Metallus Inc.

Previous wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help investors understand our results of operations, financial condition and current business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2025.

Current wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help investors understand our results of operations, financial condition and current business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for the three months ended March 31, 2026.

Previous wording

The following items represent key trends and events during the three and nine months ended September 30, 2025:

Current wording

The following items represent key trends and events during the three months ended March 31, 2026:

Previous wording

Capital investments: The Company continues to invest organically with capital investments of $28.4 million and $73.7 million in the three and nine months ended September 30, 2025, respectively. Investments included targeted spending for improved safety, equipment automation, and continuous improvement to drive best-in-class quality and asset reliability, as well as new assets to increase throughput and efficiency which are being substantially funded by the U.S. government.

Current wording

Capital investments: The Company continues to invest organically with capital investments of $24.7 million in the three months ended March 31, 2026. Investments included targeted spending for improved safety, equipment automation, and continuous improvement to drive best-in-class quality and asset reliability, as well as new assets to increase throughput and efficiency which are being substantially funded by the U.S. government.

Previous wording

Defense Contract: In the three and nine months ended September 30, 2025, the Company received $10.0 million and $28.0 million, respectively, from the U.S. government as part of the previously announced $99.75 million funding agreement to support the U.S. Army's mission of increasing munitions production for national security in the upcoming years. The agreement supports the commissioning of two major assets: a continuous bloom reheat furnace and a roller hearth heat treat furnace. The Company expects the remaining funding to be provided as mutually agreed upon milestones are achieved throughout the project. The Company is targeting late 2025 for the new bloom reheat furnace to be operational and the first half of 2026 for the new roller furnace to be operational. To date, the Company has received $81.5 million of government funding, with total spend of $59.6 million.

Current wording

Government Funding: In the three months ended March 31, 2026, the Company received $4.9 million from the U.S. government as part of the previously announced $99.75 million funding agreement to support the U.S. Army's mission of increasing munitions production for national security in the upcoming years. The agreement supports the commissioning of two major assets: a continuous bloom reheat furnace and a roller hearth heat treat furnace. The Company expects the remaining funding to be provided as mutually agreed upon milestones are achieved throughout the project. The Company plans to commission and ramp-up production of the new bloom reheat furnace and roller furnace during 2026. Through March 31, 2026, and inclusive of amounts received in 2024 and 2025, the Company has received $91.5 million of government funding, with total spend of $108.1 million.

Previous wording

Liquidity: Our balance sheet has remained strong, with total liquidity of $436.9 million, including cash and cash equivalents of $191.5 million as of September 30, 2025. Operating cash flow of $22.0 million in the third quarter was primarily driven by profitability. Operating cash flow totaled $17.9 million in the nine months ended September 30, 2025.

Current wording

Liquidity: Our balance sheet has remained strong, with total liquidity of $374.7 million, including cash and cash equivalents of $104.0 million as of March 31, 2026. Operating cash outflow of $26.9 million in the first quarter was primarily due to higher working capital requirements to support ramping business needs and the timing of required pension contributions, as expected.

Previous wording

Share repurchase program: The Company repurc hased 0.2 million and 0.9 million common shares in the open market at an aggregate cost of $3.0 million and $11.9 million for the three and nine months ended September 30, 2025, respectively. As of September 30, 2025, the Company had a balance of $90.9 million remaining on its authorized share repurchase program.

Current wording

Share repurchase program: The Company repurc hased 0.3 million common shares in the open market at an aggregate cost of $4.3 million in the three months ended March 31, 2026. As of March 31, 2026, the Company had a balance of $85.4 million remaining on its authorized share repurchase program.

Previous wording

Net sales for the three months ended September 30, 2025 were $305.9 million, an increase of $78.7 million, or 34.6% compared with the three months ended September 30, 2024. The increase in net sales was primarily driven by higher shipments and favorable surcharges, partially offset by unfavorable price/mix. Higher volume of 43.2 thousand ship tons resulted in a net sales increase of $63.9 million. The increase in surcharges of $18.8 million was primarily due to an improvement in raw material surcharge revenue per ton as a result of higher scrap prices. Unfavorable price/mix of $4.0 million was driven by lower base prices across all end-market sectors. Excluding surcharges, net sales increased $59.9 million or 32.9%.

