NYSE:RS Reliance Q3 2024 Earnings Report $27.10 +0.41 (+1.54%) Closing price 04/17/2025 04:00 PM EasternExtended Trading$27.10 0.00 (0.00%) As of 04/17/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast MidWestOne Financial Group EPS ResultsActual EPS$3.64Consensus EPS $3.66Beat/MissMissed by -$0.02One Year Ago EPS$5.00MidWestOne Financial Group Revenue ResultsActual Revenue$3.42 billionExpected Revenue$3.38 billionBeat/MissBeat by +$41.01 millionYoY Revenue Growth-5.60%MidWestOne Financial Group Announcement DetailsQuarterQ3 2024Date10/24/2024TimeBefore Market OpensConference Call DateThursday, October 24, 2024Conference Call Time11:00AM ETUpcoming EarningsMidWestOne Financial Group's Q1 2025 earnings is scheduled for Thursday, April 24, 2025, with a conference call scheduled on Friday, April 25, 2025 at 12:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Reliance Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 24, 2024 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Ladies and gentlemen, good morning, and welcome to the Reliance Inc. Third Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Operator00:00:28It is now my pleasure to introduce your host, Kim Orlando, ADDO Investor Relations. Please go ahead. Kimberly OrlandoSenior Managing Director at ADDO Investor Relations00:00:36Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's Q3 2024 Financial Results. I am joined by Carla Lewis, President and Chief Executive Officer Steve Cook, Executive Vice President and Chief Operating Officer and Arthur Ojemian, Senior Vice President and Chief Financial Officer. A recording of this call will be posted on the Investors section of our website at investors. Reliance.com. Kimberly OrlandoSenior Managing Director at ADDO Investor Relations00:01:06Please read the forward looking statement disclosures included in our earnings release issued this morning 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 Carla Lewis, President and CEO of Reliance. Karla LewisPresident & CEO at Reliance00:01:30Good morning, everyone, and thank you all for joining us today to discuss our Q3 2024 results. Our businesses continue to execute well through challenging market conditions in the 3rd quarter, once again outperforming industry shipments while maintaining gross profit margin within our sustainable range, which we refer to as smart profitable growth. Although metals pricing declined more than anticipated, the inherent resilience of our business model servicing diverse end markets with expansive value added processing capabilities and quick turn orders as well as increased volume from our targeted growth efforts helped mitigate the impact of lower pricing on our gross profit margin and on our earnings level, resulting in non GAAP earnings per diluted share of $3.64 in line with our guidance. In the Q3, we generated $463,900,000 in cash flow from operations, underpinned by strong profitability and effective working capital management through cyclical markets. Our consistently strong cash flow continues to fuel execution in all elements of our capital allocation strategy. Karla LewisPresident & CEO at Reliance00:02:51We invested $112,800,000 in capital expenditures, the majority of which was directed toward growth activities. Our CapEx budget for the calendar year 2024 remains $440,000,000 with an expected total cash outlay of approximately $425,000,000 to $450,000,000 Since our 1994 IPO, we have completed 76 acquisitions that support our growth strategy, expanding our product diversification and value added processing capabilities. We've completed 4 acquisitions to date in 2024, including our August acquisition of certain toll processing assets of the Faroe South division of Faragon Corporation and the M and A pipeline remains active. We will continue to seek acquisition candidates that align with our standards for well managed service centers and metals processors that possess strong brand equity and solid reputations in the marketplace and are immediately accretive to our earnings. During the quarter, we repurchased $432,000,000 of our common stock, reducing our total shares outstanding by nearly 3% as we opportunistically repurchase shares amid the broader pullback in equity prices across the metal space. Karla LewisPresident & CEO at Reliance00:04:17In addition, we paid $60,600,000 in dividends, highlighting our ongoing commitment to our valued stockholders. Next, I'd like to acknowledge some previously announced updates regarding our Board of Directors. We appointed Jim Kamsikas as an independent director effective October 1, increasing our board to 9 members. We look forward to Jim's contributions from his experience and expertise in industrial manufacturing and safety. Consistent with corporate governance best practices and our strategic and deliberate long term succession plan, Mark Kaminsky will step down as our Non Executive Chair on January 1, 2025. Karla LewisPresident & CEO at Reliance00:05:00Mark will continue to serve as an independent Board member, and we thank him for his many contributions as Chair since 2016. Doug Stottler, a Director since 2016, will succeed Mark as our independent Non Executive Chair effective January 1, 2025. And before my closing remarks, I'd like to acknowledge all who have been impacted by the severe weather events these past few weeks. While Hurricane Helane and Hurricane Milton had minimal impacts on our consolidated results, many of our employees were personally impacted, and we're very grateful to report that all Reliance personnel and their families are safe. In closing, I'd like to recognize our dedicated team at Reliance for their strong execution through challenging and increasingly competitive market dynamics and their continued commitment to working safely. Karla LewisPresident & CEO at Reliance00:05:59Just last month, we celebrated 85 years in business and our 30th anniversary as a publicly traded company, which would not have been possible without the daily focus and contributions from each member of our Reliance family. While heightened near term uncertainty in the Q4 is contributing to headwinds in demand and pricing, our resilient business model and positive long range view support our confidence in our ability to continue executing our strategic growth and stockholder return priorities. Thank you all for your time today. I'll now turn the call over to Steve, who will review our Q3 demand and pricing trends. Stephen KochExecutive VP & COO at Reliance00:06:43Thanks Carla, and good morning, everyone. I'd like to begin by expressing my gratitude to our dedicated team for their commitment to operating safely and executing our strategy. I'll now turn to our Q3 demand and pricing trends. Our tons sold increased 7.1% or 3.7% on a same store basis compared to the Q3 of 2023, significantly outperforming the service center industry decrease of 1.2% as reported by the MSCI. While tons decreased 2.1% compared to the Q2 of 2024, we beat our expectations of down 2.5% to 4.5% due to increased shipments of carbon steel