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OLYMPIC STEEL INC (ZEUS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered sales of $493.0M, EPS of $0.21, and EBITDA of $16.1M; revenue materially beat consensus ($466.8M*) while EPS modestly missed ($0.24*), and EBITDA was essentially in line ($16.15M*) — a mix driven by strong spot demand but higher operating expense intensity. *
  • Flat-rolled shipping volumes surged 24% sequentially and 6% year over year, reaching their highest levels since Q3 2021, as customers pulled forward orders following 25% tariff announcements on steel and aluminum.
  • Operating cash flow was strong; working capital actions reduced debt by $37M since year-end, and the $625M ABL was extended five years, with ~$269M availability.
  • All three segments posted positive EBITDA; Carbon led on shipments and coated mix, Specialty Metals held despite falling nickel surcharges, while Pipe & Tube was resilient but lagged the spot-driven boost.
  • 2025 investment cadence remains intact: ~$35M capex focused on automation and throughput; management expects onshoring, data centers, and fabrication to be multi-quarter demand catalysts.

Consensus values marked with * are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Strong shipment momentum: “flat-rolled shipping volumes were up 24% sequentially and 6% YoY… highest levels since Q3 2021,” driven by spot demand post-tariffs.
  • Cash generation and balance sheet: $37M debt reduction since year-end; five-year extension of $625M ABL, with ~$269M available capital to fund growth.
  • Diversification and coated mix: Carbon segment strength aided by coated carbon steel growth; recognition as John Deere Partner-Level Supplier underscores quality and OEM positioning.

What Went Wrong

  • Earnings compression vs prior year: Net income fell to $2.5M (from $8.7M YoY), EPS $0.21 (from $0.75), reflecting lower pricing and higher operating expenses.
  • Pipe & Tube lagged spot-driven lift: Segment volumes are more contractual and typically lag Carbon by 3–6 months; Q2 outlook similar to Q1.
  • Higher operating expense intensity: Q1 operating expenses rose to $110.6M YoY, including ~$2.5M from MetalWorks and costs to process higher shipments.

Financial Results

Trailing Quarter Actuals

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$470.0 $418.8 $492.9
Diluted EPS ($USD)$0.23 $0.33 $0.21
EBITDA ($USD Millions)$15.0 $14.5 (Adjusted) $16.1

Notes: Q4 2024 EBITDA shown as Adjusted EBITDA to match release presentation; Q1 2025 had no LIFO adjustment; Q3 2024 and Q4 2024 included LIFO income.

Q1 2025 Actual vs Consensus

MetricQ1 2025 ActualQ1 2025 Consensus
Revenue ($USD Millions)$492.9 $466.8*
Diluted EPS ($USD)$0.21 $0.24*
EBITDA ($USD Millions)$16.09 $16.15*
  • Revenue: bold beat versus consensus driven by spot orders amid tariff-induced pricing momentum. *
  • EPS: modest miss due to higher operating expenses and mix effects despite shipment strength. *

Consensus values marked with * are retrieved from S&P Global.

Margins

MetricQ3 2024Q4 2024Q1 2025
EBITDA Margin %3.19%*4.19%*3.27%*
EBIT Margin %1.66%*2.20%*1.58%*
Net Income Margin %0.58%*0.93%*0.51%*

Values retrieved from S&P Global.*

Segment Breakdown (Net Sales, Operating Income, Tons)

SegmentMetricQ1 2024Q4 2024Q1 2025
Carbon Flat ProductsNet Sales ($MM)$301.0 $235.5 $286.2
Carbon Flat ProductsOperating Income ($MM)$8.66 $1.96 $5.83
Carbon Flat ProductsTons Sold219,675 186,723 232,827
Specialty Metals Flat ProductsNet Sales ($MM)$129.5 $110.8 $129.5
Specialty Metals Flat ProductsOperating Income ($MM)$3.93 $3.01 $2.63
Specialty Metals Flat ProductsTons Sold29,903 26,172 31,679
Tubular and Pipe ProductsNet Sales ($MM)$96.1 $72.5 $77.2
Tubular and Pipe ProductsOperating Income ($MM)$7.63 $8.21 $4.15
Tubular and Pipe ProductsTons SoldN/A N/A N/A

KPIs

KPIQ4 2024Q1 2025
Operating Cash Flow ($USD Millions)N/A$49.418
Capital Expenditures ($USD Millions)$29.5 (FY) $8.8 (Q1)
Revolver Balance ($USD Millions)$272.456 $235.360
Debt to Equity Ratio0.47 to 1 0.41 to 1
Shareholders’ Equity per Share$51.54 $51.44
Dividend per Share$0.15 (Q4) $0.16 (Q1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital ExpendituresFY 2025~$35M (projects late 2025/early 2026) ~$35M; investments in automation and throughput reiterated Maintained
Effective Tax RateFY 2025~27–28% ~28% Maintained/clarified
Debt ReductionFY 2025Commentary on capacity/availability only Expect borrowing “low 200s” by year-end New qualitative target
DividendQuarterlyIncreased to $0.16 in Q4 2024 $0.16 approved; payable 6/16/2025 Maintained
LiquidityOngoing~$200M availability referenced ABL extended 5 yrs; ~$269M availability post-extension Raised availability via extension

No explicit revenue, margin, or EPS guidance ranges provided.

Earnings Call Themes & Trends

TopicQ3 2024Q4 2024Q1 2025Trend
Tariffs/MacroPricing pressure; diversification sustained profitability Anticipated tariff impacts; pricing and lead times tightening Spot demand surge; hot-rolled pricing up >30% post-announcement Strengthening pricing tailwind
Fabrication/Coated MixFocus on higher-margin coated and fabrication Fabrication growth, galvanized up 17% YoY Coated carbon growth continues; fabrication highlighted as key driver Positive mix shift
Pipe & TubeEBITDA-positive, but macro pressure Traditional seasonality expected, increased fabrication mix Lags Carbon 3–6 months; Q2 similar to Q1; data centers a growth area Near-term muted; medium-term constructive
Specialty MetalsMarket-share gains; nickel surcharge headwinds Solid EBITDA despite nickel lows Solid quarter; Houston facility expansion Operational expansion offsets surcharge headwinds
Onshoring/AI/Data CentersStrategic focus on end products Early signs in line pipe/plate; infrastructure uptick Onshoring opportunities and data centers cited; tube lasers capacity Increasing demand pockets
M&A AppetiteFinancial flexibility to invest Pipeline slowed in late 2024; remain active Expect at least one deal in 2025; pipeline re-accelerating in April Reaccelerating

Management Commentary

  • “We reported strong shipments and first quarter sales of $493 million with net income of $2.5 million… All 3 of our business segments continued to deliver positive EBITDA.” — CEO, Rick Marabito.
  • “Increased shipping levels… drove strong performance in our Carbon segment with EBITDA of $10.9 million… coated carbon steel product line… had a positive impact.” — President & COO, Andrew Greiff.
  • “Operating cash flow… enabled us to pay down debt by $37 million since year-end… five-year extension of our $625 million asset-based revolving credit facility… approximately $269 million of availability.” — CFO, Richard Manson.
  • “We remain committed to M&A… we’ve done 8 in 7 years… I’d be disappointed if we didn’t get a deal done this year.” — CEO, Rick Marabito.

Q&A Highlights

  • Pull-forward demand: Mix skewed toward spot in Q1, doubling typical 4Q→1Q seasonal lift; volumes +~25% vs Q4. Management attributes the boost largely to tariffs and spot momentum.
  • Pipe & Tube outlook: More contractual mix led to softer comparative lift; Q2 expected similar to Q1 with medium-term benefits from onshoring and data center projects.
  • Working capital and debt: Inventory levels appropriate; modest debt reduction in Q2, larger reduction in 2H; targeting “low 200s” by year-end.
  • OpEx drivers: ~+$2.5M from MetalWorks and higher shipment-related processing/distribution costs; same-store OpEx inflation managed to low single digits.
  • M&A pipeline: Slowed in early 2025 but returned in April; management targets at least one transaction this year.

Estimates Context

  • Revenue beat: $492.9M actual vs $466.8M consensus* — driven by spot orders and tariff-induced pricing momentum; indicates potential upward revisions to near-term revenue expectations. *
  • EPS miss: $0.21 actual vs $0.24 consensus* — higher operating expense intensity and segment mix weighed on earnings; may prompt modest EPS trimming unless margins normalize. *
  • EBITDA in line: $16.09M actual vs $16.15M consensus* — consistent operating performance. *
  • FY 2025 consensus context: EPS $1.13*, Revenue ~$1.90B*, EBITDA ~$66.8M*; limited coverage (# of estimates low) increases uncertainty around consensus precision. *

Consensus values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue momentum in Q1 was tariff/spot-driven; expect normalization unless pricing tailwinds persist, but onshoring/data center demand could backfill volumes.
  • Mix improvements (coated/fabrication) and specialty capacity expansion (Houston) support margin resilience into 2H 2025/2026 as automation projects come online.
  • Near-term EPS sensitivity to operating expenses warrants monitoring; watch segment mix and processing/distribution cost intensity for margin trajectory.
  • Balance sheet flexibility improved: ABL extended; debt reduced; management targets “low 200s” by year-end — creating optionality for M&A and organic investments.
  • M&A cadence likely resumes in 2025; management expects at least one deal, focused on metal-intensive end products and fabrication capabilities.
  • Dividends maintained at $0.16/share; consistent cash returns amid growth investments.
  • Trading implications: Near-term catalysts include tariff/pricing updates, spot-vs-contract demand mix, and any M&A announcements; medium-term thesis hinges on execution in coated/fabrication and automation-driven margin uplift into 2026.