Earnings call transcript: Metallus Inc Q4 2024 misses forecasts, stock drops

Metallus Inc (MTUS) reported its fourth-quarter 2024 earnings, revealing a significant miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -0.08, falling short of the expected 0.0033, while revenue came in at $240.5 million, below the anticipated $252.8 million. Following these results, Metallus’s stock declined by 8.98%, closing at $14.29, reflecting investor disappointment. According to InvestingPro analysis, the stock appears undervalued at current levels, despite trading at a P/E ratio of 28.09. InvestingPro offers 13 additional investment tips for MTUS, available to subscribers.

Key Takeaways

• Metallus missed both EPS and revenue forecasts for Q4 2024.
• The stock price fell by nearly 9% post-earnings announcement.
• Aerospace & Defense sales showed strong growth, increasing by 17%.
• The company anticipates improved performance in 2025, with higher melt utilization and cost savings from automation.

Company Performance

Metallus Inc experienced a challenging fourth quarter, with financial results missing analyst expectations. Despite sequential growth in net sales and adjusted EBITDA, the company’s GAAP net loss and reduced revenue highlighted ongoing market pressures. The aerospace and defense sector offered a bright spot, with sales up 17% to nearly $135 million in 2024, underscoring the company’s competitive position in this market.

Financial Highlights

• Revenue: $240.5 million, a 6% sequential increase.
• Earnings per share: -$0.08, missing the forecast of $0.0033.
• GAAP Net Loss: $21.4 million.
• Adjusted EBITDA: $8.3 million, up $2.2 million sequentially.
• Full Year Operating Cash Flow: $40.3 million.

Earnings vs. Forecast

Metallus Inc reported an EPS of -0.08, significantly missing the forecasted EPS of 0.0033. Revenue also fell short, reaching $240.5 million compared to the expected $252.8 million. The magnitude of these misses suggests underlying challenges in the company’s operations or market conditions.

Market Reaction

Following the earnings announcement, Metallus’s stock dropped by 8.98%, closing at $14.29. This decline positions the stock near its 52-week low, indicating investor concerns over the company’s short-term outlook and financial performance.

Outlook & Guidance

Looking ahead, Metallus projects an increase in melt utilization to 70% in Q1 2025, alongside anticipated savings from an $18 million investment in automated grinding lines. The company also plans to capitalize on growing demand in the automotive and industrial sectors, with a focus on expanding its aerospace and defense sales.

Executive Commentary

CEO Mike Williams emphasized the importance of ongoing investments for long-term growth, stating, "We believe these efforts are key for our long-term growth." CFO Chris Westbrooks added confidence in the upcoming quarter, noting, "We anticipate first-quarter adjusted EBITDA to be higher than the fourth quarter."

Risks and Challenges

• Continued weak market demand could pressure revenues.
• High capital expenditures may strain cash flow.
• Potential impacts from new steel tariffs could affect costs.
• Pricing mix challenges may influence profit margins.
• Macroeconomic factors could impact overall market conditions.

Q&A

During the earnings call, analysts inquired about the potential effects of new steel tariffs and the company’s pricing strategies. Executives confirmed a strong order book and discussed the automotive market’s outlook, highlighting ongoing challenges and opportunities.

Full transcript - Metallus Inc (MTUS) Q4 2024:

Audra, Conference Operator: 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 Metalis Fourth Quarter twenty twenty four and Full Year Earnings Call. Today’s conference is being recorded.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. At this time, I would like to turn the conference over to Jennifer Beeman, Director of Communications and Investor Relations. Please go ahead.

Jennifer Beeman, Director of Communications and Investor Relations, Metalis: Good morning, and welcome to Metalsas’ fourth quarter and full year twenty twenty four conference call. I’m Jennifer Beeman, Director of Communications and Investor Relations for Metals. 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 described in greater detail in yesterday’s release. Please refer to our SEC filings, including our most recent Form 10 ks and Form 10 q and the list of factors included in our earnings release, all of which are available on the Nattellus 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?