plate and structural products to the non residential construction market as the quarter progressed. Stephen KochExecutive VP & COO at Reliance00:07:31We believe our growth and continued outperformance of our MSCI peers while maintaining industry leading profitability are supported by our diversified business model, customer service and strategic investments in organic growth and acquisitions. Our 3rd quarter average selling price per ton sold of $2,246 declined 4.3% compared to the Q2 of 2024, exceeding our expectations of down 2% to 4% as carbon steel product prices declined more than anticipated as the quarter progressed. Aluminum prices also declined as the global market corrected from the short lived impact of Russian sanctions and the U. S. Market dealt with an abundance of low priced imports. Stephen KochExecutive VP & COO at Reliance00:08:13Stainless steel prices showed signs of stabilization. Next, I will turn to an overview of notable third quarter trends within our key end markets and products. Beginning with non residential construction. Carbon steel tubing, plate and structural products, which are predominantly sold into the non residential construction market represented about 1 third of our sales in the 3rd quarter. All three products had significant year over year growth, outperforming industry shipment levels. Stephen KochExecutive VP & COO at Reliance00:08:42Our diversified exposure to the non residential construction market, including publicly funded infrastructure projects, data centers and related energy projects supported solid demand for these products as did contributions from our recent acquisitions despite macroeconomic uncertainty, delaying projects in certain areas of the market. Our General Manufacturing business, which represents roughly 1 third of our total sales is highly diversified across both products and industries, including industrial machinery, consumer products, heavy equipment and military. Shipments increased year over year across the broader manufacturing sector, primarily reflecting strength in industrial machinery, military, shipbuilding and rail offsetting weaker demand in agricultural, heavy equipment and household consumer products. Our industry outperformance across key product groups shipping to general manufacturing applications highlights the benefits of our diversified business model in a dynamic and uncertain demand environment. Aerospace products comprise approximately 10% of our total sales. Stephen KochExecutive VP & COO at Reliance00:09:49Commercial aerospace demand remains fundamentally healthy despite short term production and supply chain challenges associated with the ongoing Boeing labor stoppage. Our defense related aerospace and space program demand remains stable 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 represents 4% of our total sales on proved demand in the Q3 of 2024 compared to the prior year due to healthy demand in both the U. S. Stephen KochExecutive VP & COO at Reliance00:10:23And Mexican automotive markets and our ongoing investments to increase capacity. Semiconductor industry demand remains subdued with continued excess inventories in the supply chain, but shows signs of stabilization in certain areas. Our long term outlook for the semiconductor market remains positive. Overall, we are experiencing relatively steady demand with continued strength in certain key end markets, counterbalancing pressures in other end markets. Please refer to our earnings release for additional commentary on our end markets and product diversification. Stephen KochExecutive VP & COO at Reliance00:10:59We are very proud of our team's outstanding efforts, which enabled our continued industry leading performance. Reliance's unrivaled scale and strong balance sheet makes us a highly attractive partner to our mill suppliers in all market conditions. Reliance continues to win new business from new and existing customers to recognize the quality and reliability of our service as well as the breadth and depth of our product offerings and value added service capabilities. I will now turn the call over to Arthur to review our financial results and outlook. Arthur AjemyanCFO & Senior VP at Reliance00:11:34Thanks, Steve, and thank you, everyone, for joining today's call. Our Q3 2024 non GAAP diluted earnings per share of $3.64 came in toward the low end of our guided range. Despite the difficult pricing environment, which was the primary driver of a 21.7% decrease in our non GAAP diluted earnings per share compared to the Q2 of 2024, Our tons sold surpassed our expectations, leading us to outperform industry shipment levels once again across nearly all products. The differentiating value of our significant scale and diversified product offerings to diverse end markets is made evident in the current choppy economic environment as they allow us to participate in the pockets of the economy where activity is strong. These factors along with our broad and expanding processing capabilities and industry leading quality of service contributed to our 3.7% year over year growth in tons sold on a same store basis in the 3rd quarter. Arthur AjemyanCFO & Senior VP at Reliance00:12:40Our gross profit margin declined from 29.8 percent in the 2nd quarter to 29.4% in the 3rd quarter from continued pricing headwind. Again, our value added processing capabilities moderated the decline in gross profit margin as orders with value added processing continue to experience significantly less gross profit margin contraction in times of declining prices versus orders without processing. Our LIFO inventory valuation method provides further stability to our gross profit margin by adjusting our cost of sales to align with current replacement costs. Consistent with our guidance, we recorded LIFO income of $50,000,000 in the Q3, and we continue to anticipate LIFO income of $200,000,000 for the full year 2024, which implies $50,000,000 of LIFO income for the Q4 of 2024. As a reminder, LIFO for the Q4 will include a true up to our interim annual LIFO estimate based on year end inventory levels. Arthur AjemyanCFO & Senior VP at Reliance00:13:49Factors such as inventory cost per ton trends along with changes in product mix and quantities will impact our annual LIFO calculation. As of September 30, 20 24, the LIFO reserve on our balance sheet was $429,300,000 which remains available to generate LIFO income and benefit future period operating results by mitigating the impact of potential further declines in metal prices. Moving along to expenses. Same store non GAAP SG and A expenses increased approximately $17,000,000 or 3% year over year as a result of slightly higher same store headcount of 2% to support higher shipment levels and general wage inflation offset by lower incentive compensation. Sequentially, same store non GAAP SG and A expenses declined approximately $4,000,000 or less than 1%. Arthur AjemyanCFO & Senior VP at Reliance00:14:50Our model inherently normalizes expenses by rightsizing incentives as profits trend down. I'll