Hello, and thank you for being here. My name is Tiffany, and I will be your conference operator today. I would like to welcome everyone to the third quarter 2025 Metallus Inc. Earnings Call. I will now turn the call over to Jennifer Beeman. Jennifer, please go ahead.

Good morning, and welcome to Metallus' Third Quarter 2025 Conference Call. I'm Jennifer Beeman, Director of Communications and Investor Relations for Metallus. Joining me today is Mike Williams, Chief Executive Officer; Kris Westbrooks, President and Chief Operating Officer; John Zaranec, Executive Vice President and Chief Financial Officer; and Kevin Raketich, Executive Vice President and Chief Commercial Officer. You all should have received a copy of our press release, which was issued last night. During today's conference call, we may make forward-looking statements as defined by the SEC. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in yesterday's release. Please refer to our SEC filings including our most recent Form 10-K and Form 10-Q and the list of factors included in our earnings release, all of which are available on the Metallus website. Where non-GAAP financial information is referenced, additional details and reconciliations to its GAAP equivalent are also included in the earnings release. With that, I'd like to turn the call over to Mike. Mike?

Good morning, and thank you for joining us today. I want to start with safety. Throughout the year, we've been dedicated to our mission of being recognized as having the safest specialty metals operation in the world. In line with this mission, we continue to make substantial investments in the safety of our people. We remain on track to spend $5 million to further enhance our safety management systems and critical equipment this year. To date, in 2025, we've had 0 serious injuries. These are events which are life-threatening or life-altering. We have also had a 15% reduction in days away and restorative work cases and a 34% reduction in lost and restricted workdays compared to the same period a year ago. In October, we successfully completed our planned annual maintenance shutdown at the Faircrest facility. These shutdowns are highly coordinated efforts involving collaboration between our teams and external contractors. Over the course of 9 days, we performed essential maintenance to ensure the 2026 reliability and performance of our melt shop assets. Most importantly, I'm proud that the Faircrest shutdown was completed without any serious safety incidents. As a reminder, we will see additional shutdown activities in our other facilities in the late fourth quarter. Customer feedback continues to reaffirm the strength of our service and quality. We recently wrapped up our annual customer survey. And I'm pleased that over 97% of respondents said they would recommend Metallus products to others, a testament to the exceptional work our teams deliver every day. As expected, the survey showed that most customers prefer buying steel made in the United States, and it's a key factor in their purchasing decision. We're seeing continued interest from both new and long-standing customers who are actively shifting toward domestic supply chain solutions. So far in 2025, we successfully sold to over 2 dozen new customers, which will contribute to future business growth. In addition, we saw a substantial year-over-year increase in our overall order backlog. Specifically, aerospace and defense backlog is up approximately 80% compared to a year ago. As we enter the final quarter of the year, we've begun our annual commercial contract negotiations. Our goal remains to secure approximately 70% of our long products business through annual agreements. While we're in the midst of negotiations, customer conversations have been encouraging for 2026. Now turning to business results for the third quarter. Despite shipments being down slightly from the second quarter, sales increased as a result of favorable product mix with continued expansion in the aerospace and defense end market. On a year-over-year basis, shipments in the third quarter improved by 36%, driven by broad-based improvements across all end markets. Our current lead times extend to late January for our SBQ bars and February for our seamless mechanical tubing products. Adjusted EBITDA rose sequentially to $29 million, driven by our growing participation in the aerospace and defense end market and stability across the other end markets. Additionally, higher levels of production during the quarter resulted in greater fixed cost leverage. Now let's cover some of the third quarter highlights of our specific end markets. Industrial shipments decreased slightly in the third quarter on a sequential basis. Distribution customer inventories have improved, but still remain lean and in line with demand. Several key customers have indicated plans to ramp up operations and are projecting stronger forecasts for 2026, while others remain cautious, closely monitoring year-end inventory levels. Automotive shipments increased slightly on a sequential basis. Key automotive customer demand was solid throughout the quarter, and we have not yet experienced any disruption due to global supply chain challenges. Energy shipments remain at reduced volumes on a sequential basis. With import levels declining and tightened enforcement of tariffs, we are beginning to capture greater customer share for 2026. However, overall energy market conditions still remain subdued. Finally, higher shipments in aerospace and defense contributed to a favorable product mix this quarter. We continue to gain traction across both new and existing programs, all supporting our targeted annual A&D sales run rate of $250 million by mid-2026. In the quarter, we added several new customer opportunities for our specialty bar and tubing products for applications, including new munitions programs, gun barrels, and aerospace bearings. We also recently secured prototype orders with multiple customers that once fully commercialized, will utilize Metallus' carbon and specialty alloys in newer warheads and rocket motor casings. These are applications where strength, efficiency, quality, and shorter lead times are critical. Today, Metallus supports several dozen defense programs with growth coming from both traditional prime contractors and emerging industry producers. We are on track with the construction of bloom reheat and roller furnaces, both assets will increase our capability and optimize our throughput. We remain optimistic about the future in the growing aerospace and defense market. Turning to another bright spot, we are focused on growing our participation in the vacuum arc remelt or VAR steel product line. We recently executed a long-term supply agreement with a trusted partner for VAR Steel, strengthening our strategic position and securing a reliable, high-quality material source to support ongoing sales and profit growth. Before I turn it over to John, I'd like to provide a brief update regarding our labor negotiations. As we announced on October 30, members of our local USW have voted not to ratify the tentative labor agreement we had reached with the union negotiating committee. While we're disappointed by the outcome, we remain committed to securing a fair agreement that supports our employees and aligns with Metallus' long-term strategic goals. The current contract has been extended by 90 days to January 29, 2026, and we expect our operations to continue without disruption. We appreciate the support of our shareholders, the trust of our customers, and the dedication of our employees as we look forward to a stronger 2026. Now I'd like to turn the call over to John.

