Reliance, Inc. (RS) Q2 2026 Earnings Call Transcript

Please refer to our second quarter earnings release for further details on our Q3 outlook, as well as anticipated contributions from the U.S. border wall project. This concludes our prepared remarks. Thank you again for your time and participation. We'll now open the call for your questions. Operator?

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. Our first question today is coming from Lawson Winder from Bank of America. Your line is now live.

Yeah, hi. Good morning. This is Satish on for Lawson. My first question is on the... Yeah, hi. Hi, Carla. My first question is on the border wall contract. So the shipments accounted for like 5.1% of Q2 volumes and then you expect an additional 2% improvement in Q3. Is there potential for further upside to these volumes or should we assume volumes to be fairly consistent through the remainder of phase one period? That's true mid-2027.

Yes, Satish, the volumes as we, you know, mentioned were stronger than we had anticipated. We just started shipping under the contract in April, and we did see the volumes ramp, and per the guidance we're giving that you just spoke about, yes, we expect higher shipments in Q3. We believe that's close to a full shipment, you know, run rate, and should be close to that going through the middle of next year. Although, of course, it's all, you know, dependent on metal supply to us and how quickly our customer pulls the inventory from us. But I think you could assume for now that the Q3 guide is – will be sustained through the following quarters.

Okay. Thank you. And in your opening remarks, you talked about the ability to capitalize on many meaningful opportunities that will continue to emerge in the second half and into 2027. Can you maybe provide a bit more color on what these opportunities are? Is there potential to add similar large government or infrastructure contracts in the near term?

I mean, the border wall contract is a very significant contract, so I don't know that there will be more of that size. However, we do want to highlight that we have the capability to do those types of large contracts or large orders. Just with the momentum we see from our customers, you know, whether it's on the data center, the infrastructure side, the power side, military spending, there's just a lot of customer optimism. And I think Reliance is doing a better job of having our companies cooperate with each other to be able to provide a broader package to customers and make it easier for them to come to us as a solution for their multiple product needs. And so we anticipate being able to support our customers when they desire it. And with reshoring, there's just a lot of positive momentum right now.

Okay. Thanks for taking my questions, and congrats on a great quarter.

Thank you. Thank you. Our next question is coming from Samuel McKinney from KeyBank Capital Market. Your line is now live.

Hi, good morning. Hey, Sam. Despite continued run-ups in carbon and non-ferrous pricing over the course of the second quarter versus the end of the first quarter, I'll say, your quarter-end inventory increased less than $100 million despite the $600 million increase in revenue. Could you talk about the inventory positioning moving forward, given that many of your orders are of that just-in-time variety?

Yes, Sam. You know, our inventory turn rate was a little above five times for the quarter, which is a little faster than typical. Our company-wide goal is 4.7 turns. But, you know, we're very comfortable with where our inventory position is. There is some limited supply, some supply constraints at some of the mills, but with our strong relationships, we're very happy with how our, you know, mill partners are treating us and we're able to get the inventory we need for our customers. But, you know, inventory levels are, I think, probably a little lower across the industry right now.

Yeah, and I also would add to that, Carla, that our strategy of buying domestically, although lead times are extended, they're still a lot shorter than imports coming in. So, you know, based on our robust inventories and our access, we feel like we're still in a really good position to capitalize on, you know, the growing demand out in the marketplace.

Okay, we appreciate that. And then SG&A as a percent of sales this quarter is lower than it's been in a couple of years. With all the storage handling you're doing for the border wall contract, I think it'd be helpful for all of us if you could further discuss just the cost to service that contract versus the rest of your business. You know, the storage handling, obviously, much cheaper.

Yeah, the, you know, SG&A costs, and as a percent of sales, you know, the average sell price being significantly higher drives that down as a percentage. there are, you know, we're still facing inflationary factors on different elements of our SG&A expense resulting in higher dollars, but the elevated selling prices help to cover that. And on the border wall contract, you know, we're not, we are doing some value-add processing, but, you know, at a, I would say at a lower rate based on total tonnage that we're providing than the rest of the company, so that keeps the SG&A cost, you know, lower per ton for the volume going into the border wall.

And Sam, I would add that, you know, since we're leveraging our vast existing infrastructure, that's what's truly allowing us to lower the variable costs on this project. Otherwise, you know, for anybody else to be able to take this on, that has to make significant investments in infrastructure, including facilities, equipment, et cetera. So, yeah, absolutely. The variable cost per ton is significantly lower than the company average, and hence the pre-tax margin accretion impact that we mentioned. Great.

Thank you. Our next question today is coming from Tim Netanners from Wells Fargo. Your line is now live.

Hey, good morning. I wanted to ask a little bit about the components of the product mix you have. So what you're seeing there, really tight, and prices have inched up further. Aluminum, at least LME, has retreated. How does that play out for your products and pricing into the second half? And then I have a follow-up, I guess, with more flat roll questions.

Hi, Timna. Yes, beam and plate prices have seen strong increases. It's a tight market, and there's, you know, significant customer demand pulling that. So, you know, we're participating in those markets, as we always do, just at higher pricing levels, and I think, you know, a stronger pull on those products. And there was the, you know, aluminum price pullback, but from very high levels. And I would say, you know, from that standpoint, even though the price has pulled back a bit, it's still elevated pricing levels. We're making very high levels of gross profit dollar margin on the aluminum products we're selling as well as beam and plate.

Yeah, Tim, I would add to Carla's comments. So based on our market position and beams and plate and some of our service centers that have been in this business for a long time, when supply gets a little bit tight, we get what we've been getting in the past years. People don't like to use the word allocation, but when it is really tight, we get what we got in the past. And also, you know, when we need some favors or have, you know, some jobs that come up, we do get preferential treatment. So I would say that just the long track record really helps us in a market like this.

Okay, that makes sense. On the flat road side, it does seem like lead times came down, came back up, depending on who you're looking at. Are you seeing evidence that the mills are starting to catch up with their, you know, lead times? What are you seeing on the flat road side? It seems like even if you're not importing, there's quite a bit on the water. So just a little more color, that would be great.

We are not importing flat roll, Timna. I would say that our average flat roll order is about two weeks late, but with some mills, they're four to eight weeks late. We've not seen a whole lot of signs of our suppliers catching up, although they really are trying to deal with the increased demand and some production challenges.

Great, great. And before I let you go, if I could, I don't have as much color on the other components, the stainless and alloy. What do you see in trend-wise there in terms of pricing and activity?

So for stainless, prices have stayed pretty steady.

And then some specialty stainless where there's been an inventory glut that seems to be working itself off, and we think that the second half should show some increase in prices.

Thank you. Our next question today is coming from Nick Cash from Goldman Sachs from Miners Now Live.

Hi, thank you all, and good morning. I just want to go back to the border wall real quick. I mean, you guys shipped about 85,000 tons in 2Q, and that's ramping up to call it maybe 120,000 tons in 3Q. In 2Q, it added 30 basis points of pre-tax margin. Should we expect that OPEX light structure to hold as you scale up shipments, or could there be any change there?

Hi, Nick. Yeah, we expect to hold at those levels, and, you know, the higher volumes make us probably a little more efficient with the tons going through, but those are good assumptions for the border wall contract.

Okay, thank you. And then just one more on carbon tubing. You know, that jumped from 9% to 12% quarter over quarter. Are you seeing, you know, the wall crowding out any potential commercial availability for tubing, or how are you counteracting that?

Well, I would say the increase in our product mix for the tubing is, you know, pretty directly attributable to the tons we're shipping under the border wall contract. And I think it, you know, from a market standpoint, it is consuming, you know, a good amount of product, but that helps support overall carbon pricing, especially for the tubing products.

Fantastic. Thank you. I'll pass it on.

Thanks.

Thank you. Next question today is coming from Martin Englert from Seaport Research Partners. Your line is now live.

Hello. Good day, everyone. I wanted to come back to a question in the release here. You noted potential supply availability as a headwind in non-residential construction, I believe. I just wanted to see, could you provide some more color and then kind of what you're hearing from customers in the construction industry regarding potential project delays or cancellations due to supply and or higher metals prices?

Hi, Martin. As we mentioned, you know, our volumes shipped have been strong, but there is, you know, some, as Steve just mentioned on an earlier question, you know, there is allocation, so to speak, on some of those products because demand has been so strong. So that helps, you know, elevate the prices. But, you know, I don't think we've seen any significant project delays.

No, we haven't seen any delays as far as I know. And when we say headwinds, our customers are growing and they want us to grow alongside of them, and that's kind of our goal. But when there's such a demand, we try to make sure that we give them everything