Mike Williams, President and Chief Executive Officer, Metalis: Good morning and thank you for joining us today. While I am proud of the progress we’ve made with several of our strategic imperatives, our financial results in 2024 were negatively affected by persistent weak market demand. Without the strategic structural changes to our business model over the past few years and a continuous improvement mindset, the market challenges in 2024 would have had a much more significant negative impact on profitability. In the face of these challenges, we remain focused on what was in our control by enhancing our strong customer relationships and investing in our people through additional training and development opportunities. We made improvements to our world class assets to enhance safety, quality and efficiency.

We believe these efforts are key for our long term growth and will better position us in the long run. Additionally, we continue to provide value to our shareholders through our capital allocation strategy, including strategic investments in our business to drive profitable growth, as well as our ongoing share repurchase program. As we begin 2025, I’m encouraged by an improving order book and increase in shipments. But first, let me reflect on safety. In 2024, we strengthened our safety management system, which equips our teams with clear guidelines for risk management, defining roles and responsibilities, reducing hazards, handling incidents, training and communications all aimed at continuous improvement.

Throughout the year, we dedicated resources to reinforce lockouttagout, tryout procedures and enhance our safe work permit processes for non routine tasks. Our commitment to safety is evident in our investment of approximately $8,000,000 in 2024 and plans to invest approximately $5,000,000 in 2025. Although we recognize that achieving our safety objectives will be a journey, we have achieved some positive improvements. Our OSHA total recordable injury rate declined seven percent over the prior year. Our corrective action completion rate related to potential serious injuries improved by fifteen percent compared to 2023.

Additionally, we improved our employee engagement in safety with a 36% increase in near miss reporting and a 60% increase in proactive observations versus the prior year. These measures indicate that we’re proactively and continuously addressing safety by maturing our safety management system, meaningfully engaging our employees, improving our hazard recognition skills, and enhancing our equipment. As you would imagine, we have been closely following the trade environment, which substantially affects the industry’s market behavior and global competitiveness. President Trump recently issued an executive order introducing a tariff of at least 25% on all steel long products, as well as certain derivative steel products, while closing loopholes in existing steel tariffs. These changes are expected to take effect on 03/12/2025.

We believe these actions will help level the playing field for the steel industry, reduce imports, which should boost domestic demand. In recent weeks, we’ve seen a meaningful increase in customer engagement, both new and existing customers, as they proactively manage their supply chain to ensure a secure and stable supply of steel. We stand ready to serve our customers and believe this marks a significant shift in the landscape for The U. S. Steel industry.

These actions align with our long standing advocacy for fair trade practices and correcting market distortions. We will continue to monitor developments in the trade environment closely. Turning to the results of the fourth quarter, Net sales increased 6% sequentially, driven by higher shipments and strength in aerospace and defense product demand. Overall, aerospace and defense has been a bright spot for us in a year where we faced weaker demand in other end markets. Consolidated shipments increased 9% sequentially, again driven by higher aerospace and defense activity as well as energy and automotive shipments.

Turning to our end markets. Shipments to our industrial customers declined 6% sequentially, primarily driven by weakness in distribution and heavy equipment. On a positive note, we are seeing an increase in order activity across our distribution and broader industrial customer base in response to the trade environment. On a sequential basis, our shipments to energy customers increased 78%, albeit from a low base. However, we are encouraged by the coupling stock and drilling to opportunities that we are seeing in the energy sector as customers look to reliable domestic supply to meet their drilling and production needs.

I’d like to take a moment to talk about some newly launched programs for our energy customers. We have worked closely with offshore well design engineers to utilize our highly engineered material suitable for corrosive environments. Leveraging our advanced capabilities, later this year, we plan to produce seamless mechanical tubing specifically for use in tie back casings and couplings for one of the highest producing natural gas wells in the world. As new wells are explored, this specialty product remains at the forefront of innovation. Secondly, we have deepened our relationship with major petrochemical companies and have committed to CapEx investments to expand our offerings.

Our well established supply chains and highly engineered and qualified steel supports critical applications in this market, including high pressure tubes for low density polyethylene reactors. Natallus will soon be able to support 15 meter LDPE requirements as plants increase and upgrade their capacity. We’ve partnered with a highly regarded fabrication and machining operation to build a supply chain with our supply chain partner offering fully assembled LDPE reactors to the petrochemical industry. The high pressure tubes that we provide are one of the very few globally qualified materials for this critical component. We are targeting $20,000,000 in annual sales from these two important energy programs beginning in 2026.

