioned well for -- to service those sectors.

And then probably agriculture has been something that's been kind of going along the bottom for the last several quarters. We're looking forward to hopefully some change in that sector in 2026. We service auto from the toll processing point of view. We don't sell the OEMs directly, but we work with all of them, and we're doing processing, whether it's aluminum or steel, and we're located near a lot of their plants and delivering just in time for them. And we've seen steady demand, and we look forward to -- we've invested in our facilities to take care of the automotive sector, and we're positive regarding that. Any other industries?

Aerospace.

Aerospace from a commercial point of view. There's been a lot of negative news in past several quarters, but we've actually heard some inventories being burned off and some positive anecdotal stories from some of the large Airbus and Boeing. So were positive regarding that. And defense and space has been a bright spot for us.

Okay. Yes, on the data center, I was at the Atlanta Steel Conference last week, and that was a pretty significant takeaway of mine. It's -- that's, I think, been making up for maybe some lost demand with the current interest rate environment. But maybe on reshoring. I think that was another trend that was discussed a lot last week. So anything you're seeing there, evidence of that actually materializing?

Yes. So from a restoring standpoint, actually from the first Trump administration, we did see some business, some manufacturing move back to the U.S. from mainly Southeast Asia, not in a big way, but there were definite -- some of our customers started making components for their customers here as opposed to it being done overseas. So there was already some momentum that -- discussions continued, obviously, coming out of COVID and bringing your supply chains closer. A lot of investment and planned investment in Mexico by a lot of our customers. And so we think that's real and it had started. Now, especially at the beginning of this year, we heard from almost all of our businesses that their customers were talking to them much more about bringing their supply chains, bringing production back to the U.S., potentially Mexico. I don't think anyone thought that the uncertainty with Canada and Mexico would last as long as it has. So I think that's holding back a lot of our customers from actually kicking off their investments, whether it ends up being in the U.S. or Mexico until they feel there's a little more certainty there. But definitely, a lot of people talking about it, and I think Steve can share some examples of real investment that we've already seen.

Yes. So we've seen Obviously, a lot of reinvestments in the chip industry down in Texas and Arizona. Automotive, we've seen some platforms move from Mexico and Canada to the United States. They're adding shifts, automotive is adding shifts to a lot of their plants. And also, we've seen a lot of pharmaceutical reshoring where research and development and actually production of drugs being moved to the United States for security purposes and other purposes.

So Karla, you mentioned the uncertainty with tariffs, especially Canada, Mexico, I think on primary steelmaking, it's kind of easy to maybe understand how tariffs would benefit a primary steelmaker here in the U.S. But I guess maybe if you could walk through how tariffs benefit or maybe they don't benefit your business? And just how do you -- yes, the impact there?

Yes. I mean, generally, a better balance between supply and demand is supportive of higher pricing levels and with less import -- and we've seen this since 2018 with less imported material coming in. It's given the domestic mills, the opportunity to increase prices. Generally, we're able to pass those higher prices on to our customers. Obviously, we have to be fair to our customers when we're doing that, but they understand the model. And so it gives us higher prices, higher earnings dollars. So we think that the -- overall for the industry tariffs in the past have been supportive to our industry. Also, I think Reliance, we have a long history of buying domestic product, over 95% of what we buy, we buy from the U.S. producers. So we have strong positions with them. So we have access to the metal and already have those relationships built. So customers know they can come to us. I think there has been some shifting. There are some service centers out there whose model historically has been to bring in a lot of import material and even some customers who would bring import indirect and they've had to find a new source for that. So we've seen our market share, our shipments increasing and outpacing kind of the industry shipment levels. We think some of -- that's part of the reason and the domestic mills who we're very close with are also picking up some of that share from import, and we like to partner with them and grow with them. And so those are some of the positives that we look at.

And then maybe just a quick follow-up there. So on the primary steelmaking side, I think some of the major producers, there's a bit of an offsetting negative with Canada and Mexico being involved, giving some of them have operations there, have invested there, given kind of the intertwining of the North American industry since, I think it was 2020 when they were originally given exemption. So anything to call out there in terms of your business deals in Canada and Mexico. I'm not sure if you touched on maybe how much of your earnings are derived from sales there or...

