TimkenSteel(TMST) - 2024 Q4 - Annual Results

Financial Performance Overview Fourth-Quarter 2024 Performance Metallus reported a net loss of $21.4 million on net sales of $240.5 million in Q4 2024, showing sequential improvement from Q3 2024 despite a significant decline from Q4 2023 Q4 2024 Key Financial Metrics vs. Prior Periods (in millions) | Metric | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Net Sales | $240.5M | $227.2M | $328.1M | | Net Income (Loss) | ($21.4M) | ($5.9M) | $1.3M | | Diluted EPS (Loss) | ($0.50) | ($0.13) | $0.03 | | Adjusted Net Income (Loss) | ($3.3M) | ($4.4M) | $16.5M | | Adjusted Diluted EPS (Loss) | ($0.08) | ($0.09) | $0.36 | | Adjusted EBITDA | $8.3M | $6.1M | $35.7M | Full-Year 2024 Performance For the full year 2024, the company's net income fell sharply to $1.3 million from $69.4 million in 2023, with net sales decreasing to $1.1 billion due to weak demand and lower melt utilization Full-Year 2024 vs. 2023 Financials (in millions) | Metric | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | | Net Sales | $1.1B | $1.36B | | Net Income | $1.3M | $69.4M | | Diluted EPS | $0.03 | $1.47 | | Adjusted Net Income | $25.1M | $89.8M | | Adjusted Diluted EPS | $0.57 | $1.91 | | Adjusted EBITDA | $77.7M | $169.0M | Management Commentary CEO Mike Williams acknowledged the disappointing 2024 financial performance but expressed encouragement about stronger customer order patterns in early 2025 and commitment to shareholder value - 2024 financial performance was deemed 'disappointing' due to weak demand, lower shipments, and reduced melt utilization across most end markets[5] - The company is encouraged by stronger customer order patterns in Q1 2025, with higher average weekly orders compared to the second half of 2024[6] - The capital allocation strategy focuses on strategic business investments for profitable growth and an ongoing share repurchase program to deliver shareholder value[6] Financial Details and Operations Fourth-Quarter 2024 Operational Summary In Q4 2024, net sales rose 6% sequentially to $240.5 million, driven by a 9% increase in ship tons, despite a year-over-year decline and increased manufacturing costs due to lower melt utilization - Net sales increased 6% sequentially due to higher shipments and favorable aerospace & defense product mix, but decreased 27% YoY[10] - Ship tons increased 9% sequentially to 130,200 tons, but decreased 17% YoY due to lower shipments across all end markets[10] - Melt utilization declined to 56% from 60% in the prior quarter, impacted by planned annual shutdown maintenance and efforts to balance inventory with demand[10] Full-Year 2024 Operational Summary For the full year 2024, net sales decreased by 20% to $1.1 billion, and ship tons fell by 19%, primarily due to lower shipments across most end markets, with melt utilization declining to 60% - Full-year net sales decreased 20% YoY, driven by a 19% decrease in ship tons (555,500 tons)[11] - The aerospace & defense end market was a bright spot, with net sales increasing 17% to $134.9 million, representing 12% of total sales in 2024, up from 8% in 2023[11] - Melt utilization for the full year declined to 60% in 2024 from 70% in 2023 as the company balanced production with demand[11] Cash, Liquidity, and Shareholder Returns The company maintained a strong financial position, ending 2024 with $240.7 million in cash and $458.6 million in total liquidity, while actively returning capital through share and note repurchases and receiving government funding - Ended 2024 with a cash and cash equivalents balance of $240.7 million and total liquidity of $458.6 million[10] - Received $53.5 million in government funding during 2024 as part of agreements with the U.S. Army and JobsOhio, with additional funding expected in 2025 and 2026[12] - In 2024, repurchased 2.0 million common shares for $37.6 million and retired convertible notes at a cost of $17.2 million[13][14] Business Outlook First-Quarter 2025 Outlook Metallus expects Q1 2025 adjusted EBITDA to be higher than Q4 2024, driven by increased shipments and an anticipated average melt utilization rate of approximately 70% - Expects Q1 2025 adjusted EBITDA to be higher than Q4 2024[15] - Shipments are expected to increase from Q4 2024, with the average melt utilization rate projected to be approximately 70%[15] - Average base price per ton for customers with annual agreements (covering ~70% of the order book) is expected to decrease by low to mid-single digits in 2025 compared to 2024[15] Full-Year 2025 Projections For the full year 2025, Metallus projects approximately $125 million in capital expenditures, with $90 million funded by the U.S. government, alongside required pension contributions and an effective income tax rate 2025 Financial Projections (in millions) | Item | Projected Amount | | :--- | :--- | | Planned Capital Expenditures | ~$125 million | | - Funded by U.S. Gov't | ~$90 million | | Required Pension Contributions | ~$65 million | | Effective Income Tax Rate | ~25% | Consolidated Financial Statements Consolidated Statements of Operations The company's income statement shows a significant drop in profitability for the full year 2024, with a net income of $1.3 million compared to $69.4 million in 2023, and a Q4 2024 net loss of $21.4 million Income Statement Highlights (in millions) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $240.5 | $328.1 | $1,084.0 | $1,362.4 | | Gross Profit | $10.9 | $41.4 | $97.7 | $186.5 | | SG&A Expenses | $20.4 | $22.7 | $87.7 | $84.6 | | Net Income (Loss) | $(21.4) | $1.3 | $1.3 | $69.4 | Consolidated Balance Sheets As of December 31, 2024, Metallus