now address our balance sheet and cash flow. Reliance generated operating cash flow of $463,900,000 in the 3rd quarter, largely flat compared to $466,000,000 generated in the Q3 of 2023. The decline in our profitability was offset by higher working capital release, resulting in relatively consistent quarterly cash flow from operations. Our healthy inventory turn rate based on tons of 4.6 times and accounts receivable DSO of 41 days also contributed to strong cash flow generation in the Q3. Arthur AjemyanCFO & Senior VP at Reliance00:15:40Furthermore, our focus on inventory management helped lessen the impact of declining prices on our gross profit margin. During the quarter, we invested $112,800,000 in capital expenditures, completed a $23,000,000 acquisition, returned $60,600,000 to our stockholders through cash dividends and repurchased $432,000,000 worth of our shares at an average cost of approximately $2.81 per share. In the 1st 9 months of 2024, we have repurchased $951,300,000 worth of our shares at an average cost of approximately $2.85 per share, resulting in nearly a 6% reduction in total shares outstanding. As announced in our release, our Board of Directors approved a $1,500,000,000 refresh of our share repurchase plan, which we will use for ongoing opportunistic repurchases. Our leverage position remains favorable with a net debt to EBITDA ratio of less than 1, providing ample liquidity to continue executing our capital allocation priorities. Arthur AjemyanCFO & Senior VP at Reliance00:16:56As previously announced, in mid September, we entered into an amended and restated $1,500,000,000 5 year unsecured revolving credit facility with more favorable pricing and fewer restrictive covenants, reflecting our improved financial condition and upgraded credit ratings. Turning now to our 4th quarter outlook. As discussed in our release this morning, due to normal seasonal trends and temporary headwinds from heightened macroeconomic and political uncertainty, we estimate our tons sold will be down 6 percent to 8% in the Q4 compared to the Q3, but up 4% to 6% compared to the Q4 of 2023, with 0.5% to 2.5% attributable to same store growth. On the pricing side, we expect our average selling price per ton sold for the Q4 to be down 1.5% to 3.5% compared to the Q3, reflecting continued pricing pressure across carbon steel products. Roughly a third of the expected quarterly pricing decline is due to the entry point in the 4th quarter being below the 3rd quarter average. Arthur AjemyanCFO & Senior VP at Reliance00:18:13We anticipate our FIFO gross profit margins will stabilize in the 4th quarter from better alignment of replacement costs with inventory costs on hand as well as relatively lower anticipated selling price declines. Based on these expectations, we anticipate non GAAP earnings per diluted share in the range of $2.65 to $2.85 for the Q4 of 2024. This concludes our prepared remarks. Thank you again for your time and participation, And we'll now open the call to questions. Operator? Operator00:18:52Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. The first question is from the line of Katya Jansek from BMO Capital Markets. Please go ahead. Katja JancicAnalyst at BMO Capital Markets00:19:36Hi. Thank you for taking my questions. Maybe starting on the commentary about 4Q being impacted by temporary factors. Katja JancicAnalyst at BMO Capital Markets00:19:45Can you talk Katja JancicAnalyst at BMO Capital Markets00:19:46a bit about what gives you confidence that some of the impact in 4Q is temporary and what will drive better demand into next year? Karla LewisPresident & CEO at Reliance00:19:57Hi, Katya. Thanks for joining the call today. We just as we reach out to our different teams running our businesses who are close to our customers, as we talk with them over the past week or 2, there just seems to be more uncertainty at the customer level than we have seen in prior periods, the presidential election being cited as quite a bit of that. I would say overall, we're confident long term because either administration seems to be supporting manufacturing and trade policy. And even if investments head in different directions, whether it's on energy or different areas, most of those products, those solutions require steel of one kind or another. Karla LewisPresident & CEO at Reliance00:20:57And with our diversified breadth of products, we expect to have a position wherever the policy may go. It just seems that there's more trepidation of our customers trying to understand where is it headed, what impact and when will the lower interest rates will help spur economic activity. The question is at what point does that really kick in. We believe in 2025, maybe not January 1, but with the trajectory as we move through 2025, we expect some pickup in activity related to that. So again, we also have heard of a few customers taking extended shutdowns maybe over the holidays in Q4. Karla LewisPresident & CEO at Reliance00:21:50So we're being probably a little cautious with our Q4 guide just because there are a lot of factors that we can't control. But we do think having the presidential election behind us, the lower interest rates, the continued strong tailwinds that are there with a lot of unspent dollars still under the different government stimulus products set us in the industry up well for 2025. Katja JancicAnalyst at BMO Capital Markets00:22:23And then maybe just quickly on the auto side, and I know you're exposed to it through the tolling business, but are you hearing any slowdown in that market or that business? Karla LewisPresident & CEO at Reliance00:22:36Yes, for the most part, from the platforms we're on with our automotive toll processing customer. We have not seen a pullback. We think it will be normal seasonality for those businesses in Q4. And generally, stable demand. Our platforms were on a lot of the SUVs and light trucks, even some of the super duty trucks where there's a lot of demand and some ramp up coming. Karla LewisPresident & CEO at Reliance00:23:09So we read the headlines. We hear people are concerned. Also again, the lower interest rates could help with consumer activity in the automotive market. So we have not experienced a slowdown yet and currently expect stable activity. Katja JancicAnalyst at BMO Capital Markets00:23:32Thank you very much. Karla LewisPresident & CEO at Reliance00:23:34Thanks, Katya. Operator00:23:37Thank you. The next question comes from the line of Phil Gibbs from KeyBanc Capital Markets. Please go ahead. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:23:52Hey, good morning. Stephen KochExecutive VP & COO at Reliance00:23:54Good morning, Phil. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:23:57So the pricing and mix in the Q3 was a little bit below what you all were anticipating with the guidance and completely understandable with the market dynamics. But I guess try to help me a little bit why the LIFO reserve wasn't changed to reflect that? Arthur AjemyanCFO & Senior VP at Reliance00:24:16Yes. Good question, Phil. So we spoke to this briefly at the last call, but I'll provide some additional color as we're seeing some things play out as the year is progressing. So we're having some interesting mix impact this year that we really haven't seen in the past. There's some specialty aerospace products that have really long lead times. Arthur AjemyanCFO & Senior VP at Reliance00:24:43And while the rest of our inventory cycling through and getting the lower replacement cost, some of these products have 50 to 70 week long lead times. So we're basically going to see the benefit of lower cost of those products in 2025. So what's effectively happening is that it's shifting some of that LIFO income from 2024 into 2025. And that's the primary reason why you haven't really seen us up our LIFO estimate for the year as the years progress because some of that impact is going to be felt or realized in 2025. Karla LewisPresident & CEO at Reliance00:25:22And Phil, I would just add, this is kind of a unique phenomenon. I've been here over 30 years and this is the first time we've really had something like this happen because the pricing of those products had basically doubled and they're high priced products and we've never seen lead times like that for especially for that large of a chunk of our inventory. The dollars are higher on a relatively lower volume just because of the type of product. So this is something we've been kind of learning as we've gone through the year this year and seeing the impact on LIFO of those unique characteristics on those products. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:26:09Well, you're not alone. I've never seen it either. So we're aligned. Question on the gross margins that you made about the 4th quarter. You said you expected things to better align and stabilize in the Q4. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:26:25Does that mean that you expect the Q4 to be the trough? Or are you saying you already saw the trough in the Q3? Arthur AjemyanCFO & Senior VP at Reliance00:26:35Good question, Phil. So it depends what pricing does in the Q1, right? So if you are forecasting the pricing in the Q1 will go up, then that would imply that Q4 would be a trough. But just to be clear, we're not putting a guidance out for Q1 or our views for pricing for Q1. But if again, depending on what pricing does in 2025 then yes, I mean if there's some tailwinds in the beginning of the year then presumably that would be true that Q4 could be the trough. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:27:12I'm just I appreciate that. I'm just saying relative to the Q3. Are you saying the Q3, you're saying it's going to be lower than the Q3, but stabilizing or is it going to be I Arthur AjemyanCFO & Senior VP at Reliance00:27:22think it should be based on our guidance, we're saying consistent with the Q3. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:27:29Okay. That's helpful. And then last question for me on the semi side. You largely do semi's infrastructure from what I remember not semi's consumables, but been a little bit squishy, but saying maybe seeing some signs that that might be stabilizing. What does that mean from year end? Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:27:52Is it just that the supply chain feels a little bit over inventoried now that some of these projects have been a little bit deferred and that might be breaking after the election cycle? Just trying to get some kind of context behind that. Appreciate it. Thanks. Karla LewisPresident & CEO at Reliance00:28:10Yes, Phil, on the semiconductor, we do sell some into the consumables, to the equipment manufacturers and then the infrastructures you mentioned. And at one of our companies selling more into the consumables, we did see a little more activity in Q3 than we had seen for the last, I guess, several quarters. As we see customers working through the inventory glut that they had, Still some room to go on the equipment manufacturers, some activity there, but not really picking up yet. And then on the infrastructure side, the new chip build, there are a lot of factors I think impacting timing. We're still very bullish long term. Karla LewisPresident & CEO at Reliance00:29:00I don't know how much of that is the election. We hear about permitting slowdowns, getting construction workers, just different reasons why it's start and stop on some of the projects. And most of the projects, you see the big headline numbers, but a lot of them were planned in different phases where it wasn't all going to come immediately, which is quite honestly a better environment where it's spread out a little bit. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:29:33Thank you. Karla LewisPresident & CEO at Reliance00:29:35Yes. Thanks, Bill. Stephen KochExecutive VP & COO at Reliance00:29:36Thank you. Operator00:29:38Thank Operator00:29:48you. As there are no further questions, I now hand the conference over to Carla Lewis, President and CEO for her closing comments. Karla LewisPresident & CEO at Reliance00:29:57Thank you. And thanks again to everyone who joined our call today. I would like to remind everyone that next month we'll be in Chicago presenting at Baird's Global Industrials Conference. And we hope to meet with many of you there. I also want to just reiterate our confidence in the ability of the Reliance team to operate well through all market conditions even with some potential temporary headwinds in Q4 and we're confident with our team moving into 2025. Karla LewisPresident & CEO at Reliance00:30:29And we'd like to thank our customers, our suppliers and our stockholders for all of your support. Thank you. Operator00:30:38Thank you. The conference of Reliance Inc. Has now concluded. Thank you for your participation. You may now disconnect your lines.Read moreParticipantsAnalystsKimberly OrlandoSenior Managing Director at ADDO Investor RelationsKarla LewisPresident & CEO at RelianceStephen KochExecutive VP & COO at RelianceArthur AjemyanCFO & Senior VP at RelianceKatja JancicAnalyst at BMO Capital MarketsPhilip GibbsDirector & Equity Research Analyst at KeyBanc Capital MarketsPowered by Conference Call Audio Live Call not available Earnings Conference CallMidWestOne Financial Group Q3 202400:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) MidWestOne Financial Group Earnings HeadlinesMidWestOne Financial Group (MOFG) Expected to Announce Quarterly Earnings on ThursdayApril 17, 2025 | americanbankingnews.comFinancial Contrast: Citizens (NASDAQ:CIZN) and MidWestOne Financial Group (NASDAQ:MOFG)April 16, 2025 | americanbankingnews.comCrypto’s crashing…but we’re still profitingMost traders are panicking right now. Bitcoin’s dropping. Altcoins are bleeding. The stock market’s a mess. The news is screaming fear. But while most traders watch their portfolios tank…April 21, 2025 | Crypto Swap Profits (Ad)MidWestOne Financial Group, Inc. Announces First Quarter 2025 Earnings Conference Call | MOFG ...April 11, 2025 | gurufocus.comMidWestOne Financial