Ryerson Holding Corp (RYI) 2025 Q3 法說會逐字稿

Please stand by.

Good day and welcome to the Ryerson Holding Corporation's Third quarter 2025 conference call. Today's conference is being recorded. (Operator Instructions)

At this time, I'd like to turn the conference over to Justine Carlson. Please go ahead.

Morning.

Thank you for joining Ryerson Holding Corporation's third quarter 2025 earnings Hall.

On our call we have Eddie Lehner, Ryerson's President and Chief Executive Officer, James Claussen, our Chief Financial Officer, and Molly Kannan, our Chief Accounting Officer and corporate controller.

A recording of this call will be posted on our investor relations website at I.rierson.com. Please read the forward-looking statement disclosures included in our earnings release issued yesterday, and note that it applies to all statements made during this call.

In addition, our remarks today are with several non-GAAP measures. Reconciliations of these adjusted numbers are also included in our earnings release.

I'll now turn the call over to Eddie.

Thank you, Justine. Good morning and thank you all for joining us to discuss our third quarter 2025 performance and our announced merger agreement with Olympic Steel.

I would like to start our call today with an abbreviated version of our prepared financial comments before asking Rick Mirrabito, Chief Executive Officer of Olympic Steel, to join us to discuss the announced merger agreement, its strategy, and the benefits we believe it will yield for our stakeholders.

So turning to our performance first, the Thirdrd quarter market backdrop continues to be difficult as we now find ourselves rounding out a Third year of contractionary conditions. The quarter can be summed up as a continuation of industry recessionary conditions characterized by falling industry shipments year over year and sequentially.

With notable carbon steel margin compression, with manufacturing activity well below mid-cycle levels.

Supply side tariffs and trade policy have placed to some extent floors under bellwether industrial metal commodity prices. However, demand in the aggregate remains stubbornly depressed. We have often said the supply side sets the price.

However, our customers set the discount, and through the Third quarter, customers continued quoting less and buying less. With our OEM book of business, especially.

The contract business We have actually seen activity come in well below our OEM customer forecasts and historical mid-cycle trends as we are in the late stages of this counter cycle that is in its third quarter and has been of longer duration than is typical of historical counter cycles of between four and six quarters, the OEM side of the commercial portfolio should eventually infect positively.

The offset to that is the very encouraging trend of Ryerson growing its transactional business as recent investments continue to operationalize, stabilize, and scale throughout our network.

This shows up in our service center fundamentals, metrics of shorter lead times, higher service levels, and improved on-time delivery.

As long as we keep on keeping on with improving the customer experience while optimizing our service center network productively and safely, our performance will continue to improve as the market navigates the many dynamic factors currently in play.

Around trade policy, investment, interest rates, and geopolitical commerce volatility, we continue to drive what we can control, building earnings quality and earnings leverage by being excellent operators of our business with.

Consistency. We understand that decades of offshoring take time to unwind just as the leveraging, asset modernization, and optimization have required long-term vision and commitment. We will persevere through this market environment, working safely and passionately throughout, and come out stronger on the other side.

I can't wait for Rick to join me on the call, but before we get there, I'll turn the call over to Jim Clausen. To provide more details on our financial results and our outlook.

Thanks Eddie, and good morning everyone.

During the Third quarter, we achieved adjusted EBITDA excluding LIFO at the low end of our guidance range with revenue and shipments in line with expectations.

Looking ahead to the fourth quarter of 25, we expect volumes to soften during the quarter by 5% to 7%. This aligns with typical seasonality patterns as our customers slow production around the holidays, and it also reflects our anticipation that the current demand challenges will persist at least through the close of the year.

From a pricing perspective, we anticipate that the current tariff structure will continue to be nominally supportive, leading to what we expect to be flat to 2% higher average selling prices. Resulting in revenues in the range of $1.07 billion to $1.11 billion.

We expect that gross margins will continue to be under pressure in the fourth quarter given elevated input prices and the recess demand environment.

In all, we forecast fourth quarter adjusted EBITDA excluding LIFO in the range of $33 million to $37 million and net loss per share in the range of [$0.28] to $0.22 per diluted share given projected LIFO expenses and depreciation higher than normalized go-forward CapEx of $50 million to $55 million.

We expect life will expense to be between $10.14 million dollars in the quarter and net CapEx to finish the year within our target range of $50 million.

Turning to the balance sheet and cash flow highlights, we ended the third quarter with $500 million in total debt and $470 million in net debt, which represents a decrease of $10 million and $0.09 million dollars respectively, compared to the prior quarter.

As a result of incremental improvements in both our net debt and trailing 12 month adjusted EBITDA excluding LIFO, our third quarter leverage ratio came in at 3.7 times, moving us closer to our target range of 0.5 times to 2.0 times.

As we progress through the fourth quarter, we expect cash flow generation to continue moving our leverage ratio back towards our target range.