These programs demonstrate our commitment to staying connected with our customers in the spirit of collaborative innovation. Moving to automotive. Shipments sequentially increased by 3%. Shipments in the back half of the year were negatively impacted by operational issues at our customers, which have since been resolved. Overall, light vehicle sales remain relatively steady and we are targeting approximately 40% of our shipments to the automotive sector in 2025.

On the topic of electric vehicles, it’s widely known that many OEMs have backed off of their 2,030 electric vehicle targets. However, we’re encouraged to be continuously evolving alongside our customers as they refine their North American EV platforms. For one OEM in particular, we have two power transmission shafts on all nine of their EV models. As a reminder, given our established partnership with our automotive customers, we remain committed to supporting all platforms, internal combustion, hybrid and electric vehicles. In aerospace and defense, fourth quarter shipments increased as expected to approximately 11,000 tons compared with approximately 3,000 tons in the third quarter.

On a full year basis, aerospace and defense sales increased by 17% to nearly $135,000,000 in 2024. This significant sales increase resulted in Aerospace and Defense representing 12% of total sales in 2024 compared with eight percent of the total in 2023. Related to specific projects within the defense sector, we continue to hit important milestones related to the installation of our Bloom reheat furnace. This asset is being designed to support the increase of capacity and finishing capability of high quality bar based products used in the production of artillery shells. In the meantime, we are actively developing partnerships in vital defense supply chains.

As an example, we were recently awarded a $4,000,000 purchase order for artillery shell canister tubing for the U. S. Army. Additionally, we are enthusiastic about expanding our participation in aerospace and defense and other sectors by leveraging vacuum arc remelt and vacuum induction melt steel combined with our unique downstream processing capability. With the support of trusted supply chain partners, we are targeting approximately $30,000,000 of revenue in 2025 using outside VAR and VIM products combined with our rolling and piercing capabilities.

Using this process path supports a large defense customers who supply the US military’s missile programs. Given the high level of demand for specialty metals, including bar and BIM products, Metallos is well positioned to increase our participation in this area in the future. Through continued focus and prudent investments, we intend to capitalize on this sustained growth trend for higher value specialty metals used in demanding applications. As we stated last quarter, we expect to grow aerospace and defense sales to over $250,000,000 by 2026. I’d like to provide a quick update on the status of our customer contracts.

I am pleased that we’ve wrapped up our calendar year customer price agreement negotiations, which cover approximately 70% of our 2025 order book. Average base price per tonne for customers covered by annual agreements is expected to decrease by low to mid single digits on a percentage basis in 2025 compared with average base price per ton for the full year 2024 mix dependent. For the remaining 30% of the order book with market spot pricing, we will continue to adjust pricing as demand evolves throughout the year. Our bar product lead times are currently at ten to twelve weeks depending on size and two product lead times are at ten weeks. Distribution inventory levels appear to be coming down and some restocking has begun.

To wrap up, our focus will continue to be on safety, exceptional customer service, new product development, especially in aerospace and defense, and our CapEx investments, all of which continue to advance our strategic imperatives to drive sustainable profitability and cash flow in all market conditions. Now, I’d like to turn the call over to Chris, who will provide more details on our financial performance and outlook.

Chris Westbrooks, Executive Vice President and Chief Financial Officer, Metalis: Thanks, Mike. Good morning and thank you for joining our earnings call. During 2024, Metallus made significant strides in a variety of areas, including advancing our safety management system and workforce development programs, expanding our participation in high growth aerospace and defense market, while continuing to support our automotive, industrial and energy customers in a challenging demand environment, and investing in our manufacturing facilities and processes to drive efficiency and future growth. These achievements were realized while continuing to return capital to shareholders and maintain a strong balance sheet. Now turning to the fourth quarter of twenty twenty four financial results.

From a top line revenue perspective, fourth quarter net sales totaled $240,500,000 sequential increase of $13,300,000 or 6%, primarily driven by a sequential increase in shipments of 10,300 tonnes. Mike previously covered the drivers of fourth quarter shipments by end market in his comments. The company reported a GAAP net loss of $21,400,000 in the fourth quarter or a loss of 0.5 per diluted share, inclusive of a $9,400,000 loss on the repurchases of convertible notes and an $8,500,000 non cash mark to market pension remeasurement loss. On an adjusted basis, the company reported a net loss in the fourth quarter of $3,300,000 or a loss of $0.08 per diluted share. Adjusted EBITDA was $8,300,000 in the fourth quarter, a sequential increase of $2,200,000 primarily driven by higher shipments and favorable product mix, partially offset by higher manufacturing costs.

