Good morning ladies and gentlemen, thank you for standing by. Welcome to the Universal Stainless First Quarter 2023 Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions].

Please be advised that today's conference call is being recorded. I will now hand the conference over to your speaker host, June Filingeri. Please go ahead..

Thank you, Lydia. Good morning. This is June Filingeri of CommPartners, and I would also like to welcome you to the Universal Stainless conference call and webcast. We are here to discuss the company's first quarter 2023 results reported this morning.

With us from management are Denny Oates, Chairman, President, and Chief Executive Officer; Chris Zimmer, Executive Vice President and Chief Operating Officer; John Arminas, Vice President and General Counsel; and Steve DiTommaso, Vice President and Chief Financial Officer. Before I turn the call over to management, let me quickly review procedures.

After management has made formal remarks, we will take your questions. Lydia will instruct you on procedures at that time. Also, please note that in this morning's call, management will make forward-looking statements under the Private Securities Litigation Reform Act of 1995.

I would like to remind you of the risks related to these statements, which are more fully described in today's press release and in the company's filings with the Securities and Exchange Commission. With the formalities complete, I would now like to turn the call over to Denny Oates. Denny, we are ready to begin..

Thanks June. Good morning everyone. Thanks for joining us today. We got off to a solid start in 2023 and our first quarter performance exceeded expectations. The main drivers were robust aerospace demand, a favorable mix of premium and finished bar products, increased base selling prices and surcharges, and higher plan activity levels.

Progress [ph] has made an improving profitability with our gross margin returning to double-digits and increasing each month of the quarter. The tempo of business remains exceptionally strong, pointing to continued sales growth and profitability improvement over the balance of the year. Let's look at the highlights starting with business activity.

March 31 order backlog was $366 million, a record high and a 27% sequential increase. First quarter order entry totaled $117 million, up 41% over Q4 of 2022 and another company record. First quarter sales were $66 million, up 17% sequentially on a 15% volume increase and marks the highest level since pre-pandemic 2019.

Premium alloy sales reached a quarterly record of $17.7 million or 27% of sales. That's a 31% increase from the fourth quarter and virtually doubled the first quarter last year. Our premium alloy sales continue to be driven by aerospace demand. First quarter aerospace sales increased 22% sequentially and represented nearly 75% of sales.

The accelerating growth in our higher margin premium products is a key part of our long-term strategy and I should note that our record backlog contains roughly 35% premium products. Let's take a look at profitability. First quarter gross margin improved to 11.7% of sales, returning to double-digit levels for the first time since 2019.

Higher shipment volume and planned activity levels, the richer sales mix, increased surcharges, and higher base selling prices were all contributors to our improved profitability. In total, we announced six price increases in 2022, which are layered into our backlog and will roll into sales through the rest of 2023 and into 2024.

In March of this year, we announced an additional increase, a base price increase of 7% to 12% on bar products which will impact 2024 given current lead-times. Planned activity levels increased 10% generating better absorption of fixed cost and substantial operating leverage.

Additionally, we were able to reduce variable cost per process pound by approximately 6% sequentially. Labor availability remains a challenge. Nevertheless, productivity and output are continuing to increase as we train and integrate new employees into operations.

I'm also very pleased to report that we achieved an OSHA recordable rate of 1 in the quarter, a record low for the company. I want to express my personal appreciation in compliments to all of our employees for their efforts in looking out for each other as we strive to maintain a safe work environment.

Although operating income in the first quarter turned positive at $1.4 million, we reported a net loss of $0.5 million -- $500,000 or $0.06 per diluted share. We have much more work to do and remain confident in our outlook for sequential quarterly improvement.

EBITDA and adjusted EBITDA reached the highest level since 2019, totaling $6.5 million and $6.8 million respectively. Just a few comments on our financial position. Managed working capital was $149.8 million on March 31 compared with $145.9 million at year end 2022.

We continue to reduce inventory, which totaled $149.4 million versus $154.2 million at the end of the fourth quarter, reflecting our announced plans to improve inventory turnover, while driving sales and operating levels higher.

Total debt on March 31 was $99 million with remaining availability relatively unchanged from 2022's year end at $24 million. First quarter capital expenditures totaled $4.5 million, mainly for our investment in North Jackson, which consists of an addition -- the addition of two vacuum arc remelt furnaces.

The equipment has been delivered, installation is on track for completion this year, with full integration operations beginning in the first quarter of 2024. Our objective is to expand our product portfolio with more technologically-advanced higher margin premium products, thereby enhancing our capabilities, cost structure, and growth prospects.

