Hello, and welcome, everyone. Welcome to the Insteel Industries, Inc. Second Quarter 2026 Earnings Call. My name is Becky, 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 turn the call over to your host, H.O. Woltz III, to begin. Please go ahead.

Good morning, and thank you for your interest in Insteel Industries, Inc. Welcome to our second quarter 2026 conference call, which will be conducted by Scot R. Jafroodi, our Vice President, CFO, and Treasurer. Before we begin, let me remind you that some of the comments made in our call are considered to be forward-looking statements that are subject to various risks and uncertainties which could cause results to differ materially from those projected. These risk factors are described in our periodic filings with the SEC. Despite falling well short of our expected financial performance in Q2, we believe the upturn in business activity we reported previously is still intact. Winter weather is a fact of life in our business; it happens that during Q2, conditions were severe and prolonged in many geographies, particularly compared to recent years. Project delays, while undesirable, are common in the industry. We are confident that short-term weather conditions and project delays do not create or destroy demand, and that postponed demand will be realized during the balance of fiscal 2026. I will now turn the call over to Scot to comment on our financial results, and then following his comments, I will return to discuss our business outlook.

Thank you, H. Good morning to everyone joining us on the call. As we reported earlier this morning, our second quarter results were weaker than expected, reflecting the combined impact of winter weather disruptions, lower spreads, and higher unit conversion costs. Net earnings for the quarter were $5.2 million, or $0.27 per diluted share, compared with $10.2 million, or $0.52 per diluted share, in the same period last year. Shipments for the quarter declined 5.9% year-over-year but increased 6.9% sequentially from the first quarter. While the second quarter typically reflects some seasonal softness, conditions this year were significantly more severe. Following a solid start in January, we experienced extended periods of winter weather across most of our markets, which reduced construction activity and disrupted operating schedules for both customers and Insteel Industries, Inc., weighing on order flow and shipments. In addition, certain projects originally scheduled for delivery during the quarter were deferred to later in the year for reasons unrelated to weather. Although we are still early in the third quarter, recent order activity has been solid, with April shipments trending above forecasted levels. With that backdrop on volumes, let me turn to pricing. Average selling prices were up 14.2% year-over-year, driven by the pricing actions we put in place throughout fiscal 2025 and into the current year to offset raw material cost increases, Section 232 tariffs, and rising operating expenses. Sequentially, average selling prices were up 1% from the first quarter even as wire rod costs continued to move higher. For context, published prices for steel wire rod, our primary raw material, rose $90 per ton during the quarter. Although we implemented additional price increases during Q2, limited sequential improvement in average selling prices was influenced by product mix, existing contractual pricing, and softer volumes. We expect these recent…

Thank you, Scot. As I noted in my opening comments, we were affected during Q2 by weather-related and non-weather-related circumstances that resulted in our operating rate, shipments, and financial performance falling short of expectations. Making matters worse, we had staffed up at certain facilities ahead of the seasonally more active part of our year in anticipation of expanding operating hours, which would reduce lead times and result in increased shipments. We carried the cost of ramping up through the quarter but were unable to operate at expected levels. While we continue to believe that demand will be solid during 2026, we will reduce costs if this forecast fails to materialize. At this point, however, we do not expect to be in a cost-reduction mode driven by demand-related concerns. Turning to another subject, the steel industry may have been more affected by the administration's tariff policy than any other industry. The Section 232 tariff of 50% on imports of steel has caused market prices in the U.S. for hot-rolled wire rod, our primary raw material, to rise to a level that is 50% to 100% over the global market price. While last summer we questioned the effect of the derivative products tariff strategy implemented by the administration, we are glad to report a significant decline in the volume of imported PC strand that has entered the U.S. since the tariff was increased to 50% and derivative products, including PC strand, were covered. From August to December, the five-month period following the changes the administration made to the Section 232 tariff regime, PC strand imports fell by more than 50%. The application of the Section 232 tariff to PC strand, together with global uncertainty and higher transportation and insurance costs related to the conflict with Iran, clearly works in favor of domestic…

Of course. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you feel your question has been answered or for any reason you would like to remove yourself from the queue, please press star followed by two. When asking your question, ensure your device is unmuted locally. Our first question comes from Julio Alberto Romero from Sidoti.

