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DATE

Tuesday, May 5, 2026 at 9 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Michael S. Williams
  • Chief Financial Officer — John M. Zaranec
  • Executive Vice President, Chief Commercial Officer — Kristopher R. Westbrooks

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TAKEAWAYS

  • Net Sales -- $308.3 million for the quarter, reflecting an increase of $27.8 million or 10%, driven primarily by higher shipments.
  • Shipments -- 11% sequential increase, reflecting expanding demand across key end markets.
  • Adjusted EBITDA -- $24.6 million, up $6.9 million or 39% year over year.
  • Net Income -- $5.4 million, or $0.13 per diluted share; on an adjusted basis, $7.7 million, or $0.18 per diluted share.
  • Order Book -- Over 40% higher compared to the prior year, representing approximately 90,000 more tons.
  • Cash and Cash Equivalents -- $104 million at period end.
  • Total Liquidity -- $375 million as of March 31, 2026.
  • Capital Expenditures -- $24.7 million for the quarter, including $18.3 million partially funded by the U.S. government.
  • Government Project Funding -- $5.9 million received in the quarter for capital projects, with an additional $9.5 million in April and $2 million anticipated by year-end.
  • Pension Contributions -- $19.8 million contributed during the quarter; $5 million contributed subsequent to the quarter and another $5 million expected for the remainder of the year, with total 2026 required contributions expected to decrease by nearly 60% from 2025.
  • Share Repurchases -- 277,000 shares bought at a cost of $4.3 million in the quarter; 26% reduction in diluted shares outstanding since early 2022.
  • Bloom Reheat Furnace -- Recently demonstrated a run rate of about 150 tons per hour, up from 100 tons per hour with legacy equipment; expected to be fully operational by early to mid-third quarter.
  • Lead Times -- Extended into late third quarter for VARs and seamless mechanical tubing, indicating robust demand and customer backlog.
  • Automotive Demand -- Volumes up slightly, supported by new program wins and stable customer relationships in light truck and SUV segments.
  • Aerospace & Defense (A&D) Pipeline -- New contract won for tubing in advanced weapon systems; run-rate expectation for A&D of $250 million remains unchanged for 2026.
  • Second Quarter Outlook: Shipments -- Management guides to modest sequential shipment growth in the low single-digit percentage range.
  • Price Actions -- $120 per ton implemented in bar products through two actions; tube pricing actions averaged about $100 per ton, impacting about 30% of annual volume and expected to be more impactful in the second half of 2026.
  • Manufacturing Cost Improvement -- Approximately $2 million of sequential cost improvement projected in Q2, net of union contract cost increases.
  • Adjusted EBITDA Guidance -- Management expects second quarter adjusted EBITDA to be modestly higher both sequentially and year over year.
  • Tariff Environment -- The 50% tariff on imported primary steel, including all long bar and tube products, remains in place, while recent Section 232 tariff updates do not impact the company’s product classifications.
  • Energy Costs -- 70% of electricity demand fixed under a two-year contract; 30% spot-purchased, starting after the expiration of the previous long-term contract.

SUMMARY

Metallus (MTUS +3.55%) reported double-digit revenue and shipment growth, with operational investments yielding measurable improvements in throughput and product quality. Management affirmed that recent supply chain re-shoring, strong government partnership funding, and an expanded order book are sustaining momentum across industrial, automotive, and defense segments. Full-year pension contributions are projected to decline substantially, supporting cash generation and ongoing capital deployment activities. Expected price realization from recent rate actions and further manufacturing efficiency gains are forecast to provide incremental profit leverage through the second half.

  • CEO Williams described the new bloom reheat and roller furnaces as “modern and efficient assets position us to better serve growing customer demand across all end markets,” reinforcing the company’s competitive stance.
  • Management stated that the $2 million in anticipated manufacturing cost improvement for the next quarter is “net of the increased labor cost with the new labor agreement.”
  • Defense order activity remains highly variable; however, management reiterated confidence in their $250 million A&D revenue run-rate expectation, despite timing uncertainties tied to major Army partner ramp plans.
  • Williams indicated, “year over year the order book is over 40% greater, which, if you did a year-over-year comparison, is about 90 thousand more tons in our order book than we had this time last year.”
  • Bar pricing actions are phased in based on customer commitment dates, and tube price increases are tailored by product, with full impact expected later in 2026.