Yes. So for us, it's pretty limited. In Mexico, we have some toll processing operations there. And their business has held up. It's actually doing really well, primarily automotive tolling. And we have a lot of customers, as I mentioned earlier, with operations down there. We haven't seen a significant impact, and it's still a fairly small part of our business. I think more of it was planning for the future. We do have some operations in Canada, again, a fairly small footprint, we used to supply them from kind of 1 of our hub locations in the U.S. And so they've had to -- they're bringing in less of that metal and having to find different supply sources. But again, for us directly, it's been pretty limited. I understand a lot of other supply chains are a little more disruptive, but I don't want to speak for any of the producers.

If anyone in the room has a question, feel free to just raise your hand. Yes, I guess, maybe moving more towards the longer-term impact of tariffs. So I think in 2018, when Trump first enacted, then I think the response from the primary steelmaking industry was to invest in new capacity, and you're starting to see that capacity come online this year, next year. And I think it maybe has painted a little bit of an unfavorable kind of market balance unless you do have tariffs on. So just curious, was there a similar response from the service center side of things in 2018? Was there a lot of investment in new capacity in the industry or...

No. I mean I think people are in the service center industry, always looking for growth opportunities. And we've done a few greenfields, but I wouldn't say that was tariff related, maybe people were more profitable, and so they had higher cash flow to be able to invest a little more in growth. But -- and our growth and investments at the service center level, if we do a greenfield today, it might cost $30 million to $40 million, the mills, the producers, they are going billions of dollars. So we can do a lot of incremental growth without the type of capacity increase that you see at the producer level.

Okay. And I think a follow-up to that would be, so I think this time around, and it's definitely a takeaway from last week that you won't kind of see that same response from the domestic producers, obviously, given the supply outlook. And I think another reason is because you're starting to see how [indiscernible] foreign producers are going to get untariffed access to the U.S. markets with Nippon's purchase of U.S. Steel and then Hyundai's commitment to the new, I think it is $6.5 billion for 3.5 million tons into the 2030s. So I guess, how does investment like that from foreign producers and more and more I guess, domestic capacity, how would that impact you guys in the long term? And I guess your margins.

Yes. I guess I'll be careful here. Again, as I said earlier, kind of the -- we like a good supply-demand balance. It's better for all of us. And as you mentioned, there has been -- domestic mills have increased their capacity here in the last few years that's coming online. And I guess from our space, timing works with the import restrictions that, that new domestic capacity could replace the metal that was coming in from foreign sources, and that would keep us in better balance. I think we're good. I don't think we need more investment in, in U.S. capacity, in the steel space, at least not in the near term, but I don't get to make those decisions, but I probably would have made different decisions.

And then just last 1 on tariffs from me. If maybe you could just talk about how the impact on the aluminum side has been, if really any different. I know, obviously, we produced much more steel here in the U.S. than we do primary aluminum and if that's been kind of a different impact with tariffs?

Yes. I mean the tariffs, I mean, hit to Midwest premium pretty hard, pretty quickly. So we've been paying the mill increases and trying to pass it through, but we're trying to also work with our customers and make sure that there's not demand destruction and work with them through their challenges, and we're in it for the long run. And we certainly support U.S. manufacturing but we also support our customer base.

Okay. So I guess maybe diving more into some company specifics. Obviously, M&A has been kind of part of D&A over the past few decades. I think I've read over 75 acquisitions. I guess what's your kind of approach there? I mean, how do you look at kind of market valuations currently? Do you -- is -- I guess, is the period now just given the elevated volatility, I guess, less favorable for M&A activity in your space?

