Insteel(IIIN) - 2025 Q4 - Annual Results

Executive Summary & Highlights Insteel Industries Inc. announced strong financial results for both the fourth quarter and fiscal year ended September 27, 2025, with significant increases in net earnings and sales driven by favorable market conditions, pricing actions, and higher shipment volumes Fourth Quarter 2025 Highlights In Q4 2025, Insteel reported a substantial increase in net earnings and sales, primarily due to wider spreads between selling prices and raw material costs, along with higher shipment volumes. Operating activities, however, used cash due to changes in net working capital Q4 2025 Financial Performance | Metric | Q4 2025 (in millions USD) | Q4 2024 (in millions USD) | Change (YoY) | | :-------------------------------- | :------------------------ | :------------------------ | :----------- | | Net earnings | $14.6 | $4.7 | +210.6% | | Diluted EPS (USD) | $0.74 | $0.24 | +208.3% | | Net sales | $177.4 | $134.3 | +32.1% | | Gross profit | $28.6 | $12.3 | +132.5% | | Gross margin | 16.1% | 9.1% | +7.0 pp | | Average selling prices (YoY) | +20.3% | - | - | | Shipment volumes (YoY) | +9.8% | - | - | | Operating cash flow | Used $17.0 | Generated $16.2 | -$33.2 | | Net working capital | Used $37.4 | Provided $5.3 | -$42.7 | - Key Drivers * Wider spreads between selling prices and raw material costs[4][5] * Higher shipments of concrete reinforcement products[4][5] * Increased incentive plan costs partially offset gains[4][5] * Acquisitions contributed incrementally to shipment growth[4][5] * Steady recovery in demand across key construction end markets[4][5] Fiscal Year 2025 Highlights For fiscal year 2025, Insteel achieved significant growth in net earnings and sales, driven by increased shipments and higher average selling prices, leading to an expanded gross margin FY 2025 Financial Performance | Metric | FY 2025 (in millions USD) | FY 2024 (in millions USD) | Change (YoY) | | :-------------------------------- | :------------------------ | :------------------------ | :----------- | | Net earnings | $41.0 | $19.3 | +112.4% | | Diluted EPS (USD) | $2.10 | $0.99 | +112.1% | | Net sales | $647.7 | $529.2 | +22.4% | | Gross profit | $93.4 | $49.6 | +88.3% | | Gross margin | 14.4% | 9.4% | +5.0 pp | | Shipments (YoY) | +14.8% | - | - | | Average selling prices (YoY) | +6.7% | - | - | | Operating cash flow | Generated $27.2 | Generated $58.2 | -$31.0 | - Impact of Charges * Restructuring charges and acquisition-related costs totaled $2.6 million, reducing diluted EPS by $0.10[9] Operational and Financial Review This section analyzes Insteel's Q4 and FY2025 financial performance, covering revenue, profitability, cash flow drivers, capital management, and liquidity Fourth Quarter 2025 Performance Drivers Q4 2025 saw net sales increase 32.1% due to a 20.3% rise in average selling prices and a 9.8% increase in shipment volumes, with acquisitions contributing to growth. Gross margin expanded significantly, but operating cash flow was negative due to working capital changes - Net Sales Growth Drivers * 32.1% increase in net sales to $177.4 million[5] * Driven by 20.3% rise in average selling prices and 9.8% increase in shipment volumes[5] * Pricing actions across all product lines to recover costs[5] * Shipment growth supported by incremental contributions from acquisitions and steady demand recovery in construction end markets[5] - Profitability * Gross profit improved to $28.6 million from $12.3 million[4][5] * Gross margin expanded to 16.1% from 9.1%, reflecting favorable market conditions[4][5] * Higher selling, general, and administrative expenses, mainly due to increased incentive plan costs, partially offset gains[4][5] - Cash Flow from Operations * Operating activities used $17.0 million of cash, compared to generating $16.2 million in the prior year quarter[6] * Primarily due to a $37.4 million use of cash from net working capital (decrease in accounts payable/accrued expenses, increase in inventories)[6] Fiscal Year 2025 Performance Drivers For fiscal 2025, net sales increased to $647.7 million, driven by a 14.8% increase in shipments and a 6.7% rise in average selling prices. Gross profit nearly doubled, but operating cash flow decreased due to working capital changes, despite higher net earnings - Net Sales Growth Drivers * Net sales increased to $647.7 million from $529.2 million[10] * Driven by a 14.8% increase in shipments and a 6.7% rise in average selling prices[10] - Profitability * Gross profit increased to $93.4 million from $49.6 million[9][10] * Gross margin widened to 14.4% from 9.4% due to improved conditions in reinforcing markets[9][10] * Net earnings for the period included $2.6 million of restructuring charges and acquisition-related costs, reducing EPS by $0.10[9][10] - Cash Flow from Operations * Operating activities generated $27.2 million of cash, compared with $58.2 million in the prior year period[10] * This was due to the relative change in net working capital, partially offset by higher net earnings[10] Capital Allocation and Liquidity Insteel maintained a strong liquidity position, ending fiscal 