From a global liquidity perspective, the company's profile remained healthy during the Third quarter, and we ended the period with $521 million of liquidity compared to $485 million at the end of the second quarter.

Third quarter operating cash use of $8.3 million was primarily driven by the net loss generated. We ended the quarter with a cash conversion cycle of 68 days, which compares to 66 for the prior quarter, as our higher value inventory added two days of supply while our payables and receivable cycles remain consistent.

I'll now turn the call over to Molly Cannon to discuss our financial performance highlights for the Third quarter.

Thanks, Jim, and good morning everyone.

In the third quarter of 2025, Ryerson reported net sales of $1.16 billion a decrease of $7.8 million or less than 1%, compared to the second quarter, with average selling prices up 2.6% and tons shipped down 3.2%. Due to the rising price environment, we recorded LIFO expense of 13.2 million, which was consistent with the prior quarter.

Gross margin and gross margin excluding LIFO both contracted during the third quarter by 70 basis points to 17.2% and 18.3% respectively, as we experience price pressure amidst the soft demand environment.

Warehousing delivery, selling, general, and administrative expenses totaled $201 million for the third quarter, a decrease of $3 million compared to the second quarter.

Despite decreased expenses and top-line metrics within our guidance ranges, gross margin compression contributed to our third quarter net loss of 1$4.8 million, or $0.46 per diluted share.

This compares to net income of $1.9 million and diluted earnings per share of $0.06 for the prior quarter.

And finally, our adjusted EBITDA, excluding lipo generation for the third quarter was $40.3 million, which, as Jim mentioned, was within our guidance range and compares to $45 million generated in the prior quarter.

And with this I'll turn the call back to Eddie.

Thank you, Molly.

I would like to conclude our prepared comments by thanking the Ryerson team for their tremendous teamwork and passion for getting better every day.

This quarter was another street fight. However, we continue executing our self-help principles and focusing on what we can control while continuing to bring our investment cycle to return and improving our financial performance through the cycle.

And with that, I am delighted to invite Rick Mirabitto to join me as we share an overview of the announced merger of our companies.

So much, Eddie.

Really appreciate being invited to be part of this call and maybe before we begin, I just had just an opening comment to make and just want to say how excited I am, how excited the Olympic team is for this combination of two great companies.

And really for the opportunity to work together with Eddie and his team at Ryerson, we're looking forward to closing so we can get to work and deliver on the benefits of the merger and really unlock the value that this combination brings to shareholders.

Our customers, our employees, and the communities where we all live and work, and I know I speak for you, Eddie. We're we're engaged, we're energized and committed to deliver the compelling value proposition in front of us with shared values and a shared vision for success.

And so with that maybe we'll get right into the slide presentation and let's start with the big picture.

I think the combination, as you see, solidifies and enhances the new company's presence as the second largest metal service center in North America.

Together we'll have over $6.5 billion of revenue and we'll serve our customers from an expansive North American network of over 160 facilities. Providing new breadth, new depth of products and processing services, as well as a greater ability to offer our customers customized metal solutions and improve speed and efficiency.

Together we expect to realize $120 million of synergies and that will be phased in over two years, which is obviously a compelling contributor to the future margin enhancement and value creation. Eddie's going to provide some more details on the synergies in a moment. So combined, our new company will have a stronger financial profile as the merger is an all-stock transaction.

Greater free cash flow and a stronger, more flexible balance sheet only provide more opportunities for future growth, then I think we'd be able to accomplish separately. So, Eddie, I'll turn it over to you for the next slide.

Hey, Red, thanks so much and really, you spoke so beautifully at the outset, and I too want to welcome all of our stakeholders.

I want to welcome everybody from Olympic and Ryerson that are on the call this morning and to really continue why we think this is such a compelling and attractive merger between our two companies with a combined 255 years of experience in the service center business, hard-on experience in the service center business.

When we look at The transaction and within the next page of our presentation, I want to go right to synergies and I want to give you two examples of synergies because I think they're powerful examples.

And we've renamed this room Synergy Central or perspective Synergy Central. So I want to share just a couple things with you, because I know synergies are really at the root and core of where we can derive multiples of value.

So, If you look at Ryerson, and you look at what's happened since September of 2022, just looking at Ryerson for now.

25% of our mix is in stainless. Okay, so when we look at Q3 revenue, about 25% revenue in stainless, 25% revenue in aluminum, and 50% revenue in carbon. And what's important to realize is we are underweighted the market in carbon.

When we look at MSCI numbers, the industry is 67% carbon and it's 33% non-ferrous roughly. So when you look at the industry, you look at rere being underweighted carbon but overweighted stainless and aluminum, just look at stainless. I mean, stainless.

It was a wonderful gift horse in '21 and '22, and I don't want to punch a gift horse in the mouth, but in '23 and '24 and even in '25, think about what happened in the stainless market. MSCI shipments and stainless are off 22%.

Nickel prices are down by more than 50%, so we endure that going through.

