Metallus Inc.

At this time, I would like to welcome everyone to Metallica's first quarter 2025 conference call. 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 star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the call over to Jennifer Beeman. Please go ahead.

Good morning and welcome to Metallis' first quarter 2025 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 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 Natalis 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 we appreciate you joining us today. First, let me say that I am encouraged by the growing demand for domestic steel and Metallos is well positioned to capitalize on this momentum. Our solid order book, strengthening spot pricing and recent market share gains reflect the confidence our customers have in us and the resilience of our business strategy. Over the past several months, the trade environment has been widely discussed. We fully support the enforcement and expansion of steel tariffs. As longtime advocates, we believe these measures align with our commitment to fair trade and balancing excessive global overcapacity. This evolving trade environment will help us meet the growing demand for U.S. produced steel. As consumption of domestically produced steel increases, we are seeing a rise in our order bookings from new customers and existing customers. Consequently, our order backlog has increased approximately 50% from the same period a year ago. At the same time, we are mindful of the potential challenges posed by the current macroeconomic uncertainty. That said, we are well positioned as a US business with a strong balance sheet and continued focus on cost management. We remain focused on execution and the factors within our control in order to deliver value to our stakeholders. Switching gears to safety, our mission is to be recognized as having the safest specialty metals operation in the world. In 2025, we plan to invest approximately $5 million to further strengthen our safety management system, and upgrade equipment. I am pleased that our past safety investments are yielding results. To date in 2025, we have seen a year-over-year improvement in all safety metrics. Two key areas of focus, lockout, tagout, tryout, and zero incident planning are exceeding our target rates thanks to the commitment of our employees, continuous training, and supervisory oversight. We recently held our annual Iron Shield competition, which invites our employees and crews to submit innovative safety projects aimed at improving safety practices. In total, over 100 projects were submitted for consideration this year. The Faircrest Electric Arc Furnace Team earned the 2024 Metallis Iron Shield Award for establishing a hands-free EAF taphole lance process, significantly improving safety. Historically, manual lancing posed exposure to potential hazards, but the team collaborated with a third party to develop an automated system using a custom-designed mounting block, telescoping lance, and push-button controls. This innovation has reduced exposure by over 80%, with plans for further enhancements. Their dedication to safety and teamwork sets a new industry standard. Congratulations to the Faircrest team. Moving to business results for the first quarter, overall shipments increased by 17% compared with the fourth quarter, driven by higher industrial, automotive, and energy shipments. partially offset by lower aerospace and defense shipments. As a result of the higher shipments and lower manufacturing costs, our sequential profitability more than doubled. In the first quarter, our melt utilization improved sequentially by nine percentage points on strong end market demand. Although not yet to our targeted melt utilization rate, we expect further melt utilization improvement into the second quarter to support our strengthening order book. Lead times are currently 10 weeks for our SPQ bars and our seamless mechanical tubing products. Turning to specific markets, shipments to our industrial customers increased by 33% sequentially, primarily driven by distributors replenishing their inventory, which helped to offset weaker mining and agricultural markets. we've experienced steady distribution orders and shipments to date through April, which supported recent spot price increases for SBQ and seamless mechanical tubing products. Chris will comment on the specifics of the spot price increases shortly. Energy shipments improved 24% on a sequential basis. Despite a relatively flat rig count since the beginning of the year, our shipments to energy customers have been increasing as we gain share in certain product categories such as coupling stock, directly resulting from the displacement of imports. We are confident that we have the right programs and service packages in place to capitalize on opportunities in the energy market. Automotive shipments improved by 9% sequentially. The sequential increase in shipments is mostly driven by seasonality. The impact of tariffs on the automotive market remains uncertain in the foreseeable future. And to date, we have not experienced demand softness. However, we maintain close contact with our customers to monitor potential shifts in programs or emerging opportunities. As a reminder, Metallus benefits by participation on the highest running light truck and SUV automotive programs, including internal combustion, hybrid, and electric vehicles, which gives us confidence to manage potential volatility in this market space. In the first quarter, key aerospace and defense customers had some production startup challenges, which resulted in a sequential decrease in aerospace and defense shipments. We expect higher aerospace and defense shipments as the industry works through these short-term supply chain challenges. As we have indicated previously, end market demand remains strong, and we are confident in our long-term participation in this market. As we mentioned last quarter, we are expanding our participation in aerospace and defense by leveraging vacuum arc remelt steel combined with our unique downstream processing capabilities In the first quarter, we saw significant orders for vacuum arc remount from new and existing customers. We remain on track to hit our 2025 goal of approximately $30 million of revenue using outside VAR products combined with our rolling and piercing capabilities and look forward to growing this business in the future. In the first quarter, we achieved another key milestone related to the installation of new assets to support the increasing demand for artillery shells. This project remains on schedule, and we look forward to continuing to partner with the U.S. Army in ramping up the munitions production. Our capital allocation strategy remains unchanged, prioritizing strategic investments that drive long-term profitable growth along with our ongoing share repurchase program. To summarize, There is uncertainty in the trade environment and macroeconomic landscape, but we remain cautiously optimistic given our U.S.-based business model and participation in growing specialty metal programs. We will continue executing our business strategy while prioritizing safety, delivering outstanding customer service, and making strategic capital investments to further support sustainable profitability generate strong cash flow, and create shareholder value. Now I'd like to turn the call over to Chris.