Thanks. Hey, good morning, H and Scot. Good morning. Could we start on volumes a bit and talk about the projects originally scheduled for the quarter that were delayed into later quarters? Any way you can help us better understand how much of this may have weighed on your shipments? And secondly, could you expand on the drivers of the project delays? I think you mentioned they were unrelated to weather. Just hoping you could elaborate a little.

If you can envision a construction project, the owner and contractor would like to start the project and operate continuously until the finish of the project or a portion of the project, but they do not want to open up the site months ahead of having all of their other needed materials and suppliers in line. Therefore, the project that we are involved in was delayed, and we should begin shipping it in the current quarter. The delays are unfortunate, but they are not surprising at all. As we have emphasized, this is a delay of business; it is not a cancellation. We will sit tight and see that come to fruition in the current quarter, and this project will go through our fiscal year and end in 2027.

Okay, great. Very helpful. You talked about April shipments trending above forecasted levels. How much are those shipments related to project delays pushed to the right—maybe some catch-up from the February weather delays—or any other underlying demand trends at play?

I do not think any of it is related to the project delay because it is still delayed, and we should see some benefits later in the quarter from that. The current shipping performance is solid relative to our expectations, and our pricing actions are taking effect as we expected them to.

Last one for me: you talked about project mix impacting the average selling price and maybe the spread. Can you talk about whether engineered structural mesh is playing a factor in that at all and, broadly, where ESM mix stands at the moment?

Please ask that question again, Julio.

Sure. You have noted project mix impacting ASP and spreads. Is engineered structural mesh affecting that, and where does ESM mix stand now?

Let me start at the beginning so you understand the difficulty we have in trying to quantify some of these things and why we do not spend a lot of time dissecting the reality of the market. In February, the adverse winter weather began in Texas and ended up in New England. It affected 9 of our 11 facilities, which is unfortunate, but that is how it happened. We had issues in various geographies of various types. In some cases, roads were not passable or stayed hazardous for extended periods. Setting aside road conditions, when it is very cold, you cannot pour concrete. People have various opinions about the temperature at which hydration becomes a concern, but at low temperatures, pouring concrete becomes not feasible. In North Carolina, for instance, we had multiple weeks of cold weather where the temperature did not break freezing. While roads were unpassable for a period, the sustained low temperature was probably of more significance. We did not go through every customer and every plant and try to quantify the impact; we are more concerned about getting our plants operating and covering the eventual demand that comes back as weather conditions improve.

Our next question comes from Tyson Lee Bauer from KC Capital.

Good morning, Tyson.

Good morning. When you talk about freight expenses, are there two considerations? Increased freight costs to get your imported supplies in on the inbound side that you have to absorb, as opposed to making shipments from your facilities where you can do surcharges and recoup those freight costs, even if it may be at zero margin but recovered on the revenue line? In other words, is there one bucket you must absorb and another you can pass along?

I would not look at it that way, Tyson. In terms of the raw materials we are importing, we are very well located for inbound freight cost purposes compared to our locations relative to domestic supplies, so I do not think we incur excess inbound freight cost because we are importing. Freight costs, whether inbound or outbound, have risen substantially following the conflict with Iran, and it happened extremely quickly. It coincided with other factors that reduced driver availability. The practical impact is much higher diesel costs and fewer drivers, which means our costs have gone up, and many of our loads have been rejected by carriers who can find loads that pay more. We are working through those issues. I was reading that in the flatbed sector, more than 40% of loads tendered to carriers have been rejected across the economy. We are dealing with something out of our control, but it is our responsibility to manage it from a cost point of view. We debated surcharges versus price increases, and we have elected to increase our prices.

