Ryerson Holding Corporation (RYZ) Q1 2026 Earnings Call Transcript

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Overview

The earnings call presents strong financial performance, with increased EBITDA, expanded gross margins, and higher shipments. Despite rising expenses and debt due to the Olympic Steel merger, management is optimistic about debt reduction and synergy benefits. The Q&A section highlights growth in the transactional business, successful integration of Olympic, and a positive outlook for the second half. While there are uncertainties in guidance, the share repurchase program and strong liquidity indicate confidence in future performance.

Key Financial Performance

Revenue Generated net sales of $1.57 billion, an increase of 37.9% compared to the same quarter of 2025. This was driven by a 31.2% increase in tons shipped and a 5.2% increase in average selling prices. On a same-store basis, net sales were $1.29 billion, with tons shipped 4.6% higher and average selling prices 8.9% higher compared to the same period last year.

Net Income Net income for the quarter was $4.5 million or $0.10 per diluted share, compared to a net loss of $5.6 million in the first quarter of 2025. Adjusted net income, which removes transaction-related expenses and a one-time impairment charge, was $13.1 million or $0.30 per diluted share.

Adjusted EBITDA (excluding LIFO) Generated $67.4 million in adjusted EBITDA, excluding LIFO, which more than doubles the $32.8 million generated in the first quarter of 2025. On a same-store basis, adjusted EBITDA, excluding LIFO, increased by $22.1 million year-over-year.

Gross Margin Same-store gross margin expanded by 270 basis points to 18%, and same-store gross margin, excluding LIFO, expanded by 150 basis points to 18.8%. This was influenced by contracts resetting at current market pricing and improved demand conditions supporting transactional pricing.

Tons Shipped Total company tons shipped increased sequentially by 42.3% or 13.4% on a same-store basis. Year-over-year, total company shipments were up 31.2%, with same-store shipments up 4.6%. This growth was driven by transactional business and low service center industry inventory levels for plate and sheet products.

Warehousing, Delivery, Selling, General and Administrative Expenses Totaled $265.2 million for the first quarter or $217.6 million on a same-store basis, representing an increase of $15.5 million compared to the first quarter of 2025. The increase was driven by higher compensation and benefits expenses, advisory service fees related to the Olympic Steel merger, and higher delivery fees due to increased diesel prices.

Inventory Days of Supply Decreased by 5 days quarter-over-quarter to 74 days, which is back within the target range of 70 to 75 days.

Debt and Leverage Ratio Total debt increased to $908 million and net debt to $883 million during the first quarter, an increase of $445 million and $447 million, respectively. The leverage ratio rose to 5.1x compared to 3.1x in the previous quarter, primarily due to the Olympic Steel merger and related costs.

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Operating Highlights

AI Infrastructure Partnership: Ryerson is increasingly participating in the AI infrastructure build-out, which is contributing significantly to the improving demand environment.

Market Share Gains: Ryerson achieved market share gains with double-digit sequential volume growth and solid margin expansion.

North American Volumes: Ryerson's North American volumes grew significantly, outpacing the industry with a 42.3% sequential increase in total company tons shipped and a 13.4% increase on a same-store basis.

Synergy Realization: Ryerson is progressing on its $120 million annual run rate synergy target post-merger with Olympic Steel, achieving $4-$6 million in Q2 and $40 million in the first year.

Operational Efficiencies: Ryerson exited two leased facilities, saving $1.5 million annually, and aligned supply chain networks to generate $15 million in annual procurement savings.

Merger with Olympic Steel: Ryerson integrated Olympic Steel, establishing a unified leadership structure and leveraging combined capabilities to enhance customer offerings and enterprise value.

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Risk or Challenges

Demand Stagnation in Large OEMs: Ongoing demand stagnation among large OEMs following a prolonged manufacturing contraction, high interest rates, and prevailing tariff and geopolitical uncertainty.

Supply Chain Disruptions and Inflationary Pressures: Concerns about supply-side disruptions, inflationary wildcards, and heightened global unrest potentially impacting economic expansion and causing hyper shocks to the system.

Input Cost Increases: Rising industrial metal commodity prices, particularly aluminum, and higher diesel fuel prices coupled with tightness in the trucking market, leading to increased delivery costs and potential challenges in passing these costs through the value chain without triggering countercyclical conditions.

Integration Risks with Olympic Steel: Challenges associated with integrating Olympic Steel, including aligning supply chain networks, realizing synergies, and managing overlapping costs and facilities.

Leverage and Debt Levels: Increased leverage ratio to 5.1x due to the Olympic Steel acquisition, raising concerns about higher debt levels and the need to reduce leverage over time.