2025 debt-free with $38.6 million in cash. Capital expenditures for FY2025 were $8.2 million, with plans to increase to $20.0 million in FY2026 for cost, productivity, and maintenance initiatives - Liquidity Status (as of Sep 27, 2025) * Net cash balance: $38.6 million[8][11] * Debt outstanding: None[8][11] * Revolving credit facility: $100.0 million, with no borrowings outstanding[8][11] - Capital Expenditures * FY 2025 Capex: $8.2 million (down from $19.1 million in FY 2024)[11] * FY 2026 Capex expectation: Up to approximately $20.0 million, focused on cost/productivity improvements and maintenance[11] Management Perspective & Outlook CEO H.O. Woltz III provided commentary on the strong Q4 performance, successful resolution of raw material constraints, and the positive impact of acquisitions. The company maintains a cautiously optimistic outlook for fiscal 2026, focusing on disciplined execution and market leadership despite some macroeconomic uncertainties CEO's Commentary CEO H.O. Woltz III highlighted a strong Q4 driven by operational improvements and core market strength, noting the successful resolution of raw material sourcing challenges through increased domestic production and offshore purchases, which improved lead times - Q4 Performance Drivers * Reasonably strong Q4, supported by steady operational improvements and core market strength[12] * Addressed raw material sourcing challenges, with lead times normalizing by quarter-end[12] * Improved supply of hot rolled steel wire rod due to increased domestic production and substantial offshore purchases[12] * Eliminating raw material constraints allowed better production alignment and reduced lead times[12] - Impact of Acquisitions * Recent acquisitions contributed meaningfully to FY 2025 results and continue to perform well[13] * Acquisitions are driving higher shipment volumes and strengthening competitive position[13] Future Outlook Insteel anticipates generally strong and stable market conditions for fiscal 2026, although residential construction remains weak. The company is cautiously optimistic, focusing on disciplined execution, targeted growth, and leveraging its strengthened operations and expanding market presence - Market Conditions for FY 2026 * Generally strong and stable market conditions, though residential construction remains weak[8][13] * Closely monitoring broader macroeconomic conditions that could impact customer sentiment and demand[8][13] - Strategic Focus * Remain cautiously optimistic about the 2026 outlook[13] * Confident in long-term strategy and market position[13] * Focused on driving shareholder value through disciplined execution and targeted growth[13] * Well-positioned to sustain performance, capitalize on future opportunities, and solidify industry leadership[13] Corporate Information This section provides practical information regarding Insteel's upcoming conference call to discuss its financial results and offers a concise overview of the company's business, product offerings, and operational footprint Conference Call Details Insteel will host a conference call on October 16, 2025, at 10:00 a.m. ET to discuss its fourth quarter financial results, with a live webcast available on its investor relations website - Event Details * Date: October 16, 2025[14] * Time: 10:00 a.m. ET[14] * Purpose: Discuss fourth quarter financial results[14] * Access: Live webcast on https://investor.insteel.com, archived for replay[14] About Insteel Insteel is the leading U.S. manufacturer of steel wire reinforcing products for concrete construction, specializing in prestressed concrete strand and welded wire reinforcement, primarily serving nonresidential construction markets from its eleven U.S. facilities - Company Profile * Largest manufacturer of steel wire reinforcing products for concrete construction in the United States[3][15] * Manufactures and markets prestressed concrete strand and welded wire reinforcement (including ESM, concrete pipe reinforcement, standard welded wire reinforcement)[3][15] * Products sold primarily to manufacturers of concrete products and concrete contractors[3][15] * Primary use: Nonresidential construction applications[3][15] * Headquartered in Mount Airy, North Carolina[3][15] * Operates eleven manufacturing facilities in the United States[3][15] Legal & Risk Disclosures This section includes a standard cautionary note regarding forward-looking statements, highlighting the inherent risks and uncertainties that could impact actual results and outlining a comprehensive list of potential risk factors relevant to Insteel's business and financial performance Cautionary Note Regarding Forward-Looking Statements The news release contains forward-looking statements, which are subject to various risks and uncertainties, including general economic conditions, construction spending, raw material costs, and trade policies. The company disclaims any obligation to update these statements, except as legally required - Nature of Statements * Identified by words like "believes," "anticipates," "expects," "estimates," "plans," "intends," "may," "should," "could"[16] * Subject to