Yes. So Reliance, we have grown quite a bit over the years, especially in our earlier years when we were building out our footprint. Our approach on acquisitions is we like to buy good, well-run companies, strong management teams immediately accretive to earnings. And a lot of times and just with the complexion of our industry, it's a lot of like family-owned businesses. maybe single to a few locations. And their model is a little more like ours where it's really locally focused, customer service, next-day delivery. And those have been kind of the best additions to our portfolio. We have done 3 larger acquisitions back in 2006. Earle M. Jorgenson, they were a public company at the time, about $1 billion transaction, then the PNA Group that had public debt that was kind of a conglomerate of some different metals companies and again, about $1.5 billion. And then our largest acquisition in 2013 was Metals USA at about $2 billion enterprise value. which had also been a roll-up that had gone public. So those are good acquisitions for us. Timing wasn't always great, especially on our 2008 acquisition but they were good long-term investments that we've been really happy with. But then we buy, as I said, a lot of these family-owned companies, and the approach is in our decentralized entrepreneurial model to let them continue to generally operate the way they have under their brand. We paid a premium because they were a good company. So we want them to continue that, but we think we can bring resources, whether through capital or people or just market knowledge to help them get better. We've had a pretty consistent valuation methodology over the years. We try to -- and especially today, a lot of these companies, when we're looking at them to acquire them, we understand metal prices go up and down. We understand end markets are cyclical. And generally, we probably have a business that sells similar products into similar end markets. So we know what the cycles were. So we look at their historical numbers, we really don't look at projections. And we try to ;[indiscernible] say, what do we think a normalized level of earnings would be for this company going forward? We buy them for the long term. We're not looking to strip them and flip them. We want them to be part of the family going forward. And we don't value any synergies into that number. We think those belong to us. So we come up with that normalized EBITDA number and then apply a multiple to that and then hope that the seller agrees with us that that's a fair number for them. I think from where our -- we are seeing -- typically, what we've seen over the years is when there's uncertainty or an unfavorable market, the sellers kind of hold back because they think they're going to get paid a lower price for their business. And then when there's more confidence, a little more certainty, we see more people come to the market, we try to explain that with the way we value we're not taking advantage of market cycles, but that's kind of the general psyche, I think. So we did see a little pullback in opportunities, I think, going into the election last fall that lasted through the beginning of this year, but we've seen a lot more teasers and just more companies that we're aware of have come to market in the second quarter. So there's activity out there. We will look at it and hopefully find some good companies that fit and execute. Valuations, there was, in our view, a big disconnect coming out of like '21, '22, '23. We thought we saw expectations become more aligned with the way we look at things. And as I mentioned, we were able to complete 4 acquisitions last year. Right now, we anticipate more reasonable expectations, although I think there was -- and hopefully, this wasn't you, Rick. We saw 1 recently where we like the business, but we don't know why someone is willing to pay the multiple they're paying for that company, and we said good for the sellers. So -- but we think that we'll continue to see activity.

Thank you for the detail there. You touched on the capital return policy. It's just -- so I heard it correctly. So it's a fixed dividend or was that right [ there ]?

So it's a quarterly dividend, and we've generally increased it annually.

Okay. Okay. And is the -- are the buybacks, I know they were think more than $1 billion last year. Are those a cash flow-based payout, an earnings based payout or just kind of based on the cash you have at hand and maybe where you see the market going?

Yes. It's really us just opportunistically accessing the market. We don't have, again, anything formal being in a business where there's metal price volatility in cyclical end markets. We like to keep flexibility on our balance sheet. We're opportunistic when we go after acquisitions. Our CapEx, what do our customers need from us. So we want to have that flexibility. But then we also look at share repurchases opportunistically as well. We've been fortunate with our good cash flow the last few years that we've been able to really execute on all 4 of those capital allocation buckets. We haven't had to pull back on any 1 to do something else. So we haven't been held back on share repurchases. We've just accessed the market in the manner that we felt was best suited to provide value to our shareholders while at the same time not having to limit anything on the acquisition or organic growth side.

Okay. I think just maybe going maybe a little bit more back to the macro. Just with the current administration, everyone talks about tariffs, especially in this space, but aside from tariffs and the onshoring initiatives, any other, I guess, changes that you've seen that have affected your business under the current administration? Like I know on the mining side of things, companies we cover have seen, permitting drastically speed up. So I'm just curious, anything else you've guys seen under the current administration?

Yes. And we're really try not to get into politics and voice and views. But there has been some rollback of regulation I think is good for business overall. Certainly, the bonus depreciation that was enacted, that's good for Reliance directly from a cash flow perspective but also, I think, helpful to spur other investments. I would say nothing else to direct for us this time.

Question there?

Just for someone who's really new your story, could you just walk me through what kind of allowed for your EPS to essentially double the last 5 years? Could you parse out like say this amount, it's from organic contribution, a certain amount from margin improvement, that sort of thing, just more of a context.

I'm not going to be able to do that very well for you, sorry. But I mean, really, we've just had a continued focus on growing the business, both with organic, inorganic. It's probably been a little more even. We used to years ago be more heavily weighted towards acquisitions. That's been probably a little more even on those 2 fronts. We also have just encouraged our businesses to go after a little more market share, making sure it's a good profitable business, don't go after everything, but be a little more aggressive, and we set some targets on that. But I think the biggest factor is really just the underlying metal cost. We are significantly impacted by the price of metal on our earnings level. But also since 2018 coming out of COVID, we think structurally, metal prices are higher. All of our costs went up at the producer level, the service center level, at our customer level. So I think we think it's a step-up in higher pricing model, which we're generating higher earnings dollars, higher cash flow, our investments in value-add processing kind of mitigating some of that metal price risk. But I can't point to 1 thing or really parse out, but metal prices would probably be the biggest driver.

I think we're out of time. I want to thank Karla and Steven for a very nice presentation. And I'm sure you could follow up myself or Karla and Stephen after. Thank you.

Thank you.

Thank you.

Greetings, and welcome to the Reliance Inc. Second Quarter 2025 Earnings Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to your host, Kim Orlando with ADDO Investor Relations. Kim, please go ahead.

Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's Second Quarter 2025 financial results. I am joined by Karla Lewis, President and Chief Executive Officer; Steve 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.

Good morning, everyone, and thank you all for joining us today to discuss our second quarter 2025 performance. Our solid financial results once again demonstrated the resilience of our proven business model in a volatile environment. Our operating teams continue to excel in providing value to our customers and increasing our market share while effectively managing their businesses through ongoing market uncertainty. Our record second quarter tons sold compared to last year once again significantly outperformed the industry average volume by 7 percentage points which we attribute to our unparalleled scale, access to domestic metal and breadth of processing capabilities.

Importantly, we maintained a gross profit margin within our sustainable range of 29% to 31%, in line with our smart profitable growth initiative. Our strong performance generated sequential increases in non-GAAP pretax income in excess of 15% and non-GAAP earnings per share of $4.43 and an increase of more than 17% compared to the prior quarter. Our capital allocation framework remains unchanged, and our long-term focus continues to guide both our growth and stockholder return strategies.

Reliance generated $229 million of cash flow from operations in the second quarter. Our strong cash flow continues to support investments in advanced value-added processing equipment, organic growth and accretive acquisitions that position Reliance for growth in all market environments. Our 2025 capital expenditure budget remains at $325 million, with over 50% dedicated to growth projects. Our expected total cash outlay for 2025 is expected to be in the $360 million to $380 million range, reflecting carryover projects from prior years that will be completed this year.

Our second quarter results include benefits from our 2024 acquisitions, and we remain in a position of financial strength to execute on M&A opportunities that align with our disciplined criteria. We continue to see new acquisition opportunities despite continuing macroeconomic uncertainty, and we will maintain our focus on pursuing opportunities that expand our geographic footprint and the value-added metal processing solutions we offer our customers align with our emphasis on smart profitable growth and complement our strong gross profit margin profile. We also remain committed to returning capital to our stockholders. We returned $143 million to our stockholders in the second quarter in dividends and share repurchases, and we have repurchased over 1.2 million shares year-to-date at favorable prices.

In summary, I'm pleased with our strong operational execution in the second quarter, particularly given the rapidly changing trade environment. Our resilience reflects both the strength of our business model and the unwavering dedication of our team whose commitment to safely delivering industry-leading solutions continues to expand and deepen our customer relationships. While we anticipate some weakness in the third quarter, we remain confident in our ability to grow amid ongoing market uncertainty and take advantage of improved demand and pricing environments as we emerge from these highly uncertain times and encouraging trends in our key end markets, including signs of reshoring activity, are creating additional tailwinds as we look ahead.

Moreover, our long-standing practice of primarily sourcing our metal from domestic mills and operating in the United States provides a strong competitive advantage in the current trade environment. Our focus remains firmly on long-term success with a disciplined approach to value creation for all Reliance stakeholders.

I'll now turn the call over to our COO, Steve Koch, who will review our demand and pricing trends.

Thanks, Karla, and good morning, everyone. I'd like to start by thanking our dedicated team for driving operational success across the board upholding the highest safety standards. I'll now turn to our demand and pricing trends. Our second quarter tons sold decreased 0.9% compared to the first quarter of 2025 in line with our outlook of down 1% to up 1%, even when considering the effect of demand pull forward into Q1 due to tariff activity. Compared to the second quarter of 2024, our tons sold increased 4%. The significantly outperforming the service center industry's year-over-year decline of 3.1% as reported by the MSCI. Our increased shipments are attributable to market share gains as a result of our smart profitable growth strategy and continued investments in organic growth.