A very large investment cycle to modernize our company, improve our company, but we take brutal compression and shipment declines over that three year period, and storing aluminum from a shipment's perspective, even though price.

There's been a lot of volatility in the aluminum price, and even though its downward gradient has not been as extreme, shipments from the MSCI for aluminum are down more than 20% since September of 2022.

But carbon prices have been about on average, even though there's been a lot of Modulation in the price in general in September of '22, carbon prices were $850 a ton, and that's kind of where they are today in that neighborhood of $850 a ton.

But what's even more provocative in this example, the synergy, is that carbon shipments in the industry only fell by 5% in that period. So if you are overweighted carbon.

In general, you did better in the industry than if you were overweight and nonfas. So when you think about the combination of Olympic and Ryerson, Olympic has more carbon exposure in tube, more carbon exposure in plate, and so that's a natural synergy.

When we look at being very complimentary, when we look at our footprint and we look at what we do, certainly on the commodity mix side, that's a really strong synergy as we look forward in this transaction. Let me share another one with you.

It's no secret that since the pandemic, we've all had to look at things that maybe were not as prolific before the pandemic. And one of the things that's happened is the demographics in our industry, it's no secret that they skew older.

When you look at the voluntary rate of attrition in this industry, just folks that just leave on their own and people that retire in this industry it's between 5% and 15%, so I want that number to sink in for a second, 5% to 15%.

Nothing the company does whatsoever. It's just people that retire or they decide they want to TRY something new.

So if you take the natural rate of attrition in this industry, You can see where we can create a really powerful synergy and efficiency.

Just given the natural rate of voluntary attrition in this industry, you can take the combined employee census, you can take the average comp that we published for the MD&A, and you can do that math and you can model it, and you can see how we create a synergy right in line with what we're bringing to our stakeholders and what we're articulating to our stakeholders.

So when we look at this, everything on this slide is true, presence.

Highly complimentary match opportunities for margin expansion, the synergies that I just spoke about and there's many more, and we'll talk more about some of those other ones as we as we go through the presentation, accelerated growth, really the combination of talent pools.

I mean, I've known. Yes, we, we've competed against the Olympic Olympics for the entire time that I've been here over the last, 13 years. And Olympic has incredible talent in their organization. They've got a great brand, a great culture, and I'd like to say that I'm proud of what Ryerson is and what we've been and where we're going over our 183 years.

And so when you look at the talent pools that we're combining. In this merger, it is very unique and it's highly accretive and valuable. And then we have an opportunity to deleverage.

There's a lot of collateral in this deal that gives us the optionality to deleverage both on a combined basis, but also in terms of the asset quality that we have in working capital, property planning and equipment.

And then we have better access to the capital markets and we also have better share flow. There's more liquidity in our combined equity, than we have now. So, with that, I'm going to kick it back over to Rick and then I'll be back with you in just a minute.

So thanks Eddie. We can go to the next slide, please, and really let's let's review the details of the transaction.

So as we said, the merger is structured as an all stock deal, and Eddie just talked about that in terms of strengthening the balance sheet and giving us really the strength and power to go forward and grow.

Closing of the transaction is targeted for the first quarter of 2026. Olympic shareholders in terms of an exchange ratio will receive [1.7105] Ryerson shares for each Olympic share, and what that equates to is Ryerson shareholders owning 63% of the combined new company and Olympic Steel shareholders owning approximately 37% of the combined company.

And as we stated earlier, 2024 combined revenue $6.5 billion with pro forma adjusted EBITDA margins approaching 6%, and that would include a phase in of the forecasted synergies. And Eddie just talked about the synergies $120 million assuming about third of those synergies are completed at the end of the first year after closing and then 100%.

Phased in completely at the end of year two, and we do, as Eddie said, we do have high conviction in terms of achieving those synergies. I think as you look at all the opportunities and Eddie just gave you a couple of examples, but there's quite a long list of potential opportunities and synergies, and I'll tell you that's we're going to be quickly engaged on realizing those.

Those synergies, in terms of leadership, the board is going to broaden its talent by expanding to 11 board members, and the board will welcome Michael Siegel as Chairman of the board. I think, as most of Michael is currently the executive chair of Olympic Steel.

And then Olympic will also appoint 3 other directors to the board, obviously mutually satisfactory to the board, and that will result in four board members from Olympic and 7 from Ryerson to round out the new board.

And then in terms of executive leadership, Eddie will continue to serve as the chief Chief Executive Officer of the new company, and I'm very excited to serve as President and COO and the Olympic executive team, I can tell you, is enthusiastically looking forward to continuing with the new combined company.

And again, since the mergers all stock in nature, the combined company will really benefit with reduced leverage as we model that out as synergies take hold.

We're looking at leverage of approximately 3 times post close, and then the credit profile of the combined company should also be enhanced through scale diversification. Improve margins and profitability and obviously greater cash flow.

So, a lot of positives here. So, Eddie, why don't you why don't you take us through the next slide.

