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Operator: Greetings, and welcome to the Reliance, Inc. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando. Thank you, and you may begin.

Kim Orlando: Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance’s second quarter 2024 financial results. I am joined by Karla Lewis, President and Chief Executive Officer; Steve Koch, Executive Vice President and Chief Operating Officer; and Arthur Ajemyan, Senior Vice President and Chief Financial Officer. A recording of this call will be posted on the Investors section of our website at investors.reliance.com. Please read the forward-looking statement disclosures included in our earnings release issued this morning and note that it applies to all statements made during this teleconference. The reconciliations of the adjusted numbers are included in the non-GAAP reconciliation part of the earnings release. I will now turn the call over to Karla Lewis, President and CEO of Reliance.

Karla Lewis: Thanks, Kim. Good morning, everyone, and thank you all for joining us today to discuss our second quarter 2024 results. Our second quarter performance once again highlighted the attractiveness of our business model through various market cycles delivering solid results in a challenging pricing environment. Reliance’s growth and diversification strategies coupled with our focus on customer service and relationships increased our shipments ahead of industry levels. Our new acquisitions and focus on smart profitable growth increased our tons shipped. However, carbon steel pricing during the second quarter declined further than anticipated offsetting the benefits of our increased tonnage. Declining metal pricing was the primary driver of our gross profit margin decrease and sequential reduction in earnings per diluted share $4.67.

Despite these challenges, our teams across the company maintained a strong gross profit margin of 29.8% within our long-term sustainable range of 29% to 31% driven in part by the significant investments we have made in value added processing capabilities in recent years. Our cash flow from operations helped fund two acquisitions in the second quarter and three year-to-date, which collectively added nearly $500 million in annualized net sales based on 2023 results. I will comment more on our acquisitions in a moment. We also invested $98.2 million in capital expenditures during the second quarter. The majority of which were directed towards growth by improving our value added processing capabilities and increasing our capacity to support future growth.

Our CapEx budget for the calendar year 2024 remains $440 million with an expected total cash outlay of approximately $425 million to $450 million. In regard to stockholder returns, we repurchased $519.3 million of common stock during the second quarter and $165.4 million in July underscoring the confidence our board and management team have in our future and we paid $62.6 million in dividends to our valued stockholders. In addition to acquiring Cooksey Steel on February 1st followed by American Alloy and MidWest Materials on April 1st. On July 15th we announced the acquisition of certain toll processing assets of the FerrouSouth Division of Ferragon Corporation. Subject to customary closing conditions, this will mark our 76th acquisition, since our 1994 IPO.

We look forward to welcoming FerrouSouth as a division of our wholly owned subsidiary, Ferragon Corporation. FerrouSouth tolling operations will expand Ferroalloy’s toll processing capabilities and provide additional capacity to Ferroalloy’s existing footprint in the Southeastern United States. The completed acquisitions expand our product offerings to our customers and enhance our geographic reach and unique processing capabilities. The M&A pipeline remains robust and we continue to seek additions to our family of companies that fit our criteria of being immediately accretive to earnings and well positioned for growth with solid management teams in place. In summary, I’d like to thank our team at Reliance for their dedication to working safely, servicing our customers and growing and managing our businesses well through uncertain markets.

It is because of our entire Reliance family that we are able to consistently post solid results throughout economic cycles. While we continue to execute through near term headwinds in demand and pricing affecting certain of our markets. We remain excited about the opportunities that lie ahead and confident in our talented team’s ability to successfully continue executing our robust and resilient business model. Thank you all for your time today. I’ll now turn the call over to Steve, who will review our second quarter demand and pricing trends.

Steve Koch: Thanks, Karla, and good morning, everyone. I’d also like to start by thanking our dedicated team at Reliance for their commitments to executing our strategy safely each and every day. I’ll now turn to our second quarter demand and pricing trends. Our tons sold increased 4% compared to the first quarter of 2024, in line with our expectations of up 2.5% to 4.5% and reflecting the benefit of the three acquisitions we’ve completed so far in 2024. On a same-store basis, our tons sold increased 0.9% over the prior quarter. Compared to the prior year, our tons sold were up 4.7% or 0.7% on a same-store basis, significantly outperforming the service center industry decrease of 1.8% as reported by the MSCI. We believe our continued outperformance of our MSCI peers is supported by our diversification strategy, customer service and organic growth in addition to the strategic acquisitions.