INDUSTRY GLOSSARY

  • VARs (Vacuum Arc Remelt steels): Specialty steel products processed to achieve high purity and enhanced mechanical properties, required for critical applications such as aerospace and defense.
  • Bloom Reheat Furnace: High-capacity industrial furnace used for reheating steel blooms prior to rolling, improving throughput and temperature control.
  • Section 232 Tariffs: U.S. trade measures imposing tariffs on steel imports classified as a national security matter, currently setting a 50% tariff on primary steel, including bars and tubes.
  • SBQ (Special Bar Quality): High-quality steel bars meeting stringent chemical and mechanical property standards for applications in automotive, energy, and industrial sectors.

Full Conference Call Transcript

Michael S. Williams: Good morning, and thank you for joining us today. I am encouraged by our team's continued focus on operational priorities, which strengthened our performance in the first quarter. Demand continues to improve across our end markets and our order book grew year over year supported by overall industrial and defense demand, decreasing distribution inventory levels, and onshoring. Section 232 tariffs continue to support our competitive position in the markets we serve. The April 2026 updates to these tariffs applied only to downstream steel-containing derivative products and do not affect our products, which are classified as primary steel.

Most importantly, the 50% tariff on imported primary steel, including all long bar and tube products, remains in place, reinforcing the long-term competitiveness of U.S.-produced steel. The capital investments and operational system improvements we implemented during the planned shutdown period in the fourth quarter contributed to higher melt utilization on both a sequential and year-over-year basis. Our strategic operational advancements achieved critical milestones during the quarter, highlighted by the safe and successful reheating and rolling of the first blooms from our new bloom reheating furnace. This achievement reflects the dedicated efforts of our internal teams and the support of the Department of War.

As a reminder, the new bloom reheat and roller furnaces facilitate more consistent reheating, improve product quality, and more efficient throughput. In fact, the bloom reheat furnace has recently demonstrated a run rate of approximately 150 tons per hour compared with approximately 100 tons per hour using our legacy assets, along with significant improvements in temperature uniformity. These modern and efficient assets position us to better serve growing customer demand across all end markets, and we anticipate they will also improve our operating leverage over time. We expect the bloom reheat furnace to be fully operational in early to mid-third quarter and the roller furnace to be fully operational in late third quarter.

We also continue to make meaningful progress in strengthening our operating systems, reinforcing consistent, efficient execution across the organization. These institutionalized systems help our teams identify issues faster and drive greater accountability. During the quarter, we expanded this framework into additional areas focused on reliability and throughput. Safety remains a foundational priority for us and a critical factor in our long-term success. As always, we focus on eliminating serious injuries through stronger controls, training, and leadership accountability. Our health and safety management system continues to mature with stronger proactive reporting, increased near-miss identification, and targeted capability building in higher risk activities such as cranes, rigging, lockout/tagout, and machine guarding.

This shift towards leading indicators and disciplined risk management reduces variability, lowers long-term cost, and protects our most important asset, our people. Turning to our first quarter performance, shipments increased by 11% sequentially. Adjusted EBITDA for the quarter totaled $24.6 million, reflecting a 39% increase compared to the prior year's first quarter. Again, this strong improvement underscores our disciplined execution against key priorities and operational improvements. Lead times continue to expand, now reaching into the late third quarter for both VARs and seamless mechanical tubing. This reflects strengthening demand for domestic steel and provides a clear signal of the momentum we expect to carry throughout 2026.

Turning to performance across our key end markets, we are seeing industrial customers take a more deliberate look at how and where they source steel as they navigate a challenging macro environment. Shifts in trade policy and the reassessing of supply chains are driving increased demand with domestic suppliers. With inventories low across the distribution channels and select products returning from offshore sourcing, we are seeing increased opportunities. We believe these dynamics position us well to strengthen new and existing customer relationships and continue gaining share as industrial markets stabilize. Automotive demand remains steady, with volumes up slightly compared to the prior year.

Our automotive order book and key customer relationships remain strong, supported by our continued focus on light truck and SUV transmission programs and our success in winning new and emerging platforms. For example, during the quarter, we won two additional programs with existing customers, reinforcing our confidence in the strength of the automotive markets we serve and the importance of our automotive customers to our base business. The energy markets we serve remain cautious, as producers continue to seek greater confidence in long-term oil prices before materially increasing investment. Ongoing global conflicts and geopolitical uncertainty are contributing to volatility in energy markets.

But favorable trade-related tailwinds, reduced imports, and a gradual increase in domestic oil and gas activity are creating incremental opportunities for Metallus Inc. Turning to aerospace and defense, this market continued to be a key source of strength during the quarter. Due to confidentiality, it is always difficult for us to call out new defense programs by name, but what I can say is that we were recently awarded an exciting contract with a new entrant in the defense supply chain to begin producing tubing for new rocket motors related to advanced weapon systems.

Demand across defense programs continues to grow, supporting our near-term $250 million run-rate revenue expectation and the longer-term strategic expansion in the market, allowing us to provide our expertise to existing and new customers in these critical applications. While defense shipment timing can vary quarter to quarter based on program needs and downstream supply chains outside of our control, the underlying fundamentals remain strong in the foreseeable future. We continue to advance targeted investments and operational improvements to support higher defense volumes. Metallus Inc. is well positioned to benefit from growing defense spending and the continued focus on developing secure domestic supply chains. Overall, we remain focused on disciplined execution in 2026.

During the quarter, we improved operational performance, strengthened our internal systems, and safely advanced strategic investments that support our long-term objectives. Our growing order book, improving operational execution, and U.S.-based manufacturing footprint provide a solid foundation as we move forward. We will continue to prioritize safety, operational discipline, and prudent capital allocation as we work to deliver consistent performance and long-term value for shareholders. With that, I will turn the call over to John to walk through our financial results in more detail.

John M. Zaranec: Thanks, Mike. Good morning, and thank you for joining our first quarter 2026 earnings call. During the quarter, our team delivered improvements in shipments, net sales, and profitability on both a sequential and year-over-year basis, consistent with our expectations. As Mike noted, we also safely advanced operational and strategic investments to support near- and long-term business growth while maintaining a strong balance sheet. From a top-line revenue perspective, first quarter net sales totaled $308.3 million, a year-over-year increase of $27.8 million or 10%, primarily driven by higher shipments across most end markets. Net income was $5.4 million in the first quarter, or $0.13 per diluted share.

On an adjusted basis, net income was $7.7 million, or $0.18 per diluted share in the quarter. Adjusted EBITDA was $24.6 million in the first quarter, a year-over-year increase of $6.9 million or 39%. The increased profitability was primarily driven by higher shipments across most end markets, better price/mix, higher raw material spread, and better fixed cost leverage on higher production volume, slightly offset by an increase in utility cost and a partial quarter of the cost increase related to the ratified union contract. As a reminder, our previous favorable electricity contract expired in May 2025, so the first quarter of 2025 included a full quarter of lower energy costs.

As we noted in February, we expected a usage of free cash flow during the first quarter, which is consistent with historical seasonality as the first quarter normally requires a larger amount of pension funding and working capital build. Additionally, this year, our CapEx spend to complete the government projects is the highest in Q1 and is expected to ramp down throughout 2026. In the first quarter, capital expenditures totaled $24.7 million, including approximately $18.3 million of first quarter CapEx partially funded by the U.S. government. Planned capital expenditures for the full year 2026 are expected to be approximately $70 million, inclusive of approximately $35 million of capital expenditures primarily funded by the U.S. government.