Hey, thanks, Rick. So when we go to the footprint, we look at the footprint, and I think a picture really is worth 1,000, is worth 1,000 words or more.

But when we go under the hood of what does the perspective com combined, what do the respective combined companies look like, if you look at this graphic, you can see and what always doesn't show up in the financial statements because you really have to drill down and you have to look at the drivers or create the financial statements for respective companies in our industry.

Think about the importance of selection, availability, lead time and on-time delivery. I mean, we have great brands, but really when a customer calls or emails us for a quote, if we have it on the floor, it sells. If we can create short lead times, it sells.

If we have wider selection, it sells. We can buy out from one another, makes it easier. To make that sale, we can use each other's outside processing network. It makes it easier to create that sale.

So when you look at this graphic, you have density and you have points to the customer that are closer to them relying in greater, I mean, and we can realize greater reliability and consistency in how we make those connections with our customers.

When you look, if you go west, we have an opportunity to take more of the combined company west, and we also have more of an opportunity to go to Mexico together where we already have a presence, and Olympic, I'm sure has customers that are looking to get to Mexico in a more meaningful way.

So when you look at the footprint and the commercial synergies that are attainable in this transaction, I think the picture truly is worth 1,000 words.

Right yes.

The next slide, this is something I tell you, I get this is an area I get really excited about. So if you look at the top there, the two companies combined over the last three years have invested a massive amount back into the company, $480 million and I think the title of this slide is exactly right, primed.

I think we're primed.

So the vast majority.

Of the money on the current investments in CapEx our portfolio, has already been spent. And so what that means is we are both now primed to reap the returns on these investments, and I think the benefit of a merger is we're going to get there faster through a larger combined platform.

And then let's not even mention what Eddie talked about earlier, and that's the opportunity for a power boost or a multiplier effect from tailwinds in the metal market. So demand has been off for several years. We get demand back to a normalized demand scenario with $480 million recently invested, and I think that is a very strong.

Indication of what we can do together, briefly, I'll touch on Olympics side of the equation in terms of what some of the investments were, and then I'll have Eddie talk about Ryerson's recent investments, but Olympic, I like to refer to our capital spending over the last one and half years to two years as the big five.

So it includes a new cut to length line in Minneapolis, and we're targeting their carbon growth, coded carbon growth specifically.

A new white metals cut to length line in Chicago, a high speed specialty stainless slitter at Berlin Metals. Berlin's right outside of Gary, Indiana.

The biggest of the five is in Chambersburg, Pennsylvania.

That's one of our plate processing hubs, and in Chambersburg we've got a massive automation project which includes all new lasers and plasma processing equipment and capacity coupled with material handling automation.

So a lot of our movements are going to be touchless, so we're really excited about that one. And then finally we've expanded down south in Texas in the stainless area through Action Stainless expansion in Houston.

So all these projects, they're poised for returns on the Olympic side for 26 through 28 time frame, and I say that's perfect upside timing for the merger. Eddie, you want to talk about from the Ryerson side your investment. Yeah.

Yeah, no thanks, Rick. When I started with Newport in 1992, Ken Iverson, legendary CEO of New Corp, stopped at my office and was just talking about the story of Crawfordsville, and he was saying that when they built Crawfordsville in '87, they were losing a million dollars a week on the project and they were asking Ken how he slept, and he said he slept just like a baby. He woke up in the night and cried every hour.

When you do CapEx and you do green fields and you do big projects to modernize your company, they all don't go, beautifully, and you have to grind through it, but it's worth it.

And certainly as we've gone through this downturn, which has lasted for, three years, I mean, Rick said that we're due for some tailwinds for the last three years, all we've had is face burned.

So when you look at The CapEx investments we've made, we made record CapEx investments to invest in our future, and As we see upside operating leverage and opportunities for the cycle to infect and certainly with the combined Olympic and Ryerson, when you look at University Park, 900,000 square feet of modern service center space for long products and two primarily.

When you look at Shelbyville, which was a fantastic investment in our non-feris franchise, it's located so close to the breadbasket of non-feris supply in the United States. You look at the release of Ryerson.com 3.0, as we go further and further into digital commerce.

So that's a synergy between Ryerson and Olympic as we go forward to bring a lot of the digital investments we've made and to actually put those in its scale in a very thoughtful way as we go forward as a combined company. And we have the Atlanta Tub Blazer Center.

We've made significant investments, and we've gone from nothing in 2016 to more than 10 work centers in Norcross, which has been a wonderful success story. And if you pair that up, for example, with Chicago Tube and iron, which is in the Midwest, you can see a powerful synergy in that franchise of high value add between Tube blazering and sheet lathering.

And then of course we took a big swing on ERP integration. We've mentioned this before in our South region and in Texas, we were on legacy systems for 40 years and we finally had to bite the bullet and we finally had to convert and get on a uniform ERP system.