Our second quarter average selling price per ton sold of $2,348 declined by 3.8% compared to the first quarter 2024. Exceeding our expectations of down 1% to 3%. Carbon steel product prices declined more than anticipated as the quarter progressed. Stainless steel and aluminum average selling prices were minimally impacted second quarter by additional Russian sanctions announced in April as price increases in both commodities were short lived. Next, I will turn to an overview of trends we saw within key end markets and products. Beginning with non-residential construction. Carbon steel tubing, plate and structural products, which are predominantly sold into the non-residential construction end market represented about one third of our sales in the second quarter and had solid sequential and year-over-year growth in tons sold, outperforming industry shipment levels.

Our diversified exposure to non-residential construction markets, including publicly funded infrastructure, data centers and related energy infrastructure, supported steady demand for our carbon steel structure on tubing products, despite negative pricing trends. Our general manufacturing business, which represents roughly one third of our total sales, is highly diversified across products and includes industrial machinery, consumer products, heavy equipment and military. Demand across the broader general manufacturing sector we serve was relatively consistent on the whole compared to the second quarter 2023, primarily due to increased activity in industrial machinery and military spending, which offset declines demand for consumer products and heavy equipment, especially agricultural.

Our industry outperformance across key product groups, shipping to general manufacturing applications highlights the benefit of our diversified business model in a dynamic demand environment. Aerospace products comprise approximately 9% of our total sales. Commercial aerospace demand remains healthy despite short term supply chain challenges and our defense related aerospace and space program demand remains stable at strong levels. We primarily service the automotive market through our toll processing operations, which are not reflected in our tons sold. Our tolling business, which represents 4% of our total revenues, saw improved demand in the Q2 of 2024 compared to the prior year period due to healthy demand in the automotive market in both the United States and Mexico and our ongoing investments to increase capacity.

Semiconductor industry demand continued to contract due to excess inventories in the supply chain, but showed signs of stabilization through the second quarter in certain areas. Our long-term outlook for the semiconductor market remains positive, reinforced by both the significant semiconductor fabrication expansion underway in the United States and the CHIPS Act, which continues to guide our investment strategy for additional capacity to meet future demand. Overall, we are experiencing relatively steady demand with continued strength in certain key end markets, counterbalancing pressures in other end markets. We are very proud of our team’s outstanding efforts, which enable our continued industry leading performance. Reliance’s unrivaled scale and strong balance sheet makes us a highly attractive partner to our mill suppliers on all market conditions.

Reliance continues to win new business from new and existing customers who recognize the quality of our service, breadth of our product offerings and increased diversity of our value added services. Please refer to our earnings release for additional commentary on our end markets and product diversification. I will now turn the call over to Arthur to review our financial results and outlook.

Arthur Ajemyan: Thanks, Steve, and good morning everyone. Our 2nd quarter non GAAP diluted earnings per share of $4.65 came in slightly below our guided range as pricing levels retreated further than anticipated and offset the sequential improvement in tons sold, which was in line with our expectations. Despite the difficult pricing environment, we successfully outperformed industry shipment levels across nearly all products as we benefited from our significant scale and diversified product offerings. Our organic and inorganic growth initiatives collectively offset the impact of declining selling prices on our revenues in the second quarter. The decrease in our gross profit margin from 31% in the first quarter to 29.8% in the second quarter is due to pricing headwinds and was the main driver of the 12.3% decrease in our non-GAAP diluted earnings per share.

Our value added processing capabilities moderated the decline in our gross profit margin as orders with value added processing continue to experience significantly less gross profit margin contraction at times of declining prices and orders without processing. Our LIFO inventory valuation method provides further stability to our gross profit margin by adjusting our cost of sales to be more in line with current replacement costs. We recorded LIFO income of $50 million in the second quarter, in line with our guidance as we continue to anticipate LIFO income of $200 million for the full-year 2024, including $50 million of LIFO income for the third quarter of 2024. As of June 30, 2024, the LIFO reserve on our balance sheet was $479.3 million which will generate LIFO income and benefit future period operating results to mitigate the impact of potential further declines in metal prices.

