Good day, and thank you for standing by. Welcome to the Q1 2022 Metallus Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to Jennifer Beeman. Please go ahead, ma'am. Thank you, and good morning, and welcome to Metallus Q1 2022 conference call. I'm Jennifer Beeman, Director of Communications and Investor Relations for Metallus. Joining me today is Mike Williams, President and Chief Executive Officer, Kris Westbrooks, Executive Vice President and Chief Financial Officer, and Kevin Raketich, Executive Vice President of Sales, Marketing, and Business Development. 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 describe in greater detail in yesterday's release. Please refer to our SEC filings, including our most recent Form 10-K and Form 10-Q, and the list of factors included in our earnings release, all of which are available on the Metallus 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? Thank you, Jennifer. I appreciate everyone joining us on the call today. During the Q1, we delivered strong profitability despite melt shop interruptions early in the quarter. In this high demand environment, our teams performed well, and we continue to meet the needs of customers while keeping safety at the forefront. Market demand and pricing remain favorable, and we are relentlessly working to improve our commercial and manufacturing effectiveness to ensure sustainable success throughout the year and beyond. Before I move on, let me say a few words on safety. As we said in the past, our goal is to continually drive better safety performance through sustainable improvements. We began the year by creating a set of action plans based on last year's performance and feedback from our teams, including safety leadership training, hazard awareness training, and systemic improvements around life-critical safety hazards. Additionally, housekeeping and COVID-19 safety protocols continue to be a focus area. Once again, we will conduct our annual Iron Shield program, where we gather safety recommendations from our employees and recognize teams for innovative ideas. We also continue to collaborate with our union safety representatives. The well-being of our people is a core value, and nothing we do is more important than returning employees home safely at the end of their workday. End market demand remained healthy in the Q1, and our order book now extends out to the end of the Q3. In mobile, shipments increased by 5% sequentially as customer demand remained strong and dealer inventories remained low. Similar to previous quarters, supply chain disruption continues to weigh on our mobile customers. We estimate that our sales were negatively impacted by approximately $10 million in the Q1. We are working closely with our customers as they continue to navigate challenging supply chains. We wrapped up our remaining annual pricing agreement negotiations, which impacts our mill order book, and they went well, reflecting our customers' recognition of our quality, service, and overall value proposition. Our industrial shipments decreased by 7% sequentially due to our melt shop interruptions early in the quarter. On a year-over-year basis, our industrial sales increased by 12%, reflecting the overall continued demand momentum, mostly in distribution. During the quarter, we saw strength in construction and heavy equipment, and particularly for mining. Energy demand continues to grow, and we've more than doubled our shipments on a year-over-year basis. We also saw a modest sequential improvement in our shipments. Last quarter, we outlined our five strategic imperatives centered around people, profitability, commercial excellence, and ease of doing business, and ESG to help us deliver sustainable through-cycle profitability and cash flow while maintaining a strong balance sheet and creating value for our shareholders. To achieve sustainable profitability, our teams are executing initiatives aimed at achieving best-in-class manufacturing excellence and reliability. We continue to drive improved performance of our single melt shop. However, we know there is plenty of opportunity for improvement. Currently, plans are underway to relocate our scrap yard to be adjacent to our melt shop, creating greater efficiencies and reducing our carbon footprint. The project is on schedule and is expected to be completed later this year. There are work streams to ensure strong safety performance, drive first-time quality assurance, enhance reliable service delivery while retaining flexibility in an ever-changing demand market. We continue to optimize inventories while structurally reducing manufacturing costs where needed. For example, we have now trained over 80 employees in ThinkReliability Cause Mapping methodology, an industry best practice in risk identification and improvement. We will continue to train more employees so they feel confident in identifying problems and implementing solutions through commonly understood risk management protocols. In order to drive focus