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Good morning, everyone, and welcome to the United States Steel Corporation Third Quarter 2023 Earnings Conference Call and Webcast. As a reminder, today's call is being recorded. I'll now hand the call over to Kevin Lewis, Vice President, Finance.

Thank you, Tommy. Good morning and thank you for joining our third quarter 2023 earnings call. Joining me on today's call is U.S. Steel President and CEO, Dave Burritt; Senior Vice President and CFO, Jessica Graziano; and Senior Vice President and Chief Strategy and Sustainability Officer, Rich Fruehauf. I would also like to take the opportunity to welcome Emily Chieng who recently joined U.S. Steel as our Investor Relations Officer. Emily brings tremendous experience from her time as a sell-side analyst covering metals and mining. I know many of you already had the chance to meet Emily in her new role and we look forward to your continued engagement with her and the Investor Relations team. This morning, we posted slides to accompany today's prepared remarks. These can be found on the U.S. Steel Investor Relations page, under the overview section. Before we start, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties, as described in our SEC filings, and actual future results may vary materially. Forward-looking statements in the press release that we issued yesterday, along with our remarks today are made as of today, and we undertake no duty to update them as actual events unfold. With that I would like to turn the conference call over to U.S. Steel President and CEO, Dave Burritt who will begin on Slide 4.

