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RADIUS RECYCLING, INC. (RDUS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 was weak on GAAP due to an 11% tax expense on a pretax loss, driving diluted EPS to $(1.30) and adjusted EPS to $(1.33); operating performance was “relatively stable” YoY with break-even adjusted EBITDA as stronger nonferrous demand and cost efficiencies offset softer ferrous and finished steel markets .
  • Revenues were $657M, down 2% YoY and down 15% QoQ; gross margin compressed to $33M as metal spreads tightened from lower ferrous/finished steel prices and seasonal volumes, partly offset by 12% higher nonferrous net prices YoY .
  • Consolidated SG&A fell 10% YoY (6% on an adjusted basis), highlighting continued execution on the cost reduction program; rolling mill utilization was 81% vs U.S. average ~75%, though down sequentially due to seasonality and a scheduled outage .
  • Capex guidance was lowered to ~$60M for FY25 from ~$80M previously, with expected $35M asset monetizations in 2H FY25 supporting free cash flow; management expects inventories to rebuild and demand to improve in 2H, aided by secular demand for recycled metals and ongoing nonferrous recovery ramp .
  • Wall Street consensus from S&P Global was unavailable due to a mapping issue; therefore beats/misses vs estimates cannot be assessed (SPGI data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Improved nonferrous contribution: average net nonferrous prices rose 12% YoY on healthy demand; management’s cost/productivity measures supported margins despite tight scrap flows .
  • Cost structure progress: consolidated SG&A down 10% YoY; adjusted SG&A down 6% YoY reflecting the $70M annual cost/productivity program benefits (near $20M quarterly run rate) .
  • Strategic positioning and utilization: “Our steel mill utilization of 81%, while down sequentially, was still higher than the U.S. average of 75%, reflecting relatively stronger markets for long products” .

What Went Wrong

  • Sequential price and volume pressure: ferrous and nonferrous average net prices fell 3% and 6% QoQ; finished steel average net price fell 3% QoQ; volumes down seasonally across products with mill utilization dropping to 81% due to a scheduled outage .
  • Finished steel margin compression: YoY finished steel contribution declined with average net selling prices down 7% and 10% compression in steel spreads; conversion costs were higher due to lower utilization .
  • Tax detriment: an 11% tax expense (vs 36% benefit in prior-year Q1) due to valuation allowance dynamics materially worsened GAAP EPS despite pretax losses; legal costs were “elevated” and expected to recede in 2H FY25 .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$672.9 $770.8 $656.5
Gross Margin ($USD Millions)$39 $52 $33
SG&A ($USD Millions)$63 $61 $57
Operating Income (Loss) ($USD Millions)$(23.0) $(8.8) $(24.9)
GAAP Diluted EPS ($)$(0.64) $(0.56) $(1.30)
Adjusted Diluted EPS ($)$(0.64) $(0.41) $(1.33)
Adjusted EBITDA ($USD Millions)$1 $17 $— (break-even)
Cash from Operating Activities ($USD Millions)$(1) $4 $(2)

Segment/product metrics

MetricQ1 2024Q4 2024Q1 2025
Ferrous Sales Volumes (LT, thousands)1,152 1,249 1,106
Avg. Net Ferrous Price ($/LT)$354 $348 $338
Nonferrous Sales Volumes (MM lbs)182 207 177
Avg. Net Nonferrous Price ($/lb)$0.91 $1.08 $1.02
Finished Steel Sales Volumes (ST, thousands)129 140 125
Finished Steel Avg. Net Price ($/ST)$831 $795 $775
Rolling Mill Utilization (%)95% 97% 81%

KPIs and balance sheet

MetricQ1 2024Q4 2024Q1 2025
Net Debt ($USD Thousands)$279,513 $409,218 $430,222
Total Debt ($USD Thousands)$283,921 $414,770 $445,445
Cash & Equivalents ($USD Thousands)$4,408 $5,552 $15,223
Dividend per Share ($)$0.1875 $0.1875 $0.1875

Note: S&P Global Wall Street consensus estimates were unavailable due to a CIQ mapping issue; therefore estimate comparisons are not provided.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
CapexFY 2025~$80M (projected on Q4 call) ~$60M Lowered
Asset MonetizationsFY 2025 (2H)N/A~$35M net proceeds expected (two properties under contract) New
Legal CostsFY 2025Elevated in Q4 FY24; expected to recede later in FY25 “Elevated… expected to recede in 2H FY25” Maintained trajectory (abatement expected)
Tax/Cash TaxesFY 2025Not cash taxpayer; tax rate volatility due to valuation allowance Not cash taxpayer; continued tax rate volatility Maintained
Dividend per ShareQ1 FY25$0.1875 (prior pattern) $0.1875 declared, payable Feb 18, 2025 Maintained

Earnings Call Themes & Trends

TopicQ3 FY24 (Prior-2)Q4 FY24 (Prior-1)Q1 FY25 (Current)Trend
Chinese steel exports impacting ferrousElevated exports dampened global demand; ferrous prices down 9% QoQ Exports at 8-year highs; pressure on ferrous markets Continued pressure; exports up ~25% YoY to multiple regions; management anticipates eventual correction Persistent headwind, potential policy-driven relief
Nonferrous demand/pricesStrengthened; avg net prices +10% QoQ; volumes +4% QoQ Strong demand; prices +4% QoQ; volumes +13% QoQ Prices -6% QoQ on volatility yet +12% YoY; volumes -14% QoQ (seasonality) Healthy YoY; near-term volatility
Scrap supply/tight flowsTight unprocessed scrap compressing margins Tight availability; seasonal benefits only Constrained supply driving higher purchase costs and margin compression Ongoing constraint until manufacturing recovery
Cost reduction/productivity$70M program ramp; adj EBITDA improved to $9M Full quarterly run-rate delivered; EBITDA $17M SG&A down 6% adjusted; near $20M quarterly run-rate benefits Structural savings sustained
Nonferrous recovery techRamp-up; last permitted systems targeted end CY24; $10 EBITDA/ferrous ton goal Continued ramp, completion schedule reiterated Commissioning of last permitted primary systems completed; targeting substantial full ramp by Q3 FY25; $10 EBITDA/ferrous ton in normal conditions Execution progressing; ramp nearing
Finished steel/West Coast constructionMill utilization 88%; seasonal pickup Utilization 97%; volumes +11% QoQ; demand to benefit from infrastructure Utilization 81% (scheduled outage); prices -7% YoY; demand soft on macro, infra tailwind still pending Soft near term; infrastructure potential
Tax rate/valuation allowanceN/AVolatility expected; not cash taxpayer 11% expense on pretax loss; volatility expected, not cash taxpayer Volatile; cash taxes unlikely

Management Commentary

  • “The contribution from our recycled metals business improved versus a year ago, driven by benefits realized from our cost reduction and productivity measures and stronger nonferrous demand… The contribution from finished steel declined year-over-year due to weaker domestic steel conditions and a scheduled maintenance outage.”
  • “We estimate these [nonferrous recovery] investments should return over $40 million in annual EBITDA after full deployment… target the substantial full ramp-up of the permitted systems by Q3 of fiscal ’25… approximately $10 EBITDA per ferrous ton in normal market conditions.”
  • “Our steel mill utilization of 81%, while down sequentially, was still higher than the U.S. average of 75%.”
  • “Adjusted SG&A expense was down 6% year-over-year… results… reflect elevated costs of several million dollars for certain ongoing legal matters, which we expect to be temporary and recede in the second half of fiscal ’25.”

Q&A Highlights

  • Export ferrous dynamics: Management expects a pullback in elevated Chinese steel exports as other countries push back; timing uncertain but prior cycles turned quickly .
  • Interest expense and debt: June credit facility amendment costs now fully reflected but non-cash amortization; floating-rate facility benefits from recent Fed cuts; liquidity positive with $800M capacity, ~$430M drawn; capex flexed to ~$60M FY25; two properties under contract for ~$35M proceeds .
  • Nonferrous product optionality: Zorba–twitch spread compressed given subdued auto production; recovery systems provide optionality to process into higher-value grades when spreads justify; currently less conversion .
  • Shipments/timing: Q4 uptick partly from shipment timing reducing inventories; seasonality remains significant .

Estimates Context

  • Attempts to retrieve S&P Global consensus for EPS/revenue failed due to CIQ mapping for RDUS; thus, no beat/miss assessment vs Street is available (SPGI data unavailable).
  • Company did not provide numerical quarterly guidance; commentary suggests typical winter seasonality in Q2 and improving 2H demand as inventories rebuild and nonferrous recovery ramps .

Key Takeaways for Investors

  • Near-term headwinds remain: softer global ferrous and finished steel prices, seasonal volume declines, and tax rate volatility drove GAAP losses despite nonferrous strength and cost savings .
  • Structural savings and technology ramp are critical levers: adjusted SG&A down and nonferrous recovery systems transitioning to full ramp by Q3 FY25 with targeted ~$10 EBITDA/ferrous ton contribution in normal markets .
  • Capex discipline and asset monetization improve FCF optics: FY25 capex trimmed to ~$60M; ~$35M asset proceeds expected 2H FY25 to support liquidity amid net debt of ~$430M .
  • Demand catalysts: potential 2H FY25 improvement from inventory rebuilding/seasonality; medium-term tailwinds from U.S. infrastructure, EAF capacity growth, industrial reshoring, and low-carbon transitions .
  • Watch export ferrous dynamics and policy: elevated Chinese exports continue to dampen spreads; management anticipates correction driven by global pushback; timing uncertain but historically swift when it turns .
  • Trading setup: absent Street comp data, focus on sequential trajectory (Q2 seasonality likely soft, 2H ramp), nonferrous price volatility, legal cost abatement, and execution on technology benefits—key drivers for margin recovery and sentiment shifts .
  • Dividend maintained ($0.1875); mill utilization remains above U.S. average, signaling relative strength in West Coast long products despite macro softness .