I mean that is a two to three year trail of tears. But once you've come through it, once you come through it, all of a sudden everybody knows that language and they find possibilities and capabilities they didn't have before within that system to create a better customer experience.

So we are on the other side of that as you see restructuring and reward costs come down and we do the cleanups from a three year investment cycle coming through this downturn with the investments we've made. As you look at a combined Olympic and Ryerson,

I think you can really start to see the potential of how those investments, they don't just pay off as individual organizations, but when you bring them together, the payoffs are very attractive.

And that takes us to again the compelling synergy opportunities. So I spoke to two very powerful synergies a couple of minutes ago, and I want to put a spotlight now on.

Procurement and supply chain. So you go from $2 million tons to say 2.9 million to 3 million tons of combined purchasing spend.

And you pick up scale. And if you really break this down into math, meddled on any given day is between 70% and 95% of our cost depending on the pound that you're quoting and the pound that you sell, 70% to 95%. So if you don't buy well, it's really hard to operate your way out of.

Sub optimal bind. But when you look at the combined scale that we generate now going To that supply chain marketplace, to that procurement marketplace, we're talking about $14 a ton.

Over $2.9 million tons is what we're talking about, and we are highly confident that we know how to get $14 a ton in supply chain synergies, not the least of which follow through to fuller truckloads that we receive from our suppliers.

So we pick up savings not just on the freight, but obviously the main course is the metal. And now you've got greater optionality of how you purchase that, how you combine that spend, and where you direct it to a more dense network to bring down your overall procurement costs.

Right.

Thanks, Eddie.

Next, let's just talk about our profile in terms of pro forma mix on and markets and and products here, and Eddie touched on it already, but really excited about a the growth markets and customers benefiting.

From our combined new mix, obviously we've got a lot of potential growth happening in the United States in terms of infrastructure reinvestment, reshoring, outsourcing and fabrication, and then of course, Massive data center demand buildout where we're seeing significant growth.

I think as you bring the two companies together, you look at the product mix, it's enriched. Eddie talked about the balance of the specialty and the carbon, but you look at really the overall mix now, a great balance across flat and long stainless and aluminum, carbon, especially, coated carbon.

And then the increased value add processing and fabricating capabilities, I think fantastic. And then combine that with Olympic Steel's recent growing focus on end product manufacturing.

Wow, these are all margin enhancers. So I think in summary, the combined company is going to be more diverse. We're going to have more high margin processing capabilities. We're going to have a richer mix of metal products, and that's going to really provide a powerful and expansive one-stop solution for our customers.

And when I look at that altogether, I think all this, what it means is it contributes to an improved and less cyclical earnings stream for the combined company going forward.

Eddie.

Thanks, Rick.

So when we look at moving up the value chain, and what does this industry look like as you start to Visualize margin accretion.

On the pick pack and ship side, it's a speed game, right? You quote fast, you quote short lead times, you have the inventory on the floor, you get it to the customer. You need to do that with running water like consistency. But as you move that up and you pick up margin points when you do that, but the key there is consistency and scale.

But as you move up through processing and finished parts and kits and assemblies and value add. Our Value Add franchises combined. I mean, individually they're significant, but combined, there is another force multiplier when you look at going up that adjacency curve and going to every next step of service capability and value add capability.

And then you get to end products where I'm highly complimentary of the work that Olympic has done forging a path into manufactured products and end products, and Rick's going to speak to that in just about a few seconds here, but you can start to see.

Another very complimentary fit as we go up that curve to get a more margin on that consistency for transactional spot building material business, the menu of offerings that you can take to a program account or an OEM, and then all the way through to manufacture products, right?

Yeah, thanks, Eddie, and some of you may or may not know about Olympic strategy the past 5 or 6 years to acquire and integrate and product manufacturing into our mix. So for example we make inside of Olympic we make industrial hoppers, we make stainless steel bollards, we make metal canopies.

We've got many different end products that go into HVAC applications. And as I spoke before, the end product, it carries a higher margin in return profile than traditional service center business and And the end products are also countercyclical to distribution margins.

So for example, when metal pricing declines, kind of the the depression in the cycle of metals, service center margins tend to come under pressure while end product margins have the offsetting effect in those types of declining price environments, end product margins typically expand.

So the other beautiful thing about it is end products through our internal purchasing through fabricating capabilities, which, I think about Olympic and now triple that given the new co size we're able to provide synergies to the end product manufacturing companies that Our competitors at the end market level just don't have.

So I think that the new combined company is going to really be able to better leverage those synergies across the end product portfolio that we have.

And then if you go right into the next slide, we also talk about stronger.

Wow, the ability to continue to invest at a faster pace in the areas that expand our margins. So, you can see on this slide really the summary is on the left side when you look at the margin profile immediately accretive synergies give us the boost to earnings that Eddie talked about.

Improved EBITDA returns, getting to 6%, and then on the right side you look at the capital structure and the balance sheet and you go, wow, stronger, more flexible balance sheet, synergies drive cash flow generation, so more cash flow, reduce debt, reduced leverage.