Thanks, Mike. Good morning, and thank you for joining our third quarter earnings call. During the quarter, our team delivered sequential increases in net sales, melt utilization, and profitability consistent with our earnings guidance. We also advanced our capital investment safely, on budget, and on schedule. As it relates to our top line, third quarter net sales totaled $305.9 million, a sequential increase of $1.3 million, primarily driven by higher shipments in aerospace and defense and steady volume across auto and industrial end markets. Net income was $8.1 million in the third quarter, or $0.19 per diluted share. On an adjusted basis, net income was $12 million or $0.28 per diluted share. Adjusted EBITDA was $29 million in the third quarter, a sequential increase of 9% primarily driven by improved product mix and continued improvement in melt utilization, driving better fixed cost leverage. This marks the fourth consecutive quarter of sequential growth in both net sales and adjusted EBITDA, underscoring the consistency of our commercial execution, improving operations, sustained demand in our core markets, and our focus on growing in aerospace and defense. During the third quarter, operating cash flow was $22 million, primarily driven by profitability, partially offset by a slight increase in working capital needs to support the growing business. At the end of the third quarter, the company's cash and cash equivalents balance was $191.5 million, inclusive of approximately $21 million of government-funded cash on hand for future outlays as we finalize our capital projects funded by the U.S. government. In the third quarter, capital expenditures totaled $28.4 million, including approximately $22 million of third quarter CapEx supported by previous government funding. Planned capital expenditures for the full year 2025 are approximately $120 million, slightly lower than previous guidance due to timing of cash payments. The full year CapEx guidance includes approximately $90 million of spending, which was funded by the U.S. government, consistent with our previous guidance and the continued successful execution of the projects. As it relates to government funding, during the third quarter, the company received $10 million of cash from the government as part of the previously announced nearly $100 million funding agreement in support of the U.S. Army's mission of increasing munitions production. To date, through the end of September, the company has received approximately $82 million of government funding with an additional $4.1 million received in October. Receipt of the remaining committed government funding is expected in early 2026, as mutually agreed upon milestones are achieved. As a reminder, this funding will substantially pay for both the new bloom reheat furnace at the company's Faircrest facility and the new roller furnace at the Gambrinus facility. In terms of shareholder return activities, in the third quarter, the company repurchased 178,000 shares of common stock for $3 million. At the end of September, a balance of $90.9 million remained under our share repurchase authorization. Since the inception of common share repurchases in early 2022, combined with the convertible note repurchase activities, we've reduced diluted shares outstanding by a significant 25% or 13.5 million shares compared to the fourth quarter of 2021. These actions reflect the strength of the company's balance sheet and the confidence in through-cycle cash flow generation. As it relates to liquidity, total liquidity remained strong at $437 million and no outstanding borrowings as of September 30, 2025. Turning to our near-term business outlook, commercially, fourth quarter shipments are expected to be 5% to 10% lower than the third quarter, primarily due to normal year-end seasonality and customers' potential global supply chain challenges. Base price per ton is anticipated to increase slightly as we realize the previously announced bar and tube price increases of 5% that will take effect through the fourth quarter. Product mix is expected to be less favorable than the third quarter due to the mix of sales within the industrial and aerospace and defense markets, which is primarily timing related. In summary, commercially, we expect lower shipments and slightly weaker product mix compared to Q3, slightly offset by increased base price per ton, but the net impact is expected to be a $2 million to $3 million adjusted EBITDA sequential headwind. From an operational perspective, annual shutdown maintenance in the fourth quarter will be approximately $11 million, a sequential increase of approximately $8 million from the third quarter. The planned annual shutdown maintenance timing and the normal fourth quarter commercial seasonality will result in a decrease in melt utilization from the 72% achieved in the third quarter and is anticipated to result in a sequential decrease in fixed cost leverage of approximately $3 million. And finally, depending on the status and timing of a new labor agreement, we could also face additional labor and benefit costs that could result in a sequential fourth quarter cost increase. Given these elements, the company expects the fourth quarter adjusted EBITDA to be lower than the third quarter, primarily driven by our normal year-end seasonality, planned annual shutdown maintenance costs and timing, and a few potential customer global supply chain challenges. As compared to the fourth quarter of 2024, we expect adjusted EBITDA to improve slightly. To wrap up, thank you to all of our employees, customers, and suppliers for their support. We're well positioned for a successful 2026 and beyond as a high-quality U.S.-based specialty metals producer supporting critical markets. We remain committed to delivering value to our shareholders by driving profitable growth and executing our capital allocation strategy. As always, thank you for your interest in Metallus. We would now like to open the call for questions.