Group, Inc. Announces First Quarter 2025 Earnings Conference CallApril 11, 2025 | gurufocus.comMidWestOne Financial Group, Inc. Announces First Quarter 2025 Earnings Conference CallApril 11, 2025 | globenewswire.comSee More MidWestOne Financial Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like MidWestOne Financial Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on MidWestOne Financial Group and other key companies, straight to your email. Email Address About MidWestOne Financial GroupMidWestOne Financial Group (NASDAQ:MOFG) operates as the bank holding company for MidWestOne Bank that provides commercial and retail banking products and services to individuals, businesses, governmental units, and institutional customers. It offers range of deposit products, including noninterest bearing and interest bearing demand deposits, savings, money market, and time deposits accounts. The company also provides commercial, real estate, agricultural, credit card, and consumer loans; and financing arrangements, such as brokered deposits, term debt, subordinated debt, and equity. In addition, it offers trust and investment services comprising administering estates, trusts, and conservatorships; property and farm management, investment advisory, retail securities brokerage, financial planning, and custodial services; and licensed brokers services. Further, the company provides online and mobile banking, debit cards, automated teller machines, and safe deposit boxes. MidWestOne Financial Group, Inc. was founded in 1934 and is headquartered in Iowa City, Iowa.View MidWestOne Financial Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Aviation Unveils NYC Network Ahead of Key Earnings Report3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? 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PresentationSkip to Participants Operator00:00:00Ladies and gentlemen, good morning, and welcome to the Reliance Inc. Third Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Operator00:00:28It is now my pleasure to introduce your host, Kim Orlando, ADDO Investor Relations. Please go ahead. Kimberly OrlandoSenior Managing Director at ADDO Investor Relations00:00:36Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's Q3 2024 Financial Results. I am joined by Carla Lewis, President and Chief Executive Officer Steve Cook, Executive Vice President and Chief Operating Officer and Arthur Ojemian, Senior Vice President and Chief Financial Officer. A recording of this call will be posted on the Investors section of our website at investors. Reliance.com. Kimberly OrlandoSenior Managing Director at ADDO Investor Relations00:01:06Please read the forward looking statement disclosures included in our earnings release issued this morning 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 Carla Lewis, President and CEO of Reliance. Karla LewisPresident & CEO at Reliance00:01:30Good morning, everyone, and thank you all for joining us today to discuss our Q3 2024 results. Our businesses continue to execute well through challenging market conditions in the 3rd quarter, once again outperforming industry shipments while maintaining gross profit margin within our sustainable range, which we refer to as smart profitable growth. Although metals pricing declined more than anticipated, the inherent resilience of our business model servicing diverse end markets with expansive value added processing capabilities and quick turn orders as well as increased volume from our targeted growth efforts helped mitigate the impact of lower pricing on our gross profit margin and on our earnings level, resulting in non GAAP earnings per diluted share of $3.64 in line with our guidance. In the Q3, we generated $463,900,000 in cash flow from operations, underpinned by strong profitability and effective working capital management through cyclical markets. Our consistently strong cash flow continues to fuel execution in all elements of our capital allocation strategy. Karla LewisPresident & CEO at Reliance00:02:51We invested $112,800,000 in capital expenditures, the majority of which was directed toward growth activities. Our CapEx budget for the calendar year 2024 remains $440,000,000 with an expected total cash outlay of approximately $425,000,000 to $450,000,000 Since our 1994 IPO, we have completed 76 acquisitions that support our growth strategy, expanding our product diversification and value added processing capabilities. We've completed 4 acquisitions to date in 2024, including our August acquisition of certain toll processing assets of the Faroe South division of Faragon Corporation and the M and A pipeline remains active. We will continue to seek acquisition candidates that align with our standards for well managed service centers and metals processors that possess strong brand equity and solid reputations in the marketplace and are immediately accretive to our earnings. During the quarter, we repurchased $432,000,000 of our common stock, reducing our total shares outstanding by nearly 3% as we opportunistically repurchase shares amid the broader pullback in equity prices across the metal space. Karla LewisPresident & CEO at Reliance00:04:17In addition, we paid $60,600,000 in dividends, highlighting our ongoing commitment to our valued stockholders. Next, I'd like to acknowledge some previously announced updates regarding our Board of Directors. We appointed Jim Kamsikas as an independent director effective October 1, increasing our board to 9 members. We look forward to Jim's contributions from his experience and expertise in industrial manufacturing and safety. Consistent with corporate governance best practices and our strategic and deliberate long term succession plan, Mark Kaminsky will step down as our Non Executive Chair on January 1, 2025. Karla LewisPresident & CEO at Reliance00:05:00Mark will continue to serve as an independent Board member, and we thank him for his many contributions as Chair since 2016. Doug Stottler, a Director since 2016, will succeed Mark as our independent Non Executive Chair effective January 1, 2025. And before my closing remarks, I'd like to acknowledge all who have been impacted by the severe weather events these past few weeks. While Hurricane Helane and Hurricane Milton had minimal impacts on our consolidated results, many of our employees were personally impacted, and we're very grateful to report that all Reliance personnel and their families are safe. In closing, I'd like to recognize our dedicated team at Reliance for their strong execution through challenging and increasingly competitive market dynamics and their continued commitment to working safely. Karla LewisPresident & CEO at Reliance00:05:59Just last month, we celebrated 85 years in business and our 30th anniversary as a publicly traded company, which would not have been possible without the daily focus and contributions from each member of our Reliance family. While heightened near term uncertainty in the Q4 is contributing to headwinds in demand and pricing, our resilient business model and positive long range view support our confidence in our ability to continue executing our strategic growth and stockholder return priorities. Thank you all for your time today. I'll now turn the call over to Steve, who will review our Q3 demand and pricing trends. Stephen KochExecutive VP & COO at Reliance00:06:43Thanks Carla, and good morning, everyone. I'd like to begin by expressing my gratitude to our dedicated team for their commitment to operating safely and executing our strategy. I'll now turn to our Q3 demand and pricing trends. Our tons sold increased 7.1% or 3.7% on a same store basis compared to the Q3 of 2023, significantly outperforming the service center industry decrease of 1.2% as reported by the MSCI. While tons decreased 2.1% compared to the Q2 of 2024, we beat our expectations of down 2.5% to 4.5% due to increased shipments of carbon steel plate and structural products to the non residential construction market as the quarter progressed. Stephen KochExecutive VP & COO at Reliance00:07:31We believe our growth and continued outperformance of our MSCI peers while maintaining industry leading profitability are supported by our diversified business model, customer service and strategic investments in organic growth and acquisitions. Our 3rd quarter average selling price per ton sold of $2,246 declined 4.3% compared to the Q2 of 2024, exceeding our expectations of down 2% to 4% as carbon steel product prices declined more than anticipated as the quarter progressed. Aluminum prices also declined as the global market corrected from the short lived impact of Russian sanctions and the U. S. Market dealt with an abundance of low priced imports. Stephen KochExecutive VP & COO at Reliance00:08:13Stainless steel prices showed signs of stabilization. Next, I will turn to an overview of notable third quarter trends within our key end markets and products. Beginning with non residential construction. Carbon steel tubing, plate and structural products, which are predominantly sold into the non residential construction market represented about 1 third of our sales in the 3rd quarter. All three products had significant year over year growth, outperforming industry shipment levels. Stephen KochExecutive VP & COO at Reliance00:08:42Our diversified exposure to the non residential construction market, including publicly funded infrastructure projects, data centers and related energy projects supported solid demand for these products as did contributions from our recent acquisitions despite macroeconomic uncertainty, delaying projects in certain areas of the market. Our General Manufacturing business, which represents roughly 1 third of our total sales is highly diversified across both products and industries, including industrial machinery, consumer products, heavy equipment and military. Shipments increased year over year across the broader manufacturing sector, primarily reflecting strength in industrial machinery, military, shipbuilding and rail offsetting weaker demand in agricultural, heavy equipment and household consumer products. Our industry outperformance across key product groups shipping to general manufacturing applications highlights the benefits of our diversified business model in a dynamic and uncertain demand environment. Aerospace products comprise approximately 10% of our total sales. Stephen KochExecutive VP & COO at Reliance00:09:49Commercial aerospace demand remains fundamentally healthy despite short term production and supply chain challenges associated with the ongoing Boeing labor stoppage. Our defense related aerospace and space program demand remains stable 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 represents 4% of our total sales on proved demand in the Q3 of 2024 compared to the prior year due to healthy demand in both the U. S. Stephen KochExecutive VP & COO at Reliance00:10:23And Mexican automotive markets and our ongoing investments to increase capacity. Semiconductor industry demand remains subdued with continued excess inventories in the supply chain, but shows signs of stabilization in certain areas. Our long term outlook for the semiconductor market remains positive. Overall, we are experiencing relatively steady demand with continued strength in certain key end markets, counterbalancing pressures in other end markets. Please refer to our earnings release for additional commentary on our end markets and product diversification. Stephen KochExecutive VP & COO at Reliance00:10:59We are very proud of our team's outstanding efforts, which enabled our continued industry leading performance. Reliance's unrivaled scale and strong balance sheet makes us a highly attractive partner to our mill suppliers in all market conditions. Reliance continues to win new business from new and existing customers to recognize the quality and reliability of our service as well as the breadth and depth of our product offerings and value added service capabilities. I will now turn the call over to Arthur to review our financial results and outlook. Arthur AjemyanCFO & Senior VP at Reliance00:11:34Thanks, Steve, and thank you, everyone, for joining today's call. Our Q3 2024 non GAAP diluted earnings per share of $3.64 came in toward the low end of our guided range. Despite the difficult pricing environment, which was the primary driver of a 21.7% decrease in our non GAAP diluted earnings per share compared to the Q2 of 2024, Our tons sold surpassed our expectations, leading us to outperform industry shipment levels once again across nearly all products. The differentiating value of our significant scale and diversified product offerings to diverse end markets is made evident in the current choppy economic environment as they allow us to participate in the pockets of the economy where activity is strong. These factors along with our broad and expanding processing capabilities and industry leading quality of service contributed to our 3.7% year over year growth in tons sold on a same store basis in the 3rd quarter. Arthur AjemyanCFO & Senior VP at Reliance00:12:40Our gross profit margin declined from 29.8 percent in the 2nd quarter to 29.4% in the 3rd quarter from continued pricing headwind. Again, our value added processing capabilities moderated the decline in gross profit margin as orders with value added processing continue to experience significantly less gross profit margin contraction in times of declining prices versus orders without processing. Our LIFO inventory valuation method provides further stability to our gross profit margin by adjusting our cost of sales to align with current replacement costs. Consistent with our guidance, we recorded LIFO income of $50,000,000 in the Q3, and we continue to anticipate LIFO income of $200,000,000 for the full year 2024, which implies $50,000,000 of LIFO income for the Q4 of 2024. As a reminder, LIFO for the Q4 will include a true up to our interim annual LIFO estimate based on year end inventory levels. Arthur AjemyanCFO & Senior VP at Reliance00:13:49Factors such as inventory cost per ton trends