That's a beautiful thing for being able to fund future growth in the areas that give us higher returns and more profitability. So I think and it ties in with the slide we talked about before, on having spent a lot of capital too.

So we're entering into this from really a position of strength where we Don't have big capX needs, so we can really focus on growth, whether it's M&A or whether it's on the internal investment side of the equation.

So I just think it's another exciting piece of the way the two companies are coming together at this point in our history, as well as the structure of the deal again by being an all stock transaction.

Eddie.

Hey, thanks, Rick. And just to follow-up on some of the points that Rick made, when you look at things like and avoidance is maybe not a great word, but we'll stay with it. When we look at CapEx avoidance, when you come through two investment cycles that Ryerson and Olympic have had over the last 3 years.

Given the quality of the assets, given the magnitude of the assets, now we have the opportunity even to think about how do you move things around, how do you beneficiate assets, how do you how do you repurpose assets. So one of the things you noticed in our earnings release was our depreciation expense is about $19 million in the quarter.

If you think about what our normalized CapEx run rate is, depreciation should really be between $13 million and $14 million in the quarter, which is about $16 to $0.18 EPS.

So one of the ways that we envision EPS secretion is we don't have to spend as much cap X as a combined organization, not just gearing down from the cap X we've had over the last three years, but really looking at what is really, what is the right normalized rate of cap X going forward as a combined organization.

And how much depreciation then do you book over time against that CapEx as you add to the balance sheet, but you also optimize the asset footprint that you have.

So moving then to the benefits of scale and scope, and I think Katia in her note, I mean, I think she summarized it really well, it's scale and scope within a highly fragmented space. I mean, trivia question for everybody.

Can anybody remember what the last transaction was of any significance? You'd have to go back to 2013. For the Reliance Metals USA transaction and then a better tributed question that I won't give the answer to, even though I know it is go back and find the three largest transactions of significance before that.

But I'll tell you this over the last 21 years, four transactions of any significance in the space. So when you look at the combined company at 6.5 billion in revenue.

It speaks to the benefits of densification of the network and creating a better customer experience because that's what I want to bring it around to.

Creating a better consistent customer experience is really how you win in this industry. When you get past all the big terms and all the business speak,

There's a customer on the other end that just wants a consistently high-level experience from low touch to high touch, from pick pack and ship to finish part, and they want a reliable, dependable, professional, and enjoyable experience with that supplier, with that partner. So those are the benefits.

Of increased scale and scope, availability selection.

Within this proposed merger.

Like.

Thanks, Eddie. And really the next two slides I'm just going to touch on briefly, and it's really for those of you who may not be as familiar with Olympic steel.

And I'll tell you, most of the next two slides we've already covered in our conversation, so I'm not going to go in depth. Just wanted to make a couple of points here.

So we talked about at Olympic moving down the values up the value stream, higher returns. Less cyclicality and all the things that we're trying to do there.

So I'll point out a couple things here. 8% of our revenue mix is now from manufactured products. I'd say roughly 20% of our mix is from. Multi-process fabricating work. Again, you combine those two, we're pushing 25% to 30% of our mix, is of the, kind of the highest. End of the margin returns that we see for service centers.

To really quickly our specialty metal segment, specialty metals for us is aluminum and stainless. That's really been a growth engine for us, 10% compound annual growth.

Really excited about our aluminum opportunities and the growth there. We've seen enormous growth year over year for now two years in aluminum.

So excited about that and excited about the opportunities when the two companies combined on aluminum.

If you look at the bottom of the slide, that's just how we report publicly. We report in three segments. We break it out by product, the carbon is really the traditional Olympic steel.

And we've got a high degree of Investment going into that in terms of the branded end products and some of the high margin fabricating equipment, especially metals I talked about already, that's been a growth engine for us and then of course the pipe and tube business which is highly tilted to tube and we do a lot of highly Intricate value add work on the tube.

So it's really a higher EBITDA segment than the others when you look at it as a percentage of revenue. So and then the next page is really just a lot of what we've already talked about, so I'm not going to repeat ourselves. So Eddie, back to you.

Hey, thanks, I appreciate it.

So, as we conclude our run through the the presentation, I want to speak to this in summary because I think you've heard a lot of really good things and really I think you can really envision now the potential and possibilities of the merged company.

And it really goes to the heart again of the spotlight on synergies, and look, we're going to get them all.

And I'm going to share with you briefly again, a couple more because I want to put down these bread crumbs. I want to put down these nuggets.

When you look at investments we made in the last 4 years, for example, in non-fas polishing and buffing and grinding, and you look at Olympics franchise and specialty medals. There really is another really excellent synergy between those two capacities.

When you look at slitting, for example, Ryerson has a lot of cut to length lines. We don't really match that cut to length capacity with as much slitting capacity as we need. Olympic has wisely made those investments in slitting both on the carbon and oner side, so that's another really good fit as we look at creating better customer solutions.