To capitalize on the abundant opportunities in our future and to accelerate fusion of our long-term growth strategy, we announced two changes in our leadership team earlier this month. Chris Zimmer was named Executive Vice President and Chief Operating Officer.

Chris takes on manufacturing, purchasing, technology, and quality in addition to his current responsibilities for sales, marketing, and supply chain management and development. Chris is a 15-year veteran of Universal and most recently served as Executive Vice President and Chief Commercial Officer of the company.

He's been a key partner in building Universal over the past 15 years and his promotion to Chief Operating Officer elevates that partnership to a new level. Additionally, Brian Kane was promoted to Vice President of Sales and Marketing. Brian is also a 15-year Universal veteran and served most recently as Manager of Field Sales.

Chris, I'll turn it over to you for your review of operations..

Thank you, Denny, and good morning, everyone. I'm pleased to report substantial improvement in the operating issues that impacted our fourth quarter, which were mainly caused by several unplanned equipment outages at key facilities as well as difficult weather conditions in December.

Let me contrast our performance today with the situation at the end of 2022. In December, operating hours at the Bridgeville hot mill declined by 30% sequentially, but they have rebounded and are up 52% by the end of March. The North Jackson forge had the lowest monthly operating hours of the year in December after we lost a warm year.

However, operating hours at the forge are up 16% sequentially and back to pre-COVID operating levels. In fact, company-wide, there were no significant unexpected manufacturing issues or equipment downtime in the first quarter. A major challenge we continue to face is the nationwide labor shortage.

Fortunately, we are continuing to see a steady increase in our labor employee count, retention is improving, onboarding and training are continuing to produce tangible results. Supply chain bottlenecks and extended lead-times particularly for repair parts continue, but the situation is improving. Now, turning to commodities.

The commodities market continued to be volatile in the first quarter. Nickel prices were down 19% sequentially at the end of March, macroeconomic factors including a stronger US dollar and slower than expected return of demand following the Lunar New Year in China have put pressure on nickel prices.

At the same time, moly was up 24% and iron was up 51% from the end of December. Based on current commodity prices, we are expecting surcharges to be modestly lower in the second quarter. Let's turn to end markets beginning with aerospace, our largest market.

We continued growth in our aerospace sales in the first quarter of 2023, which totaled $49 million and represented 74% of sales, that's up 22% from $40.1 million in revenue in the fourth quarter of 2022 and up 63% from the first quarter of 2022.

On our last call, we said that the pace of aircraft deliveries, increased order activity, ramping build rates, and lean supply chain inventories indicated a multi-year aerospace expansion. Those drivers continue today as evident by robust demand throughout the supply chain.

Universal has realized strong aerospace sales, record premium alloy sales, and we have a record backlog. Air travel is back and as one analyst put it, airlines are clamoring for new aircraft as existing fleet capacity struggles to meet demand. Let's look at developments at Boeing and Airbus.

For the first quarter of 2023, Boeing deliveries rose nearly 40% to 130 planes from 95 planes in the year ago quarter, which was above the analyst estimates of 120. That total included 111 737 MAX airplanes with Ryanair, Southwest, and United receiving a combined total of 64 737 MAX airplanes.

It also included 11 787 widebody airplanes where demand is recovering as international travel resumes. At Airbus, delivery in the first quarter totaled 127 aircraft including 10 of the small A220 jets, 106 A230neo single aisle airplanes, and 11 widebody aircraft including five A350s.

Airbus has been guiding to 270 total aircraft deliveries in 2023 and reported 142 net orders in the first quarter. That included the reinstatement of 73 A350s, following settlement of their legal dispute with Qatar Airlines. Among their new orders was an agreement with Lufthansa to expand its fleet by 15 A350s.

There were also deals with Delta Airlines and British Airways. Last week in response to a media report, Airbus confirmed that there would be unspecified delays in 2024 aircraft deliveries, but management reaffirmed production targets for 2024 and beyond, namely a rate of 65 aircraft per month to be reached by the end of 2024 and a rate of 75 in 2026.

At March 31st, Airbus' backlog stood at 7,254 aircraft. Meanwhile, Boeing reported strong first quarter orders with a total 120 gross orders booked, including 78 737 MAX planes, with the largest of these for 12 aircraft from Japan Airlines. JAL's first ever order for the 737 MAX was an important win for Boeing beating out the Airbus A320neo.