along with changes in product mix and quantities will impact our annual LIFO calculation. As of September 30, 20 24, the LIFO reserve on our balance sheet was $429,300,000 which remains available to generate LIFO income and benefit future period operating results by mitigating the impact of potential further declines in metal prices. Moving along to expenses. Same store non GAAP SG and A expenses increased approximately $17,000,000 or 3% year over year as a result of slightly higher same store headcount of 2% to support higher shipment levels and general wage inflation offset by lower incentive compensation. Sequentially, same store non GAAP SG and A expenses declined approximately $4,000,000 or less than 1%. Arthur AjemyanCFO & Senior VP at Reliance00:14:50Our model inherently normalizes expenses by rightsizing incentives as profits trend down. I'll now address our balance sheet and cash flow. Reliance generated operating cash flow of $463,900,000 in the 3rd quarter, largely flat compared to $466,000,000 generated in the Q3 of 2023. The decline in our profitability was offset by higher working capital release, resulting in relatively consistent quarterly cash flow from operations. Our healthy inventory turn rate based on tons of 4.6 times and accounts receivable DSO of 41 days also contributed to strong cash flow generation in the Q3. Arthur AjemyanCFO & Senior VP at Reliance00:15:40Furthermore, our focus on inventory management helped lessen the impact of declining prices on our gross profit margin. During the quarter, we invested $112,800,000 in capital expenditures, completed a $23,000,000 acquisition, returned $60,600,000 to our stockholders through cash dividends and repurchased $432,000,000 worth of our shares at an average cost of approximately $2.81 per share. In the 1st 9 months of 2024, we have repurchased $951,300,000 worth of our shares at an average cost of approximately $2.85 per share, resulting in nearly a 6% reduction in total shares outstanding. As announced in our release, our Board of Directors approved a $1,500,000,000 refresh of our share repurchase plan, which we will use for ongoing opportunistic repurchases. Our leverage position remains favorable with a net debt to EBITDA ratio of less than 1, providing ample liquidity to continue executing our capital allocation priorities. Arthur AjemyanCFO & Senior VP at Reliance00:16:56As previously announced, in mid September, we entered into an amended and restated $1,500,000,000 5 year unsecured revolving credit facility with more favorable pricing and fewer restrictive covenants, reflecting our improved financial condition and upgraded credit ratings. Turning now to our 4th quarter outlook. As discussed in our release this morning, due to normal seasonal trends and temporary headwinds from heightened macroeconomic and political uncertainty, we estimate our tons sold will be down 6 percent to 8% in the Q4 compared to the Q3, but up 4% to 6% compared to the Q4 of 2023, with 0.5% to 2.5% attributable to same store growth. On the pricing side, we expect our average selling price per ton sold for the Q4 to be down 1.5% to 3.5% compared to the Q3, reflecting continued pricing pressure across carbon steel products. Roughly a third of the expected quarterly pricing decline is due to the entry point in the 4th quarter being below the 3rd quarter average. Arthur AjemyanCFO & Senior VP at Reliance00:18:13We anticipate our FIFO gross profit margins will stabilize in the 4th quarter from better alignment of replacement costs with inventory costs on hand as well as relatively lower anticipated selling price declines. Based on these expectations, we anticipate non GAAP earnings per diluted share in the range of $2.65 to $2.85 for the Q4 of 2024. This concludes our prepared remarks. Thank you again for your time and participation, And we'll now open the call to questions. Operator? Operator00:18:52Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. The first question is from the line of Katya Jansek from BMO Capital Markets. Please go ahead. Katja JancicAnalyst at BMO Capital Markets00:19:36Hi. Thank you for taking my questions. Maybe starting on the commentary about 4Q being impacted by temporary factors. Katja JancicAnalyst at BMO Capital Markets00:19:45Can you talk Katja JancicAnalyst at BMO Capital Markets00:19:46a bit about what gives you confidence that some of the impact in 4Q is temporary and what will drive better demand into next year? Karla LewisPresident & CEO at Reliance00:19:57Hi, Katya. Thanks for joining the call today. We just as we reach out to our different teams running our businesses who are close to our customers, as we talk with them over the past week or 2, there just seems to be more uncertainty at the customer level than we have seen in prior periods, the presidential election being cited as quite a bit of that. I would say overall, we're confident long term because either administration seems to be supporting manufacturing and trade policy. And even if investments head in different directions, whether it's on energy or different areas, most of those products, those solutions require steel of one kind or another. Karla LewisPresident & CEO at Reliance00:20:57And with our diversified breadth of products, we expect to have a position wherever the policy may go. It just seems that there's more trepidation of our customers trying to understand where is it headed, what impact and when will the lower interest rates will help spur economic activity. The question is at what point does that really kick in. We believe in 2025, maybe not January 1, but with the trajectory as we move through 2025, we expect some pickup in activity related to that. So again, we also have heard of a few customers taking extended shutdowns maybe over the holidays in Q4. Karla LewisPresident & CEO at Reliance00:21:50So we're being probably a little cautious with our Q4 guide just because there are a lot of factors that we can't control. But we do think having the presidential election behind us, the lower interest rates, the continued strong tailwinds that are there with a lot of unspent dollars still under the different government stimulus products set us in the industry up well for 2025. Katja JancicAnalyst at BMO Capital Markets00:22:23And then maybe just quickly on the auto side, and I know you're exposed to it through the tolling business, but are you hearing any slowdown in that market or that business? Karla LewisPresident & CEO at Reliance00:22:36Yes, for the most part, from the platforms we're on with our automotive toll processing customer. We have not seen a pullback. We think it will be normal seasonality for those businesses in Q4. And generally, stable demand. Our platforms were on a lot of the SUVs and light trucks, even some of the super duty trucks where there's a lot of demand and some ramp up coming. Karla LewisPresident & CEO at Reliance00:23:09So we read the headlines. We hear people are concerned. Also again, the lower interest rates could help with consumer activity in the automotive market. So we have not experienced a slowdown yet and currently expect stable activity. Katja JancicAnalyst at BMO Capital Markets00:23:32Thank you very much. Karla LewisPresident & CEO at Reliance00:23:34Thanks, Katya. Operator00:23:37Thank you. The next question comes from the line of Phil Gibbs from KeyBanc Capital Markets. Please go ahead. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:23:52Hey, good morning. Stephen KochExecutive VP & COO at Reliance00:23:54Good morning, Phil. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:23:57So the pricing and mix in the Q3 was a little bit below what you all were anticipating with the guidance and completely understandable with the market dynamics. But I guess try to help me a little bit why the LIFO reserve wasn't changed to reflect that? Arthur AjemyanCFO & Senior VP at Reliance00:24:16Yes. Good question, Phil. So we spoke to this briefly at the last call, but I'll provide some additional color as we're seeing some things play out as the year is progressing. So we're having some interesting mix impact this year that we really haven't seen in the past. There's some specialty aerospace products that have really long lead times. Arthur AjemyanCFO & Senior VP at Reliance00:24:43And while the rest of our inventory cycling through and getting the lower replacement cost, some of these products have 50 to 70 week long lead times. So we're basically going to see the benefit of lower cost of those products in 2025. So what's effectively happening is that it's shifting some of that LIFO income from 2024 into 2025. And that's the primary reason why you haven't really seen us up our LIFO estimate for the year as the years progress because some of that impact is going to be felt or realized in 2025. Karla LewisPresident & CEO at Reliance00:25:22And Phil, I would just add, this is kind of a unique phenomenon. I've been here over 30 years and this is the first time we've really had something like this happen because the pricing of those products had basically doubled and they're high priced products and we've never seen lead times like that for especially for that large of a chunk of our inventory. The dollars are higher on a relatively lower volume just because of the type of product. So this is something we've been kind of learning as we've gone through the year this year and seeing the impact on LIFO of those unique characteristics on those products. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:26:09Well, you're not alone. I've never seen it either. So we're aligned. Question on the gross margins that you made about the 4th quarter. You said you expected things to better align and stabilize in the Q4. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:26:25Does that mean that you expect the Q4 to be the trough? Or are you saying you already saw the trough in the Q3? Arthur AjemyanCFO & Senior VP at Reliance00:26:35Good question, Phil. So it depends what pricing does in the Q1, right? So if you are forecasting the pricing in the Q1 will go up, then that would imply that Q4 would be a trough. But just to be clear, we're not putting a guidance out for Q1 or our views for pricing for Q1. But if again, depending on what pricing does in 2025 then yes, I mean if there's some tailwinds in the beginning of the year then presumably that would be true that Q4 could be the trough. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:27:12I'm just I appreciate that. I'm just saying relative to the Q3. Are you saying the Q3, you're saying it's going to be lower than the Q3, but stabilizing or is it going to be I Arthur AjemyanCFO & Senior VP at Reliance00:27:22think it should be based on our guidance, we're saying consistent with the Q3. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:27:29Okay. That's helpful. And then last question for me on the semi side. You largely do semi's infrastructure from what I remember not semi's consumables, but been a little bit squishy, but saying maybe seeing some signs that that might be stabilizing. What does that mean from year end? Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:27:52Is it just that the supply chain feels a little bit over inventoried now that some of these projects have been a little bit deferred and that might be breaking after the election cycle? Just trying to get some kind of context behind that. Appreciate it. Thanks. Karla LewisPresident & CEO at Reliance00:28:10Yes, Phil, on the semiconductor, we do sell some into the consumables, to the equipment manufacturers and then the infrastructures you mentioned. And at one of our companies selling more into the consumables, we did see a little more activity in Q3 than we had seen for the last, I guess, several quarters. As we see customers working through the inventory glut that they had, Still some room to go on the equipment manufacturers, some activity there, but not really picking up yet. And then on the infrastructure side, the new chip build, there are a lot of factors I think impacting timing. We're still very bullish long term. Karla LewisPresident & CEO at Reliance00:29:00I don't know how much of that is the election. We hear about permitting slowdowns, getting construction workers, just different reasons why it's start and stop on some of the projects. And most of the projects, you see the big headline numbers, but a lot of them were planned in different phases where it wasn't all going to come immediately, which is quite honestly a better environment where it's spread out a little bit. Philip GibbsDirector & Equity Research Analyst at KeyBanc Capital Markets00:29:33Thank you. Karla LewisPresident & CEO at Reliance00:29:35Yes. Thanks, Bill. Stephen KochExecutive VP & COO at Reliance00:29:36Thank you. Operator00:29:38Thank Operator00:29:48you. As there are no further questions, I now hand the conference over to Carla Lewis, President and CEO for her closing comments. Karla LewisPresident & CEO at Reliance00:29:57Thank you. And thanks again to everyone who joined our call today. I would like to remind everyone that next month we'll be in Chicago presenting at Baird's Global Industrials Conference. And we hope to meet with many of you there. I also want to just reiterate our confidence in the ability of the Reliance team to operate well through all market conditions even with some potential temporary headwinds in Q4 and we're confident with our team moving into 2025. Karla LewisPresident & CEO at Reliance00:30:29And we'd like to thank our customers, our suppliers and our stockholders for all of your support. Thank you. Operator00:30:38Thank you. The conference of Reliance Inc. Has now concluded. Thank you for your participation. You may now disconnect your lines.Read moreParticipantsAnalystsKimberly OrlandoSenior Managing Director at ADDO Investor RelationsKarla LewisPresident & CEO at RelianceStephen KochExecutive VP & COO at RelianceArthur AjemyanCFO & Senior VP at RelianceKatja JancicAnalyst at BMO Capital MarketsPhilip GibbsDirector & Equity Research Analyst at KeyBanc Capital MarketsPowered by