Hello, and welcome, everyone, to the Insteel Industries First Quarter 2026 Earnings Call. My name is Breeka, and I will be your operator today. All lines will be muted throughout the presentation portion of the call with a chance for Q&A at the end. I will now hand over to your host, H.O. Woltz III, CEO, to begin. Please go ahead.

Good morning. Thank you for your interest in Insteel Industries, Inc. Welcome to our first quarter 2026 conference call, which will be conducted by Scot R. Jafroodi, our Vice President, CFO, and Treasurer, and me. Before we begin, let me remind you that some of the comments made in our presentation 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 projected. These risk factors are described in our periodic filings with the SEC. The upturn in business activity we reported previously continued during our first quarter, and our fiscal 2025 acquisitions continue to perform well. While our ability to forecast future activity is limited, we are encouraged by the level of optimism in our markets as well as brisk order entry up to this point in January, which causes us to believe that 2026 will be a strong year for the company. While the relative strength of our markets is real, we are aware of uncertainties created by the administration's trade policies, the nation's fiscal conditions, and by the economic cycle. I am going to turn the call over to Scot R. Jafroodi to comment on our financial results. Following Scot's comments, I will pick the call back up to discuss our business outlook.

Thank you, H.O. Woltz III, and good morning to everyone joining us today. As highlighted in this morning's press release, we delivered a strong start to the year. First quarter results benefited from improved demand for our concrete reinforcing products, which supported wider spreads between selling prices and raw material costs. Net earnings for the 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. It is also worth noting that last year's first quarter results included $1 million of restructuring charges and acquisition-related costs, which collectively reduced earnings per share by 4¢. First quarter shipments, which are typically our softest period due to winter weather conditions and holiday schedules, increased 3.8% year-over-year. On a sequential basis, shipments declined 9.7% from the fourth quarter, which is consistent with normal seasonal patterns. The year-over-year growth in shipments reflects improved demand across our commercial and infrastructure markets along with incremental volume from the acquisitions we completed early last year. As we move forward, our year-over-year volume comparisons will normalize now that these acquisitions are fully integrated into our run rate. Turning to pricing, average selling prices increased 18.8% year-over-year, reflecting the pricing actions we took throughout fiscal 2025 to offset higher steel wire rod costs driven by tight domestic supply conditions and increased Section 232 steel tariffs, as well as to address rising raw operating costs. Sequentially, average selling prices were essentially unchanged from the fourth quarter as we did not take additional pricing actions during the current period. However, with scrap and wire rod prices now moving higher again, we implemented our old price increases across most product lines, which took effect earlier this month. Gross profit for the quarter improved to $18.1 million from $9.5 million a…

As I noted in my opening comments, we are pleased with the acceleration of business activity that continued through our first quarter. Our first quarter performance will never be strong due to the limited number of working days in the quarter after giving effect to Thanksgiving and Christmas shutdowns through much of the industry and to seasonal weather patterns. So our first quarter results are never indicative of the level of demand for our products. Nevertheless, we are pleased with the performance for the quarter and see no indication that the level of activity in our markets is poised to subside. As we consider the drivers of demand for our products, the facts are no clearer to us today than they have been in the past. We believe, however, that funding from the Infrastructure Investment and Jobs Act (IIJA) is responsible for much of the uptick in demand we have experienced, although we cannot definitively state that any single project was funded by IIJA. I suspect the same is true for our customers. They have enjoyed better volume levels without knowing the precise source of funding that drives demand for their products. While IIJA funding expires in 2026, funded projects will proceed into 2027 and beyond. The consensus today is that there is bipartisan support for a replacement infrastructure funding mechanism. Of course, that remains to be seen. The other notable source of demand that we expect to remain robust into 2027 is from the data center construction boom that has been well publicized. While community pushback seems to be growing as the scale of data center resource intensity is more fully appreciated, we have commitments from customers for projects that have been approved and funded and that should run through calendar 2026. The timing of the data center activity…

Of course. If you wish to ask a question, please press star followed by one on your telephone keypad now. Please press star followed by two. And when preparing to ask your question, ensure your device is unmuted locally. We have our first question from Julio Alberto Romero from Sidoti and Company. Your line is now open. Please go ahead.

Thanks. Hey, good morning, H.O. Woltz III and Scot R. Jafroodi. To begin, you sounded pretty constructive on the overall demand outlook, particularly with the data center and IIJA-related projects. You mentioned the commitments you have from customers on the data center side that have been approved and funded and run through calendar 2026. Can you give us a little bit more color on these commitments? Are these new commitments in your pipeline? Have they been accelerating? And what is your sense of how far out these commitments are beyond calendar 2026?

Well, I mean, the data center business is new to Insteel Industries, Inc. It is new to much of the economy. I think 2025 was the first year we had done any significant data center business, but certainly, now that we are in that market and connected with some of the companies that regularly do that business, we are seeing repeat opportunities and robust demand, which comes as no surprise based on what has been publicized about that industry and that build-out.

Got it. That is helpful. And, talking about the volumes in the quarter, you experienced growth of roughly 4%. Can you talk about how that was affected, if at all, by constraints of wire rod? Both in this quarter and on a go-forward basis?

Do you mean just the domestic situation?

Yeah. I think the last couple of quarters you called out that raw material constraints have kind of constrained your volume output. But it sounds like that was less of an effect this quarter.