In widebodies, Taipei-based EVA Air ordered five additional 787 Dreamliners to leverage what they describe as the 787's unrivaled efficiency and performance, in line with airline carbon neutral growth strategy. And while not in their order books, Boeing announced that Saudi Arabian airlines is set to purchase 39 787s.

Boeing also reported that in total Saudi Arabian carriers intend to purchase up to 121 787 Dreamliners and what will be the fifth largest commercial order by value in Boeing's history. Boeing ended the quarter with a net backlog of 4,555 aircrafts.

Wall Street is closely monitoring production rates of the 737 MAX and expects Boeing to deliver approximately 570 jets in 2023. Boeing previously told investors to expect 400 to 450 deliveries of the MAX in 2023.

In an exclusive story on April 10th, Reuters said that it learned from unidentified sources that Boeing intended to restore production of the 737 MAX to its 2019 rate of 52 a month by January of 2025. With monthly MAX production rates reaching 38 in June of this year, 42 by January of 2024, then 47 by June of 2024. Boeing declined to comment.

The general expectation has been that Boeing will increase MAX output to 38 planes per month by the middle of this year. Airlines are entering their busy travel months. In the recent first quarter report, Delta Airlines reported record quarterly revenues and record advanced bookings for the summer with international travel being exceptionally strong.

United Airlines also reported that demand remains strong especially internationally, although they are watching the macroeconomic risks carefully. Recent statistics from IATA reflect an improving travel demand trend.

They report that total traffic in February of 2023 rose 56% from the prior year February 2022 period, reflecting a 25% increase in domestic travel worldwide and international travel climbed 90% versus February of 2022, with all markets recording strong growth led by carriers in the Asia-Pacific region.

Total global traffic is now with 95 -- excuse me, 85% of February 2019 level with domestic travel at 97% of that February 2019 level and international travel at 78% of the February 2019 levels.

Meanwhile, TSA screened an average of 2.1 million passengers daily during the first three months of this year, in line with the same average of 2.1 million passengers experienced during the first three months of 2019. Not surprisingly, defense market remains strong given conflicts around the globe and the Pentagon's $585 billion defense budget.

A few rotorcraft deals in the first quarter are worth noting. Boeing will supply the US Army and its allies with 184 AH-64E Apache helicopters under terms of a $1.9 billion contract modification of the enhancing US Army's attack fleet.

And in positive news for our customer Bell Helicopter, the GAL upheld the US Army's decision to choose the Bell V-280 tiltrotor aircraft to replace the Blackhawk helicopter.

What this all means for Universal and our customers is continued robust demand from customers anxious to restock depleted inventories in order to meet ramping build rates and a very active aftermarket. The heavy equipment market remained our second largest market in the first quarter of 2023 with sales of $6.9 million, representing 10% of sales.

This is up 23% sequentially and 14% lower from the first quarter of 2022. Metal fabrication demand drives our sales to the heavy equipment market, especially for automotive applications. After trending downward in 2022, we saw a strong sales pickup in the first quarter as customers once again began replenishing inventories.

New car model launches in the USA are forecasted to increase from 23% in 2023 to 31 in 2025, which bodes well for our 2023 and 2024 demand as toolmakers generally lead new model launches by 18 months.

The outlook for our heavy equipment sales for the balance of the year remains positive despite our service center customers' cautious approach to inventory levels as demand is closely linked to general economic conditions.

The oil and gas end market was our third largest in the first quarter of 2023 with sales of $4.8 million, representing 7% of sales. This is down 10% from the fourth quarter of 2022, but up 9% from the first quarter of 2022. Despite our lower sequential sales, demand has been strong in oil and gas.

That is reflected in the first quarter results of Baker Hughes, which reported better than expected revenues and earnings for the quarter. The company remains optimistic for the outlook of energy services even though 2023 started off with some macro volatility.

Schlumberger reported stronger year-over-year revenue growth and are optimistic about the outlook for global activity through the rest of the year. At Universal, we expect oil and gas to provide additional opportunities over the next several years, given the continuing bullish sentiment and current supply chain inventories.

The general industrial market was our fourth largest market in the first quarter of 2023 with sales $3.5 million, representing 5% of sales. This is down 4% from the fourth quarter of 2022, but up 4% from the first quarter a year ago.

For context, the Semiconductor Industry Association reported that global semiconductor industry sales in February of 2023 declined 4% from January of 2023 and 21% from February of 2022, reflecting short-term market cyclicality and macroeconomic headwinds.