in key areas, we have moved many employees into new management roles and have recently begun high-performance team training. Our goal is to create deeper collaboration between team members and break down silos to improve business outcomes while evolving as one team. Thus far, we've trained a group of our leaders, and we will provide similar training to others across the organization and on the shop floor. On the commercial front, we continue to refine sales and service to enhance effectiveness and cost. We have recently reinvigorated our marketing and business development efforts in certain markets such as defense, renewables, and electric vehicles, where we have had proven success. From an administrative perspective, we have kicked off a multi-year IT transformation as a part of our process simplification efforts. Our current challenge is the complexity of our systems, which we need to methodically remedy to drive greater efficiencies in an ever-changing demand environment. Lastly, I hope you had the opportunity to review our recently published sustainability report. This important report illustrates our commitment to operating responsibly and highlights progress on key initiatives. We are making continued progress toward our 2030 environmental goals related to reductions in greenhouse gas emissions, energy consumption, fresh water usage, and waste. With that, I thank employees for the strong start to the year. I thank our customers for their trust, our suppliers for their partnership, and our shareholders for their continued support. Now I'd like to turn it over to Kris. Kris? Thanks, Mike. Good morning, everyone, and thanks for joining us today. I'm pleased that we started off 2022 with strong profitability and positive operating cash flow. Our Q1 results reflect continued strength in customer demand combined with higher base selling prices as well as the benefit of profitability improvement actions, continued working capital discipline, and implementation of our shareholder return program. Turning to our Q1 of 2022 results, net sales totaled $352 million and net income was $37.1 million or $0.70 per diluted share. Comparatively, Q4 of 2021 net sales were $338.3 million with net income of $57.1 million or $1.07 per diluted share. Q1 of 2021 net sales were $273.6 million with net income of $9.8 million or $0.20 per diluted share. On an adjusted basis, net income for the Q1 improved to $48.6 million or $0.92 per diluted share. For comparison purposes, adjusted net income in the Q4 of 2021 was $42.3 million or $0.80 per diluted share. Adjusted net income in the Q1 of last year was $22.6 million or $0.43 per diluted share. Adjusted EBITDA improved to $65.3 million in the Q1 of 2022, a $3.2 million sequential increase. Drivers of the increase included higher base selling prices and improved manufacturing fixed cost leverage. Partially offsetting these items was a lower raw material surcharge environment driven by a decline in scrap prices. Compared with the same quarter in 2021, adjusted EBITDA significantly increased by $24.5 million, reflective of higher base selling prices and improved mix. Turning now to the details of the financial results in the Q1. Shipments in the quarter were 196,400 tons, a decrease of 1,900 tons or 1% compared with the Q4 of 2021 and consistent with our expectations. The sequential decrease in shipments was driven by lower industrial shipments, partially offset by higher shipments to mobile and energy customers. Q1 of 2022 shipments increased 3,000 tons or 2% from the Q1 of last year as a result of improved industrial and energy demand, partially offset by lower shipments to mobile customers. In the industrial end market, shipments totaled 94,900 tons in the Q1, a sequential decrease of 6,700 tons. The reduction in industrial shipments was primarily driven by availability of finished goods inventory for shipment as industrial customer demand remained strong throughout the quarter. In comparison to the Q1 of 2021, shipments to industrial customers increased by 10,500 tons, reflecting year-over-year improvements in demand, primarily within the distribution channel. Mobile customer shipments were 88,900 tons in the Q1, a sequential increase of 4,400 tons. The increase in mobile shipments was primarily driven by normal seasonality combined with ongoing strength in customer demand. During the Q1, we also experienced a lower impact from supply chain disruption on our mobile shipments. Lastly, from an end markets perspective, continued momentum in energy demand drove shipments of 12,600 tons in the Q1, a slight increase on a sequential basis, and over twice the level of shipments in the Q1 of 2021. Net sales of $352 million in the Q1 increased 4% compared with the Q4 of 2021, and improved 29% compared with the Q1 of last year. The sequential increase in net sales was driven by higher base selling prices, partially offset by a reduction in average raw material surcharge per ton as a result of lower scrap prices. The