Moving along to expenses. Same-store non-GAAP SG&A expenses decreased approximately $18 million or 3% sequentially and $4 million or 1% on a year-over-year basis. These declines were primarily due to lower incentive based compensation resulting from lower profitability, offset by higher costs associated with increased tons sold and wage inflation for the year-over-year change. As a reminder, our model inherently normalizes expenses by rightsizing incentives as profits trend down. I’ll now move on to discuss our balance sheet and cash flow. Reliance generated $366.3 million in operating cash flow for the second quarter, which helped fund $292.8 million in acquisitions and $98.2 million in capital expenditures. We also returned $62.6 million to our stockholders through cash dividend and repurchased $519.3 million of our shares at an average cost of approximately $288 per share.

In July, we repurchased an additional $165.4 million of our shares at an average cost of approximately $284 per share, which combined with our second quarter repurchases resulted in more than a 4% reduction in our total shares outstanding. As of July 23, 2024, $755 million remained available under our October 2023 1.5 billion share repurchase authorization, and we have ample liquidity for continued opportunistic repurchases. Turning now to our third quarter outlook. We anticipate the operating environment will remain challenging in the third quarter from a pricing perspective, with demand remaining relatively stable, subject to seasonal patterns, including decline in shipping volumes as a result of planned customer shutdowns and vacation schedules.

Accordingly, we estimate our tons sold will be down 2.5% to 4.5% in the third quarter compared to the second quarter, but up 4.5% to 6.5% compared to the third quarter of 2023 with approximately 4% of the year-over-year growth coming from our 2023 and 2024 acquisitions. On the pricing side, we expect our average selling price per ton sold for the third quarter to be down 2% to 4% compared to the second quarter, primarily driven by lower prices for carbon steel products. Accordingly, we believe our gross profit margin will remain under pressure in the third quarter of 2024. Based on these expectations, we currently anticipate non-GAAP earnings per diluted share in the range of $3.60 to $3.80 for the third quarter of 2024. This concludes our prepared remarks.

Thank you all for your time and participation. We’ll now open the call to questions. Operator?

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. The first question comes from Martin Englert with Seaport Research Partners. Please go ahead.

Martin Englert: Hello. Good morning, everyone.

Karla Lewis: Good morning, Martin.

Arthur Ajemyan: Good morning.

Martin Englert: Looking past the 3Q gross margin weakness due to lower carbon steel pricing, if prices overall are flattish on an ASP basis in 4Q, do you think you’re going to be able to work through some of the higher cost inventories so that gross margins will start to converge more towards a normalized level on a FIFO basis?

Karla Lewis: Yes, Martin. So we certainly do. I mean, that’s normal cyclicality for us managing through the different pricing cycles. Our people have done this for decades out there in our world. Prices go up and they go down and we try to really focus on managing our inventory well, turning our inventory in line with our shipment levels which staying ahead of that helps us as we go through these cycles. Certainly, there has been some pressure. Prices did fall more than we had anticipated. So we had hoped that we would have leveled off a bit more on gross profit margin by now. But as prices continue to decline, we’ve got to work through that inventory. But it’s typically a two, maybe three month lag. Lead times on a lot of our major products right now are kind of normal to short. And so with that, we can work through our inventory a little faster too.

Martin Englert: Thank you for that. Coming back to the share repurchases, that were substantial in 2Q. I believe that eclipsed what was done in all ’23. There was 755 million remaining on the authorization, ended the quarter with $350 million of cash. Maybe if you could touch on expectations for 3Q working capital, company’s availability to continue repurchases at an elevated level and if there’s a minimum cash balance that you’d be targeting?

Karla Lewis: Yes, Martin, so Reliance has always been a growth company and also a company to return value to our stockholders. So we try to continuously execute on all of that in an opportunistic manner. We felt the market gave us a great opportunity to be in repurchasing Reliance shares during the second quarter. We heard from everyone on the first quarter when we were not in the market, there was a lot of surprise. But again, that goes with our opportunistic approach to how we’re repurchasing the shares. We also completed three acquisitions already this year and announced another small one. We’re in a financial position where we’re able to execute on all of our different capital allocation and growth strategies and we expect to be able to continue doing that in third quarter, fourth quarter and beyond. So we’re still in really good shape to execute, but I’ll let Arthur address your working capital part of your question.

