Insteel(US:IIIN)2022-07-21 15:23Financial Data and Key Metrics Changes - The company reported quarterly revenue of $227.2 million, an increase of 41.3% from $160.8 million in the prior year [5] - Net earnings were $38.6 million, or $1.96 per diluted share, compared to $18.4 million or $0.84 per diluted share in the prior year, representing a 109% increase in earnings per share [5] - Average selling prices increased by 53.9% compared to the prior year and 6.3% sequentially from Q2 2022, marking the eighth consecutive quarter of rising average selling prices [6][7] Business Line Data and Key Metrics Changes - Shipments for the quarter decreased by 8.2% from last year, remaining essentially unchanged sequentially from Q2 2022 [8] - The decrease in shipments was attributed to softness in the standard welded wire mesh product line and labor availability issues [8][9] - Gross profit increased by $26.6 million or 84% from the same period last year to a record level of $58.1 million, with gross margin expanding over 600 basis points to 25.6% [10] Market Data and Key Metrics Changes - The residential market represents about 15% of the company's revenue, and while it is transitioning to a slower growth period, the overall market outlook remains positive [17] - Non-residential construction markets are expected to remain robust, with customer backlogs at near record levels [25][27] Company Strategy and Development Direction - The company is optimistic about the impact of the infrastructure investment and JOBS Act, expecting significant demand for products beginning in late 2022 or early 2023 [27] - The company plans to closely monitor market conditions and pursue actions to maximize shipments and optimize costs, positioning itself for attractive growth opportunities [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for reinforcing products and the positive outlook for markets, driven by infrastructure investments [3][16] - Labor availability has emerged as a key constraint on production, with management implementing flexible work schedules to address staffing challenges [21][22] Other Important Information - Cash flow from operations for the quarter used $5 million due to increased working capital from higher inventory levels [13] - The company ended the quarter with $63 million in cash and no borrowings on its $100 million revolving credit facility [15] Q&A Session All Questions and Answers Question: Could you guys maybe just dig into standard welded wire? What percentage of sales is that typically make up of overall sales? - The company does not disclose product line details [34] Question: Would it be -- I think you guys have typically talked about 15% of your overall sales comes from residential. Does that kind of fall in line with that? - The residential market consumes both standard welded wire reinforcement and PC strand [35] Question: Is the shipments down 8.2% you talked about labor, is that very regional? - Labor availability issues are experienced across different regions, with unemployment rates ranging from 2% to 4% [49] Question: Did the timing of getting the raw materials in along with the staffing shortage contribute to revenue loss? - Yes, the company entered the third quarter with low finished goods inventories, impacting potential revenue [51] Question: Will we see a big increase in cash balances at the end of the calendar year? - Inventory balances are expected to remain higher due to a combination of more units and higher values [53]