But SIA concluded short-term market cyclicality and macroeconomic headwinds have led to cooling sales, but the market's medium and long-term prospects remain bright, thanks to growing demand across a range of end markets. We continue to view these trends as a positive for our customers and for Universal over the long-term.

We expect our general industrial sales to remain solid during the balance of the year and we are poised to capitalize on the long-term growth prospects.

Power generation markets totaled $1.1 million, representing 2% of sales in the first quarter of 2023, an increase of 4% over the fourth quarter of 2022, but 16% lower than the prior period in the first quarter of 2022.

Demand for maintenance of industrial gas turbines for electricity generation continues to account for most of our power generation sales and as we said last time, there has not been much news of late about new builds of gas turbines.

In their short-term energy outlook, EIA projected that the share of total electricity generation supplied by natural gas will remain about the same this year at 39%.

We expect that maintenance activity will continue to pace our power generation sales for 2023 and we are well-positioned to benefit from long-term increases in new gas turbine builds when the market returns to adding capacity. Now, let me turn the call over to Steve for his report on our financials..

Thank you, Chris and good morning everyone. Our topline sales for the quarter increased to $65.9 million on stronger shipment volume sequentially and rising selling prices.

The increase versus the 2022 fourth quarter was $9.7 million in total of which approximately $1.3 million was due to the greater mix of premium product sales, $3.2 million was due to higher selling prices, and the remainder came from the 15% increase in gross shipment volume.

This marks the second consecutive quarter of double-digit shipment volume growth as we continue to ramp up production and deliver on our record order backlog.

First quarter gross margin totaled $7.7 million or 11.7% of sales, an increase of more than 7% sequentially and the highest quarterly gross margin percentage achieved since the first half of 2019. The margin expansion is primarily a result of higher base prices, stronger production volume and cost absorption, and higher shipment volume.

In addition, the misalignment of raw material surcharges per pound within our selling price and our materials cost of sales reversed some in the current quarter. As a reminder, in Q4, we experienced negative misalignment of $2.4 million as surcharges fell and materials cost of sales rose compared with the third quarter of 2022.

Now, in the first quarter of 2023, our materials cost of sales continued to rise some, but our surcharges increased. And our misalignment was positive $1.8 million when measured sequentially versus the prior quarter.

This helped offset much of the negative misalignment that burdened our Q4 results and brings us close to an even playing field with the middle of last year with regard to the balance between raw material surcharges and raw material costs.

Additionally, the AMJP grant benefit that was in our gross margin throughout last year was fully recorded by the end of the year and does not provide any such benefit in the Q1 2023 results. Moving onto selling, general, and administrative costs.

SG&A totaled $6.3 million in the current quarter compared to $5.6 million in the fourth quarter of 2022, but decreased as a percent of sales from approximately 10% in Q4 to 9.5% now. We expect SG&A to land in the low $6 million in the second quarter as well.

We earned operating income of $1.4 million during the first quarter compared to a loss of $3.2 million in the fourth quarter of 2022, reflecting our growing gross margin as we benefit from higher prices and higher plant activity levels. We will continue to see prices and production activity increase as we step through each quarter of 2023.

However, interest expense rose to $2 million compared with $1.6 million in the 2022 fourth quarter or $700,000 in the first quarter of the prior year.

The $1.3 million increase comparing back to the first quarter of last year is first attributed to higher market interest rates, which are reflected in the variable rates we pay on the majority of our revolver and term loan borrowings under our credit facility.

Those rates increased on average from about 3% in the prior year quarter to more than 7% during the 2023 first quarter. The average total balance outstanding on our revolver also increased and our total debt balance was about 30% higher this quarter compared to the same quarter in the prior year.

After interest expense, we recorded a pre-tax loss of about $540,000 and an income tax benefit of about $30,000, resulting in an effective tax rate for the quarter of about 5%.

Our estimated annual effective tax rate for 2023 is 13%, which is less than the federal statutory rate of 21% due to the beneficial impact of our research and development credits. Discrete items during the first quarter were less than $100,000, but had about an 8% impact on the Q1 rate due to the narrow loss position.

Our net loss for the quarter was $500,000 or $0.06 per share. EBITDA totaled $6.5 million, significantly up from $1.7 million in the fourth quarter of 2022 and $3.8 million in the same quarter a year ago and reached its highest level since the second quarter of 2019.

