Metallus Inc. (MTUS)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue of $280.5M beat S&P Global consensus ($264.0M), while adjusted EPS of $0.07 missed consensus ($0.12). Sequential profitability improved meaningfully on higher shipments, better cost absorption, and increased surcharge revenue per ton . Values retrieved from S&P Global.*
• Guidance: Management expects Q2 2025 adjusted EBITDA to be higher than Q1, supported by rising melt utilization, modest shipment increases (A&D), and spot price hikes on SBQ/SMT .
• Operational momentum: Ship tons rose 17% sequentially to 152.9K and melt utilization improved to 65% (from 56% in Q4), aided by distributor restocking and energy share gains; order backlog up ~50% YoY .
• Cash outflow driven by required pension contributions ($52.6M); liquidity remained strong at $432.0M; buybacks of ~395K shares for $5.6M during Q1 .
• Catalysts: Enforcement/expansion of steel tariffs, implemented spot pricing actions, and accelerating A&D ramp (VAR/VIM path) are the key narrative drivers into Q2–H2 2025 .

What Went Well and What Went Wrong

What Went Well

• Sequential top-line and margin recovery: Net sales +17% QoQ to $280.5M; adjusted EBITDA +$9.4M QoQ to $17.7M on higher shipments and $12.5M lower manufacturing costs .
• Pricing actions and backlog: Company implemented SBQ/SMT spot price increases ($60/$120 per ton for SBQ; $100 per ton for SMT); backlog up ~50% YoY, supported by tariff enforcement narrative and market share gains .
• A&D strategy and VAR/VIM expansion: Significant orders for VAR products and goal of ~$30M 2025 revenue using outside VAR/VIM with rolling/piercing capabilities; positioning for munitions-related demand and defense programs .

What Went Wrong

• Year-over-year declines: Net sales down 13% YoY, adjusted EBITDA down from $43.4M to $17.7M as mix shifted toward lower base-price carbon SBQ products and lower surcharge revenue per ton; A&D shipments declined sequentially due to customer startup delays .
• Operating cash flow negative: Q1 operating cash outflow of $38.9M driven by required pension contributions of $52.6M; free cash flow was -$52.5M (ex-government-funded capex) .
• Mix headwinds and automotive/A&D volatility: Unfavorable price/mix and seasonality in auto; A&D commissioning issues at a customer weighed on shipments; management flagged price/mix likely unfavorable in Q1 bridge .

Financial Results

Segment net sales (end-market):

Key KPIs and balance sheet/liquidity:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our solid order book, strengthening spot pricing environment, and recent market share gains...our order backlog has increased approximately 50 percent from the same period a year ago.” — Mike Williams, CEO .
• “We fully support the enforcement and expansion of steel tariffs...this evolving trade environment will help us meet the growing demand for U.S.-produced steel.” — Mike Williams .
• “Adjusted EBITDA was $17.7 million in the first quarter, a sequential increase of $9.4 million...manufacturing costs declined by $12.5 million on a sequential basis.” — Kris Westbrooks, CFO .
• “Specifically, for SBQ spot orders effective April 28, prices increased by $60 per ton for standard products and $120 per ton for thermally treated...For SMT spot orders effective July 7, prices will increase by $100 per ton.” — Kris Westbrooks .
• “Following settlement of the convertible notes in June, the company will be debt-free and well-positioned for the future.” — Kris Westbrooks .

Q&A Highlights

• Tariff pull-forward: Minimal Q1 shipment impact from tariff pull-forward; growth driven by market share gains and distributor restocking .
• A&D commissioning issue: Customer startup challenges caused Q1 A&D softness; management expects improvement later in 2025 with new inquiries and A&D wins (munitions grades, VAR) .
• Price/mix bridge: Near-term unfavorable price/mix vs Q4 tied to greater carbon SBQ mix; expected to improve with richer alloy and A&D mix .
• Energy dynamics: Import overhang being worked down; domestic sourcing increasing; coupling stock products gaining share .
• Taxes/OPEB: Q2 effective tax rate likely above statutory due to convert settlement; OPEB cash contributions at normal levels .

Estimates Context

Note: Values retrieved from S&P Global.*

Implications: Street underestimated revenue recovery in Q1 (distributor restock, surcharge uplift), but overestimated margin/EPS due to unfavorable mix and A&D timing; expect upward revisions to Q2 EBITDA on shipment/melt utilization guidance and spot pricing, but EPS sensitivity to mix persists .

Key Takeaways for Investors

• Sequentially stronger quarter with revenue beat, but adjusted EPS miss amid unfavorable price/mix and A&D timing; focus on Q2 mix improvement and price actions to drive margin .
• Pricing catalyst: Implemented spot price increases on ~30% of book (SBQ/SMT), supporting sequential EBITDA expansion into Q2; monitor elasticity and pass-through .
• A&D ramp intact: Despite Q1 commissioning hiccups, management reiterates higher Q2 A&D shipments and VAR/VIM path toward ~$30M 2025 revenue and larger defense participation into 2026 .
• Operational leverage: Melt utilization rising (65% in Q1; expected higher in Q2) and improving cost absorption; scale benefits should accrue with shipments .
• Cash/returns: Strong liquidity ($432M) and ongoing buybacks; expect near-term cash flow pressure from pension contributions, then improvement as year progresses .
• Trade/tariffs: Enforcement/expansion of steel tariffs underpin domestic demand, backlog strength, and energy import displacement; catalysts for share gains across industrial/energy .
• Near-term modeling: Assume modest QoQ shipment gains, improved surcharge revenue per ton, and higher Q2 adjusted EBITDA, offset by potential mix headwinds and Q2 effective tax rate above statutory due to convert settlement .