substantial improvement compared with the prior year quarter was driven by an increase in average raw material surcharge per ton as a result of higher scrap and alloy prices, higher base selling prices, and improved industrial and energy demand. Average base selling prices increased by $170 per ton, or 16% in the Q1 of 2022 across our end markets in comparison with the full year 2021 average. Turning to manufacturing, costs decreased sequentially by $5.2 million in the Q1, primarily driven by improved fixed cost leverage and the completion of the annual Faircrest melt shop maintenance shutdown activities that occurred in the Q4 of last year. In comparison to the prior year Q1, manufacturing costs were $2.9 million higher, given the current inflationary cost environment, as expected. Inflationary pressure is anticipated to remain on non-surchargeable raw materials, manufacturing consumables, and other operational items during the remainder of 2022. We continue to estimate the 2022 inflationary impact to be in the range of 10%-15% over 2021 average prices. From an SG&A expense perspective, in the Q1, SG&A increased $1.7 million on a sequential basis to $18.5 million, primarily driven by increased benefit cost and share-based compensation expense. In comparison to the Q1 of 2021, SG&A decreased by $1 million, largely driven by lower employee expense as a result of prior restructuring actions. These restructuring actions resulted in cash severance payments of $1 million in the Q1 of 2022, with approximately $4 million of additional cash severance expected during the remainder of this year. Overall, SG&A expense remains well controlled and significantly lower than historical levels. Switching gears now for an update on our targeted $80 million of profitability improvements in support of achieving our long-term through-cycle financial targets. We expect to realize approximately $25 million of profitability improvements in 2022 from actions directly linked to our strategic imperatives, with the remaining targeted profitability improvements expected between 2023 and 2026. The majority of this year's profitability improvement actions are expected to be realized through commercial portfolio optimization to improve mix and margin. Other areas of focus where we are beginning to see early signs of benefits in 2022 but are expected to have a more significant impact in the future include a variety of operational improvement projects to improve yield, quality, efficiency, and asset reliability. We're also actively working on the transition of our information technology support functions to a third-party managed service later this year for efficiency and effectiveness. It's great to see the energy and collaboration between our teams to identify the top areas of strategic focus and deliver on these important projects. Moving on to cash and liquidity. During the Q1, operating cash flow was $13.3 million, driven by quarterly profitability, partially offset by working capital requirements and the payment of variable compensation earned in 2021. This marks the company's 12th consecutive quarter of generating positive operating and free cash flow. During the Q1, we redeployed a portion of our operating cash flow to fund capital expenditures of $6.5 million. We finished the Q1 with $239.9 million of cash, and total liquidity was a record $522.8 million at the end of March. Regarding pensions, the company recorded a non-cash gain of $6.5 million in the Q1 of 2022 as a result of the required remeasurement of the salaried and supplemental pension plans. Remeasurement of these plans is required on a quarterly basis for the remainder of this year. In terms of required cash contributions to our pension plans, we continue to estimate no significant required cash contributions until after 2031 based on current assumptions. Looking now at our capital allocation strategy. In December of last year, we announced a $50 million common share repurchase program, which is intended to return capital to shareholders while also offsetting dilution from annual equity compensation awards. During the Q1, the company repurchased approximately 170,000 common shares at a cost of $3.4 million. Additionally, in April, the company repurchased approximately 137,000 common shares at a cost of $3 million. As of April 30, 2022, the company had $43.6 million remaining under its authorized $50 million common share repurchase program. We look forward to updating you in future quarters regarding this repurchase program. Switching gears to our convertible notes from a return on capital perspective. In the Q1, we repurchased $10 million aggregate principal amount of convertible notes due in 2025 at a cash cost of $26.8 million. The $16.8 million purchase premium, driven by the company stock price now being significantly in excess of the conversion price, was excluded from non-GAAP adjusted EBITDA. The convertible note repurchase activity in the Q1 will reduce future quarterly diluted shares outstanding by approximately 1.3 million shares, in addition to further reducing outstanding debt and interest expense. At this time, the outstanding principal balance on the convertible notes is $36 million and includes approximately 4.6 million diluted shares. We may repurchase additional convertible notes in the future, depending on the repurchase price and holder interest, among other factors. In comparison to the Q4 of 2021 diluted shares outstanding, the previously discussed common share and convertible note repurchase activity completed between January and April of 2022 represents a 3% reduction in diluted shares outstanding. Turning now to the Q2 of 2022 outlook. From a commercial standpoint, Q2 shipments are expected to increase from the Q1, supported by solid customer demand across all end markets, as evidenced by a full order book through the end of the Q3. Periodic customer manufacturing disruptions may continue to negatively impact shipments. Base selling price per ton is expected to be similar to slightly higher in the Q2 compared with the Q1. Q2 base price per ton changes are expected to be primarily driven by any changes in product mix, negotiated base price increases on approximately 5% of the order book that resets annually on April first, and the impact of previous spot price increases. Additionally, surcharge revenue per ton is expected to increase sequentially in the Q2 as a result of higher scrap and alloy prices positively impacting April and May surcharges. Operationally, melt utilization is expected to be above 85% during the Q2. Given these elements, the company expects to report a sequential increase in adjusted EBITDA in the Q2 of 2022. From a cash perspective, operating cash flow is expected to be positive in the Q2, primarily driven by profitability and continued discipline in our working capital management. Additionally, we continue to estimate full year 2022 capital expenditures to be approximately $40 million. To wrap up, thanks to all of our employees who helped the company deliver a solid Q1. We appreciate your interest in Metallus and look forward to sharing our continued progress in the future. We would now like to open the call for questions. Thank you. Ladies and gentlemen, if you wish to ask a question, simply press star one on your telephone keypad. Again, to ask a question, please press star one on your telephone keypad. Your first question comes from the line of Phil Gibbs from KeyBanc Capital Markets. Your line is open. Please go ahead. Thanks. Good morning. Good morning, Phil. You've said that volumes are expected to improve this quarter versus the Q1. Does that also include automotive? Well, we think that automotive is gonna continue to be choppy, so it's somewhat unpredictable. That's about the best way I could phrase it. As you know, they still have an impact from the supply chain. I will tell you that our April mobile shipments were slightly down compared to the average of the Q1, the monthly average for the Q1. You know, we'll react and respond accordingly. We've been very successful in moving our tons to the proper markets when needed, when there's openings. The pickup will largely be in the stronger part of your mix, and that's a little bit of a bounce back in industrial and continued growth in oil and gas? Yeah, that's our expectation. Okay. On the inflationary pressures, Kris, you mentioned largely intact versus your last iteration. As we look at the Q2 versus the Q1, should we be modeling or thinking about a pickup in conversion costs even further versus the Q1 level, either on a per ton basis or an absolute dollar amount basis, however you wanna capture that, if it's applicable? Well, our fixed cost leverage is gonna improve, primarily due to increased melt shop utilization in the upcoming or this quarter versus last quarter. Yeah, we do expect our conversion cost to improve. Yep, agreed, Mike. The inflation on alloys and energy and all those factors isn't getting any stronger or higher than the Q1? It's just maintaining? Correct, just maintaining. We're locked in for our base volume for the majority of the alloys for 2022. That are non-surchargeable. To the extent mix changes, you know, that could create some additional headwinds from an inflation standpoint, but we think it's manageable in comparison to Q1. Okay. Thank you very much. Thanks, Phil. Thank you. Your next question comes from the line of Marco Rodriguez from Stonegate Capital Markets. Your line is open. Please go ahead. Good morning, everybody. Thank you for taking my questions. Good morning, Marco. Morning. I was wondering if I can follow up just on that prior question there on the inflation aspects. You've provided the range for the year of a 10%-15% increase. I was just wondering if maybe you can kind of frame what you've seen here in the first five months. Are we sort of trending to the low end, to the high end? Any kind of color there? No, I think I'll let Kris provide some additional color, but I think our