Adjusted EBITDA totaled $6.8 million versus $2.1 million in the fourth quarter of 2022 and $3.2 million in the 2022 first quarter. Our adjusted EBITDA includes add backs for non-cash share compensation and other unique items impacting our results for the reported period.

The calculations for EBITDA and adjusted EBITDA are provided in the tables in our press release. Now, I'll highlight the key elements driving our cash flow and debt. During the first quarter, we generated $3.5 million of cash from our operations despite growing our managed working capital by $2 million.

The working capital growth was driven by a $3 million increase in accounts receivable from our higher sales and a $3 million decrease in accounts payable. Meanwhile, inventory decreased $4 million during the quarter as a result of effective inventory planning and production execution.

The decrease reflects a reduction of work in process pounds on hand, partly offset by an increase in the overall blended value per pound and a shift in mix toward premium melted product and inventory.

Our capital spending increased to $4.5 million for the quarter, half of which was related to the strategic expansion of our vacuum arc remelt facility at our North Jackson, Ohio plant.

As a result, our net -- our total net debt including cash increased by about $1.5 million compared to the end of 2022, while our available borrowings under our revolving credit facility remained flat at $24 million. That concludes my financial report. Denny, I turn the call back to you..

Okay, Steve. Thank you. Let me summarize. Our first quarter results exceeded expectations and we're focused on building on our positive momentum as we move through the year. We have a record backlog of $366 million containing over 35% premium alloy products and substantial base price escalation.

The operational issues that hit us last quarter have largely been resolved. There were few unexpected manufacturing issues or unplanned equipment downtime in the first quarter. Planned activity levels increased, making a major contribution to strong operating leverage and a return to double-digit margins.

Employee count is up, retention is up, and training is gaining traction. Supply chain bottlenecks remain a significant issue, particularly on electrical equipment, which makes basic maintenance and capital project management very challenging. Inflation also continues to put the rate of increases generally moderated compared to last year.

Our capital project had two additional vacuum arc remelt furnaces at North Jackson is on track and will be operational in the first quarter of 2024 to meet the production needs of our record backlog and expand our capabilities in premium, remelted steels.

The tempo of our business remains exceptionally strong, which points to continued sales growth and profitability improvement over balance of the year and well into 2024 and 2025.

Development of organization continues with the appointments of Chris Zimmer as Chief Operating Officer and Brian Kane as Vice President of Sales and Marketing, both seasoned Universal veterans. We have an exceptionally talented team here at Universal.

They remain dedicated, relentless in their pursuit of strategic goals, and resilient in the face of significant challenges over the past few years. They each have my sincere gratitude as do our Board, our customers, and our stockholders. That concludes our formal remarks. Lydia, we're ready to take some questions..

Certainly. [Operator Instructions] And our first question coming from the line of Michael Leshock with KeyBanc. Your line is open..

Hey, guys. Good morning..

Mike, how you doing?.

Good. I wanted to start asking about your split between OEM and MRO business.

Do you have any level of visibility into what you're normalized level of MRO businesses as a percentage of sales? And how does that compare to what you're seeing in the near-term?.

So, this is Chris. I'll take a stab at that. The answer is, it's hard for us to really get a good beat on that. Because the majority of our product is flowing through service centers and forgers, even when we're selling up into the supply chain of prime, sometimes it's hard for us to know how much of that is a new build versus an MRO activity base.

The feedback that we get is that demand is being driven by both. There have been some very strong, very bullish comments on the MRO side. But I'm not able to quantify how much of that revenue of ours goes into either one of those buckets..

And then if you're thinking about margin for the second quarter, given declining spare charges while the Aero ramp is still picking up order momentum and labor productivity is improving.

Maybe what are some of the important puts and takes that we should think about there for the second quarter at least directionally?.

Directionally, we would expect to see some modest improvements in sales. With the sales growth accelerating during the third and fourth quarters of the year, we expect margins to expand each quarter of the year.

We would expect to be paying down debt each quarter of the year, and we expect to see improved inventory turnover as we move through the year. And I guess lastly, our capital estimates, I think Steve already went through, but they're relatively unchanged..

Great. That's very helpful. And -- and lastly for me, just from a working capital, perspective, you mentioned inventory.

Are we at peak levels here? Or is there any reason that you would need to build some buffer to mitigate some supply chain strains?.