Your first question comes from the line of John Franzreb with Sidoti & Company.

I'd like to start with the automotive business. It was up nicely on a year-over-year basis. And last quarter, you talked about regaining share domestically. I'm curious if that's the case. And I have a follow-up to that when you answer it.

Sure, John. Thanks for your question. If you look at the platforms we're on, those are typically SUVs and trucks that continue to sell reasonably well. The auto companies had forecasted that the quarter would be weaker, but that didn't happen. People are still purchasing vehicles, which means they need to build transmissions and motors to supply those vehicles, and that's where we excel. We'll see how the fourth quarter unfolds, and we do anticipate some seasonal trends. There are also concerns about supply chain disruptions in the fourth quarter that could affect vehicle production at the levels we experienced in Q3. Does that address your question?

Yes. And when you referenced supply chains, you actually said global. So I'm curious, are you referencing specifically the Ford problems? Or is there something more to it?

There has been public concern regarding chip supply and other supply chain issues. However, Ford is particularly notable because this has been widely reported in the media.

Okay. And regarding the $3 million to $5 million that you expected to incur with the labor negotiations, how much did you incur in the third quarter relative to your expectations?

We have incurred very little, only our costs for negotiations. The $3 million to $5 million is mostly related to the final negotiations, so we will have more updates on that soon.

Fair enough. And have you seen any impact from the tariffs? We talked a little bit about last quarter that there was kind of a wait-and-see status. I wonder if you've seen customers gravitate more to reacting to the tariff environment. And maybe another thought on that is, does the government shutdown impact the A&D business at all?

No, we've seen no A&D impact. This is the #1 priority is national security, and they need the volumes of munitions and weapons programs supplied. So no, we've not seen any impact on that. What was the first part of your question?

Any impact from tariffs on customers? Last quarter, you kind of said there was a wait and see...

Actually, I mean, the tariffs environment has been favorable to us. We are taking new customers. We've seen new customers come in. And we've seen a tremendous amount of inquiry activity for 2026, where more people are trying to position the domestic supply chain, as you heard us in our comments. So from a commercial sales perspective, it's been fairly positive. It's just the rate of speed in which that domestic awards are made. But there is a negative in the fact that we are seeing some tariff impacts on certain materials that we purchase offshore for our operating supplies and manufacturing.

Your next question comes from the line of Phil Gibbs with KeyBanc Capital Markets.

Mike, I know you mentioned this in your last response, but could you elaborate on the global supply chain challenges you're referring to? Are these challenges mainly related to automotive and Ford, or is there more involved? I'm looking for some clarity.

No. I mean there's been information out there that we've been told that there is concern over, again, some chip supply. Of course, you know the impact to the Ford F-150 with the aluminum supply domestically. So those are kind of things that we're aware of. We haven't seen that impact yet, but that's a potential going forward. So we just want to put it out there. Honestly, it's just a timing issue. So whatever they don't produce, they will produce because they want to meet sales targets, et cetera, for 2026.

Got it. And with your commentary of improved year-over-year EBITDA in the fourth quarter, does this contemplate any of the potential employee contract negotiations? Or would that be separate to that commentary?

Well, I'm not quite clear what your question is. We've identified if we do get a contract settlement in the fourth quarter, we're going to see those outlined costs that John referenced in his comments.

And we didn't quantify it yet, but I think there would be potentially some additional costs. It really depends on the timing.

Yes, it's all about timing. Right now, we have an extension until January 29. We are going to work hard to negotiate a fair and equitable contract and align with our longer-term strategic objectives.

Your next question comes from the line of Dave Storms with Stonegate.

I want to start with the energy end market here. What do you see as a potential for volumes to rebound over 2026?

A significant part of it is influenced by oil prices and global demand. There are additional factors at play, such as the effectiveness of sanctions on Russian oil and whether that would lead to increased domestic production in North America. If that happens, we are likely to benefit, especially since higher oil prices generally stimulate more production. Furthermore, as the LNG plants being constructed come online over the next few years, they will increase gas consumption and natural gas production to meet the demands of global markets. While this is promising, it will take time. We're also observing a strong uptick in inquiries for 2026 from our energy end markets, as they have historically relied on a substantial amount of SBQ for offshore, and current tariffs are influencing their purchasing decisions and strategies.

Understood. That's very helpful. Turning to your order book. Just curious as to how you feel it's tracking relative to this point last year? I know you mentioned you want to be about 70% booked going into the year. Do you feel like you're on pace to meet that goal relative to last year? Or just maybe where do things stand there?

Yes. We're pretty strong believers that we're going to get to that 70%. It could be a little bit higher depending on the pricing landscape. We are seeing customers telling us, not every customer, but some key customers telling us their internal production forecast for next year are going up, and we see them asking for more volume for 2026. So we're very happy about that, and we look forward to delivering an even better 2026.

Understood. That's very helpful. And then just maybe one more for me. I know last quarter, we talked about energy input prices and that you were working on a new negotiation there. Would just love to hear where that stands going into the new year.

I believe the primary issue is electrical energy. We had a long-term contract that ended in May of this year, which required us to turn to the market. I can confirm that market prices have changed significantly compared to the favorable contract we previously had. We have been open about experiencing rising costs for our electrical energy purchases. Currently, we have a two-year agreement for a significant part of our needs, but a small portion is still subject to market pricing, which we will monitor closely. We also have many projects planned to reduce our electrical energy consumption and enhance our efficiency in production regarding energy use per ton. On the natural gas front, we have locked in 70% to 80% of our needs for next year, and we are committed to various supply agreements extending up to five years. We are actively purchasing in the market, seeking the best competitive prices to position ourselves favorably for both electricity and natural gas costs.

Yes. And Dave, to add briefly to what Mike mentioned about electricity, at the end of Q2, we indicated a sequential cost increase of $2 million to $3 million, which is exactly what we experienced. This aligns with the contracts we have secured for the next two years.

Your next question is a follow-up from John Franzreb with Sidoti & Company.

I'm just curious about the CapEx spend. You dropped it down a little bit this year. What does next year look like?

Well, we're in the planning phases of that right now. The reason why we dropped down the forecast is it's all about timing. It's tied to completion of work as well as payment terms tied to after that completion and how long before we have to pay them. So it's all a timing issue. For 2026, we're in the planning phases right now, John. So we'll talk more on that early next year.

Okay. And if I recall, you brought in a third party to help you maybe with your floor operations. Any kind of progress you can report about that and how that's going?

Yes. We're very pleased with the progress, and you're going to start to see those results throughout the remainder of this year. The project is not over, but we're very pleased with the outcomes of the findings, the improvements that they're assisting with and helping my team implement them. This project goes on until late March. So a lot of those benefits will be realized in 2026.

Actually helpful. And I guess lastly, on the new A&D awards, maybe any additional color you want to provide and maybe the timing of revenue recognition or material revenue recognition from those jobs?

Yes. We're starting to actually see some of that now, particularly in the VAR VIM sales that continues to grow, which is just value creation for this company. And that's only going to continue to grow in 2026. We expect the munitions to continue to build demand as some of the downstream supply chain issues get resolved throughout the end of this year and early next year. And then we're getting awarded as we commented earlier, a number of new programs, weapons programs, gun barrel programs, aircraft bearings, etc., that demand and the realization of that value growth is really going to materialize in 2026, in my view, at a notable rate. And like we said, our objective overall was to achieve or exceed a run rate of $250 million a year in revenue, and we're very confident that we'll hit at least that by mid-2026.

That concludes our question-and-answer session. I will now turn the call back over to Jennifer Beeman for closing remarks.

Thank you all for joining today, and that concludes our call.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.