Arthur Ajemyan: Yes. So Martin, while we don’t necessarily put out a guidance for cash flow, you could look at typical seasonality for our business. Typically in the first half, there’s working capital build in the second half. Just given the seasonality of the business, there’s working capital release. And then you can take our assumptions for pricing and volume. So as prices go down, you’d have slightly more working capital release than just from purely adjusting volume and inventory on hand levels. Hope that answers your question.

Martin Englert: Yes, that’s helpful. I appreciate it. If I could one more, could you take a moment and highlight specific areas of your businesses that have higher exposure to grid electrification, grid expansion, and that is an end market?

Karla Lewis: Yes. Hi, Martin. The electrification, the grid, I mean those are parts of end markets that we service. There is definitely metal used in a lot of different components and ways a lot of the different metals that we sell, will go into those markets. I think Steve can maybe comment a little more specifically on some areas where we participate.

Steve Koch: So Martin, we’ve been in this business for quite some time servicing that market through our mission tower manufacturers that we have in Texas and then a couple other places throughout the United States. Also our flat rolled companies who provide galvanized steel to electrical enclosure and panel makers and transformer box manufacturers. So we don’t — we’re not exactly sure every order where it goes, but the trend when we do our end market conversations is that end of the business is steady to growing.

Martin Englert: Okay. Appreciate that. Nice to see the buybacks. Thanks for your time.

Karla Lewis: Yes. Thank you.

Arthur Ajemyan: Thank you, Martin.

Operator: Thank you. The next question is from Phil Gibbs from KeyBanc Capital Markets. Please go ahead.

Philip Gibbs: Hey, good morning.

Karla Lewis: Good morning, Phil.

Arthur Ajemyan: Good morning, Phil.

Philip Gibbs: Can you just help us understand the LIFO dynamic a little bit better, if pricing inherently missed what you were expecting, why didn’t this change to a higher income accrual in the quarter?

Arthur Ajemyan: Yes, great question, Phil. So, when we put out a quarterly guidance, it’s for pricing, that’s just pricing for the quarter. LIFO guidance is an annual estimate where basically what we’re doing is forecasting inventory costs on hand at the end of the year. So as we were making our annual LIFO projection at the end of the first quarter, we’re certainly looking at pricing expectations, not just through the end of the second quarter but through the balance of the year. So what we experienced through the second quarter, certainly there was more price contraction, but at a high level kind of when we looked at our estimates through the end of the year, they did not change materially, so we kept our LIFO estimate unchanged.

Now we’re going to revisit this at the end of the third quarter and see where we are with our assumptions and then adjust as needed. And at the end of the year, the numbers are what they are based on actual costs on hand. So then typically in the fourth quarter, you have a true up to the estimate that you’re making.

Philip Gibbs: Thanks, Arthur. And clearly about a buyback activity during the second quarter and early in third. It looks like the share count didn’t fall all that much, which tells me you bought a lot back in the latter part of Q2. If we were just to still assume that you didn’t make any further repurchases in the quarter, where would that shake us out for share count in Q2?

Karla Lewis: So, I think we provided the total shares purchased in the earnings release, Phil. So it’s roughly $2.4 million through July. So, yes, I mean, you’re right, the weighted average shares that you used for EPS calculations, that’s weighted. So Q3 is going to have the benefit of all Q2 share repurchases and then anything that was purchased in July, that will be weighted. But you’ll get the full benefit of Q2 buybacks on Q3. I should point out that offsetting some of that benefit is the lower interest income that you get from lower cash on hand. So it’s not just purely incremental, so there’s some offsetting impact there.

Philip Gibbs: Understood. And then lastly for me, I know you have a lot of balls in the air with CapEx and new sites, new processing and fabrication and distribution sites. Are there still a few of those that are in relatively, call it low rate production or startup mode that you don’t have full or near full contribution on. I know the mills like to call them startup costs, but for you, it’s just I know it’s just sort of everyday business until they get to sort of full adoption. But are there a handful of your facilities or your new key facilities that are still in that level? Are they starting to contribute?