Thank you, Kevin and good morning to all of you joining us. We appreciate your continued interest in U.S. Steel and look forward to this morning's discussion. But as we begin, we are deeply saddened by recent events in Ukraine, the Middle East, or earlier this week in Maine. Our thoughts and prayers go out to those impacted by these tragedies. But this morning we'd like to focus on three key messages that will shape our commentary. First, a high level of interest in U.S. Steel that has come to light from the strategic alternatives review process. Second, the continued strong performance of the business today, as Jess will discuss in our third quarter results. And third, the opportunity we have today to bridge the market to higher expected EBITDA than what we currently believe is being projected by the Street for 2024. Throughout the call we hope you'll hear the enthusiasm we have for maximizing stockholder value. Let's start with the first point, the strategic alternatives review process. We announced in August that after receiving multiple unsolicited proposals from credible bidders, ranging from the acquisition of certain production assets to the entirety of U.S. Steel, the U.S. Steel Board of Directors had initiated this strategic alternatives review process. The company's Board of Directors, with the assistance of the management team and its advisors is progressing a robust, fair, and rigorous review process. The Board's North Star [ph] is and will continue to be maximizing stockholder value. The process remains ongoing and therefore we must respect our confidentiality obligations and the work the Board is doing. Rest assured, steady progress is being made as we continue to support the due diligence efforts of the bidders in the process. To be very clear, again, our Board is fully committed to maximizing stockholder value. While I can't speak to the specifics of the process, I can tell you this, there is serious interest from many highly credible bidders in the Board's competitive process. Guided by our code of conduct known as our Steel Principles, once the process is complete, the U.S. Steel Board will make a decision that is in the best interests of our stockholders. With that update, we will not answer any questions about the process or participants. We are flattered by all the interest in our company, flattered but not surprised. We know that U.S. Steel is strategically positioned for tremendous value creation in the months and years ahead. We've been climbing a mountain of strategic CAPEX and now that we're coming down the other side of the mountain, we're not surprised, so when you see it, it won't be long before these new world class assets generate strong free cash flow. In fact, we are creating value today as we continue to deliver on our Best for All strategy, the second point of enthusiasm for stockholders. To that end, we are very pleased to have safely delivered a strong third quarter performance, our 12th consecutive quarter of profitability and even with elevated capital spending, we generated another positive free cash flow quarter. Consistency has become our middle name. Our results reflect a solid operational performance. Our position in the heart of the USA, the world's most robust steel industry. Our resilience and flexibility in the face of shifting business conditions and our continued laser focus on safety. In fact, we're on pace for another record best year of safety performance. I say another because our exceptional safety record follows record safety performances in 2020, in 2021, and in 2022. Our stellar safety record is part and parcel of our stellar operations. We have a culture of caring, safety has always been and always will be one of our core values. The way we see it, if you aren't operating safely, you aren't operating well. Our safety performance, enabled by the best employees in the steel industry, allowed us to deliver strong financials in the third quarter. Our Best for All strategy is paying off. We've talked about this before, U.S. Steel is well positioned to leverage megatrends that favor our industry. We are up to the challenge to harness these megatrends with our competitive advantages. With much of the global steel industry stagnant at best when you consider industry dynamics in China and in Europe, we are bullish on American steel. Why? On our last call, I mentioned the three global megatrends that will provide tailwinds for American Steel and our business in the months and years to come. One is accelerating de-globalization in a world impacted by conflicts like those in the Middle East and Ukraine and emerging from a global pandemic that stretched supply chains to the limit. We are witnessing a stark reversal after decades of globalization. The upshot, enabled by legislation like the Bipartisan Infrastructure Law, the CHIPS Act and the Inflation Reduction Act what we like to call the Manufacturing Renaissance Act. The United States is experienced a once in a generation on shoring boom. The de-globalization boom means U.S. Steel's nearly 123-year history of producing steel that is mined, melted, and made in the USA is paying significant dividends, with more to come and significant room for continued growth in North American steel demand. Fundamental to the globalization trend is the USA's achievement of energy independence. Between our strong segment in tubular steel and our line pipe products coming out of North America and the flat rolled, we are seeing and we will continue to see a robust order book supporting America's energy markets. Another megatrend is de-carbonization. There is a strong global commitment to reducing greenhouse gas emissions. With our electrical steels that are empowering the transition to EVs, plus our exposure to sustainable steelmaking at big River, U.S. Steel is well-positioned to harness the de-carbonization trend. And the last is digitization. Tools like Generative AI are enabling us to improve safety and efficiency and capture value in truly unprecedented ways. For instance, at our Minnesota mining operations we are using AI to improve the maintenance of our truck fleet. AI applications are assisting crews with truck repairs, ordering parts, and distilling complex information. We believe these megatrends will provide strong tailwinds for the domestic steel industry, and especially for U.S. Steel. Finally, we're excited for what lies ahead as our Best for All strategy unlocks significant value in the next 12 months. This is an exciting time. We are in the heart of, if not the world's best and brightest steel industry, the United States of America. Of course, it's up to us to harness these megatrends to strengthen our business and ride the tailwinds and that's exactly what we're doing with our strategic investments. This leads us to the third key message of today's call, bridging to 2024. As mentioned at the start of the call, our Best for All strategy unlocks significant value. Value, we don't believe the Street is fully projecting into their expectations for next year. Consider our new non-grain oriented or NGO Electrical Steel Line, which just had its completion celebrated with a ribbon cutting this month at Big River Steel. Our new index branded electrical steel is now officially out in the market, enabling us to leverage both the de-carbonization and de-globalization trends. And by the way, we delivered NGO on time and on budget. Next, our dual galvanized GALVALUME coating line, or CGL2 at Big River is nearing its anticipated startup in 2024. This line will leverage the sustainable steel making at the Big River Complex to offer value added construction and appliance steels. And then there's Big River 2, our state of the art mini mill that remains on track for a second half 2024 startup. As we shared during the last call, Big River 2, in combination with the existing Big River Steel will form a cutting edge 6 million ton mega mill, supplying the most advanced and sustainable steels in North America, with up to 70% to 80% fewer greenhouse gas emissions than the traditional integrated steel making route. Our progress at Big River 2 is tangible. When we last spoke in July, we just had a quarter of the equipment on site. Today, almost two thirds, and our experienced construction team is progressing as closer to first coil in the second half of 2024. Today, we'll spend time unpacking 2024 and helping bridge the gap between Best for All and 2024 Street estimates. This is time well spent given the transformation in our business model and the benefits we expect to see next year. Simply put, we believe that the trajectory of our performance, both today and tomorrow has not been fully appreciated by the market. We are 12 months away from the scheduled launch of Big River 2, which means incremental strategic EBITDA creation and about $1 billion reduction to CAPEX in 2024 relative to 2023. After years of heavy investment, we are finally coming down the CAPEX Mountain and ready to collect the bounty of free cash flow and unlock stockholder value. Even as we invest in strategic projects that will reshape our footprint and drive our Best for All strategy forward in 2024, we are taking necessary actions today in the face of volatile market conditions. We have recently had to make some tough decisions related to reducing fixed costs in September, when we made the difficult decision to temporarily idle our last operating blast furnace at Granite City Works. I say this was a difficult decision, and it truly was, but it was a necessary one. With the auto worker strike impacting the order book in the fourth quarter, we acted to ensure that our melt capacity is in line with demand. We remain nimble, enabling us to maintain profitability as we manage through uncertain market conditions. Now let's turn things over to Jess, who will go over the financials and 2024 expectations. Jess?