Over that horizon, really long into the future between our combined companies. So, with that, we'd like to go ahead and open it up to your questions and look forward to answering them all.

(Operator Instructions)

First question comes from Samuel McKinney with Keybank Capital Markets.

Hi, good morning and congratulations guys.

Thank you.

Thank you.

Hey, just want to start with one Ryerson specific question. A fourth quarter typically a strong cash flow for quarter for you guys. Given the earnings guidance in the normal year and working capital release, fair to us, fair for us to expect some more solid cash generation again to close the year.

Yeah, I mean, poor Jim's been silent the entire call, so I'm going to go ahead and let him.

Hi, SAM, how are you doing? Yeah, you're correct on the cash generation and we typically see, somewhere between $70 million and $80 million of working capital release, in 1/4 quarter relative to volumes and natural release. So I expect again in this fourth quarter to get A decent working capital release and cash flow there from operations.

Yes, SAM, and I can't resist to put another breadcrumb out there. So for all you, modeling home gamers out there, when you look at traditionally the revenue that it takes, the working, the networking capital it takes to generate an incremental $1 of revenue.

If you take the combined networking capital of both companies and look at that on a go forward basis, post-close, you can also see where some of that free cash flow opportunity is really significant around optimizing the working capital of the combined company.

If you work with a ratio that we've been solidly in, over over my 13 years here, which is usually about $6 to $7 of revenue generated per dollar of networking capital. So I'll let you all go at it and model that, but it's a good result.

Okay, thanks. And then moving to the the merger presentation, you call out driving market share growth, whether it's the recent multi-year CapEx cycle at Ryerson or the high margin in product businesses at Olympic, where is it that you see the greatest opportunities to win incremental pro forma market shares combined company.

I guess I'll just make some opening comments and then I'm going to kick it over to Rick, but I really think when you look at cross-selling and upselling opportunities over a shorter distance to the customer, I think that's the key.

I mean, if you look at Ryerson's customer count, which Which, we do share, with the stakeholder public, it's about 40,000 active accounts. Olympic is about 8,000 to 9,000 active accounts.

When you look at the fragmentation of the industry and the ability to go to market from a cross-selling and upselling perspective, again with Greater selection, greater value add, but really getting closer to the customer, day to day as those quoting opportunities come in, it really is a function of.

I have it, I can do it in 1 day or 2 days, I can give you the value add solution you want, or on the contract side, we have a menu of value-added options for you to select from, not just supply chain design, but risk management, scrap management, and a whole bunch of other things that we can bring to the table when we're trying to create a better customer solution, right?

Yeah, I couldn't agree more.

I think, SAM, if you look at that map, I get excited at Olympic. You can see our dots are pretty much in the eastern 2/3 of the country. So wow, you look out west and the footprint of Ryerson.

Certainly great opportunities for new geographies for Olympic.

I think Eddie said it right. When you overlay all the products and capabilities of the combined companies, I think a much greater ability for one stop shopping for customers, and it gets back to that cross selling opportunity that Eddie just talked about.

So yeah, I think. I think we're not even touching on Mexico, where Olympic has a very small presence, and so I see a lot of growth opportunities, at least on the Olympic side of the equation of what we do and where we are, so really excited about it.

Okay, and then last one for me currently Ryerson generally reports the whole company while Rick you touched on earlier, you guys provide results for carbon specialty and pipe and tube. Are you planning for this merger to be a complete roll up with no segments or are you going to provide some segments to the business?

We don't know, so we're we're we're going to figure it out though.

Because we're not okay, SAM, that's all those are all things you have to do between signing and close, so that goes into that category, but I'm sure Rick and Rich can give you some good color on that too.

Yeah, I mean, I think I think we'll sit down and and and map that out and obviously do what we think is best for shareholders and potential shareholders to best understand the company and where we're going.

Yeah, the guy who like.

Yes, absolutely. Well, no, understood, can't blame me for asking and congrats guys.

Thanks.

And as a reminder, if you would like to signal with questions, please press one. Again, that is one. Our next question will come from Alan Weber with Robotti & Company.

Hey, good morning. How are you?

Alan, what took you so long?

So.

Can you talk first about, other cash costs to get the synergies, and I just want to make sure that the synergies that you're talking about are under current market conditions, not based upon improved, business cycle, etc.

Yeah, Alan, again, I'm going to kick it over to Rick here in just a second, but look, all we've known for the last 3 years is the current conditions, and so, we have to really go way back to remember better conditions.

So the synergies are really founded and premised on current conditions and how we get them and when you, again, to me, I take great comfort when I look at the combined bulk value of both companies, there's really a strong underpinning for those synergies if this environment were to unfortunately continue for an unprecedentedly long time.

Certainly any upturn we get, we'll have a chance to really show off that operating leverage as a combined company, but the synergies are really premised on where we live today, right?

Yeah, I agree 100%. How you doing, Alan? Good to talk to you.