We plan to continue to ramp up our plan activity and our shipment level. At the same time improve our turnover. So in terms of absolute dollars on the balance sheet, we would expect over the course of the next two quarters to see some reduction in inventory. So I don't know if this is a, so I would not characterize this as a peak.

I understood your question..

No, that's helpful. Thanks, guys..

You're welcome..

Thank you. One moment for our next question. And our next question coming from the line up of Alan Weber with Robotti Advisors. Your line is open..

Good morning. When you talk about, you know, you're in a good spot as you look out into 2024, 2025.

Can you talk about how you think about, you know, kind of what are the goals towards gross margin and operating margins?.

Well, if you take a look at our underlying long-term strategy we've talked about a lot, our basic strategy is to add more technologically advanced products into our product portfolio, all of which carry significantly higher prices and higher margins than our traditional business, while at the same time working to improve our legacy business in terms of products by several basis points.

So what does that mean? In an up market like we're looking now. We would expect to see record margins.

What does that mean quantitatively? High teens, 20-ish?.

And that's gross margins..

Gross margins I'm talking about, yes..

Right.

And in that scenario, how do you think about SG&A?.

SG&A is going to be around $6 to $6.5 million a quarter. As you look at our current organization, if you're talking long-term, we really don't need to add significant numbers of people through our SG&A headcount today, or for that matter, really throughout the company. So we basically have the organization and the infrastructure in place.

So as the top line grows, you would expect to see significant leverage as sales increase..

Yeah.

Have you, I forgot now, did you, have you historically had high-teen, gross margins?.

We got up to 17.7% back in the second quarter of 2018-2019, 2019 I guess it was, 2018. So yes, we've been there before. If you go back earlier in the company's history, before North Jackson, we've been there. But in the last five or six years, yes, we've been up in the 17, 18% range..

Okay. Great. That was really great. Thank you..

You're welcome..

Thank you. [Operator Instructions] And our next question coming from the line of Bob Sales with LMK Capital. Your line is open..

Hi. Nice quarter, guys. Two questions. Doing well. First question is, when you talked about – inventory reduction going forward and perhaps some cash generation, a little bit of cash generation, are the means of driving down debt as you look through the year.

Can you expand a little bit more about what you've identified and what you plan to be acting on in terms of your ability to reduce inventory? And if there's any opportunity to quantify what you think the opportunity is, that would be helpful..

Well, we typically, I'm not prepared to give you guidance in terms of what our inventory balance will be at the end of each quarter. But directionally, what we're doing is looking at inventory turnover and velocity through the plant.

So if you think about the kind of operation we have as we bring people on board and we increase the activity level, the number of hours we can run equipment, material moves faster through the plant, and we have a series of programs to accelerate that velocity through the plant. And at higher velocity, we'll end up with two things.

One is we'll have shorter cycle times. We can pull in our lead times, which will help our sales grow. And at the same time, we'll reduce the amount in inventory. That's essentially what we're doing..

Got it. Got it.

And then the second question I had, you know, as your cost of working capital increases with rates, what's the cost of that? Is there any opportunity when you look at your business to de-emphasize growth and identify the products that drive a higher return on invested capital, allow you to expand gross better inventory metrics or do you look at the business sort of ubiquitously where it's not so easy to identify that on a product line by product line basis?.

Our product portfolio gets a great deal of attention around here, Bob. And if you look at where we're at today, there are elements of our product portfolio which we have basically exited.

So if you look at some of our shape art business, some certain grades of steel, where we have pruned that out of our product portfolio because of their margin contribution or because they're relatively low volume and it ends up with very slow moving inventory. So I understand the concept you're expressing and that's part of our long-term plan.

We've been doing that. So if you look at things like wire and rod, product lines. we really don't sell much of that anymore. Our shaped part business is much smaller than it used to be. We do melt some 316 product, which basically goes in the semiconductor in most cases, but most of the 300 series stuff we don't melt anymore.

So we've been on a long term March to try and do exactly what you're suggesting..

Got it. Got it. Well, yes, it looks great. It looks like you guys have made huge operational improvements. So good luck for the rest of the year..

Thank you, Bob..

Thank you. [Operator Instructions] All right. And I see no further questions in queue at this time. I will now turn the call back over to Mr. Oates for any closing remarks..

Thanks, Lydia. Once again, thanks everyone for joining us this morning. Our first quarter performance and record backlog in bookings reinforce our optimism for the rest of the year and beyond. We'll look forward to updating you on our progress on our next call in July. In the meantime, stay well, stay safe..

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect..