Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter 2025 Metallus Inc. Earnings Call. [Operator Instructions] I would now like to 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 Zanarec, 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 work days 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…

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 and 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…

[Operator Instructions] 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 asking the question. Yes, I mean if you look at the platforms, that we're on, those are the typically the SUVs, trucks, et cetera, that continue to sell at a decent rate. And they actually -- the auto companies were giving us a forecast that they thought the quarter would be lower, but that didn't materialize. So people are still buying vehicles. They're still having to build transmissions and motors, et cetera, to supply those vehicles, and that's our sweet spot. So we'll see how the fourth quarter develops. We do expect seasonality from them. And then there are some risks of some supply chains in the fourth quarter, their supply chains disrupting potentially vehicle production at the level that we saw in Q3. Does that answer 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?

Well, there's concern or at least there's been public voice concern over chip supply and other issues with their supply chain. So -- but yes, Ford is the one that stands out because we've seen a lot of that in the public press reporting.

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?

Barely nothing except for our cost to negotiate. A lot of those -- that $3 million to $5 million is tied on the final negotiations. So more to come yet on that.

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 maybe 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 -- pretty 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, the -- and I know you talked a little bit about that with the last question, but what are exactly the global supply chain challenges you're mentioning? Is that more so -- is that more so with automotive and Ford? Or is there more to it? Just wanted some context?

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. I mean right now, we have an extension until January 29. We just -- we're 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?

Well, I mean a lot of it's driven by the price of oil and overall global demand, right? I think there are some other influencing factors like what sanctions and how effective sanctions against Russian oil are. And would that increase domestic production in North America? And then we would -- we most likely would benefit from that increased production, higher oil prices tend to drive increased production too. Other areas where as these LNG plants come on over the next couple of years that they're building, that will drive gas consumption, pipelines, et cetera, or natural gas production et cetera, to feed the global markets that they're targeting, that's all positive stuff for, but that takes time. We are seeing where we're -- actually probably where we're seeing potential increases in 2026 is that energy end market has historically procured a lot of SBQ into offshore and those tariffs are starting to affect their thinking and their buying strategy. So we've seen a tremendous amount of inquiries for 2026 for our energy end markets and customers.

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 were 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 think the biggest one is electrical energy. And we had a long-term contract that expired in May of this year, and we had to go to market. I can tell you that prices -- market prices change significantly for the time of that really nice electrical energy contract we had. So yes, and we've been transparent that we're seeing cost increases on our electrical energy purchases. We currently have a 2-year agreement for a large portion of our requirements, but there is a small portion that's exposed to market pricing, and we'll watch that very closely. We have many projects in the pipeline to work on reducing our electrical energy consumption and let alone also increase our efficiency of production with how much electrical or kilowatt per ton we use. And on the natural gas side, we're purchased forward for 70% to 80% of our needs for next year. And we actually probably are out 5 years at various supply requirements, but we're an active buyer in the market, and we're very opportunistic. So we looked for the best competitive prices we get and position ourselves for the best cost in those unit prices for both electricity and natural gas.

Yes. And Dave, real quick, one thing to add to that, what Mike was saying on electricity is we -- if you recall at the end of Q2, we said $2 million to $3 million of sequential cost increase, that's what we experienced. So we kind of guided that, and that's what we saw. And that's aligned with the contracts that we've lined up for the next 2 years.

[Operator Instructions] 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. On the -- for 2026, we're in the planning phases right now, John. So we'll talk more to 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 build 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, et cetera, that demand and the realization of that value growth is really going to materialize in 2026, in my view, as a notable rate. And like we said, our objective overall was to achieve or exceed a run rate of $250 million a year of revenue, and we're very confident that we'll hit at least that in 2020 -- 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.