The sequential increase in manufacturing costs of $10,300,000 in the fourth quarter was a result of lower cost absorption as well as the recognition of costs previously capitalized into inventory. Melt utilization declined to 56% in the fourth quarter from 60% in the third quarter as a result of the planned annual shutdown maintenance and additional planned downtime to balance inventory with demand. The company’s manufacturing assets and team are well positioned to run at a higher rate of utilization beginning in the first quarter as demand begins to recover. Now switching gears to pensions. In the fourth quarter, the company made $5,300,000 of

Mike Williams, President and Chief Executive Officer, Metalis: required pension contributions, resulting in total required

Chris Westbrooks, Executive Vice President and Chief Financial Officer, Metalis: contributions of approximately $43,000,000 resulting in total required contributions of approximately $43,000,000 in 2024. With the benefit of previous annuitization activities, the pension and retiree medical benefit liability has declined by approximately $150,000,000 since the end of twenty twenty three and declined by approximately $800,000,000 since the end of twenty twenty one. As of 12/31/2024, the underfunded position of the company’s pension and retiree medical plans totaled $171,000,000 As a result of the current underfunded position, funding rules and year end actuarial assumptions, the estimate for required pension contributions in 2025 is approximately 65,000,000 with a higher proportion of required contributions in the first quarter. Following this elevated level of required pension contributions in 2025, the company is estimating a significant reduction in required contributions in future years based on assumed investment performance. Moving to cash flow and liquidity.

During the fourth quarter, operating cash flow was $13,900,000 driven by lower levels of working capital. For the full year, the company generated operating cash flow of $40,300,000 Capital expenditures totaled $15,200,000 in the fourth quarter and sixty four point three million dollars for the full year in line with previously stated guidance. Approximately $8,000,000 of the company’s capital expenditures in 2024 were supported by government funding. Other important CapEx spending included safety upgrades such as machine guarding, furnace leak detection and automated testing equipment. Additionally, the automated grinding line construction and installation of the Harrison facility was a significant project in 2024.

This $18,000,000 investment, which is currently being commissioned, will significantly improve the efficiency of our finishing capabilities and is expected to generate over $3,000,000 in savings per year. Additionally, new gauging at one of our seamless mechanical tube piercing mills was upgraded last year to improve first time quality. Lastly, we continue to invest in maintenance CapEx across our manufacturing footprint, including items such as rolling mill rolls, tooling and electrical upgrades. These investments help ensure the reliability and integrity of the company’s assets. As it relates to government funding, during the fourth quarter, the company received $8,000,000 of cash funding from the government as part of the previously announced $99,750,000 funding agreement in support of the U.

S. Army’s mission of increasing munitions production. In total, during 2024, the company received $53,500,000 of the approximate $103,000,000 of total committed funding. Receipt of the remaining $50,000,000 of committed funding is expected throughout 2025 and into 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 as well as the new roller furnace at the Gambrynes facility.

Once commissioned, these investments will support the company’s targeted growth in aerospace and defense product sales as well as support all Metallis customers with more efficient and modern assets. From a total capital expenditure forecast perspective, we’re targeting approximately $125,000,000 this year, inclusive of approximately $90,000,000 of CapEx funded by the U. S. Government. We’ve included a slide in the latest investor presentation available on our website to show the timing of anticipated government funding in advance of related CapEx spending.

In terms of base CapEx for 2025, our focus includes important safety and maintenance investments, completion of prior year automation projects and growth CapEx to support anticipated energy product demand that Mike previously highlighted. Switching gears to shareholder return activities. Throughout 2024, the company continues to make progress on its share repurchase program. In total, the company repurchased 2,000,000 shares of its common stock for $37,600,000 last year, reducing outstanding shares by nearly 5%. At the end of twenty twenty four, the company had a balance of $102,800,000 remaining under its current share repurchase authorization.