Thanks, Dave and good morning to everyone on the call. I'll pick up on Slide 5, where we'll start with a look at the third quarter. We were very pleased with third quarter performance, with net earnings of $299 million or $1.20 per diluted share. Adjusting for certain one-time items, adjusted net earnings were $350 million or a $1.40 per share. Both the adjusted EPS of a $1.40 and adjusted EBITDA of $578 million were stronger than expected, in large part from better performance across our NAFR segment. Free cash flow during the quarter was a positive $232 million. When you consider that we spent $423 million in strategic CAPEX related to our inflight projects, I'll note the business generated a robust $655 million in investable-free cash flow in the third quarter. The balance sheet continues to be in excellent shape. We ended the quarter with $5.5 billion of total liquidity, including $3.2 billion of cash. Our leverage at September 30th remains very low at two times adjusted debt to EBITDA. Buybacks are on a pause as a result of the Strategic Alternatives Review and to date, we have $125 million left to buy on our authorized $500 million program. Now, let's spend a few minutes on Q3 within the segments on Slide 6. Our flat rolled segment delivered a sequentially strong third quarter with EBITDA of $378 million, that's in line with Q2 performance. Despite a sequentially lower HRC environment in Q3, we realized higher than expected average selling prices driven by mixed benefits from a greater proportion of higher value products sold in the quarter. The third quarter was also helped by raw material tailwinds, including lower outside purchased scrap and alloy costs. We also benefited from fixed cost reductions and lower mining related costs during the quarter. Mini Mill segment EBITDA declined sequentially to 84 million as spot deal prices were lower and we had slightly lower shipments. Lower metallic costs served to offset some of the pricing headwinds we experienced in Q3, with both the benefit of having our Gary Pig machine ramped to full run rate production during the quarter, as well as lower scrap prices. The Mini Mill segment EBITDA margin for the quarter was 13%. Now, I will note that results this quarter included about $17 million of non-recurring anticipated startup costs for our inflight projects at Big River. Adjusting for those expenses, Big River EBITDA margin would have been 15% in Q3, which is in line with expectations. Moving to our European business, we delivered $10 million of EBITDA in the third quarter. We experienced declining prices and lower volumes impacting the top line in Europe. We also incurred costs related to the planned outage in August on one of our blast furnaces. The Tubular segment continued to deliver historically high EBITDA for the third quarter of 99 million at a very healthy 32% margin. You'll recall that we mentioned on our earnings call back in July that we expected results to slow in Q3 versus Q2. The sequential decrease in EBITDA was primarily driven by a reduction in lower average realized prices and shipments for Tubular. Later, I'll wrap up my prepared remarks with our customary outlook for the fourth quarter. But before I do that, I'll spend a few minutes providing context around 2024 expectations. As Dave mentioned, 2024 is an important year for us strategically, as all of our in-flight projects will begin generating EBITDA and cash flow for at least a portion of the year, and our strategic capital spending starts to wind down. We're assessing the timing of those benefits as we get closer to project completion. We also expect to generate savings from identified, and in some cases, completed actions that we're taking in fixed costs and with continuous improvement projects in our mills and mines. These 2024 numbers are still assumptions and subject to change, so we'll continue to provide quarterly guidance. But as we've pulled forecasts together for the year, we noticed a sizable gap to current analyst models. So to be helpful, we wanted to highlight year-over-year changes that we expect to see. I want to start on Slide 7 by showing you the strategic progress made over the last couple of years. Now as you can see we are over the hump on the heavy CAPEX that is a critical path to Best for All. We are about 12 months away from when we expect all of these initiatives will be up and running. And we're in the execution phase of our Gary Pig machine project and as we've discussed, first coil was achieved last month on our NGO line. Next up at Big River is our continuous GALV line or CGL2, which remains on track for start-up in mid-2024. Our DR-grade pellet facility in Minnesota is also on track for a fourth quarter 2023 start-up. We're in the midst of completing equipment installation as we speak in Minnesota, and our commercial team is progressing negotiations for offtake agreements. And finally, Big River 2 is progressing by leaps and bounds. Take a look at the photos on Slide 8 in our investor presentation. Clearly, a picture is worth a thousand words. It is a beautiful site. So as you can see on Slide 9, using Dave's analogy, we are getting to the other side of the mountain towards the point of considerable value unlock. Once this investment period is complete, our footprint will support increased earnings stability, decreasing capital intensity, and improving free cash flow generation next year. On Slide 10, we want to provide some detail behind the pieces that together will help bridge the gap to 2024. Now let's start with 2023 as our baseline, which we're expecting will shake out at around $2 billion of adjusted EBITDA. Moving from left to right, let's first layer in the $155 million to $210 million of incremental EBITDA from our strategic projects. And where we fall in that range is largely dependent on the exact timing of the start-up. Next, we are implementing roughly $100 million of cost