At the end of the first quarter, the company's cash and cash equivalents balance was $104 million. As it relates to government funding, during the first quarter the company received $5.9 million of cash funding from the government, with an additional $9.5 million received during the month of April based on our successful completion of key milestones. As a reminder, these funds are part of the previously announced nearly $100 million funding agreement in support of the U.S. Army's mission of increasing munitions production. Additional government funding of approximately $2 million is expected to be received in 2026 to complete the government funding arrangements, contingent on the achievement of the final mutually agreed-upon milestone.

As a reminder, this funding substantially paid for both the new bloom reheat furnace at the company's Faircrest facility as well as the new roller furnace at the Gambrinus facility. Now switching to pensions, in the first quarter the company made $19.8 million of required pension contributions, of which the majority related to the U.S. bargaining plan and reflects roughly two-thirds of the expected full year 2026 pension contributions. Subsequent to the first quarter, the company made a required pension contribution of approximately $5 million in April, with an estimated $5 million of required pension contributions expected for the remainder of 2026.

Consistent with our expectations in February, total 2026 required pension contributions are expected to decrease by nearly 60% compared to 2025. As part of the USW contract ratified during the first quarter, employees who are currently accruing a pension benefit will have a one-time opportunity between March 30 and May 30 to freeze their pension accrual and begin receiving a market competitive benefit under the 401(k) plan. These actions will allow employees access to their retirement funds earlier while also providing competitive defined contribution benefits and derisking the long-term pension obligation. As we continue to actively manage the pension, we will provide further updates as available.

In terms of shareholder return activities, in the first quarter the company repurchased approximately 277 thousand shares of common stock at a cost of $4.3 million. At the end of March, a balance of $85.4 million remained under our existing share repurchase authorization. Since the inception of common share repurchases in early 2022, combined with the convertible note repurchase activities, we have reduced diluted shares outstanding by a significant 26%, or 13.8 million shares. These actions reflect the strength of the company's balance sheet and confidence in through-cycle cash flow generation. As it relates to liquidity, total liquidity remains strong at $375 million as of 03/31/2026. Additionally, as of 03/31/2026, the company had no outstanding borrowings.

Moving now to near-term business outlook, commercially, second quarter shipments are sequentially expected to increase modestly in the low single digits on a percentage basis, supported by continued strength in the order book and normal seasonality. Through the first four months of 2026, we announced a series of targeted price actions across our bar and tube portfolios. In bar, we implemented two actions totaling $120 per ton, phased in based on customer promise dates. In tube, pricing actions were differentiated by size and product types, averaging about $100 per ton across the product mix.

As a reminder, these pricing actions apply only to business not sold under annual price agreements and to new business, which historically represents approximately 30% of our total annual volume. We expect price realization to be gradual, with greater impact toward the second half of the year, based on lead times and product mix dependent. Second quarter price and mix are expected to be similar to the first quarter, with improvement anticipated in the second half of 2026. From an operational perspective, the company anticipates a sequential increase in its second quarter average melt utilization rate, supported by a strong order book.

Manufacturing costs are expected to improve sequentially by approximately $2 million in the second quarter, as a result of higher melt utilization resulting in improved cost absorption, and net of the full-quarter run-rate cost increase related to the ratified union contract. And finally, an adjusted effective income tax rate between 27–30% is expected for the full year 2026. Given these elements, the company expects second quarter 2026 adjusted EBITDA to be modestly higher sequentially and year over year. To wrap up, thank you to all of our employees, customers, and suppliers for their support. We are well positioned as a high-quality, U.S.-based specialty metals producer supporting critical markets.

As we continue to move forward in 2026, our focus is on safe execution to meet continued rising customer demand. We remain committed to delivering shareholder value through disciplined capital allocation and sustained profitable growth. As always, thank you for your interest in Metallus Inc. We will now open the call for questions.

Operator: To ask a question, simply press 1 on your telephone keypad. Again, that is 1 to ask. Our first question is from the line of John Edward Franzreb with Sidoti. Please go ahead.

