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 six months ended June 30, 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 nine months ended September 30, 2026.

Previous wording

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

Current wording

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

Previous 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.

Current wording

Capital investments: The Company continues to invest organically with capital investments of $13.1 million and $53.0 million, including $4.9 million and $32.7 million for projects substantially funded by the U.S. governmentfor the three and nine months ended September 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: 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.

Current wording

Government funding: The Company received the final $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. Additionally, the Company received $1.0 million from JobsOhio during the first half of 2026. The agreement supports two major strategic assets: a continuous bloom reheat furnace and a roller hearth heat treat furnace. During the third quarter of 2026, the related assets were fully commissioned and depreciation commenced. Through September 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 $122.5 million.

Previous wording

Liquidity: Our balance sheet has remained strong, with total liquidity of $394.8 million, including cash and cash equivalents of $108.6 million as of June 30, 2026. During the second quarter, the Company refinanced its asset-based revolving credit facility ("Credit Facility") and extended the maturity date to June 2031. Following the amendment, Credit Facility available capacity was $300.0 million with improvement in a variety of financial terms and covenants, including reduced annual fees.

Current wording

Liquidity: Our balance sheet has remained strong, with total liquidity of $388.7 million, including cash and cash equivalents of $98.6 million as of September 30, 2026. During the second quarter, the Company refinanced its asset-based revolving credit facility ("Credit Facility") and extended the maturity date to June 2031. Following the amendment, Credit Facility available capacity was $300.0 million with improvement in a variety of financial terms and covenants, including reduced annual fees.

Previous 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.

Current wording

Share repurchase program: The Company repurchased 0.2 million and 0.7 million common shares in the open market at an aggregate cost of $3.6 million and $11.5 million for the three and nine months ended September 30, 2026, respectively. As of September 30, 2026, the Company has $78.2 million remaining under its authorized share repurchase program.

Previous 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%.

Current wording

Net sales for the three months ended September 30, 2026 were $337.2 million, an increase of $31.3 million, or 10.2% compared with the three months ended September 30, 2025. The increase in net sales was driven by favorable surcharges, improved price/mix, and higher shipment volume. The increase in surcharges of $13.5 million was primarily a result of higher alloy and scrap market prices, as well as energy surcharges. Favorable price/mix of $11.2 million was primarily due to higher aerospace & defense shipments and increased base prices across all end markets, except automotive. Higher shipment volume of 2.7 thousand ship tons resulted in a net sales increase of $6.6 million. Excluding surcharges, net sales increased $17.8 million or 7.4%.

Previous wording

The charts below present net sales and shipments for the six months ended June 30, 2026 and 2025.

Current wording

The charts below present net sales and shipments for the nine months ended September 30, 2026 and 2025.

Previous wording

Net sales for the six months ended June 30, 2026 were $649.3 million, an increase of $64.2 million, or 11.0% compared with the six months ended June 30, 2025. The increase in net sales was driven by higher shipments, surcharges and favorable price/mix. Higher volume of 17.5 thousand ship tons, resulted in a net sales increase of $28.7 million. Higher surcharge per ton resulted in a net sales increase of $24.4 million. Favorable price/mix of $11.1 million was driven by higher aerospace & defense shipments and increased base prices, primarily within the industrial end market. Excluding surcharges, net sales increased $39.8 million or 8.7%.

Current wording

Net sales for the nine months ended September 30, 2026 were $986.5 million, an increase of $95.5 million, or 10.7% compared with the nine months ended September 30, 2025. The increase in net sales was driven by favorable surcharges, higher shipment volume, and improved price/mix. Higher surcharge per ton resulted in a net sales increase of $37.9 million. Higher shipment volume of 20.1 thousand ship tons, resulted in a net sales increase of $35.4 million. Favorable price/mix of $22.2 million was driven by higher aerospace & defense shipments and increased base prices, primarily within the industrial end market. Excluding surcharges, net sales increased $57.6 million or 8.2%.

Previous wording

Gross profit for the three months ended June 30, 2026 increased $1.9 million, or 5.9% compared with the three months ended June 30, 2025. The increase was driven by favorable price/mix and higher shipment volume, partially offset by higher manufacturing costs and unfavorable raw material spread. Favorable price/mix was due to higher aerospace & defense shipments and improved base prices, particularly in the industrial end market. Higher automotive and aerospace & defense shipments were partially offset by slightly lower shipments to energy and industrial end markets. Manufacturing was unfavorable due to higher energy costs and higher maintenance costs to address downstream asset reliability, partially offset by improved fixed cost leverage on higher production volume. Raw material spread was unfavorable due to lower scrap spread, partially offset by higher alloy spread.

Current wording

Gross profit for the three months ended September 30, 2026 increased $1.3 million, or 3.7% compared with the three months ended September 30, 2025. The increase was driven by favorable price/mix, partially offset by higher manufacturing costs and unfavorable raw material spread. Favorable price/mix was due to higher aerospace & defense shipments and improved base prices, particularly in the industrial end market. Manufacturing performance was unfavorably impacted by higher maintenance costs associated with improving downstream asset reliability and higher energy rates, as well as planned shutdown costs and an increase in power curtailments, partially offset by improved fixed-cost absorption from higher production volumes. Raw material spread was unfavorable due to lower scrap spread, partially offset by higher alloy spread.