benefits focused primarily on fixed cost reductions within the North American Flat-Rolled segment. And finally, we anticipate certain headwinds, primarily from foreign exchange impacts and lower steel prices based on average consensus sell-side estimates of about $750 per ton HRC in 2024. That's partially offset by tailwinds from raw material costs and some of those impacts reflect -- is reflected in the all other bucket of $300 million. Taken together, we feel comfortable with projecting at least a similar level of EBITDA performance in 2024 compared to 2023. Now it's worth spending a few minutes on the strategic project contributions in 2024 on Slide 11 that together make up the $155 million to $210 million range. We believe the contributions from these projects in 2024 remain underappreciated in many of the analyst models. Let's start with the Gary Pig machine. As you may remember, this came online, under budget, and ahead of schedule in Q4 2022. Using pig iron from Gary provides an approximate $50 per ton cost advantage relative to third-party purchases. We expect to see the full $30 million of EBITDA benefit next year. Moving to the NGO line, we expect to deliver a $60 million EBITDA uplift in 2024 on our way to the full $140 million EBITDA benefit in 2026 as we ramp up and optimize product mix. On our dual-coating line or CGL2, it's on track for start-up in the second half of 2024. Depending on the exact timing of that start-up, we are anticipating an incremental $10 million to $15 million of EBITDA. And finally, BR2. Depending on the exact timing of the start-up in the back half of the year, we're expecting to deliver an additional $75 million to $125 million of EBITDA that we did not have in 2023. We wanted to provide a segment view for 2024 on Slide 12. Starting off with the North American Flat-Rolled business, we believe our Flat-Rolled segment can deliver approximately $1 billion of EBITDA in 2024. That's in line with the $1 billion or so we believe true cycle looks like for this segment when you consider the impact of recent investments and improvements we've made over the last few years. We've talked a lot about the value being generated in our Mini Mill segment, and we think it's only going to keep getting better. We expect 2024 adjusted EBITDA in the neighborhood of $600 million, on its way to a projected $1.3 billion of EBITDA in 2026 as Big River 2 hits run rate. We've actioned cost savings in Europe, which together with expected energy tailwinds, should deliver about $100 million of EBITDA in 2024, offsetting impacts from a top line that's going to continue to be challenged and from an extended supply chain. And finally, Tubular, a true transformation. What was recently a segment that was inconsistent and vulnerable to commodity cycles is now generating material and resilient EBITDA. We've seen Tubular benefit from a structural improvement in the cost structure, in-sourced rounds production and proprietary connections and a continued strong commercial backdrop. Our current estimates for 2024 will see Tubular contribute about $300 million of EBITDA. Let's take a look at the free cash flow profile on Slide 13. Our free cash flow profile has fundamentally changed over the last 10 years. Our annual average free cash flow generation has gone from essentially breakeven in the 2015 to 2019 period to what we estimate could average about $1 billion in the 2021 to 2024 timeframe. Again, as you consider what is driving our free cash flow outlook, it's three things: the decline in our strategic CAPEX requirements, the ramp-up of our strategic projects, and the decrease in capital intensity of our transformed footprint. As you can see on Slide 14, this has afforded us the flexibility to strengthen our balance sheet, invest in our strategy, and return capital to stockholders, checking the box on each of our capital allocation priorities. As we discussed earlier, our balance sheet is, as I like to say, strong as steel. We're advancing our strategic projects and we have maintained our quarterly dividend. And while our buyback program is currently on a pause, we will continue to assess capital returns as appropriate given the business will continue to generate excess cash. I'll wrap up with our current view of the fourth quarter. Pricing across the segments will be a headwind in the quarter, and we expect sequentially lower EBITDA in the fourth quarter versus the third. We expect a sequential decline in Flat-Rolled segment EBITDA, reflecting lower pricing and volumes. This is due in part to lower spot prices and the decreased volumes and associated costs from planned maintenance that's occurring in the fourth quarter. In the Mini Mill segment, we expect lower steel prices and a planned maintenance outage to impact fourth quarter results, driving lower sequential EBITDA. These items are expected to be partially offset from lower metallics costs. In Europe, we expect Q4 EBITDA to be consistent with Q3 performance as we expect lower raw material costs and the absence of planned outage spending to broadly offset pricing headwinds during the quarter. And finally, we also expect sequentially lower EBITDA at our Tubular operations. That reflects decreased average selling prices, partially offset by shipments returning to more normalized levels. Taken together, we expect fourth quarter adjusted EBITDA to be between $200 million and $250 million. Now before I turn it back to Dave, I do want to invite you to take a look at refreshed slides we've included in the appendix of this presentation on our website. The analysis includes detailed assumptions on pricing and product mix information and a bottoms-up cost breakdown for our integrated segments and the Mini Mill business. And of course, you can always reach out to the Investor Relations team with any questions you may have. So with that, I'll turn it back to Dave before we take your Q&A. Dave?

Thanks, Jess. Before we move to Q&A, I'd like to thank the stockholders for the opportunity to provide an update on the strategic alternatives review process. We are flattered and excited by the robust interest in U.S. Steel and especially excited for our stockholders. But we have provided all of the information we are going to give. We kindly ask that you keep your questions focused on our operational and financial performance, which we will be more than happy to discuss. Kevin, let's open up the line for Q&A.

Okay. Thank you, Dave. And of course, as many of you know, we typically begin our calls with a question submitted from our retail and institutional investors platform, say, technologies. But today, we believe we've adequately addressed these in our prepared remarks. So I will now ask the operator to open the line for questions.

[Operator Instructions]. And we'll proceed with our first question on the line from Bill Peterson with J.P. Morgan. Please go ahead with your questions.

Yeah, hi, good morning. And thanks for taking the questions. Interesting you're putting out the 2024 sort of illustrative guidance on EBITDA. I just want to clarify, you're using 750 I guess, HRC just to make sure. And then also, can you give a little bit more detail on the underlying assumptions around input costs, energy, labor, or inflation or any other things on the cost side?

Hi, there, yes. Good morning Bill. So we are using 750, that's right, I'll start there. And then I'll give a little bit of color behind both NAFR and the Mini Mill segment. A couple of things, so first off, clearly, that $750 HRC is going to have some sensitivity around it, right, just given that 30% of our shipments are sold on fixed-price contracts. And our market-based contracts, particularly the quarterly ones, are going to exhibit a little less volatility than what we would experience in spot price movements. So that plays through some of our estimates for the $1 billion that we're expecting for NAFR. We do believe that we will see a tailwind in coal costs. 2024 coal costs are expected to be a tailwind when you think about we sort of start off with a lower cost base than the competition in coal. And we have a competitive advantage in our coal blending abilities. So when we put that together, and we're looking out across commodity prices, we believe that's going to be a benefit in that number. We also believe raw materials, we're not going to go into much more detail by commodity, but raw materials as a whole will be a tailwind for us in the year as well. And then for NAFR, that $100 million of cost benefits, that annualized number that we're seeing in 2024 is a significant driver as well. As far as Big River in terms of the Mini Mill, we do see an increase in the shipments that are expected, particularly when you think about the impact of the additional lines, the NGO line add about 100,000 tons and additional shipments from the CGL2 and Big River depending on the timing of when those get started. We do also see better product mix as we think about the value-added benefit to the portfolio in bringing those lines up and running, NGO and CGL specifically. We do also see additional benefit in the Mini Mill, and that's playing through that $600 million number from the continued benefit coming out of Gary Pig within the metallics cost. So I think that gives a high level of probably some of the biggest puts and takes within those numbers. If there's something more specific, Bill, if you'd ask a second question.

Yes, no, that's a good overview. Wanted to ask about, I guess, what you're looking for in terms of a market environment to turn grants to be back on. I mean we've seen prices improve here in recent weeks. But what are the kind of signposts or guideposts you're looking at before you turn that asset back on?

Yes, maybe I'll just make -- this is Dave. Just to make a few comments, then Jess, I'll turn it to you. The key for us is we got to be nimble and respond to whatever the market dynamics are. And certainly, the update we've heard from the UAW and Ford is clearly a positive sign. But negotiations with Stellantis and General Motors remain outstanding. It's clearly something we're watching closely as the days go by. And maybe, Jess, you just give a little more color, if you could.