As it relates to convertible notes, during the fourth quarter, we repurchased $7,800,000 of outstanding convertible notes for total cash of $17,200,000 The repurchase premium was driven by an increase in the company’s stock price, which was significantly in excess of the instruments conversion price. As a result of the fourth quarter convertible note repurchases, diluted shares outstanding will decrease by approximately 1,000,000 shares in the first quarter of twenty twenty five. The outstanding principal balance of the remaining convertible notes is $5,500,000 and the balance will be settled at or in advance of the December 2025 maturity date. Since the inception of common share repurchases in early twenty twenty two combined with the convertible note repurchase activities, we’ve reduced diluted shares outstanding by a significant 22% compared to the fourth quarter of twenty twenty one. These actions reflect the strength of the company’s balance sheet and confidence in through cycle cash flow generation.

Switching gears now for an update on our targeted $80,000,000 of profitability improvements in support of achieving our long term through cycle financial targets that were announced in early twenty twenty two. As you may recall, our previously communicated objective is to deliver sustainable profitability and cash flow in all business cycles and 2024 has proven out the business model in a challenging market environment. Over the last several years, the company has implemented the necessary manufacturing, commercial and process improvement actions to realize its $80,000,000 profitability improvement target. Although it’s difficult to see the impact of these actions in a weak demand environment like twenty twenty four, these investments and process improvements position the company for profitability improvement in the future. Turning now to the outlook.

We anticipate first quarter adjusted EBITDA to be higher than the fourth quarter. Commercially, first quarter shipments are expected to increase on a sequential basis as our order book continues to strengthen, particularly within the industrial end market. We also expect continued strength in aerospace and defense demand and steady shipments across the automotive and energy end markets in the first quarter. Additionally, raw material surcharge revenue per tonne is expected to sequentially increase in the first quarter, driven by a $50 per tonne increase in the number one bushelings scrap index in February, which will impact March surcharge revenue. Given the outcome of the annual customer price agreement negotiations that Mike summarized earlier, combined with weakness in spot pricing carried over from last year, we expect sequentially unfavorable pricemix in the first quarter.

Operationally, melt utilization is expected to increase to approximately 70% in the first quarter, resulting in improved fixed cost leverage and sequentially lower manufacturing costs. Contributing to the expected sequentially lower first quarter manufacturing costs is approximately $5,000,000 of planned annual shutdown maintenance that occurred in the fourth quarter. In terms of additional assumptions for the full year 2025, depreciation and amortization expense is expected to be approximately $58,000,000 in 2025. SG and A expense is anticipated to be approximately $85,000,000 to $90,000,000 this year, excluding IT transformation costs and amortization expense. Net interest income is expected to be lower than last year, driven by an anticipated decline in the company’s cash balance this year and lower market interest rates.

From an income taxes perspective, the rate is expected to be approximately 25% this year. And in terms of the share count, we estimate diluted shares to be approximately $44,000,000 in 2025, adjusted for any share repurchases and equity compensation activity. Regarding cash drivers, in addition to the approximately $65,000,000 of estimated required pension contributions that were discussed earlier, which are more heavily weighted to the first quarter of the year, we expect working capital to be a use of cash in the first quarter, driven by higher accounts receivable and inventory given the improving customer order book. As a result, we expect the first quarter of twenty twenty five to be operating cash flow negative with an anticipated improvement in operating and free cash flow as the year continues. Additionally, the timing of approximately $125,000,000 of CapEx is more heavily weighted to the second half of the year.

Also, we expect to receive approximately $37,000,000 of government funding this year to support our CapEx investments with the cash funding more heavily weighted to the first half of the year. As we progress to the first quarter of twenty twenty five, we’re optimistic about the opportunities that lie ahead. We remain committed to delivering value to our shareholders by driving profitable growth and executing our capital allocation strategy. Thanks to all of our employees, customers and suppliers for their continued support in achieving our shared objectives. To wrap up, thanks for your interest in Metallus.

We would now like to open the call for

Mike Williams, President and Chief Executive Officer, Metalis: questions. Thank

Audra, Conference Operator: you. We’ll take our first question from John Franzreb at Sidoti and Company.

John Franzreb, Analyst, Sidoti and Company: Good morning, everybody, and thanks for taking the questions.