So the reason that I went through the mill closures and sort of the macro with respect to wire rod supply and demand is to give readers of our release and participants on this call a sense for why our inventories have grown. Our inventories have grown because we are unable to acquire sufficient quantities of wire rod domestically, and we are forced to go offshore. I will point out that the situation in the wire rod market is very different than the situation that confronts purchasers of other hot rolled steel products because wire rod capacity has contracted significantly, and capacity has expanded significantly in other hot rolled products. So when we concluded that it was unlikely we could support our business objectives by buying solely domestically, we went to the offshore market to fill the gaps. We will continue doing so until such time as we see that availability improves in the US and that suppliers are willing to work for an order.

Very helpful context there. Last one, if I may, and I will pass it on, is on the SG&A front. You were able to grow sales 23% while SG&A grew by 11%. My question is, are you beginning to realize SG&A leverage from your acquisitions of EWP and OWP at this point in time? Or is that leverage still coming in your view?

Well, I mean, we certainly realize the synergies we expected to come from the acquisition. I would say that together with the added shipments and sales volume is really what that acquisition was all about. We are pleased with its performance, and we are moving along well.

Excellent. I will pass it on. Thanks very much.

Thank you.

Our next question is from Tyson Lee Bauer from KC Capital. Your line is now open. Please go ahead.

Good morning, gentlemen. Insteel Industries, Inc. has consistently been able to run counter to the industry stats as far as your ability to grow shipments and your ability to grow as a company. Versus, I think you mentioned, thirteen straight months of ABI billings below 50 and some of the other general industry stats. What has allowed you to run counter to those? Are we seeing an underlying acceleration away from just standard rebar to more of your ESM products and other products that would account for your ability to grow facing those kinds of industry headwinds?

Well, if I remember correctly, Tyson, the first time that business conditions for Insteel Industries, Inc. seemed to diverge significantly from what the major macro indices would indicate was 2025. Several things have happened internally that have helped us with that. Our work in the cash-in-place market has helped. Our acquisitions have helped. I think there are things going on internally that are different than what you may see in macro indicators for construction activity in the US market. We will continue pursuing the paths that we are pursuing now.

In the past, you benefited from when we were going into 2021 with the distribution centers. Now we are looking at data centers, both DC, ironically. You are working with those contractors that specialize there. Are you being spec'd into those designs as you were with some of the online retail customers before in the DCs? As we see that develop and that industry grow, are you kind of in lockstep with that?

Yeah. I think every project is different. But as a general goal, I would say no. We are not spec'd in. Rebar is spec'd in. We make a conversion of rebar applications to engineered structural mesh applications and rely on the value proposition of our product. Particularly with respect to data centers, one of the significant value propositions that we offer is speed. These owners and lessors of these centers are really focused on constructing them and getting them up and operating quickly. Our product helps with that whole charge.

So you do have an inherent advantage based on what your product is to grow along with that growing segment, that niche.

Yeah. I think the value proposition of our product relative to rebar is solid. There is no question about that.

Okay. Inventory levels, it sounds like that may have peaked this past quarter. Will we see a gradual downtick? Will that downtick accelerate as we get into fiscal three and fiscal four?

Well, I think it depends on the level of shipments that we see. If the scenario that we believe will unfold actually unfolds, and that is one of strong business conditions in 2026, then I think that is correct. But keep in mind that we will go back to the offshore market for Q3 and Q4 if we do not see significant improvements in the balance of supply and demand domestically.

Okay. The CapEx of $20 million, is that roughly split fifty-fifty maintenance, $10 million, $10 million for whether it be cost reductions or product line expansions, more of the growth side or improvement in margin? Is that kind of the split you are looking at?

I would say that is close to correct. We are still identifying some of the capacity expansion opportunities that exist out there. Of course, we are always interested in incorporating new technology into our manufacturing operations that will help us reduce cash costs of operation. We still have the underlying labor availability issue. As you might suspect, the more new technology we bring into the plants, the less labor-intensive our operation is. We are very much oriented toward looking at that.

Okay. And last one for me. As the administration goes to Davos, it is supposed to lay a plan to increase and incentivize greater activity in the residential side, which is about 15% of your overall business. Betting against the administration has proved futile. So you kind of go with what they are pushing, especially in an election year. How quickly can that residential market for you turn where it becomes a benefit as opposed to just kind of being stuck in the mud the last couple of years?

My view would be probably not fast enough to have any meaningful impact on 2026 for Insteel Industries, Inc. More importantly, our participation in residential markets would be related to slab-on-grade construction of housing units where the slabs are post-tensioned, and we are using PC strand. That is the segment of business where we knock heads with the imports most closely.

Okay. I am going to sneak one in. The labor cost outlook, we have heard other companies talk about general wage increases, health costs on that side of it. Have you indexed or looked at labor costs in increases for this year and what kind of offsets you have there?

Yeah. We have 11 or 12 different considerations because we look at prevailing labor markets in each of the areas where we operate. They are each different. But the upward pressure on labor costs still exists. We are incurring significant reciprocal and Section 232 tariff expenses in purchases of non-raw material items like spare parts, seeing energy increase. The inflationary environment is alive and well within our operations, and it really, like I say, every one's an independent event.

Okay. Thank you, gentlemen.

Thank you. We currently have no further questions, so I will hand back over to the management team for closing remarks.

Okay. We appreciate your interest in Insteel Industries, Inc. and its operating results, and we look forward to talking to you next quarter. In the meantime, if you have questions, do not hesitate to follow up with us. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your lines.