Sure, Dave. Thank you. So clearly, as Dave just mentioned, it's a positive outcome to see the settling of the strike between Ford and the UAW. But we are still watching for both Stellantis and GM to see what happens. Auto makes up about 30% of the Flat-Rolled segment. And so while we also have exposure to other transplants, which have not been impacted, we did take the impact of the strike into consideration on the decision to temporarily idle Granite City. So as we look through the quarter, we're really going to focus on the order book, and ultimately make a decision on whether or not we see that order book activity reaccelerate and use that as the guide to decide on making the most efficient use of the footprint and then get to ultimately whether or not we decide to turn Granite City back on. It's just -- it's too early at this point to be able to give an update on that.

Thank you very much. And we'll proceed with our next question on the line. It is from the line of Alex Hacking with Citi. Go right ahead.

Yeah, good morning. Thanks for the call. So I guess, first question on Big River, the new mill. One that was announced, I think you guys said that those -- that, that would not necessarily represent incremental tons into the marketplace. As we approach the start-up of that mill next year, is that still the strategy or will you take more of a market-based approach and see how demand is? Thank you.

Well, I'd say, yes, Alex, Big River is progressing well. And obviously, this is the driver to incremental EBITDA in 2024. And I think that's one of the reasons that we focused on that today with Jess providing additional color. But the opportunity to align the market on the tremendous value is obviously going to be happening next year. We're tracking towards second half 2024 start-up, and we're going to be generating EBITDA, of course, next year. Jess, I think you got maybe some more to say on that.

Yes, I think it's similar to -- as you think about the footprint and the impact on incremental volumes, I think it's a similar conversation as we just had for Granite City, which is we're going to look at the order book, right. We're going to make sure that we're always balanced in terms of the way we think about our capacity with our footprint. Now we're not going beyond 2024 today. So as we make decisions in the future, it's too early to be able to talk about any other changes to the footprint as we bring Big River to online and we start to look at the volumes that we expect will come into the market from BR2 specifically in 2024. We're really kind of limiting our conversation today to what we see, the level of visibility we have for 2024. But obviously, those decisions are real-time ones that we make as far as how to best align our footprint with what we're seeing across the market, and we'll continue to do that.

Okay, thanks. And then a follow-up. I have in my notes that all the strategic CAPEX is done in 2024, and there's no carryover into 2025, is that correct?

There's a little bit of timing. So right now, we're looking at, let's call it, maybe $50 million to $100 million of some cash outlay, not commitments, cash outlay that would flow into 2025, but nothing material. The bulk of it -- I mean, almost all of it really is going to be completed by 2024.

Okay, thanks. Back to operator [ph].

Thanks Alex.

Thank you very much. We'll get our next question on the line from Carlos De Alba with Morgan Stanley. Please go right ahead.

Yeah, good morning. Thank you. Just we saw news this morning that you still is increasing [indiscernible] prices or all flat prices by about $100 per ton. Just wanted to maybe -- if you could confirm this or what color can you offer, what you see in the marketplace that supports this decision if indeed you're going ahead with it?

I'd say, yes, I confirm that, of course. And obviously, we got a full order book for this quarter. So a lot of the price increases that will come will likely show up in the first quarter of next year. But we're seeing a lot of different drivers across our four operating segments. And maybe, Kevin, I'll ask you just to go through each one of these real quickly here to give them a sense of what those drivers are.

Yes. Thanks, Dave. Happy to do that and good morning Carlos. So as Dave mentioned, we were out with a $100 a ton price increase earlier this week. We believe it's very much supported by the strength that we're seeing in the order book and the continued momentum that continues to be built here as we conclude calendar year 2024. So you think about automotive, we know it's been impacted by UAW work stoppage, but hopefully, with some light at the end of the tunnel, we think that will rectify itself in the short term and will continue to support demand through our automotive portfolio. We have a unique and diverse end-market exposure through our product portfolio. So we benefited from increase in inquiries and order activity through line pipe and energy markets. Appliance sector remains strong, on track to achieve its third best year ever in appliances. Construction has been stable and service center activity, I think from our vantage point, is beginning to increase, and we're seeing higher levels of order activity in the fourth quarter. So with inventories low and continued strong demand through our diverse end markets, we think the pricing momentum is real and certainly excited about the increase that we announced this week. In Europe, we do expect higher volumes versus the third quarter. We have all three blast furnaces operating for the quarter. We did have a two-month planned outage in Europe. So while demand remains sluggish it is probably how we would call it. We still will be in a position to run all three blast furnaces. And then Tubular, oil and gas markets are improving. They remain quite strong, and we've seen rig counts tick up. Imports have declined throughout -- from peak levels, but still remain obviously elevated. And with reduced inventories in the system, we see certainly improved Q4 shipments. So all in all, I think we're starting to see a positive momentum continue to be built, and we expect that to begin to flow through in Q4 and put us in a very good position to start 2024.