Our second quarter average selling price per ton sold increased 6.1% compared to the first quarter of 2025, doubling the high end of our expected range of up 1% to 3%. And reflecting the strong tariff-driven momentum for both demand and pricing near the end of the first quarter. Pricing for many carbon and aluminum products peaked in April but then declined for the remainder of the second quarter. stateless pricing declined modestly in the quarter as these products were less sensitive to trade base in the short term. As Arthur will expand upon shortly in reviewing our outlook for pricing for most products has remained steady entering the third quarter.

Next, I will review notable trends within our key end markets and products, beginning with nonresidential construction. Carbon steel tubing, plate and structural products, which we predominantly sell into the nonresidential construction market represented roughly 1/3 of our Q2 2025 sales. Compared to last year, [indiscernible] products were up second quarter. Improved demand for Reliance's products was driven by Reliance on scale and geographic diversity that allow the company to benefit from heightened data center construction and related infrastructure as well as publicly funded infrastructure projects such as schools, hospitals and airports.

Our general manufacturing business, which also represented roughly 1/3 of our total sales in Q2 2025 is highly diversified across geographies, products and industries. Shipments increased year-over-year and shipments related to rail and ship-related transportation projects and heavy construction equipment, were particularly strong in the second quarter, demonstrating Reliance ability to capture share even in challenged manufacturing markets. While shipments to consumer products and industrial maturing markets also improved year-over-year. Demand in those markets remains comparably softer than other manufacturing sectors.

Our continued ability to outperform the industry across key product groups shipping to general manufacturing applications highlights the versatility, the competitive advantage of our diversified business model and a fluid macroeconomic and policy environment and our ability to grow with new and existing customers. Aerospace products comprised approximately 10% of our Q2 2025 sales demand for commercial aerospace was stable compared to the first quarter of 2025 in the second quarter of 2024. Demand for defense-related aerospace and space programs remained consistent at strong levels. We primarily service the automotive market through our toll processing operations, which are not included in our tons sold.

Our tolling business, which represented approximately 4% of our Q2 2025 sales saw process tons stay relatively consistent with both the first quarter of 2020 and the second quarter of 2024, and supported by our capacity expansions. The semiconductor industry remained under pressure in the second quarter due to ongoing excess inventory from the supply chain. In summary, I thank our team for executing effectively and safely through dynamic operating conditions. The breadth and depth of our value-added processing capabilities high-quality products and reliable customer service continue to win Reliance new customers and increase our market share. Reliance's long-term dedication to domestic metal sourcing along with our industry-leading scale and strong balance sheet makes us a highly attractive partner to our mill suppliers in all market conditions.

I will now turn the call over to our CFO, Arthur Ajemyan, to review our financial results and outlook.

Thanks, Steve, and thanks, everyone, for joining us today. Our second quarter operating performance was strong, with shipment levels in line with our guidance despite some demand pull forward into Q1. And and higher-than-anticipated average selling prices. Our second quarter non-GAAP earnings per diluted share of $4.43 demonstrated strong growth of 17.5% compared to the first quarter of 2025 in a mixed pricing environment that reflected the following dynamics: pricing for many carbon steel products peaked in April and were treated through the balance of the quarter. resulting in the cost of our inventory on hand exceeding replacement costs. At the same time, shorter product lead times starting in March continuing through May, accelerated our receipt of higher cost material.

These factors contributed to non-GAAP FIFO gross profit margin realization that was slightly lower than expected increasing merely from 30.4% in Q1 of 2025 to 30.6% in Q2 of 2025. LIFO non-GAAP gross profit margin also rose by 20 basis points to 29.9% in Q2, with both quarters including $25 million of LIFO expense. For the full year 2025, we are maintaining our LIFO estimate of $100 million of spend. As of June 30, 2025, the LIFO reserve on our balance sheet was $485 million, which remains available to benefit future period operating results and mitigate the impact of potential declines in metal prices.

Turning to expenses. Our second quarter and 6-month period, same-store non-GAAP SG&A expenses were up 6.2% and 3.1%, respectively, compared to the same periods in 2024. And reflecting the impact of inflationary wage adjustments, increased variable warehousing and delivery expenses associated with increases in our tons sold and higher incentive compensation related to increased FIFO profitability. On a per-ton basis, our same-store non-GAAP SG&A expenses increased only 2% compared to the second quarter of last year and actually declined 1.7% over the first half of 2025 versus the same period in 2024, demonstrating the operating leverage achieved through our organic growth strategy.