Previous wording

The chart below presents the drivers of the gross profit variance from the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

Current wording

The chart below presents the drivers of the gross profit variance from the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2026.

Previous wording

Gross profit for the six months ended June 30, 2026 increased $5.1 million, or 9.4% compared with the six months ended June 30, 2025. The increase was driven by favorable price/mix, higher volume, partially offset by higher manufacturing costs and unfavorable raw material spread. Favorable price/mix was due to higher aerospace & defense shipments and improved base prices, particularly in the industrial end market. Higher automotive and aerospace & defense shipments were partially offset by slightly lower shipments to energy and industrial end markets. Manufacturing was unfavorable due to higher energy costs and higher maintenance costs to address downstream asset reliability, partially offset by improved fixed cost leverage on higher production volume. Raw material spread was unfavorable due to lower scrap spread, mostly offset by higher alloy spread and the impact of higher volume.

Current wording

Gross profit for the nine months ended September 30, 2026 increased $6.4 million, or 7.2% compared with the nine months ended September 30, 2025. The increase was driven by favorable price/mix and higher shipment volume, partially offset by higher manufacturing costs and unfavorable raw material spread. Favorable price/mix was due to higher aerospace & defense shipments and improved base prices, particularly in the industrial end market. Higher aerospace & defense and automotive shipments were partially offset by slightly lower shipments to energy and industrial end markets. Manufacturing performance was unfavorably impacted by higher maintenance costs associated with improving downstream asset reliability and higher energy rates, as well as planned shutdown costs and an increase in power curtailments, partially offset by improved fixed-cost absorption from higher production volumes. Raw material spread was unfavorable due to lower scrap spread, mostly offset by higher alloy spread and the impact of higher volume.

Previous wording

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

Current wording

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

Previous 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.

Current wording

SG&A expense for the three months ended September 30, 2026 decreased by $0.7 million, or 2.9% compared with the three months ended September 30, 2025. SG&A expense for the nine months ended September 30, 2026 decreased by $2.0 million, or 2.8% compared with the nine months ended September 30, 2025. The decrease was primarily due to lower professional services, partially offset by slightly higher salary and benefits and variable pay compensation.

Previous 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.

Current wording

Net interest income for the three and nine months ended September 30, 2026 was $0.3 million and $0.8 million, respectively, compared with net interest income of $1.4 million and $4.2 million for the three and nine months ended September 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 nine months ended September 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 11 - Financing Arrangements” in the Notes to the unaudited Consolidated Financial Statements for additional information.

Previous wording

Non-service related pension and other postretirement benefit income, for all years, consists primarily of the interest cost, expected return on plan assets and amortization components of net periodic cost.

Current wording

Non-service related pension and other postretirement benefit income, for all years, consists primarily of the interest cost, expected return on plan assets and amortization components of net periodic cost. For more details on the aforementioned remeasurement, refer to “Note 12 - Retirement and Postretirement Plans."

Previous 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.

Current wording

The provision for income taxes for the three and nine months ended September 30, 2026 was $8.5 million and $14.1 million compared to a provision for income taxes of $2.8 million and $9.3 million for similar periods in 2025. The effective tax rate for the three months ended September 30, 2026 remained relatively consistent year over year. The decrease in the effective tax rate for the nine months ended September 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

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.

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 September 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 September 30, 2026, projected cash generated from operations, and borrowings available under the Credit Agreement, 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 substantially funded by the U.S. government.

Previous wording

In the first half of 2026, the Company contributed a total of $25.2 million in pension contributions, most of which related to the Bargaining Plan, and does not anticipate to make any additional contributions during the remainder of 2026.

Current wording

For the nine months ended September 30, 2026, the Company contributed a total of $25.2 million in pension contributions, most of which related to the Bargaining Plan, and does not anticipate making any additional contributions during the remainder of 2026.

Previous 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.

Current wording

For the three months ended September 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 $19.38 per share. For the nine months ended September 30, 2026, the Company repurchased approximately 0.7 million common shares in the open market at an aggregate cost of $11.5 million, which equates to an average repurchase price of $17.56 per share. As of September 30, 2026, the Company had a balance of $78.2 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 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.

Current wording

The following table reflects the major categories of cash flows for the nine months ended September 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 operating activities for the six months ended June 30, 2026 was $14.1 million compared to net cash used of $4.1 million for the six months ended June 30, 2025. The change was primarily driven by increased working capital use of cash in the first half of 2026 to support the growing order book, partially offset by higher profitability and lower required pension contributions.

Current wording

Net cash used by operating activities for the nine months ended September 30, 2026 was $7.3 million compared to net cash provided of $17.9 million for the nine months ended September 30, 2025. The change was primarily driven by increased working capital use of cash in 2026 to support the growing order book, partially offset by higher profitability and lower required pension contributions.

Previous 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.

Current wording

Net cash used by investing activities for the nine months ended September 30, 2026 was $35.8 million compared to net cash used of $44.0 million for the nine months ended September 30, 2025. The change was due to lower capital expenditures and reduced proceeds from government funding in 2026 compared to the prior year.

Previous 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.

Current wording

Net cash used by financing activities for the nine months ended September 30, 2026 was $15.8 million compared to net cash used of $23.6 million for the nine months ended September 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

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

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, whether the anticipated increase in throughput is achieved;