Thank you Kevin. And then just another question. Given that you are well ahead or well advanced in your transformation and with your capital projects on time and on budget, is there any timing as to when would you make a decision on whether to increase the dividend or buybacks and/or establish a capital allocation framework that either links returns to shareholders or money -- cash flows to shareholders to EBITDA minus sustaining CAPEX or free cash flow or some sort of that metric?

Yes. Carlos, you've seen our capital allocation process, if you will, and the priority is for cash, and we're going to be staying with that. But Jess, maybe you talk a little bit more specifically about the dividend question.

Sure. Sure, absolutely. Well, as I mentioned in prepared remarks, I mean, as we continue with the strategic alternatives review process, right, it's not that we aren't prioritizing our capital allocation framework. I mean on the contrary, we've been checking boxes across those priorities as we manage the business every day. But as far as what's next, that's a conversation that if and when appropriate, we would have with our Board. Right now, the focus is on completing a fair and adequate process. The Board is fully committed to and engaged in that process. And as the conversation on capital allocation and priorities with dividend and buybacks will be something we'll have, again, if and when appropriate. So I appreciate the question. It's clear that as we think about where we are in, to your point, the Best for All process, there is a tremendous free cash flow unlock that's coming for us, as Dave says, as we get to the other side of the mountain on CAPEX. So clearly, we are focused on being the best stewards of that cash, and we'll have conversations as appropriate on what to do with that cash.

We're focused on very clearly maximizing stockholder value, and the strategic process has put us in a really good place for unleashing a lot of value. And you heard Jess's remarks about the stock buyback program was delayed, frankly, for confidentiality reasons, because we have lots of information on what's going on here. So we can't actually do that program. So we've got to get through this, obviously. And you can count on us in this environment. The Board will make a great decision to maximize stockholder value because in fact, every time we meet on this, we talk about our jobs or our fiduciary duties to maximize stockholder value within the code of conduct, our steel principles. So we're committed to doing that, and then we can talk about some of these other issues. But our priorities are getting through this strategic alternative process and maximizing that value.

Thank you very much. We'll proceed with our next question on the line is from Tristan Gresser from Exane BNP Paribas. Please go right ahead.

Yes, hi. Good morning. Thank you for taking my questions. The first one is on Europe. It looks like you operate full again despite the poor market conditions. So if I understood correctly, you don't anticipate capacity cuts there and maybe shutting down the furnace like last year. And also, you guide for stable EBITDA quarter-on-quarter, but if I look at spot margins there, demand, all the indicators are pretty negative. So why is it not as bad as last year and why your message is a bit more constructive this year versus last year? That's my first question.

Thanks Tristan, this is Kevin. If we look at the fourth quarter for Europe, you're right, we're kind of guiding to a flat quarter-over-quarter level of performance. There are some moving pieces, obviously, that uniquely impact the third quarter, and then we'll really start to reverse themselves in the fourth quarter, and that's being some of the significant outage work that was done in 3Q. We do expect to have an order book that supports three blast furnaces worth of production. And we'll see that really generate sequentially higher shipments in the fourth quarter versus the third quarter. Order of magnitude, maybe somewhere between 30,000 and 40,000 tons quarter-over-quarter of incremental volumes. We are seeing proceeds soften, as you mentioned, in the fourth quarter. But with our continued focus on costs, some of the operating efficiencies that we will be able to generate in the fourth quarter into raw material tailwinds, we think the business will be in a position in Slovakia to deliver stable EBITDA quarter-on-quarter.

There's no doubt Europe is challenged where we are today. But just keep in mind also that this business has been extraordinarily well run. These guys know how to run the operations very, very well. This last year, I think the EU steel demand is expected to fall 5%, and it's more like expected to rebound 6%. So how all of that transfers through our numbers into this next year, we'll have to see. But it is not as strong, frankly, as what it has been in the past. It's a challenged business for sure in the short-term.

Alright. That's clears it and actually brings me to a quick follow-up there for next year. I mean the $100 million EBITDA for the business is pretty much what the COVID levels. I mean, expectations are we would see some rebound in demand at least upfront demand. So is there something in the business that is structurally different or are you just being really conservative on how the first half of the year will shape out there?