perspective, our view and what we're experiencing is that inflationary forecast that we put forth is pretty much in line with what we expect in Q2. Yeah, that's right. We were right around the 12%-13% range in Q1. You know, maybe slightly higher, but still within that range as we look forward. We did refresh that just recently. As a reminder, every percent, just the math on that is every percent's worth about $3 million of cost. Understood. In your prepared remarks, you guys talked about refreshing some of the sales and marketing activities. I was wondering if you could provide a little detail around that. Are there specifics or changes to incentives, or reallocation of individuals to different segments? Yeah. It's basically a refocus, orientation of what end markets and what customers within those end markets that we really want to develop, a long-term relationship with, a partnership with, and expanding and really focusing on our most profitable products. We've gone through some structural changes with our commercial organization, and we've recently implemented those in Q1. There's additional action plans and items that we'll be implementing throughout the remainder of the year. That's the predominantly as the execution and focus of our sales engagement in the right end markets and the right customers within those end markets, focused on margin expansion, and profitability growth. Got it. Is there a need to add additional heads or additional bodies into that function, or do you think you have the right people thus far? No, there's no additional heads. The next wave that we have. We've actually done a little bit of shrinking in that area, but it's really, it's about focus, execution, driving efficiency of our engagement with our customers on value creation through margin expansion and profitability growth. Got it. If I can squeeze one more in here, just on the end markets, you noted some particular strength in the mining areas. Wondering if you could discuss that a little bit as it relates to, geographies or what sort of feedback you're getting as to the strength you're noticing. Well, it's really related to the heavy equipment that is utilized in the mining industry itself. That's a large concentration focus for us in that particular end market on the heavy equipment used in mining. We've seen expansion and demand there. It's good product line for us. It leverages to our large bar, SBQ bar, and that's one of our key focuses from a commercial perspective and strategy. Excellent. Thank you, guys. I really appreciate your time. Thanks, Marco. Thank you. Your next question comes from the line of Xin Wang from BNP Paribas. Your line is open. Please go ahead. Hi, guys. Thank you for the questions. So I wanna ask two questions on scrap, please. The first one is, can you discuss a bit or maybe quantify the impact of prime obsolete scrap spread expansion on Q1 earnings, and maybe give a bit of indication on Q2 earnings, if possible. Then the second one is, can you share your views on, scrap availability and price trajectory through Q2? Thank you. Okay. Kris and I will tag team this. I'll let you take the first part. Yeah, I'll take. I'll take the second part. Yeah, in the Q1 it was a headwind for us, and we quantified that in our earnings release. Q4 to first was about a $17 million headwind on adjusted EBITDA. We saw the raw material spread difference between busheling and the shredded grades decline in Q1. Then, as you know, that rapidly went the other way in Q2, at least through April and May. We surcharge generally on a one-month lag. The increases that were announced in April and May are now impacting—I'm sorry, March and April are now impacting our April and May surcharges. The way to think about it is the headwind that we faced in Q1 is essentially we estimate going to reverse in Q2 to a similar if not higher level, given the spike that we're seeing at least through two-thirds. June is still yet to determine to be determined there in terms of how that will play out, but the first two months are a pretty significant increase. In regards to your second question, in regards to scrap availability and pricing, you know, there's no issues with availability, predominantly based on our geographic region where we sit. Availability is there. In regards to pricing, it hasn't settled. May hasn't settled yet for June surcharge, but all indications are that it will decline, pricing will decline, and we're just gonna have to wait and see where it settles. Okay. That's very clear. Thank you very much. Thank you. Again, if you have any questions, simply press star one on your telephone keypad. Again, to ask a question, please press star one on your telephone keypad. There seems to be no further question at this point. Presenters, please continue. Great. Well, thank you everyone for joining us today, and we look forward to continuing to update you next quarter. Thank you. Thank you, presenters. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.