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 months ended March 31, 2026.

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 and six months ended June 30, 2026.

Previous wording

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

Current wording

The following items represent key trends and events during the three and six months ended June 30, 2026:

Previous 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.

Current wording

Capital investments: The Company continues to invest organically with capital investments of $15.2 million and $39.9 million including $9.5 million and $27.8 million for projects funded by the U.S. governmentfor the three and six months ended June 30, 2026, 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.

Previous 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.

Current wording

Government funding: The Company received the final $11.3 million during the second quarter of 2026 and $16.2 million in the first half of 2026 from the U.S. Army 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 two major strategic assets: a continuous bloom reheat furnace and a roller hearth heat treat furnace. The Company plans to commission the new bloom reheat furnace in the third quarter, and the roller furnace remains on schedule for commissioning in 2026 as well. Through June 30, 2026, and inclusive of amounts received in prior periods, the Company has received $102.8 million of government funding, consisting of $99.75 million from the U.S. Army and $3.0 million from JobsOhio as part of the previously announced grant, with total spend of $117.6 million.

Previous 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.

Current wording

Share repurchase program: The Company repurchased 0.2 million and 0.5 million common shares in the open market at an aggregate cost of $3.6 million and $7.9 million for the three and six months ended June 30, 2026, respectively. As of June 30, 2026, the Company has $81.8 million remaining under its authorized share repurchase program.

Previous wording

(1) Please see discussion of non-GAAP financial measures in Form 10-Q – Net Sales Adjusted to Exclude Surcharges

Current wording

(1) Please see discussion of non-GAAP financial measures in Form 10-Q – Net Sales, Excluding Surcharges.

Previous 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%.

Current wording

Net sales for the three months ended June 30, 2026 were $341.0 million, an increase of $36.4 million, or 12.0% compared with the three months ended June 30, 2025. The increase in net sales was driven by higher volume of shipments and related surcharges and improved price/mix. The increase in surcharges of $12.7 million was primarily a result of higher shipments, alloy market prices and energy surcharges. Favorable price/mix of $12.3 million was primarily due to higher aerospace & defense shipments and increased base prices across all end markets, except automotive. Higher volume of 6.5 thousand ship tons resulted in a net sales increase of $11.4 million. Excluding surcharges, net sales increased $23.7 million or 10.0%.

Previous wording

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

Current wording

The charts below present selling, general and administrative (“SG&A”) expense for the three and six months ended June 30, 2026 and 2025.

Previous 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.

Current wording

SG&A expense for the six months ended June 30, 2026 decreased by $1.3 million, or 2.8% compared with the six months ended June 30, 2025. The decrease was primarily due to lower professional services, partially offset by higher salary and benefits and variable pay compensation.

Previous 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.

Current wording

Net interest income for the three and six months ended June 30, 2026 was $0.1 million and $0.5 million, respectively, compared with net interest income of $1.3 million and $2.8 million for the three and six months ended June 30, 2025, respectively. The decline in net interest income was primarily due to a combination of lower interest rates and lower average cash balances in 2026 compared to 2025. Additionally, for the three and six months ended June 30, 2026, net interest income included a partial write-off of debt issuance costs of $0.1 million related to the refinancing of the Amended Credit Agreement. Refer to “Note 12 - Financing Arrangements” in the Notes to the unaudited Consolidated Financial Statements for additional information.

Previous 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.

Current wording

The provision for income taxes for the three and six months ended June 30, 2026 was $3.0 million and $5.6 million compared to a provision for income taxes of $4.9 million and $6.5 million for similar periods in 2025. The decrease in the effective tax rate for the three and six months ended June 30, 2026 is primarily related to higher pre-tax income and the limitations of the tax deductibility of the loss on extinguishment of debt on the Convertible Senior Notes in the prior year.

Previous wording

On September 30, 2022, the Company, as borrower, and certain domestic subsidiaries of the Company, as subsidiary guarantors, entered into a Fourth Amended and Restated Credit Agreement (the “Amended Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, which further amended and restated the Company’s secured Third Amended and Restated Credit Agreement, dated as of October 15, 2019.

Current wording

On June 30, 2026, the Company, as borrower, and certain domestic subsidiaries of the Company, as subsidiary guarantors (the “Subsidiary Guarantors”), entered into a Fifth Amended and Restated Credit Agreement (the “Amended Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the lenders party thereto (collectively, the “Lenders”), which further amends and restates the Company’s existing secured Fourth Amended and Restated Credit Agreement, dated as of September 30, 2022.

Previous wording

(1) As of March 31, 2026, and December 31, 2025, Metallus had less than $400.0 million in collateral assets to borrow against.

Current wording

(1) As of June 30, 2026, Metallus had less than $300.0 million in collateral assets to borrow against. As of December 31, 2025, Metallus had less than $400.0 million in collateral assets to borrow against.

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 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.

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 June 30, 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 June 30, 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 servicing our debt and 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 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.

Current wording

For the three months ended June 30, 2026, the Company repurchased approximately 0.2 million common shares in the open market at an aggregate cost of $3.6 million, which equates to an average repurchase price of $18.70 per share. For the six months ended June 30, 2026, the Company repurchased approximately 0.5 million common shares in the open market at an aggregate cost of $7.9 million, which equates to an average repurchase price of $16.83 per share. As of June 30, 2026, the Company had a balance of $81.8 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 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.

Current wording

The following table reflects the major categories of cash flows for the six months ended June 30, 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 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.

Current wording

Net cash used by investing activities for the six months ended June 30, 2026 was $22.7 million compared to net cash used of $25.6 million for the six months ended June 30, 2025. The change was due to lower capital expenditures and reduced proceeds from government funding in the first half of 2026.

Previous 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.

Current wording

Net cash used by financing activities for the six months ended June 30, 2026 was $12.1 million compared to net cash used of $20.6 million for the six months ended June 30, 2025. The change was primarily due to the repurchase of Convertible Notes during the second quarter of 2025 and lower repurchases of common shares in 2026, partially offset by debt issuance costs in 2026 with no similar costs in 2025.

Previous 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:

Current 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:

Previous wording

with respect to the equipment investments to support the U.S. Army’s mission of ramping up munitions production in the coming years, whether the funding awarded to support these investments is received on the anticipated timetable, whether the Company is able to successfully complete the installation and commissioning of the new assets on the targeted budget and timetable, and whether the anticipated increase in throughput is achieved; and

Current wording

with respect to the equipment investments to support the U.S. Army’s mission of ramping up munitions production in the coming years, and whether the anticipated increase in throughput is achieved; and