INSTEEL INDUSTRIES INC Q1 FY2026 earnings call

• Strong start to the year with improved demand for concrete reinforcing products. • Acquisitions completed early last year are fully integrated and contributing to volume growth. • Pricing actions taken in fiscal 2025 to offset higher raw material costs. • Inventory increased in Q1 due to offshore material purchases but expected to moderate in Q2. • Returned $19.4 million of capital to shareholders via special dividend and continued share buyback. • Construction end markets have mixed indicators with ABI in negative territory but DMI showing strengthening activity. • IIJA funding and data center construction driving demand, though tariff uncertainties and steel market supply constraints pose challenges. • $20 million CapEx target for 2026 to support growth of engineered structural mesh and enhance information systems.

Net earnings for the first quarter rose to $7.276 million or 39¢ per share compared with $1.1 million or 6¢ per share in the same period last year. First quarter shipments increased 3.8% year-over-year. Average selling prices increased 18.8% year-over-year. Gross profit for the quarter improved to $18.1 million from $9.5 million a year ago, with gross margin expanding to 11.3% from 7.3%.

• Believes 2026 will be a strong year for the company. • Expect inventory levels to moderate over the course of the second quarter as purchasing activity normalizes and shipment volumes increase. • Committed to a full-year CapEx target of $20 million. • Effective tax rate for remainder of the year expected to be approximately 23%.

• Uncertainties created by administration's trade policies and economic cycle. • Steel industry affected by Section 232 tariffs, leading to tight wire rod supply and price increases. • Domestic wire rod production reduced due to mill closures and financial struggles, causing market tightness. • Uncertainty surrounding potential modifications or removal of trade tariffs affecting market stability.

Q: Could you give more color on data center commitments, whether they are new, accelerating, and how far out they are beyond 2026?

A: Data center business is new to Insteel, seeing repeat opportunities and robust demand, but specifics on beyond 2026 not quantifiable.

Q: How were volumes in the quarter affected by wire rod constraints, both this quarter and going forward?

A: Inventories grew because of inability to acquire sufficient domestic wire rod, forced to go offshore, and will continue until US availability improves.

Q: Are you realizing SG&A leverage from acquisitions of EWP and OWP?

A: Pleased with acquisition performance, synergies expected and moving along well.

Q: What has allowed Insteel to run counter to industry stats, and is it related to ESM products?

A: Internal factors like cash-in-place market work, acquisitions, and value proposition of ESM products have helped.

Q: Will inventory levels continue to downtick, and split of CapEx?

A: Depends on shipment levels; may go back to offshore if domestic supply not improved. CapEx roughly split for maintenance and growth/margin improvement.

Q: Thoughts on residential market and labor costs?

A: Residential market unlikely to have meaningful impact in 2026 for Insteel; labor costs have upward pressure with inflationary environment.