I'll now address our balance sheet and cash flow. We generated $229 million in operating cash flow in Q2 despite over $100 million investment in working capital, mainly due to higher metal costs. We used that cash to fund $88 million in capital expenditures, $63 million in dividends and repurchased $80 million in our shares at an average price of $265 per share. Year-to-date, our repurchases have reduced our total shares outstanding by 2%. We still have approximately $1 billion available under our $1.5 billion share repurchase plan that we refreshed in October 2024.

As of June 30, our total debt was $1.43 billion including a $48 million reduction in borrowings on our revolving credit facility during Q2. Our leverage position remains favorable with a net debt-to-EBITDA ratio of less than 1 providing significant liquidity to continue executing our capital allocation priority.

Moving on to outlook for the third quarter. Looking ahead, we anticipate demand across our diversified end markets to remain stable in the third quarter, subject to normal seasonal patterns, which reduced our shipping volumes due to planned customer shutdowns and vacation schedules, as well as ongoing domestic, international trade and economic policy uncertainty. Accordingly, we estimate our tons sold will be down 1% to 3%, and compared to the second quarter of 2025, but more importantly, up 3% to 5% compared to the third quarter of 2024.

We do, however, anticipate pricing will stay relatively consistent with current levels throughout the third quarter, which will result in our average selling price per ton sold to be down 1% to up 1% and compared to the second quarter, largely driven by lower prices for carbon steel products, partially offset by higher prices for certain aluminum stainless products. As a result, we anticipate our FIFO gross profit margin will remain under some pressure in Q3. Based on these expectations, -- we anticipate non-GAAP earnings per diluted share in the range of $3.60 to $3.80 for Q3, inclusive of quarterly LIFO expense of $25 million or $0.36 per diluted share.

This concludes our prepared remarks. Thank you again for your time and participation. We'll now open the call for your questions. Operator?

We're now conducting our question-and-answer session. [Operator Instructions] Our first question is coming from Martin Englert from Seaport Research Partners.

Question on the guidance. Within the guide, you noted that FIFO gross margin is expected to remain pressured, is that meant to imply sequential weakness or rather a continuation of all those comparable to 2Q?

Martin, so Q3, if you recall, for Reliance and in our industry, typically, there is demand weakness just due to normal seasonal patterns during July and different months not only do a lot of the big OEM-type customers shut down for scheduled maintenance, that flows down to more of our customer base through their subs. And we also see in some of our smaller customers, which make up a big portion of our customer base. they will oftentimes shut their locations down here and there during the summer for their employees to take vacations.

So nothing in our view out of the ordinary. We probably guided, I think, from a demand standpoint, a little stronger in Q3 than we do typically from the seasonal slowdown and also, it's still year-over-year stronger, and we've been trending. Our demand has been stronger in our year-over-year quarters. all year so far. And so we feel good about it. On the pricing side, we can talk a little more, but in Q2, there were -- we would say it was a little atypical from our normal cycle. If you recall at the end of Q1, we talked about some potential demand pull forward into Q1 and there were price increases. Prices had good momentum when we look to everyone in April and gave our Q2 guide, but prices kind of peaked out, especially on a lot of the carbon products in April, and then we saw prices decline.

And so we had some margin -- gross profit margin compression in Q2 typically in a rising price environment, we would expect that to expand, which was in our guidance. So we might be a little more hesitant going into our Q3 guide now although on the pricing side, there's weakness in a couple, most products we think, are fairly steady. And we see upside, aluminum prices did increase in Q2 and hold because of some of the tariff-related impact on their input costs. So we -- and we expect that to continue to flow through in Q3 as well as a base price increase on stainless near the end of Q2. So there's a little lag to work that in.

But overall, we did imply some continued pressure on gross profit margin in Q3, primarily it's just very uncertain out there. The tariff uncertainty does -- we believe, has been holding back some of the buying by many customers throughout the space. We think once that gets unlocked, we feel very good about where we in the industry will go for the rest of the year or at whatever point tariffs get resolved.

So more generally, just a more conservative one, given more conservative guidance overall, based off of how second quarter transpired and given some of the uncertainty out in the market, is that a fair characterization?

That is fair. And we can only guide to what to what we see and what we believe is happening in our business. We unfortunately can't control what consensus or other expectations look like out there for us and whether or not -- they're in line with what we see happening in the market.

You did touch on this, but I want to see if there's any more that you'd like to highlight what customers have been saying about the tariff environment, the impact on their business. anything else that you've been seeing or observing about them?

Yes. I think we just -- I would say, what's a real positive for us, Martin, is we continue, especially in our the kind of non-res construction business. We continue to see new activity, the types of projects we do, some of the smaller projects. That space for us remains active. We're not saying it's growing, but it is not declining. And our management teams selling into that space are very confident and upbeat about what's going on in those markets. Certainly, data center is a strong coal there. And at Reliance with the breadth of the products we sell, we're not just selling into the kind of foundational construction of the data center buildings. We have a lot of different products that also go internally into the data centers and the electrification of that. So that's bright -- a real bright spot out there. But overall, schools, hospitals, airports, we continue to see a lot of activity in that space.

Okay. Within the aero -- commercial aero supply chain fully be noted in inventory overhang, is there more detail that you can share there or expected duration around the issue?

Yes. I mean I wish we had a perfect answer to that, Martin. We have to watch what happens in the space, but we are seeing some products where it appears the supply chain has worked through and there's some activity buying activity from our customers buying from us. But at fairly moderate level at this point. I do believe Boeing's build rates did increase recently. So once that starts to flow through the supply chain, we do anticipate seeing more activity levels, but our guide for Q3 was pretty flat with what we saw in Q2.

Our next question today is coming from Katja Jancic from BMO Capital Markets.

Maybe starting on the market share gains, can you talk a bit about what gives you the ability to really gain market share? And how are you thinking about over the next few quarters? Is this expected to continue?

So if you go back a few quarters, even through most of last years, we have been picking up market share. The important thing for us, we talk about smart profitable growth means we're picking up market share but also maintaining our gross profit margin. So we're not just chasing business out there. We're going after good business, and we think there is room to continue to do that. I think the Reliance teams win that new business because of the superior customer service that our people provide to our customers, especially in uncertain markets where customers want to buy more frequently, our next-day delivery model, the level of processing that we can provide to our customers the quality of our products.

I think that high-touch customer service model is -- and the way that we're structured, decentralized so our people can react quickly to opportunities that they see in the market. and really focus on those customer relationships with our broad footprint. I think those are all positives that allow us to gain that market share.

And then there's a lot of uncertainty still right now in the market. Does this increase the potential acquisition opportunities? Is there more potential deals that are coming to the market? And how do the valuation look?

We have seen an increase in Q2 over Q1. We had talked, I think, starting last year going into the presidential election that we had seen some pullback in acquisition activity, which we attributed to uncertainty around that. And then with all the trade uncertainty that had continued, but in Q2, we did see an uptick in number of deals in the market. So we're pleased to see that. Oftentimes, if there's uncertainty and owners of companies, they don't think they'll get the valuation they would like to, so they pull back.

But I think for whatever reason, we're seeing more of them come to market at this time. Sometimes people will get tired of the uncertainty. And if they're near retirement age, they may choose to exit. So we're pleased to see that increased activity from a valuation standpoint. For the most part, we believe that seller expectations more closely aligned, at least with the way we at Reliance look at some of the opportunities, but there are still some deals out there where valuation expectations are still higher than our view going forward. But we're pleased to see more opportunities for us to look at. We continue to actively look at those opportunities. And if and when we find the company -- good companies that are the right fit, we believe, for Reliance at the right value, we're excited to execute on those opportunities.

Next question is coming from Mike Harris from Goldman Sachs.

Just Carlos, follow-up on the earlier question around the gross margin pressure in the third quarter. It sounded like and I want to just make sure that I understood what you said that you guys were being conservative based on the second quarter results. And so I'm just curious, I mean, based on your current visibility, and I'm not asking for a beyond the third quarter but if you had [indiscernible] do you have the visibility that you would have confidence to speak to margin? I'm trying to get a sense of whether or not this pressure is limited to perhaps the third quarter? Or could it extend beyond that?

Yes. Mike, it's hard to answer. We hope we're being conservative, but with our model, we won't know until we get there. But again, we do think the environment was a bit unique in Q2 and with the trade uncertainty continues to potentially be a bit unique in Q3. The tariffs and the unknown around the tariffs gave our suppliers an opportunity to increase prices on some products. But on the other side, our customers Also, we're facing that uncertainty and so we're holding back on buying. So our more normal pattern of being able to pass through those price increases at time of announcement was not as successful as it has been in some prior periods.