several risks and uncertainties; no assurances plans will be implemented or achieved[16] - Key Risk Factors (non-exhaustive) * General economic and competitive conditions, including global trade policies and tariffs[18] * Changes in spending levels for nonresidential and residential construction[18] * Changes in transportation funding[18] * Cyclical nature of steel and building material industries[18] * Credit market conditions and financing availability[18] * Impact of rising interest rates on customer financing[18] * Fluctuations in cost and availability of hot-rolled carbon steel wire rod[18] * Competitive pricing pressures and our ability to raise selling prices[18] * Changes in U.S. or foreign trade policy[18] * Unanticipated changes in customer demand, order patterns and inventory levels[18] * Impact of fluctuations in demand and capacity utilization levels on our unit manufacturing costs[18] * Ability to develop the market for ESM and expand shipments[18] * Legal, environmental, economic or regulatory developments[18] * Unanticipated plant outages, equipment failures or labor difficulties[18] * Impact of cybersecurity breaches and data leaks[18] * Other "Risk Factors" discussed in the Annual Report on Form 10-K[18] - Disclaimer * All forward-looking statements are qualified by cautionary statements[17] * Statements speak only to their respective dates; no obligation to publicly release revisions unless required by law[17] Consolidated Financial Statements This section provides the complete unaudited consolidated financial statements for Insteel Industries Inc. and its subsidiaries, encompassing the Statements of Operations, Balance Sheets, and Statements of Cash Flows for the reported periods Consolidated Statements of Operations The Consolidated Statements of Operations detail Insteel's revenue, cost of sales, gross profit, and net earnings for the fourth quarter and full fiscal year 2025, showing significant year-over-year improvements in profitability Key Income Statement Data | Metric | Q4 2025 (in thousands USD) | Q4 2024 (in thousands USD) | FY 2025 (in thousands USD) | FY 2024 (in thousands USD) | | :-------------------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Net sales | $177,444 | $134,304 | $647,706 | $529,198 | | Cost of sales | $148,836 | $122,045 | $554,268 | $479,566 | | Gross profit | $28,608 | $12,259 | $93,438 | $49,632 | | SG&A expense | $9,708 | $7,470 | $39,002 | $29,591 | | Earnings before income taxes | $19,249 | $6,062 | $53,805 | $25,287 | | Net earnings | $14,550 | $4,669 | $41,020 | $19,305 | | Diluted EPS (USD) | $0.74 | $0.24 | $2.10 | $0.99 | | Cash dividends declared per share (USD) | $0.03 | $0.03 | $1.12 | $2.62 | Consolidated Balance Sheets The Consolidated Balance Sheets present Insteel's financial position, including assets, liabilities, and shareholders' equity, as of September 27, 2025, highlighting changes in cash, inventories, and total assets compared to the prior fiscal year-end Key Balance Sheet Data (as of September 27, 2025 vs. September 28, 2024) | Metric | Sep 27, 2025 (in thousands USD) | Sep 28, 2024 (in thousands USD) | Change (in thousands USD) | | :-------------------------------- | :------------------------------ | :------------------------------ | :------------------------ | | Cash and cash equivalents | $38,630 | $111,538 | -$72,908 | | Accounts receivable, net | $78,719 | $58,308 | +$20,411 | | Inventories | $137,776 | $88,840 | +$48,936 | | Total current assets | $261,947 | $267,294 | -$5,347 | | Property, plant and equipment, net | $128,691 | $125,540 | +$3,151 | | Intangibles, net | $16,553 | $5,341 | +$11,212 | | Goodwill | $37,755 | $9,745 | +$28,010 | | Total assets | $462,650 | $422,552 | +$40,098 | | Accounts payable | $48,173 | $37,487 | +$10,686 | | Accrued expenses | $17,836 | $9,547 | +$8,289 | | Total current liabilities | $66,009 | $47,034 | +$18,975 | | Total shareholders' equity | $371,532 | $350,855 | +$20,677 | Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows outline the sources and uses of cash from operating, investing, and financing activities for Insteel, indicating a decrease in operating cash flow and significant cash usage for acquisitions in fiscal 2025 Key Cash Flow Data | Metric | Q4 2025 (in thousands USD) | Q4 2024 (in thousands USD) | FY 2025 (in thousands USD) | FY 2024 (in thousands USD) | | :-------------------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Net cash (used for) provided by operating activities | $(17,007) | $16,229 | $27,163 | $58,207 | | Net cash provided by (used for) investing activities | $3,137 | $(1,763) | $(75,674) | $(19,637) | | Net cash used for financing activities | $(1,165) | $(673) | $(24,397) | $(52,702) | | Net (decrease) increase in cash and cash equivalents | $(15,035) | $13,793 | $(72,908) | $(14,132) | | Cash and cash equivalents at end of period | $38,630 | $111,538 | $38,630 | $111,538 | - Major Cash Flow Activities (FY 2025) * Acquisition of businesses: $(72,089) thousand[24] * Capital expenditures: $(8,213) thousand[24] * Cash dividends paid: $(21,761) thousand[24] * Repurchases of common stock: $(2,273) thousand[24]