Current wording

Net sales for the three months ended March 31, 2026 were $308.3 million, an increase of $27.8 million, or 9.9% compared with the three months ended March 31, 2025. The increase in net sales was primarily driven by higher shipments and surcharges as a result of higher scrap and alloy market prices. Higher volume of 10.9 thousand ship tons resulted in a net sales increase of $16.1 million across all end-markets except energy. The increase in surcharges of $11.7 million was primarily a result of higher shipments, scrap and alloy prices and energy surcharges. Excluding surcharges, net sales increased $16.1 million or 7.2%.

Previous wording

Gross profit for the nine months ended September 30, 2025 increased $2.3 million, or 2.6% compared with the nine months ended September 30, 2024. The increase was driven by higher volume, favorable raw material spread, better manufacturing performance, partially offset by unfavorable price/mix. All end-market sectors were favorably impacted by higher volume. Raw material spread was favorable due to higher scrap prices and shipments. Improved manufacturing performance was primarily due to increased fixed cost leverage on higher production levels. Higher automotive shipments and lower base prices across all end-markets except aerospace & defense, resulted in unfavorable price/mix.

Current wording

Gross profit for the three months ended March 31, 2026 increased $3.2 million, or 14.6% compared with the three months ended March 31, 2025. The increase was primarily driven by higher volume, favorable price/mix and raw material spread, partially offset by higher manufacturing costs. All end-market sectors except energy were favorably impacted by higher volume. Favorable price/mix was due to higher aerospace & defense shipments, partially offset by higher automotive shipments. Raw material spread increased due to higher shipments and alloy prices. Unfavorable manufacturing was due to higher utility costs, increased costs related to the ratified union contract, and costs related to investments in our manufacturing optimization projects, partially offset by increased fixed cost leverage on higher production volume.

Previous wording

The charts below present selling, general and administrative (“SG&A”) expense for the three and nine months ended September 30, 2025 and 2024.

Current wording

The charts below present selling, general and administrative (“SG&A”) expense for the three months ended March 31, 2026 and 2025.

Previous wording

SG&A expense for the three months ended September 30, 2025 increased by $2.0 million, or 8.9%, compared with the same period in 2024. The increase was primarily due to higher variable compensation and salary and benefits.

Current wording

SG&A expense for the three months ended March 31, 2026 decreased by $2.1 million, or 8.6%, compared with the same period in 2025. The decrease was primarily due to lower professional services and salary and benefits expense.

Previous wording

Net interest income for the three and nine months ended September 30, 2025 was $1.4 million and $4.2 million, respectively, compared with net interest income of $2.4 million and $7.6 million for the three and nine months ended September 30, 2024, respectively. The decline in net interest income was primarily due to a combination of lower interest rates and average cash balances in 2025 compared to 2024. Refer to “Note 11 - Financing Arrangements” in the Notes to the unaudited Consolidated Financial Statements for additional information.

Current wording

Net interest income for the three months ended March 31, 2026 was $0.4 million compared with net interest income of $1.5 million for the three months ended March 31, 2025. The decline in net interest income was primarily due to a combination of lower interest rates and average cash balances in 2026 compared to 2025. Refer to “Note 11 - Financing Arrangements” in the Notes to the unaudited Consolidated Financial Statements for additional information.

Previous wording

For more details on the aforementioned remeasurements, refer to “Note 12 - Retirement and Postretirement Plans."

Current wording

For more details on the aforementioned remeasurement, refer to “Note 12 - Retirement and Postretirement Plans."

Previous wording

The effective tax rate for the months ended September 30, 2025 was 25.7% compared to 16.9% in the three months ended September 30, 2024. The increase in the effective tax rate for the three months ended September 30, 2025 is primarily related to being in a taxable income position in the third quarter of 2025.

Current wording

The effective tax rate for the three months ended March 31, 2026 was 32.5% compared to 53.3% in the three months ended March 31, 2025. The decrease in the effective tax rate for the three months ended March 31, 2026 is primarily related higher pre-tax income.

Previous wording

Our principal sources of liquidity are cash and cash equivalents, cash flows from operations and available borrowing capacity under our Credit Agreement. As of September 30, 2025, taking into account our view of industrial, automotive, aerospace & defense and energy market demand for our products, and our 2025 operating and long-range plan, we believe that our cash balance as of September 30, 2025, projected cash generated from operations, borrowings available under the Credit Agreement and committed government funding to support capital investments, will be sufficient to satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations, including servicing our debt and pension and postretirement benefit obligations, for at least the next twelve months. We expect capital expenditures to be approximately $120 million in 2025, inclusive of approximately $90 million of capital expenditures funded by the U.S. government.