John Edward Franzreb: Good morning, everyone, and thanks for taking the questions. I would actually like to start with the recent results reported. You touched on it in your prepared remarks about it typically being a working capital outflow quarter, but I was just curious about the sizable rise in inventory. Is that illustrative of any particular end market demand, or are you building inventory for any particular reason? I am just curious about that. Got it. That is good to hear. Sequentially, you are suggesting that revenue is going to be up in the low single-digit range.

I am kind of curious, does that suggest maybe one of your key end markets is a little bit slower than you would have thought, say, three months ago, especially considering the visibility you have in A&D? And one last question and I will get back into queue. Regarding the operational improvement of $2 million, I just want to make sure I understand that properly. Is that improvement above the increased cost from the new union contract, or does it net out the increased cost? So it is a net positive of $2 million off the wages. I just want to make sure I understand. Great. Alright. Thank you. I will get back into queue.

Michael S. Williams: Yeah, so hey, John, how are you doing? Pretty much, you know, we build inventory in Q1 based on the order book demand going into Q2, and with our lead times out to mid- depending on product, to late Q3, we can see. So we are positioning inventory to service our customers. And we continue to see higher demands. As we mentioned, year over year the order book is over 40% greater, which, if you did a year-over-year comparison, is about 90 thousand more tons in our order book than we had this time last year. So we are positioning the inventory to meet the order demand that we have. I mean, I do not see anything slower.

It is just the timing of when the orders are requested and when we need to ship them on time, aligned with our throughput capability. Yeah, it is net of the increased labor cost with the new labor agreement.

John M. Zaranec: Yes, that is an all-in increase that is offset, yeah, that is offsetting the wages. Correct. Correct.

Operator: Your next question is from Samuel McKinney with KeyBanc Capital Markets. Please go ahead.

Samuel McKinney: Hey, good morning. Your first quarter auto shipments were up slightly year on year despite the negative SAR comp. Could you just give us a little more color on your ability to outpace that figure and what you are hearing from the SUV and heavy truck customers moving into the summer? And I just want to turn to A&D and the Army investment. Given other commentary during this earnings cycle, it appears that the Army's munitions partner does not plan to begin production at the facility until sometime during 2027. How does that impact the timing for you to hit your previously stated goal of $250 million in annualized A&D sales this year? Okay.

So is there any change to the outlook of hitting $250 million in A&D sales this year? Right. Sure. Alright. Thanks, Mike and John.

Michael S. Williams: Yeah, I mean, those are predominantly the platforms that we are on, and those are the platforms that are driving the demand where we have seen year-over-year order increases. So we expect that to be fairly stable at this point throughout the year, with some typical seasonality towards the end of the year. It is all about the platforms that we are on and the pull rate that they are requesting for their build rates of the powertrain and transmission programs that we are on. I mean, it definitely has an overall impact of them getting to the 100 thousand shells per month production, which then, of course, affects us.

But what we are seeing is we have seen them ramp up their other facilities, as well as we have seen some non-U.S. demand—most of it is still in North America, just not in the U.S.—and then the offshore inquiries and orders that we are getting. So it affects it, but then we are working diligently to offset that with other weapon system applications. We mentioned the one new program we just got; it will most likely ramp up to its full demand in 2027, but it will ramp up throughout the year this year, and really hit the peak cycles in 2027 and 2028.

But we continue to work hard to get other programs to kind of offset the original planning process with the new facility coming online for the particular 155 millimeter munitions. As I said earlier, we are seeing increased demand from existing facilities because they are really trying to ramp it up. If you look at the math, and we kind of calculate it based on what we sell in those particular grades, they are operating around 70 thousand shells a month right now toward their 100 thousand target, but that is up from 50 thousand six months ago.

So we do anticipate, as they continue to push these other facilities to improve their throughput capacity, that will continue to modestly increase throughout the year. And then, depending on timing when that other facility gets up and running, it is a win-win for us. No, we still have that expectation, as we said in our comments. There is some variability that we are working towards in the second half to fill some gaps, because we were anticipating some type of ramp-up out of the one facility that still is being worked on to get it up and operational. But we are still confident that we are going to hit that expectation.