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Guidance & Outlook

Demand and Order Activity: The company expects healthy transactional activity moving forward, driven by historically low service center industry inventory levels for plate and sheet products relative to shipments. Data centers and power generation projects are expected to continue driving strong backlogs, with optimism for the Class 8 truck trailer industry in 2026 as a supply-driven transition year.

Revenue and Shipment Projections: Second-quarter total company tons shipped are expected to be 18% to 20% higher compared to the first quarter of 2026, with revenues projected in the range of $1.86 billion to $1.93 billion. Same-store average selling prices are expected to increase by 2% to 4% sequentially, and overall average selling prices are anticipated to rise by 1% to 3% quarter-over-quarter.

Net Income and EBITDA Expectations: Net income for the second quarter is projected to be in the range of $20 million to $22 million, or $0.38 to $0.42 per diluted share. Adjusted EBITDA, excluding LIFO, is expected to range between $88 million and $92 million, with $21 million to $23 million attributed to Olympic Steel.

Synergy Realization: Second-quarter synergy realization is expected to be in the range of $4 million to $6 million. The company is on track to achieve its first-year synergy target of $40 million in annual run-rate synergies and its two-year target of $120 million.

Capital Expenditures: The company plans to invest approximately $75 million in capital expenditures for 2026, with $50 million allocated to same-store projects and $25 million to Olympic Steel.

Market Trends and Risks: The company is monitoring supply-side disruptions, inflationary pressures, and geopolitical uncertainties, which could impact demand conditions. Rising diesel fuel prices and tightness in the trucking market are expected to inflate delivery costs industry-wide.

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Shareholder Return Plan

Dividend Distribution in Q1 2026: Ryerson distributed $9.7 million in dividends, equating to $0.1875 per share.

Dividend Announcement for Q2 2026: A dividend of $0.1875 per share has been announced for the second quarter.

Share Repurchase in Q1 2026: Ryerson repurchased approximately 74,000 shares from the open market, returning $1.6 million to shareholders.

New Share Repurchase Program: The Board of Directors approved a new share repurchase program, authorizing up to $100 million worth of share repurchases over the next 2 years.

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Key Q&A

Q:Could you discuss the divergence between spot and contract tons and what is needed to get the contract business moving again?

A:The transactional business showed significant growth, attributed to CapEx investments and improved service center fundamentals. Contract business is lagging by 4-5%, with uneven performance across sectors like residential construction, agriculture, heavy truck and trailer, and consumer durables. Expectations are for improvement in the second quarter and a stronger second half of the year, driven by industrial OEMs and sectors like construction and data centers.

Q:What are the capital allocation priorities in the context of the new share repurchase program and the net debt level approaching $900 million?

A:Management expects debt trends to improve significantly throughout the year due to strong free cash flow generation and normalized CapEx. The share repurchase program was initiated when the stock was undervalued, supported by strong liquidity. The focus remains on reducing the leverage ratio while taking advantage of opportunities to repurchase shares.

Q:What is the current split between contract and transactional business on a pro forma basis?

A:Ryerson operates at approximately 52% transactional and 48% contract, while Olympic operates at 30% transactional and 70% contractual. The combined company aims to increase the transactional business percentage over time, leveraging a larger footprint and optimizing facilities for same-day or next-day delivery.

Q:Is there an optimal level of transactional sales the company could achieve?

A:The company aims for a 60-40 split between transactional and contract business. The focus is on optimizing profitability for both segments, with transactional business offering greater growth opportunities due to its reliance on inventory and quick turnaround capabilities.

Q:Have there been any issues or challenges with the integration of Olympic?

A:Management reported no significant issues with the integration. Collaboration between teams has exceeded expectations, and synergy efforts are progressing well. The company is confident in achieving $40 million in savings in year 1 and $120 million after year 2, with additional ideas emerging from deeper organizational engagement.

Q:How is the company thinking about the third and fourth quarters in terms of EBITDA?

A:Management expects the second half of the year to be better than the second half of last year, driven by internal improvements, synergy ramp-up, and potential demand recovery in key industries like agriculture and construction. Pricing trends are currently favorable, and synergies are expected to contribute significantly in the second half.

Q:What are the expectations for synergy attainment in the second half compared to the $40 million target?

A:The company is on track to achieve its annual run rate synergies, with $1 million realized in Q1, $5 million expected in Q2, and momentum building through Q3 and Q4.

Q:Review of Unclear Management Responses

A:Management avoided providing specific estimates for the third and fourth quarters, citing uncertainty in the global economy. They also used vague language when discussing the optimal level of transactional sales, stating it depends on factors like footprint and inventory without providing concrete data.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

RYZ Transcript

Ryerson Holding Corporation (RYZ) Q1 2026 Earnings Call Transcript

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