Karla Lewis: Yes, Phil. So we have as you commented on when you were asking the question as you’ve known from following us for many years, we don’t go build $2 billion projects. So we have a lot of different projects very meaningful for us in each of our business, but certainly not at the scale of our suppliers and people like that. But we have had quite a few growth activities. I mean, we’ve talked over the last few years about our on campus Greenfields in Sinton and in Gallatin. And Gallatin is pretty fully ramped. Sinton, we kind of produce at the levels the mills are. So we’ve seen improvement there, probably a little more to go there. Our toll processing operations here in the U.S., we’ve added some capacity through some lines and expansions.

A couple of those are still pretty early processing, but still more room to grow on those lines. We’ve got another U.S. toll processing expansion that probably won’t come on until late this year, beginning of next year to really contribute. Down in Mexico, our tolling operations there, we’ve continued to expand and add equipment in all of those locations. So they’re continuing to contribute. We just opened a larger EMJ facility down in Atlanta. We have an Infra Metals larger facility in Georgia that is not going to probably be operating until next year. We’ve got our semiconductor expansions in Texas. So a lot of different things going on. We’re kind of at the pace we’ve been going and with the length of time it takes to get some of these operations up and running, we have multiple things coming online kind of consistently throughout the year.

Philip Gibbs: Thank you. And one more if I could. Just what are you and I know you commented a bit on in your prepared remarks, but can you give us a little bit more detail in terms of what you’re seeing in aerospace and defense given the volatility and the build rates and maybe your position as a distributor/processor versus someone who might be shipping more kind of more mill direct? How are you managing through the volatility? Thanks.

Karla Lewis: Yes. So certainly the defense projects, the programs that we participate in, those have been strong. They continue to be strong. Whether it’s kind of aerospace, military defense or more general military and defense. Unfortunately, because of what’s going on in the world, we see strong demand continuing in those pockets. But specifically on the aerospace side that continues to be strong. Commercial aerospace certainly with some of the manufacturers not producing at the announced build rates that they’ve been buying to. We’re anticipating some pressure potentially on just kind of on the activity on the flow. We haven’t — we’ve still been busy so far. Our shipments have been pretty steady, but we think there could be some pressure coming on the supply chain just because of the dynamics that are out there.

Philip Gibbs: Thank you.

Karla Lewis: I think so.

Operator: Thank you. The next question comes from Timna Tanners with Wolfe Research. Please go ahead.

Timna Tanners: Hey, good morning, team.

Karla Lewis: Hi, Timna.

Timna Tanners: I wanted to dig in a little bit. Hello, I wanted to dig in a little bit more on the pricing outlook, if I could. Does that reflect like today’s spot price for carbon steel and the retreat in some of the base metals tied products? Or if I’m missing something, is there any other items that could explain that guidance?

Karla Lewis: Yes, Timna. So as we commented, the prices in Q2 primarily for some of the major carbon items that we sell, plate, beam, tubing. We saw those prices fall further, flat roll included as well, fall further than we had anticipated for the quarter. We thought we were at a point earlier in the quarter where we had kind of hit the bottom, but then prices went down further from there. For our guide for Q3, yes, a lot of that the decline we’re talking about is for the average for Q3 compared to the average of Q2. So it does for the most part reflect where prices are currently. It’s not anticipating significant declines from where we are today.

Timna Tanners: Okay. That’s helpful. Thanks. And then maybe as backing up, is there much impact from the kind of roller coaster back down from the aluminum and other base metals prices? Or is the aluminum segment almost entirely toll processing?

Karla Lewis: Yes. We certainly do a lot of toll processing of automotive aluminum. But we’re selling all the different metal products. Aerospace, heat treat plate, mainly that we sell into aerospace, that pricing doesn’t follow the LME the way common alloy does. And with the Russian sanctions that were announced in Q2, there was more of a bump than we had anticipated in a positive way to aluminum and stainless, but we’ve seen those pull back. It was kind of a short lived increase in the pricing.

Steve Koch: And aluminum sales are — sorry, Timna. I was just going to say they’re roughly 16% of our sales. And to Karla’s point, when you look at some of the aerospace products included in that 16%, those don’t follow the LME pricing. So, that’s where you might get a little different pricing trends on the aluminum side of the business.