Mike Williams, President and Chief Executive Officer, Metalis: I guess I’d like to start with

John Franzreb, Analyst, Sidoti and Company: the demand profile in the fourth quarter and coming into the first quarter. I’m curious how much you think of that is attributed to the rebalancing of demand that you saw in the fourth quarter versus maybe the tariff impact that we may be seeing in the first quarter. Can you kind of walk us through what you’re seeing there?

Mike Williams, President and Chief Executive Officer, Metalis: Sure, John. So I would very pleased to say that our order book is developing in a very healthy way. Situations that we haven’t seen for two to three quarters. The development and the positive momentum in our order book is really being driven by a couple of factors. One is

John Franzreb, Analyst, Sidoti and Company: the,

Mike Williams, President and Chief Executive Officer, Metalis: what I would call some recapture of automotive business that we’ve achieved in 2025. A much greater order increase coming from the industrial base, kind of spread heavily orientated to A and D, but kind of spread across the heavy equipment, some rail and other market segments within our industrial base. And then thirdly, what we’re seeing is really a restocking coming out of distribution. Distribution really held off the second half of last year, in a kind of a hand in mouth demand scenario and inventory levels have gotten fairly low in a number of products. And what we’re seeing is those customers come back in.

And then, I guess, the last item really is the trade environment where we’re getting a significant number of inquiries from new customers. Old customers that we haven’t serviced in a while and new customers. And I believe that’s pretty much attributed to the trade environment expectation going forward as these tick tariffs get implemented on March 12.

John Franzreb, Analyst, Sidoti and Company: So Mike, if I kind of want to summarize what you just said, it sounds like it’s a normal rebalance of demand is the first driver and the anticipation of the trade environment is this secondary driver? Is that the way to kind of look at it from your point of view?

Mike Williams, President and Chief Executive Officer, Metalis: Yes. I would say the first part really is the recapture of market share, particularly in automotive. And then we have the distribution folks reloading. And then we’re seeing much more activity coming out of the industrial base that was pretty weak second half of last year where there’s much more activity

John Franzreb, Analyst, Sidoti and Company: there. Understood. And I mean,

Mike Williams, President and Chief Executive Officer, Metalis: again, we’re pretty pleased because we have a pretty good quarter backlog. We have much longer visibility. Our lead times have almost doubled from where they were in the fourth quarter. So, I think this is more of a normal environment that we haven’t experienced in 2024. So we’re still somewhat in a wait and see how the demand evolves over the next two quarters.

John Franzreb, Analyst, Sidoti and Company: Got it. And I might have missed this, but is there any expected downtime in the first quarter?

Mike Williams, President and Chief Executive Officer, Metalis: Actually, we’ve already experienced downtime. We had, due to the severe cold weather in our region, we had power interruptions early on in January. However, we expect to fully run, just with our normal, normal, every other week outage activity, maintenance outage activity, but no expected or planned downtime.

John Franzreb, Analyst, Sidoti and Company: Got it. And you mentioned some of this at, I guess, Chris mentioned in his closing remarks about that $80,000,000 target. I guess there’s two things. Because the first way Chris phrased it, it sounds like all the upgrades were finished and it’s really just a matter of volume coming back. But then later on he mentioned that there’s sort of expected IT upgrades that are going to incur in 2025.

So I’m curious, are those two items independent of each other or is all the necessary upgrades that you plan for the $80,000,000 target been put in place already?

Mike Williams, President and Chief Executive Officer, Metalis: Well, predominantly the IT transformation upgrades are independent of the other investments. However, all the other investments, particularly the new AGL line, some of the new inspection technology that we’ve installed, that all require support from the IT discipline. So they are involved in those projects. But what Chris is referring to is really the IT transformation project, which is totally separate from those other investments.

John Franzreb, Analyst, Sidoti and Company: Okay. One last question. I’ll get somebody else some questions. I’m kind of curious about the share repurchase and the 1,000,000 lower share count because I guess as a point of clarification, is that from the average count of twenty twenty four or is that from the fourth quarter number Because I thought I heard 44,000,000 shares was the number we should use for the full year. So, I just want to make sure I got that right.

