Metallus Inc.

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter 2024 Metallus, Inc. earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I'd like to turn the conference over to Jennifer Beeman, Director of Communications and Investor Relations. Please go ahead.

Good morning, and welcome to Metallis' third quarter 2024 conference call. I'm Jennifer Beeman, Director of Communications and Investor Relations for Metallis. Joining me today is Mike Williams, President and Chief Executive Officer, Chris Westbrooks, Executive Vice President and Chief Financial Officer, and Kevin Rakitic, 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 the 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. Throughout the quarter, we continue to navigate challenging market conditions demonstrating the resilience of our business model and the strength of our team. Our third quarter net sales saw a sequential decrease of 23%, primarily due to lower shipments across our markets. During the third quarter, we continued to maintain and invest in our world-class assets aimed at improving safety, efficiency, and quality. Additionally, We continue to offer training and development opportunities for our employees. I believe these two focus areas are the key to our near-term success, allowing us to better serve our customers and quickly capitalize on future demand recovery. Speaking of customers, we recently completed our annual customer survey, and I'm pleased to report that our customers rank us highly in both service and quality. I'm proud of our team's outstanding performance on both fronts. This is also the time of the year when we initiate our annual contract negotiations with our customers. Generally, we target around 70% of our business to be linked to annual contracts. Currently, we are still early in this process, but discussions are going well. Turning to safety, in late October and early November, we completed our annual maintenance shutdown at the Faircrest facility. Shutdowns are complex operations that depend on the coordinated efforts of additional contractors and vendors working alongside our teams. The required maintenance, which took us 12 and a half days as scheduled, is critical for ensuring the reliability of our assets. Most importantly, I'm pleased to report that we completed the shutdown without any serious safety incidents. During these shutdown periods, we take time to further train our people in important safety measures. Starting in October, we begin our safety standard program. We put an even sharper focus on preventing serious injuries and fatalities. This is about identifying potential hazards and stopping them immediately. This program consists of a series of hands-on stations where we provide our employees with real equipment, tools, and situations to ensure they are just not hearing about safety, but feeling and practicing it too. Working with operations, our safety team, union leadership representatives, and company leadership, We are demonstrating that safety is a shared responsibility and continues to be our top priority. Our commitment to safety is evident in our investment of $6 million year-to-date. As a result, we achieved a 29% year-over-year reduction in our OSHA recordable rate for the third quarter. Our investments are paying off, and we look forward to continuing this trend into 2025. Moving to our end markets, shipments decreased by 20% compared with the second quarter. Shipments to our industrial customers declined 6% sequentially, primarily driven by weaker mining and agricultural markets, as well as continued softness in distribution. On the other hand, we've seen a slight uptick in sales from our rail customers, although not enough to offset other declines in the sector. As expected, energy customer demand remains weak, as drilling activity is expected to remain flat in the near future. Despite the market being down, we anticipate some additional volume in the energy space going forward, as inventory levels will need replenishing at some point. And that is expected to drive demand for our highly engineered steels. Automotive shipments declined by 16% sequentially. Our customers have faced several issues, including ongoing equipment issues, recalls, and unexpected downtime. Additionally, the third quarter tends to be seasonally weaker in terms of demand. As expected, we saw a sequential decline in aerospace and defense third quarter shipments due to customer order patterns. However, based on our defense customers' needs, we anticipate an increase in aerospace and defense shipments in the fourth quarter as well as in 2025. With ongoing investments by our customers to increase capacity and targeted growth in new programs, we expect to grow aerospace and defense sales to over $250 million by 2026. Overall, we are confident in the long-term growth prospects for aerospace and defense, driven by strong customer demand and strategic investments. In the current market landscape, the influx of SBQ and seamless mechanical tubing imports continues to exert pricing pressure, especially within the industrial and energy sectors. China holds the largest share of seamless mechanical tubing imports to the U.S., and therefore increased Section 301 tariffs may help us moving forward. As background, China's share of the U.S. seamless mechanical tubing market has grown significantly, rising from approximately 6% in 2021 to 16% in 2024. Regarding our capital investments, we are actively progressing with investments in assets that not only promote growth, but enhance safety, product quality, improve asset reliability, elevate customer service, and optimize our cost structure. During the quarter, we invested over $17 million in capital expenditures Investments include the installation of an automated grinding line in our Harrison facility, which is designed to improve safety, quality, and efficiency. This should be operational by the end of this year. At Harrison, we are also targeting the installation of two inline saws in the first quarter of 2025. They are connected to the new grinding line. These new assets will enhance safety and efficiency while also limiting the need to outsource cutting of certain bar sizes. As you know, we are in the process of installing a bloom reheat furnace at our fur craft facility intended to significantly increase the ability to serve needs of the Department of Defense, as well as support our broader customer base. Lastly, We recently approved a thermal treatment roller furnace at our Gambrinus facility. This investment is another example of our commitment to investing in state-of-the-art technologies while also doubling our heat treating capacity for specialty grade, primarily used in defense-related products. We have received funds from the Department of Defense for both the bloom reheat and the roller furnace. Chris will cover the details of our government funding in a moment. These efforts align with our overall objectives to drive cost reductions, increase free cash flow, and boost our profitability. Despite challenges in the current market demand environment, we remain committed to our capital allocation strategy, balancing investments and growth with returning capital to shareholders. Looking ahead, we are cautiously optimistic as we see our order book picking up in the fourth quarter and into early 2025. With a strong balance sheet, an active share repurchase program, and a positive long-term outlook, we remain well positioned for future growth. Now I'll turn the call over to Chris, who will provide more details on our financial performance.