At least that we strive for higher, as you can imagine, internally. But right now, we are confident that we will meet that expectation.

John M. Zaranec: That is a run-rate expectation. I mean, some of this is a little bit lumpy due to supply chain and order timing, but as we talked about last year, that $250 million is a run rate that we expect to achieve in the year.

Operator: Your next question comes from the line of David Joseph Storms with Stonegate. Please go ahead. Dave, your line is open.

David Joseph Storms: Is that better? Just wanted to start with getting your thoughts around lead times. I know you mentioned they go to the third quarter. With the ramping of the bloom reheat furnace, could this maybe be the high watermark and maybe lead times might start to come down throughout the year, or does the order book indicate that they might continue to increase? Understood. Appreciate that. And then just also looking at the order book, a lot of strength there. Are you seeing more of the growth coming from price or maybe more from mix, or is it volume that is expected to drive that? Just any commentary on maybe some of the profile of the order book. Understood.

Thank you for taking my questions.

Michael S. Williams: Right now, everything we can see—here we sit in early May—is the fact that we expect demand to continue to be really good. Now, we do expect that the seasonality that occurs in the fourth quarter is going to be there—our maintenance outage, etc. But right now, what we see, we are halfway through the third quarter, so orders continue to come in at a pretty good rate per week, and we expect that to continue. We just have to focus on our execution and serve our customers. I mean, overall, it is volume, okay? But our team does a pretty good job trying to manage and maximize the highest return value creation in mix as we can.

The area we see—automotive continues to be steady. We continue to expect growth in A&D. And we expect energy—we have seen positive improvement in energy because of the trade environment and what we would call reshoring, but it is really domestic sourcing of supply. So we expect that to potentially continue to modestly grow. As you can imagine, there is a lot of volatility with all the uncertainty, the global conflict, etc., affecting the energy market, so we have to watch that very closely and align with our customers the best way we can. I think the biggest area of opportunity we see the remainder of this year is really steady growth in the industrial end markets.

Operator: Our next question is from the line of Analyst with Northcoast Research. Please go ahead.

Analyst: Thanks for taking my question here. One of the questions I really have is, you mentioned that your old energy contract was expiring and you have a new one. I was wondering if you could give us any more insights into the terms around that, and is that something that is typically paid on spot, or are those longer-term contracts? That is helpful. Thank you. And the other question I had is about the new tariffs that went into place on May 1 for automotive. Do you expect that to have a meaningful impact on automotive demand? I know it is typically not what we are importing from Europe.

Is it a real lot of overlap with what you are applying to? I just was not sure in the past how that impacted you, and does that give any insights on what the market might look like here going forward? Super helpful. Thank you. I will turn it back over.

Michael S. Williams: Okay. So we did have a long-term contract that expired at the end of last May. The contracts that we currently operate on: 70% of our electrical demand is fixed under a two-year agreement—we actually just began the second six months of year one—that will exist for two years. The other 30% is spot purchased. Well, we are heavily influenced based on build rates and platforms. Predominantly, most of our steel applications go into powertrains, particularly transmissions.

Kristopher R. Westbrooks: Crankshafts, etcetera.

Michael S. Williams: And we have heavily focused on SUVs and trucks, and those are the vehicles that are selling. That is why we are seeing good steady demand all last year throughout the volatility of the market, regardless of imports. And this year, we see the same thing with incremental improvement. What we are seeing is the move away from the high expected volume of EVs and more hybrid demand, which is good for us because it has a combustion engine and has a transmission, as well as electric motors. So that is the move we have seen. And I think it still plays well for us because we can play in all three of those platforms—ICE, hybrid, or EV.

So I think we are in a good spot. Our team has done a pretty decent job of going after the right applications where, typically, the consumer price effect is not as influenced based on price movements, because these tend to all be high-end vehicles.

Operator: I will now hand the call back over to Metallus Inc. as we have no further questions in queue. Great. Thank you so much, and that concludes our call for today. Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.