Chris Westbrooks, Executive Vice President and Chief Financial Officer, Metalis: Yes. John, this is Chris. It’s down from the fourth quarter. That activity happened towards the end of the fourth quarter, so there’s a little bit of impact in Q4. It’s hard to see in the fourth quarter given that we are in a net loss position from a GAAP standpoint, but I think 44% on average on a weighted average basis is a good estimate for 2025

John Franzreb, Analyst, Sidoti and Company: Okay. Thank you. So I’ll get back into queue. Thank you, Mike.

Mike Williams, President and Chief Executive Officer, Metalis: Thank you.

Audra, Conference Operator: We’ll move next to Dave Storms at Stonegate.

Dave Storms, Analyst, Stonegate: Good morning.

Mike Williams, President and Chief Executive Officer, Metalis: Good morning, Dave.

Dave Storms, Analyst, Stonegate: Good morning. Just hoping we could start with seasonality of 2025. Are you expecting anything unusual? Should we plan for maybe a bit of a Q1 bump as customers try to get ahead of some of these tariffs? Anything like that would be very helpful.

Mike Williams, President and Chief Executive Officer, Metalis: Well, I think the restocking is a little bit of a bubble, but then should level out. I still think that people were still waiting to see whether the tariffs, get implemented as stated today, and how long they last or will they last? So I somewhat expect, that there’s further demand development in a positive way potentially out there as people look to consume their current inventories that are foreign imported and look to secure domestic demand going forward. And Dave, if I

Chris Westbrooks, Executive Vice President and Chief Financial Officer, Metalis: could add to that from a timing standpoint, Aerospace and Defense, we are expecting that to ramp throughout the year as our customers bring their capacity online and ramp up their production. So we’re optimistic that we’re going to have a strong year in Aerospace Defense, but it’s going to continue to grow throughout 2025 and into 2026.

Dave Storms, Analyst, Stonegate: Understood. So then with that expected increase in demand and lead times currently sitting around three months, should we expect that to increase? And are you seeing any customers maybe ordering a little bit extra to get ahead of those lead times? Or does that feel pretty normal for the industry?

Mike Williams, President and Chief Executive Officer, Metalis: Right now, it feels fairly normal. It’s very hard for us to decipher whether people are over ordering for security reasons, and future demand. But again, I don’t think we’re back to the we’re not totally back to the 2122, ’20 ’3 type demand, from an order book and an order backlog standpoint. But we sure are, on our way there. So, my crystal ball is not that clear beyond, the order book that we have today and the positive conversations that we’re having with our customers and the hard work the sales team is putting forth as well as the business development team in securing additional new product applications in aerospace and defense.

As well as we’ve gotten some gain recapture in energy as well. And that’s all we’re sixty days into the year. That’s all at least sends strong positive messages to us right now. But we’re going to have to wait and see how it evolves.

Dave Storms, Analyst, Stonegate: Understood. And if I could just ask one more around end markets. I thought you mentioned in the prepared remarks that you’re targeting 40% of shipments for auto in 2025, which looks to me to be down a little bit year over year if that holds up. Is that a product of weaker expected OEM market or maybe a stronger than expected stronger than historical aerospace and defense industry or industrial market?

Mike Williams, President and Chief Executive Officer, Metalis: Yes. I mean, when you have weak markets, automotive is pretty steady. So they became a larger share of our total shipments in 2024. Going forward, we say 40% because of our view and our understanding of the industrial demand heavily driven by aerospace and defense. And then the activity that we’re seeing in energy increasing modestly, again, from a very low level, but increasing.

And some of that’s driven by we recaptured some market share there. But energy is heavily affected by imports. So as the import the consumption of our end customers working through the import inventories they have should drive higher demand from the domestic market. And John, to add I’m sorry, Dave, to

Chris Westbrooks, Executive Vice President and Chief Financial Officer, Metalis: add a little bit there, our overall view of shipments in 2025 is stronger than 2024. So part of that is the denominator in that calculation. Yes, by far. Driving the percentage lower, but our participation is still being strong.

Dave Storms, Analyst, Stonegate: That’s all very helpful. Thank you for taking my questions and good luck in Q1.

Mike Williams, President and Chief Executive Officer, Metalis: Thanks,

Audra, Conference Operator: We’ll go next to Philip Gibbs at KeyBanc Capital Markets.

Philip Gibbs, Analyst, KeyBanc Capital Markets: Hey, good morning.

Mike Williams, President and Chief Executive Officer, Metalis: Hey, Phil.