reported total assets of $1.12 billion, a decrease from $1.18 billion at the end of 2023, primarily due to reduced cash and cash equivalents, leading to a decrease in total shareholders' equity Balance Sheet Summary (in millions) | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $240.7 | $280.6 | | Total Current Assets | $587.3 | $656.8 | | Total Assets | $1,116.7 | $1,175.3 | | Total Current Liabilities | $281.5 | $248.4 | | Total Liabilities | $426.2 | $443.7 | | Total Shareholders' Equity | $690.5 | $731.6 | Consolidated Statements of Cash Flows For the full year 2024, net cash provided by operating activities significantly decreased to $40.3 million from $125.3 million in 2023, with net cash used in investing and financing activities resulting in a net decrease in cash of $39.4 million Cash Flow Summary (in millions) | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $40.3 | $125.3 | | Net Cash from Investing Activities | $(10.8) | $(49.9) | | Net Cash from Financing Activities | $(68.9) | $(51.9) | | Net Change in Cash | $(39.4) | $23.5 | | Cash at End of Period | $241.9 | $281.3 | Non-GAAP Financial Measures and Reconciliations Reconciliation of Free Cash Flow The company reported a negative free cash flow of $16.0 million for the full year 2024, a sharp decline from a positive $73.7 million in 2023, calculated by subtracting capital expenditures from operating cash flow Free Cash Flow (in millions) | Period | Net Cash from Operations | Capital Expenditures | Free Cash Flow | | :--- | :--- | :--- | :--- | | Q4 2024 | $13.9 | $(13.0) | $0.9 | | FY 2024 | $40.3 | $(56.3) | $(16.0) | | FY 2023 | $125.3 | $(51.6) | $73.7 | Reconciliation of Adjusted Net Income and EPS Metallus provides reconciliations from GAAP to adjusted net income and EPS, excluding specific items to show a Q4 2024 adjusted loss of $3.3 million and a full-year 2024 adjusted income of $25.1 million - Q4 2024 adjustments included a $9.4M loss on debt extinguishment and an $8.5M loss from remeasurement of benefit plans[35] - Full-year 2024 adjustments totaled $23.8 million, primarily from remeasurement of benefit plans ($10.3M), loss on debt extinguishment ($9.4M), and IT transformation costs ($5.1M)[42] Reconciliation of EBIT and EBITDA The reconciliation from GAAP Net Income to Adjusted EBITDA shows a Q4 2024 Adjusted EBITDA of $8.3 million and a full-year 2024 Adjusted EBITDA of $77.7 million, down from $169.0 million in 2023 EBITDA Reconciliation Summary (in millions) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $(21.4) | $1.3 | $1.3 | $69.4 | | EBITDA | $(12.1) | $15.7 | $49.7 | $146.2 | | Adjusted EBITDA | $8.3 | $35.7 | $77.7 | $169.0 | | Adjusted EBITDA Margin | 3.5% | 10.9% | 7.2% | 12.4% | Reconciliation of Base Sales by End Market The company provides a breakdown of sales by end market, showing a 19% year-over-year decrease in total ship tons for 2024, with declines in most markets offset by growth in Aerospace & Defense Full-Year Ship Tons by End Market (in thousands) | End Market | FY 2024 | FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Industrial | 220.0 | 264.6 | -16.9% | | Automotive | 250.0 | 306.4 | -18.4% | | Aerospace & Defense | 47.0 | 45.6 | +3.1% | | Energy | 38.5 | 67.2 | -42.7% | | Total | 555.5 | 683.8 | -18.8% | Calculation of Total Liquidity Total liquidity, comprising cash and available borrowing capacity, stood at $458.6 million at the end of 2024, a decrease from $539.4 million at the end of 2023 due to lower cash and reduced credit availability Total Liquidity (in millions) | Component | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $240.7 | $280.6 | | Availability not borrowed | $217.9 | $258.8 | | Total Liquidity | $458.6 | $539.4 | Adjusted EBITDA Walk The Adjusted EBITDA walk illustrates that the decline from $169.0 million in FY 2023 to $77.7 million in FY 2024 was primarily driven by lower volume, higher manufacturing costs, and unfavorable raw material spread Full Year 2023 to 2024 Adjusted EBITDA Change (in millions) | Driver | Impact on EBITDA | | :--- | :--- | | Beginning Adj. EBITDA (FY 2023) | $169.0 | | Volume | $(60.3) | | Price/mix | $18.3 | | Raw material spread | $(15.9) | | Manufacturing | $(31.1) | | SG&A | $(1.0) | | Other | $(1.3) | | Ending Adj. EBITDA (FY 2024) | $77.7 | Other Information Webcast Information Metallus will host a conference call and live webcast for the financial community on Friday, February 28, 2025, at 9:00 a.m. ET to discuss these results, accessible via the company's investor relations website - A conference call is scheduled for February 28, 2025, at 9:00 a.m. ET[17] About Metallus Inc. Metallus (NYSE: MTUS) is a U.S. manufacturer of high-performance specialty metals, primarily alloy steel bars and seamless mechanical tubing, serving industrial, automotive, aerospace & defense, and energy markets - Metallus is a U.S. producer of alloy steel bars and seamless mechanical tubing from recycled scrap metal[18] - The company serves the industrial, automotive, aerospace & defense, and energy end markets[18] Forward-Looking Statements and Non-GAAP Measures This report contains forward-looking statements subject to various risks and uncertainties, and clarifies the company's use of non-GAAP financial measures for performance assessment and improved investor comparability - The report includes non-GAAP financial measures like adjusted EPS, adjusted net income, EBITDA, and free cash flow, which management believes are useful for investors[19] - Key risks identified include fluctuations in customer demand, changes in operating costs, success of capital investments, and global economic conditions[21]