I think our customers again, are still uncertain. And if they can hold back on buying, they were. So it was a little more difficult that even though the mills made some price announcements to get the market to accept those. And that's why we think once there is more certainty and we get the tariff, the trade unknowns behind us, our people in the field feel very confident about their ability to get in the market, the strength of their customers. So we believe it's temporary, and we want to get back to our more normal pattern.

But -- and I think also in Q2, again, March, April no price increases, costs going up and then they -- we saw the pressure and prices started to come down in May and June, but also supplier lead times shortened, so we were getting the higher cost metal more quickly. We're working through that in Q2 and Q3. And again, as I mentioned earlier, we are positive on the price increases on aluminum and stainless flowing through and holding. It just takes a little time to get those in, which we expect to happen through Q3.

Okay. That was very helpful. And then I guess just 1 more here. It looks like you guys have continued to gain a meaningful market share versus the field. And I was just wondering if perhaps you could share your thoughts on as we look forward, what does that pace look like? And maybe speak to the sustainability of the gains going forward?

Yes. I mean we think that they are sustainable, Mike. Again, as I mentioned in the prior comments, Reliance has always prided ourselves, we don't pride [indiscernible] at corporate. It's prides based on what our people out in the field are able to do every day in servicing our customers. And we think that model allows them to win the new business that it will continue to allow them to grow that business. And we referred to our smart profitable growth initiative. So we are from a corporate level over the last couple of years, we have been setting targets with our teams incentivizing them to grow their volume there were -- there was a period of years where our volumes were actually declining at Reliance. And we are pushing our teams to grow their volumes.

We've invested a lot in value-added processing equipment and facilities and we want to get better utilization out of all of those investments. So it is a put from us, but it's a balanced push that they also have to maintain our sustainable gross profit margin range of 29% to 31% and hopefully grow that as we move into the future. but also grow their tons, which is helping us from an operating leverage standpoint as well as we push more tons through our investments.

Our next question today is coming from Alex Hacking from City

I just had 1 question. which was on the aluminum business, to take U.S. aluminum prices are up 30%, 40% this year, I think, with the Midwest premium at $0.70. Your shipments still seem pretty robust, but how are you seeing acceptance of these significantly higher prices with your customers?

Thanks, Alex. Steve, do you want to address that.

Yes. Alex, the aluminum prices have gone up fast and fewer and then let off a little bit in the second quarter. We are passing along the increases to our customers. And we're being aware of their businesses, they are accepting the increases. But the level, whether it's stainless or aluminum, they've been rather outsized from our mill suppliers. And we think that it's a matter of timing. And as the year goes on, they'll be push into the market more and more.

Yes. And Alex, I would just add, at Reliance, whether it's in different periods, there's been maybe more of a highlight on nickel surcharges or it's aluminum Midwest premium. We really look at our cost on as an all-in cost, and that's how we go to market and based on our average -- our sell prices on the all-in cost. So we're treating the Midwest premium the same.

I guess just to follow up. I mean, are you seeing customers at all sitting back saying, "I want to wait for a trade deal with Canada to see where the Section 232 ends up before I pay a $0.70 Midwest premium or the business requirements effectively just compel them to keep buying even at these prices?

I mean, Alex, our customers who are purchasing aluminum for manufacturer whatever the end use is they're going to be paying a higher price. They may just buy a little bit less and a little more frequently, which is what benefits our model of next-day delivery for the most part and having breadth of inventory all over the country. So it is a little bit shocking in some cases for them. But I think that there's uncertainty with tariffs and higher prices will affect -- will benefit Reliance.

We've reached end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

All right. Thanks, operator. And thanks again to all of you for joining our call today and for your continued support of Reliance. We'd also like to thank the entire Reliance team for staying safe, operating safely every day and continuing to service our customers at the highest level. And as we mentioned in our comments, we are confident in Reliance's continued ability to perform well in all markets. We'll get through this temporary uncertainty here and come out of that very strong -- before we end the call, I'd like to update everyone that in August will be participating in Seaport Research Partners Annual Summer Investor Conference. And in early September, we'll be participating in the Jefferies as conference in New York City, and we hope to meet with many of you there. Thank you, and goodbye.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.