Timna Tanners: Okay. Thank you. Wanted to also look into the SG&A a little bit more. I know from history and from your prepared remarks, you look to temper that with declining earnings. But if we just look year-over-year, it hasn’t really come down as much as your overall profits have. So and I know you mentioned that there’s wage inflation, but also less profit sharing, but are there other steps that you can take, given your guidance and where the market is? Are there other steps that you can take to kind of take a deeper hit to some of that overhead to manage it with what’s happening in the broader market?

Karla Lewis: Yes, Timna, on the expense side we feel our teams throughout the companies are doing a good job managing. I mean, one of the things that we can do is sell more metal profitably. So that’s part of our smart profitable growth we talk about to make up and cover some of the higher costs. Everyone’s operating with higher costs now. We’re continuously in each of our businesses looking at ways to become more efficient. But a lot of times it really is company-by-company. We do have some of our businesses who recently have had to lay off some employees because their business volumes are down. That’s one of the ways that we manage our expenses, although we do very much value our employees and the skills that they have. So we try to retain them as long as we can, but sometimes business conditions in certain markets require us to do some layoffs.

But I think we continue to try to manage expenses and we’ll continue to look for ways. But there’s not one magic bullet we have that applies across all of our companies to do that.

Timna Tanners: Okay. Thank you. One last one for me, if I could. On the — I know you mentioned A&D and discussed that, but that seems like in the last couple of days, we’re seeing growing caution around the auto end market, and some disappointment there. Can you just elaborate a little bit more on if you’re seeing any of it or if you feel like you might have some offsetting factors that can keep your business more stable?

Karla Lewis: Yes. As you know, Timna, most of what we do with automotive is on the toll processing side and so we’re inspecting them out over, processing the metal, we’re storing the metal, we’re doing logistics. We’ve seen that business, which we have a lot here in the U.S. also in Mexico. We’ve seen those markets remain stable and they’ve grown over last year. We hear the same comments maybe a little more cautious, but our businesses are still doing well with the aluminum toll processing that we do. That we believe is still growing. Our carbon side of the business has grown as well, but we think that we may be positioned a little better. And on the carbon side too, the different platforms that we’re on, we’re not concerned. We think the market is still stable for us there.

Timna Tanners: Okay. Thanks for all the color.

Karla Lewis: Thanks, Timna.

Operator: Thank you. The next question comes from Katja Jancic with BMO Capital Markets. Please go ahead.

Katja Jancic: Hi, thank you for taking my questions.

Arthur Ajemyan: Good morning.

Katja Jancic: Karla, you mentioned the investments in the semiconductor expansion. Can you talk a bit about what the status of that project is and also especially given the market has slowed down?

Karla Lewis: Yes, Katja. So we have been dealing for, I think a little over a year now with a weaker market from the record levels that the semiconductor industry had been operating at globally. And that’s again part of what we have to deal with, really a buildup in the supply chain when a lot of factors impacted the semiconductor flow, especially from some products in the U.S. going globally. So our folks have been managing through that. We think the supply glut is starting to be worked out and we’re seeing a little better activity with some of the equipment manufacturers. As far as the investments we’re making, we are still very bullish on the semiconductor industry in the long-term, it does take some time to build our facilities.

These are probably a little more advanced facilities than some of our other service centers. So our smaller expansion in Texas has been up and running. It’s still ramping a bit, but that one is producing. Our larger investment in Texas has been continuing through the process. I think probably late this year, beginning of next year, we’ll be starting to operate in that facility. And we’re comfortable with the timing and with the investments that we’ve made there and excited about what we’ll be able to provide in the U.S. semiconductor market.

Katja Jancic: And then maybe shifting gears a little bit to the M&A environment. What are you seeing there? How does your pipeline look like right now?

Karla Lewis: Yes, I mean, we’re really happy. We’ve been able to add some really good companies to the Reliance family this year with the acquisitions we’ve already completed and announced. They’re all pretty strategic helping us with our growth plans and working with some of our existing Reliance companies. And we continue to see opportunity. It’s been a pretty good flow for the last year or so. And I would say especially with what we would talk about the service centers who kind of fit Reliance’s model, we’ve been happy to see a continuous flow there.

Katja Jancic: Perfect. Thank you.

Karla Lewis: Thanks, Katja.

Arthur Ajemyan: Thank you.