So you are recovering those now?

I would not say we have recovered them retroactively. We absorb some of those costs until the effective date of price increases that will, among other things, serve to recover those higher costs.

Regarding price increases, you did some early in Q1 and announced another in April. Any idea of the magnitude, and are we expecting additional price increases to get you whole?

Our price increases are implemented to reflect what is happening in our marketplace, both with our raw material costs and with other operating costs. While official inflation statistics may look modest, the impact on our operations has been much more significant. Everything we consume—labor, chemicals, electricity, natural gas—has gone up substantially. Wire rod has continued to increase substantially as well. We are primarily looking to recover our costs by implementing price increases, and we have implemented three since the first of the year. When volume falls, as it did in Q2, we honor the commitments we have made to customers; we are not operating on the basis of price in effect at time of shipment. The next orders are affected by price increases. That is the way the business is done, and that is how Insteel Industries, Inc. is operating.

On April 2, there was clarification on Section 232 for steel and aluminum. Would you provide your view on whether that provided clarity regarding foreign content, U.S. content, and different baskets that imports fall into at different rates?

We are affected by two different types of tariffs. Section 232 is the primary effect on our business. There was confusion created by the administration's inclusion of derivative products last summer, and that confusion related to how you calculate the tariff on the product. To know for sure how the tariffs were being calculated, we went back to the entry documents and confirmed that in practically all cases, PC strand that was entering was being assessed a 50% tariff rate. We did not pick up that many importers of record were minimizing their tariff exposure, so the recent clarifications do not have much impact on us because we do not believe we were being under-assessed to begin with. So now any questions about how the values are calculated have been put to rest; we were not really a victim of that. On the other side, over the AIBA tariffs, the AIBA tariffs would have affected any capital equipment that we purchased as well as, primarily, our purchases of spare parts. Purchases of spare parts are not discretionary; we have to do it. The importer of record declares the value of that part and applies the tariff rate to it. In most cases, the tariff was a line item on our invoices. We are studying now the implications of the Supreme Court’s action on AIBA tariffs and the Court of International Trade requirement that those tariffs are rebated to the importers of record. That is not Insteel Industries, Inc., so we will be talking with our vendors about, first, their obligation to recover those tariffs, and second, what to do with any refunds that they obtain, because we actually paid those tariffs but will not be rebated by the government; that goes to the importer of record. All of that is overlaid by the question of where the money will come from. I understand that they have collected $160 billion of AIBA tariffs, and ostensibly all that has to go back to the people who paid it. I would bet a lot that it will not happen that simply. We will not be booking any receivables for tariff collections because it is highly improbable that it will happen in a simplistic way.

Understood. Last question: data centers are a headline catalyst for nonres, but they seem prone to delays due to transformers, switches, and power-related components. There are a lot of announcements and expectations, but many have been pushed to the right for permitting and supply issues. Is this a great opportunity that may still be ripe for ongoing delays?

I would look at it from a broader perspective. The good news is that we do not think the data center phenomenon goes away in 2026 or 2027. I think you have five solid years of data center activity. As we pointed out in our last earnings release and conference call, it is really good that it is here because the rest of the private nonres market seems to be weak. A delay is a delay. My guess is that, when we look back at it, it will be reasonably insignificant. The better news is that this will be a solid marketplace for a while. While we are doing business on-site with some of these projects, it is hard to tell how much data center business is included in our legacy business. We sell reinforcing products to customers who make wall panels or double tees, but we do not always know where those are going. There are more references in call reports to data centers that are consuming products out of our legacy business as well as from our cast-in-place business.

That sounds good. Thanks a lot, gentlemen.

Thank you, Tyson.

Just as a reminder, if you would like to ask a question, please press star followed by one. We currently have no further questions, so I will hand back over to H for closing remarks.

Thank you. We appreciate your interest in Insteel Industries, Inc. We look forward to talking to you next quarter and encourage you to call us if you have questions in the meantime. Thank you.

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