Philip Gibbs, Analyst, KeyBanc Capital Markets: Question is just on the bridge in Q1. You talked about unfavorable price mix. Is that an absolute impact or a per, I guess, a per ton impact or both?

Mike Williams, President and Chief Executive Officer, Metalis: It’s really and, Chris can probably give you a little bit more clarity, but it’s really driven by what we refer to it as a mix within the mix. It’s really we had more carbon SBQ sales than we did on the alloy products that we sell. So you tend to see your surcharges are going to be lower, affecting your overall revenue. And then the base prices are lower on the, what I would call, the more commodity carbons versus the specialty alloys. We expect as the industrial base continues to improve and the A and D demand continues to increase, that’ll drive a richer mix for us on the alloy products versus the more the vanilla carbon products.

Philip Gibbs, Analyst, KeyBanc Capital Markets: That makes sense. I’m thinking about the standard bridge that you all provide in your release in this quarter like price mix was positive, I can’t remember, but maybe $5,000,000 or so. And then you have the manufacturing and you have all those components. Is that price mix expected when you make those comments, is that piece of it expected to be down relative to Q4? You obviously have the manufacturing piece getting better, volumes getting better, spread getting better on the raw material piece.

But is that price mix should we expect that piece to be on an absolute basis down based on the comments?

Chris Westbrooks, Executive Vice President and Chief Financial Officer, Metalis: Yes.

Philip Gibbs, Analyst, KeyBanc Capital Markets: Okay. That’s helpful. And the pension contribution that you talked about, Chris, the $65,000,000 a lot of that weighted in Q1. Is there any does that include OPEB as well? I can’t remember.

Chris Westbrooks, Executive Vice President and Chief Financial Officer, Metalis: No, it does not. OPEB typically leverages the assets is how we pay most of those. So there’s a withdrawal and you pay the truly the bargaining plan that’s driving the majority of that contribution in 2025.

Philip Gibbs, Analyst, KeyBanc Capital Markets: Is there anything that we should be modeling for OPEB cash contributions?

Chris Westbrooks, Executive Vice President and Chief Financial Officer, Metalis: Just kind of a normal level of activity there.

Philip Gibbs, Analyst, KeyBanc Capital Markets: And then, on the newer products that you all talked about on the seamless side, did you say that that was seamless mechanical tubing or seamless OCTG?

Mike Williams, President and Chief Executive Officer, Metalis: No, it’s mechanical tubing. Okay. It’s basically the missile liner shells, and then the specialized canisters that are for smoke artillery shells.

Philip Gibbs, Analyst, KeyBanc Capital Markets: Thank you. And then lastly, there was a kind of a certainly a soft patch in automotive in the back half. Some of the big three, one in particular trying to take their inventory down. There’s a couple right now that do have pretty elevated inventories and maybe some reduction plans in the first half. How are you thinking about the year just in general within automotive?

It feels like we’ve been in general as a steel industry underserving that market the last couple of quarters, but part of which is related to just inventory rebalancing. And it seems like to me that there all else equal should be some sort of pickup all else equal in auto maybe Q2, Q3, I don’t know. But, I guess help us think through kind of what you all see going on there. Thank you.

Mike Williams, President and Chief Executive Officer, Metalis: Yes. So we kind of right now our view is, if you look at the platforms that we’re on and the applications within those platforms, we’re well positioned. We see modest increases in automotive demand in 2025. And I think it’s really going to be how interest rates evolve, how people they’re buying habits and patterns on new vehicles. But I just saw a report early this morning, I think, one of the other banks saying that they believe the SAR rate is going to go up slightly, maybe a couple of hundred thousand units based on early assumptions of activity in February.

Philip Gibbs, Analyst, KeyBanc Capital Markets: Thanks everyone. Appreciate it.

Mike Williams, President and Chief Executive Officer, Metalis: Thanks Bill. Thanks.

Audra, Conference Operator: And that concludes our Q and A session. I will now turn the conference back over to Jennifer for closing remarks.

Jennifer Beeman, Director of Communications and Investor Relations, Metalis: Great. Thanks, everyone, for joining us today. And that concludes our call.

Audra, Conference Operator: And again, this does conclude today’s conference call. Thank you for your participation. You may now disconnect.

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