Operator: Thank you. The next question comes from Lawson Winder with Bank of America Securities. Please go ahead.

Lawson Winder: Thank you very much operator and hello team. Thank you for taking the questions. So first off, I just wanted to get an idea of whether or not you’re seeing any pickup in ordering activity from carbon steel customers. So like understanding there’s a bit of seasonality involved, but feedback from the mills has indicated that after a pretty weak Q2 activity has potentially started to pick up in recent weeks. Are you seeing that?

Karla Lewis: Yes, hi, Lawson. So as we’ve talked about, we talked about in Q1 and continued in Q2 when there are price decreases happening, sometimes buyers will hold back, but they can only do that for so long and they need metal. So I would say we did see second quarter was a little uncertain. I think some of our companies talked about like June, it seemed uncertainty increased a little bit and there may have been a pullback but then we saw people coming back in. I’ve seen the comments from the mills about the service center industry, not Reliance. We try to buy based on what we’re shipping. And so that’s how we manage our business and how we place our orders. We try to be as consistent as we can subject to our customers’ buying patterns. So and overall, we still see demand pretty stable subject to the seasonal impacts. But I don’t know that we can really comment much on what’s happening really outside of Reliance.

Steve Koch: Yes, I agree, Lawson. Hi, it’s Steve. We’d like to — we’ve understood from the mills over the years that they want a consistent order book. So instead of we’re not a company that goes in and buys 50,000 tons in one quarter than is out of the market the next quarter. So we’re buying consistently each and every month. We’ve not heard from the mills that they’re having trouble filling our orders or that they’re being extended with big orders coming from our competitors. So we’ve not seen any spike in the carbon activity at the mill level.

Lawson Winder: Okay. Thanks Carla. Thanks Steve for adding that color and totally fair. It’s all helpful color. I wanted to follow-up on the M&A question and just ask it a slightly different way, which is how are you perceiving value? I mean, particularly given that I mean, this year fuel activity for Reliance has really, really picked up after a bit of a lull for a number of years. Are the weaker steel prices perhaps helping bring those bid ask spreads back to an area that’s a little bit more digestible or comfortable for Reliance? And are you seeing opportunities in any particular region or is it fairly spread?

Karla Lewis: Yes, on the M&A side and valuation at Reliance, we’ve had a pretty consistent approach for many years to how we value companies. And we focus on what we think a normalized pretax income or EBITDA level is for the long-term. When Reliance acquires companies, we’re bringing them into the family really more on a permanent basis. So we really take a long-term view and certainly market conditions outlooks can impact that a bit. But we’ve been in the business a long time, so we did not believe that the 2021, 2022 record metal prices would hold for the long-term. We certainly enjoyed it while it was here, but we weren’t comfortable valuing companies at that level. So with our normalized long-term approach, our valuation methodology stayed consistent and so we didn’t get some of those deals.

Some of those deals just didn’t get done in the market anyway because others had the same view on pricing outlooks. And so I think overall expectations are more in line now between buyers and sellers and kind of a more realistic outlook on earnings levels going forward.

Lawson Winder: Okay, great. Very, very helpful. And then if I might try a bit of a trickier question, which is just thinking about the election coming up in November, and for your business, how might we think about risks and opportunities for Reliance?

Karla Lewis: There are always risks and opportunities out there in our business. That’s what we manage through. That’s what our people do well every day. I would say good news for Reliance is we’re in many different products. We’ve got a diverse product base, diverse geographies, diverse end markets and many, many things if you look around require metal. So even if there’s a shift on energy priorities or various other markets, most of those still require metal and we sell many metals that are used out there. So we’ll manage through it just like anything else and don’t have a bias or preference in any direction.

Lawson Winder: Okay, fair. Very diplomatic response. Thank you for your color and helpful responses Karla and team.

Karla Lewis: Great. Thanks, Lawson.

Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to Karla Lewis for closing comments.

Karla Lewis: Great. So thanks again for joining our call today and thank you to each of our 15,000 Reliance employees for all that you do every day to drive our company forward. Please be safe. And before we close out the call, I’d like to remind everyone that next month we’ll be participating in Seaport’s Annual Virtual Summer Conference. Thank you again for your continued support of Reliance and we are more than metal.

Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.