I agree 100% with Eddie, at least how we thought of it on the Olympic side in terms of synergies.

Synergies are basically not, in my opinion. Synergies are not, oh, the market's going to improve, so we're going to call that a synergy.

The synergies in terms of how we thought about it are real enduring synergies based on our existing model and the model going forward.

So I agree 100% with Eddie on that. And then you did ask about, excuse me, some costs that would be incurred to realize those synergies and yeah, obviously there'll be some costs. I think on one of the slides we talked about potentially that being up to $40 million.

Okay, and then I guess the last question is, when and if the markets do improve, how do you think about incremental EBITDA margins, starting from your pro forma EBITDA.

Well, I, I'll start on that. I mean.

Certainly again what we've got in the deck and what we've talked about are our pro forma margins using sort of the the environment we're in and then looking on a pro forma basis and modeling out what that would be. If you go back two or three years in terms of what the EBITDA margin profiles were for our sector, for Ryerson, for Olympic, and for others, it was several points higher.

I tend to think of.

If you can get in that %6 to 8% quarter consistently on on the distribution service center side of the business, that's pretty good, obviously, given the depressed market we've been in the last couple of years, the current margin profiles for really all of us in terms of service centers is is depressed from that.

So you know we've got a 6% pro forma in here, but.

You get market tailwinds and more of a normalized market, and I can see that going to 6% to 8%.

Okay.

Yeah.

Alan, when we look at it historically, and you go back and look at again the last 20 years and you can certainly spotlight years like 2014, 2018, 2021.

And conversely, you can look at years like 2015, 209, 2020, and even the last several years, 2024 and even 25 here to date, and you kind of, you traverse that continuum of years, and here's what I would tell you, we're in the bottom quartile now.

And so that feels like a 2% to 5% even of margin as you get to that second quartile, that feels like a 4% to 6% even of margin. You get to that third quartile when you start to see.

Mid-cycle trends and better that that gets you to 6% to 8%. And then when you get to that top quartile, you start to see 8% to 10% even in margins, which is really a function of being able to sweat the assets to a greater extent.

Your demand is going up, you get some holding gains and inventory, but you also get more value add because at that point when the economy is doing better, you also get more outsourcing and manufacturing where some of our customers bring things in-house during times like this.

As everybody gets busy, they need to go out to variable resources to go ahead and service that demand and so you get incremental margins on top of that. So it really, as we've studied it over the years, it really looks like that [2 to 5 to 76 to 8, and 8 to 10.] So I hope that helps.

It does, thanks. And I guess my last question is, can you talk about assuming market conditions are flattish next year or similar to this year, kind of working capital for the combined company for next year?

Whether that would be a source of cash or.

Yeah, Alan, I TRY to get some a little bit of insight into that in terms of what we've seen over time where how much networking capital does it take for us to to really finance an incremental dollar of revenue, and I think if you look at that in reverse, if conditions were to stay the same.

Depending on where price goes, but if conditions were to stay the same, in a combined company scenario, there's certainly working capital there to be had and there's working capital release and free cash flow there. More to come as we get through this.

Signing to close period and as we really, start to really enumerate that. But again, I want to kick it over to Rick and I know he's got some thoughts around that as well.

No, I agree. I think Eddie you said it well. I think in a normal market if we just stayed in the same market conditions, so let's not talk about the price side of the equation.

There's big opportunity. On working capital turnover specifically on inventory sharing, improving inventory returns, absolutely will have a positive cash flow and a working capital release just from being more efficient.

And I guess my last question is, have you gotten any, customer comments, good or bad or concerns?

No.

But I mean it's early, but no.

Every, everything, I have to say, I mean, so far everything has been overwhelmingly positive, notwithstanding maybe the initial reaction of the market, but it's been overwhelmingly positive.

Okay.

Alright, on our end, same on our end.

Great thanks a lot and good luck.

Thanks, Alan.

Appreciate you.

And that does conclude the question-and-answer session. I'll now turn the conference back over to you.

Well, I really want to give the last word to Rick, and I'm going to do that. I just really want to thank everybody for tuning in with us today.

We couldn't be more excited and more enthusiastic and optimistic about what lies ahead for our combined companies, and I really look forward to being with you on future calls as you start to see the realization of the vision we have for the combined companies.

Everyone have a great holiday season, and I know we're going to see out there on the road, Rick.

Yeah, thank you, Eddie. I really appreciate the time and ability to talk to everybody about what I think is an incredible and exciting transformational opportunity for the two companies, and I'm not going to repeat what I said in the beginning. I'll just leave you with this.

I truly believe the best is yet to come, and what I will tell you. Is you've got a combined committed and engaged new combined team that is going to work really hard to make it happen. So thank you all, appreciate your participation.

Thank you.

Thank you. That does conclude, oh, I'm sorry, go ahead.

Oh, no, nothing. Thanks.

Thank you. That does conclude today's conference. We do thank you for your participation and have an excellent day.