Reliance(US:RS)2024-04-25 20:45Financial Data and Key Metrics Changes - The company reported non-GAAP earnings per diluted share of $5.30 for Q1 2024, which was at the low end of the guided range due to softer pricing than anticipated [15][5] - The gross profit margin for Q1 2024 was 31%, supported by a higher-than-expected LIFO benefit and better alignment of costs [16][6] - Operating cash flow for Q1 was $126.3 million, funding $108.7 million in capital expenditures and $65.3 million in dividends [18][6] Business Line Data and Key Metrics Changes - Tons sold increased by 10.3% compared to Q4 2023, but were down 1.7% year-over-year, outperforming the service center industry decrease of 4.2% [9][10] - Carbon steel tubing, plate, and structurals represented about one-third of sales, showing solid volume growth [11] - Aerospace products accounted for about 9% of total sales, with stable demand year-over-year [12] Market Data and Key Metrics Changes - The average selling price per ton sold was $2,442, a decline of 1% compared to Q4 2023, with carbon steel prices increasing by 1% but trending down in Q2 [10][11] - Demand in the semiconductor industry has stabilized but remains down year-over-year, with a positive long-term outlook due to the CHIPS Act [13] Company Strategy and Development Direction - The company completed three acquisitions in 2024, adding nearly $500 million in annualized sales based on 2023 results, and continues to evaluate future acquisition opportunities [6][7] - The capital expenditure budget for 2024 is $440 million, with two-thirds allocated for growth projects [6][7] Management's Comments on Operating Environment and Future Outlook - Management expects a better-than-normal seasonal recovery in demand for Q2 2024, with shipping volumes anticipated to increase by 2.5% to 4.5% sequentially [19] - The company anticipates non-GAAP earnings per diluted share in the range of $4.70 to $4.90 for Q2 2024, reflecting short-term pressure on gross profit margins [20] Other Important Information - The company has a strong M&A pipeline and has completed 75 acquisitions since its IPO in 1994 [7] - The LIFO reserve on the balance sheet was $529 million, which will benefit future operating results [17] Q&A Session Summary Question: Expectations for FIFO gross margins in Q3 - Management expects FIFO gross margins to improve in Q3 as prices level out [22][23] Question: Operating expenses higher than anticipated - Management noted that increased operating expenses were due to higher volumes and ongoing infrastructure expansions [24][26] Question: Same-store volumes in Q2 and Q3 of last year - Management indicated that same-store volumes were relatively stable, with minor acquisitions not significantly affecting the numbers [31][32] Question: Impact of acquisitions on growth rates - Management confirmed that acquisitions would contribute positively to growth rates, with expectations of around 4% growth year-on-year [34][35] Question: Repurchase activity and acquisition pipeline - Management stated that no share repurchases occurred in Q1 due to ongoing acquisition activities, but they remain open to future repurchases [39][40] Question: Aerospace and defense market outlook - Management sees strong demand in the defense sector, while commercial aerospace faces near-term pressure due to supply chain adjustments [54][56]