Current wording

Our principal sources of liquidity are cash and cash equivalents, cash flows from operations and available borrowing capacity under our Credit Agreement. As of March 31, 2026, taking into account our view of industrial, automotive, aerospace & defense and energy market demand for our products, and our 2026 operating and long-range plan, we believe that our cash balance as of March 31, 2026, projected cash generated from operations, borrowings available under the Credit Agreement and committed government funding to support capital investments, will be sufficient to satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations, including pension and postretirement benefit obligations, for at least the next twelve months. We expect capital expenditures to be approximately $70 million in 2026, inclusive of approximately $35 million of capital expenditures funded by the U.S. government.

Previous wording

For the nine months ended September 30, 2025, the Company repurchased approximately 0.9 million common shares at an aggregate cost of $11.9 million in the open market, which equates to an average repurchase price of $14.31 per share. As of September 30, 2025, the Company had a balance of $90.9 million remaining under its share repurchase program. The share repurchase program is intended to return capital to shareholders while also offsetting dilution from annual equity compensation awards. The share repurchase program does not require the Company to acquire any dollar amount or number of shares and may be modified, suspended, extended or terminated by the Company at any time without prior notice. These authorizations reflect the continued confidence of the Board and senior leadership in the Company’s ability to generate sustainable through-cycle profitability while maintaining a strong balance sheet and cash flow.

Current wording

For the three months ended March 31, 2026, the Company repurchased approximately 0.3 million common shares at an aggregate cost of $4.3 million in the open market, which equates to an average repurchase price of $15.55 per share. As of March 31, 2026, the Company had a balance of $85.4 million remaining under its share repurchase program. The share repurchase program is intended to return capital to shareholders while also offsetting dilution from annual equity compensation awards. The share repurchase program does not require the Company to acquire any dollar amount or number of shares and may be modified, suspended, extended or terminated by the Company at any time without prior notice. These authorizations reflect the continued confidence of the Board and senior leadership in the Company’s ability to generate sustainable through-cycle profitability while maintaining a strong balance sheet and cash flow.

Previous wording

The following table reflects the major categories of cash flows for the nine months ended September 30, 2025 and 2024. For additional details, please refer to the unaudited Consolidated Statements of Cash Flows included in this quarterly report.

Current wording

The following table reflects the major categories of cash flows for the three months ended March 31, 2026 and 2025. For additional details, please refer to the unaudited Consolidated Statements of Cash Flows included in this quarterly report.

Previous wording

Net cash used by investing activities for the nine months ended September 30, 2025 was $44.0 million compared to net cash used of $3.6 million for the nine months ended September 30, 2024. The change was due to higher capital expenditures in the nine months ended September 30, 2025 compared to the same period in 2024, partially offset by proceeds from government funding.

Current wording

Net cash used by investing activities for the three months ended March 31, 2026 was $18.8 million compared to net cash used of $12.9 million for the three months ended March 31, 2025. The change was due to lower proceeds from government funding in the three months ended March 31, 2026 compared to the same period in 2025.

Previous wording

Net cash used by financing activities for the nine months ended September 30, 2025 was $23.6 million compared to net cash used of $48.2 million in the nine months ended September 30, 2024. The change was primarily due to lower shares surrendered for taxes during the nine months ended 2025 compared to the same period in 2024, lower repurchases of common shares in 2025 compared to the same period in 2024, partially offset by the repurchase of Convertible Notes during the second quarter of 2025.

Current wording

Net cash used by financing activities for the three months ended March 31, 2026 was $7.0 million compared to net cash used of $8.2 million in the three months ended March 31, 2025. The change was primarily due to lower repurchases of common shares, partially offset by higher shares surrendered for taxes in 2026 compared to the same period in 2025.

Previous wording

Certain statements set forth in this Quarterly Report on Form 10-Q (including our forecasts, beliefs and expectations) that are not historical in nature are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, Management’s Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements. Forward-looking statements generally will be accompanied by words such as “anticipate,” “aspire,” “believe,” “could,” “estimate,” “expect,” “forecast,” “outlook,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “strategic direction,” “strategy,” “target,” “will,” “would,” or other similar words, phrases or expressions that convey the uncertainty of future events or outcomes. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q. We caution readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of us due to a variety of factors, such as:

Current wording

“could,” “estimate,” “expect,” “forecast,” “outlook,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “strategic direction,” “strategy,” “target,” “will,” “would,” or other similar words, phrases or expressions that convey the uncertainty of future events or outcomes. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q. We caution readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of us due to a variety of factors, such as: