Insteel (IIIN) Q3 2025 Earnings Call Transcript

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Moreover, However, ETCALL PARTICIPANTSPresident and Chief Executive Officer — H

Woltz IIIVice President, Chief Financial Officer, and Treasurer — Scot JafroodiNeed a quote from one of our analysts. [ tected]RISKSH, in today's market environment

Meanwhile, Woltz III said, "scheduling has been a tremendous headache for us," citing instances where "we have had plants at ten days of raw materials

We have had plants with no raw material

However, " Domestic wire rod supply remains insufficient, mpting substantial imports and increasing reliance on offshore sources; Scot Jafroodi stated, "Despite these price increases, supplies remain limited (this bears monitoring), given the current landscape

At the same time, "The section 232 tariff, recently doubled to 50%, is causing cost uncertainty, delays, and administrative burdens for both raw materials and spare parts, potentially affecting future operations, amid market uncertainty

Scot Jafroodi said, "we were not able to fully meet all the market demand this quarter

Additionally, Moreover, Limited availability of wire rod created duction challenges at several of our facilities, which in turn affected our ability to maintain typical lead times. "TAKEAWAYSNet Earnings: $15, in this volatile climate. 2 million, or $0 (remarkable data)

SUMMARYInsteel Industries, Inc, given current economic conditions. 87%) reported strong top- and bottom-line imvements for Q3 FY2025, driven by shipment growth and successful price increases that outpaced persistent raw material cost inflation (something worth watching), amid market uncertainty

However, Strategic offshore wire rod sourcing mitigated domestic supply limitations, yet duction was still hampered by shortages, resulting in increased backlogs and ext lead times

Management flagged significant risk and complexity from recent changes in tariff policy, which impact both curement practices and administrative overhead

Nevertheless, Meanwhile, President and CEO H

Woltz III said that, despite challenging macroeconomic data and "mediocre activity in the construction sector," customer sentiment and end remained favorable, with demand strength most visible in data centers and infrastructure jects

Management noted that the rising Dodge Momentum Index and commercial planning activity signal "a growing pipeline that could support future nonresidential construction demand," but also cited softness in residential and highway-related segments, in today's market environment

PC Strand: Prestressed concrete strand—a seven-wire steel duct used to reinforce concrete structures such as bridges and parking decks (something worth watching)

WWR (Welded Wire Reinforcement): A mesh of steel wires welded together for reinforcing concrete in various construction applications

Dodge Momentum Index: An indicator tracking nonresidential building jects entering the planning stage in the U. , used as a forward-looking gauge for construction activity, amid market uncertainty

Meanwhile, IIJA: Infrastructure Investment and Jobs Act—a federal funding initiative int to accelerate U

Conversely, Infrastructure spending

Full Conference Call TranscriptH, in today's financial world

Woltz III: Good morning

At the same time, Thank you for your interest in Insteel Industries, Inc, in today's market environment

The call will be conducted by Scot Jafroodi, our Vice President, CFO, and Treasurer, and me

Before we begin, let me remind you that some of the s made in our call are considered to be forward-looking statements that are subject to various risks and uncertainties, which could cause actual results to differ materially from those jected

These risk factors are described in our periodic filings with the SEC (this bears monitoring)

Additionally, We're pleased that the upturn in activity we experienced over the last couple of quarters continued during our third fiscal quarter despite macro indicators that would indicate mediocre activity in the construction sector

Furthermore, While we are glad to see the recovery in our, we continue to be aware of uncertainties created by the rollout of the administration's trade policies and from the economic cycle

I will now turn the call over to Scot Jafroodi to on our financial results

Ing Scot's s, I will pick it back up to discuss our outlook and the view of the impact of tariffs on our company, amid market uncertainty

Scot Jafroodi: Thank you, H

Good morning to everyone joining us on the call today (an important development)

As reported in this morning's press release, our strong third quarter performance was driven by higher shipment volumes along with a significant recovery in spreads between selling prices and raw material costs, in today's market environment

However, 34 per in the prior year

Our results this quarter were supported by the pricing actions we have taken to manage the continued rise in raw material costs

Additionally, As we mentioned on our last call, the US wire rod market remains tight, driven by reduced domestic duction capacity alongside strong underlying demand

Despite these price increases, supplies remain limited

To help ease these conditions, we have supplemented our domestic purchases with significant offshore volumes, which have imved our material availability and are helping to support duction levels heading into the fourth quarter

The growth was driven by contributions from our recent acquisitions along with imving demand in our construction end

Moreover, Meanwhile, That said, we were not able to fully meet all the market demand this quarter, considering recent developments

Limited availability of wire rod created duction challenges at several of our facilities, which in turn affected our ability to maintain typical lead times, given the current landscape

Nevertheless, Performance was driven primarily by an expansion of spreads as the increase in average selling prices outpaced the rise in raw material costs during the quarter

As we have noted on prior calls, during periods of strong demand and rising steel rod prices, financial results tend to benefit from both the timely implementation of price increases, enabling us to offset higher replacement costs, and the favorable impact of lower-cost inventory flowing through under our first-in, first-out accounting methodology

As we move into the fourth quarter, we expect gross margin to remain near current levels, supported by strengthening demand, favorable raw material carrying values, and higher operating rates at our facilities

Moreover, Meanwhile, These actions our acquisitions of Engineered Wire ducts and O'Brien Wire ducts in Texas earlier in the fiscal year

However, Looking ahead to the balance of the year, we expect our effective rate to run close to 23

Inventory position at the end of the quarter represented 2, in light of current trends

Additionally, Moreover, 7 months of shipments on a forward-looking basis, calculated off of forecasted Q4 shipments, up from 2. 2 months at the end of the second quarter

Conversely, Finally, our inventories at the end of the third quarter were valued at an average unit cost that was higher than our third quarter cost of sales but remained favorable relative to current replacement costs, which will have a positive impact on spreads and margins as we move through the fourth quarter

On the other hand, Woltz III will vide more detail on this topic in his remarks

Turning to the macro indicators for our construction end, recent data continues to reflect a mixed and uncertain outlook

The evidence shows demonstrates that reading from key leading indicators for nonresidential construction suggests that the may remain challenging over the near term

Meanwhile, In May, the architectural billing index increased to 47, in light of current trends

Meanwhile, 2, reflecting a modest easing in the rate of decline

While this uptick suggests some early signs of stabilization, particularly with an increase in new ject inquiries, the index remains below the 50 threshold that indicates growth, considering recent developments

Meanwhile, the Dodge Momentum Index, which tracks nonresidential jects entering the planning stage, offered a more encouraging outlook in June

This pickup in planning activity suggests a growing pipeline that could support future nonresidential construction demand (something worth watching)

US cement shipments, another xy for construction activity, showed modest imvement in March, rising 1

However, on a year-to-date basis through March, shipments remained down 7

Additionally, Construction spending data from the US Department of Commerce also reflects a softer demand environment

In May, total construction spending declined 2

However, Within that category, highway and street construction, a key end-use market for our ducts, was down 0

Meanwhile, The broader macroeconomic environment is also contributing to the uncertainty moving forward

While the Federal Reserve has indicated a possible shift towards lower interest rates later in the year, persistent inflationary pressures and uneven economic data could delay or limit the extent of easing (something worth watching)

At the same time, the evolving US trade and tariff landscape, particularly around steel, presents further uncertainty, with potential implications for both input costs and our long-term demand forecast, in this volatile climate

Moreover, While market conditions remain competitive and visibility beyond the near term is limited, we believe Insteel Industries, Inc

Is well-positioned to capitalize on.