So if we think about performance in 2024 versus 2023, let me speak to some of the favorable changes that we expect to see in this segment. First, energy should be a tailwind for us in 2024 versus 2023. We do expect to see increased shipment volume once again with three blast furnaces running throughout the year. Recall, the two-month outage that we had in the third quarter of this year, plus we did have an idled furnace to start calendar year 2023. So that's a year-on-year change. We will see likely some raw material headwinds, whether that's in iron ore pellets using the IDEXX kind of as our barometer for costs or with coking coal versus 2023 as well as some higher labor and CO2 costs. But all of that taken together gives us a line of sight to sequentially stable EBITDA as well as FX being flat on a year-over-year basis.

Alright, that's fair. And just a quick one on CO2 costs you just mentioned, is that a big hike into next year?

It will certainly be a headwind. I don't think we're in a position right now to assess in absolute values, the level of year-on-year change. But you should think about it as a year-on-year headwind.

Alright, that's very clear. And maybe my second question, given that, that was all Europe is a bit more on capital allocation and putting the strategic process aside. I think looking for 2025, what would really be the plan after Big River 2 from the point of view of management, is there a Big River 3 somewhere in the future, it seems that is the strategy that is maximizing shareholder value or do you expect some time off in 2025 on growth and pose a bit the growth and reward shareholders a bit more, what kind of is the strategy after Big River 2?

I have to say you're getting a little greedy on this call. I just gave you 2024. Now listen, we're not going to go that far on this call right now. We feel very comfortable with the path we see for 2024. We're very comfortable with talking about what we expect the financial impacts of that are going to look like, but we're not going further than that today.

That's a good thing we didn't give him any more. He'd be asking for 2026.

No, that's fair. And I appreciate the additional disclosure you provided. Thank you. That's all from me.

Thank you.

Thank you. We'll get to our next question on the line from Gordon Johnson with GLJ Research. Please go right ahead.

Hey guys, congrats on the results. Just a quick question for me. I mean a lot of the questions have been asked. So maybe I can ask a couple. So it seems like there's been some inventory build, some purchases made up until now, prices are up. I have heard some concerns from some of the service centers and distributors in the Midwest that you could potentially see a lull in buying given that some of the inventory concerns have been addressed. Have you guys seen any of that and if not, could you elaborate? Thank you.

Yes. Sure, Gordon. This is Kevin. I would say on the inventory side, inventories at service centers were low as we ended the third quarter. I think it was somewhere around 1.9 months of inventory on hand, which is well below the 10-year average. So we think with some resolution to the UAW, better demand picture entering into 2024, that will actually bring some of the buyers off the sidelines and start to see, as we already have, a recovery in order entry rates. So I think we're quite at least optimistic in the near term that some of the uncertainty becomes more resolved and more fully resolved, that will provide some good demand.

Thank you. One more, if I could. You guys are assuming $750 in 2024 for the guide, but the curve is currently at $850. Could you guys be being a little conservative there? Thank you.

Obviously, Gordon, we wanted to align around a level of expectations that we believe is currently reflected in the market from a sell-side perspective at $750. Obviously, our results will fluctuate as steel prices move. And to the extent -- and just recently, as you pointed out, the forward curve has kicked out significantly. Obviously, we'll be -- continue to be focused on running our operations extremely well, having the right commercial strategy in place, whether that's the right mix of that market exposure, the right mix of contract, fixed volumes, index, monthly and spot to optimize the results regardless of the pricing environment. So we do see that same momentum that you're seeing, but we didn't necessarily include it in our outlook for 2024 at this juncture. But I'll pass it over to Jess if she's got some additional comments.

Yes. Just to underscore, we wanted to be helpful in bridging the gap that we saw, and these numbers are still assumptive right. So from our perspective, if you think about on the slide where we show the walk, right, that's all other $300 million, that's going to move. That's going to have the puts and takes of what happens across the market in 2024, both in the top line and within the cost base. So for the level of visibility that we have right now, we feel comfortable making clear that we expect 2024 will likely look the same -- in the same ballpark as 2023. But all the puts and takes in the business that we're going to experience are kind of in that bucket, if you will.

Thanks again guys, congrats.

Yeah, thanks.

Thank you very much. [Operator Instructions]. We'll get to our next question on the line from Carlos De Alba from Morgan Stanley. Go right ahead.

Yeah, thank you very much. And Dave, so I heard what you said about no comments on the process. I just have one, I'm going to risk it. Any color on the timing, like no details other than is this a process that the Board is taking very seriously but is there a sense of will it be completed this year or early next year, that would be extremely helpful? Thank you.

Well, Carlos, I just want to make sure you heard my earlier comments that I'd just say we're really not able to provide any further details on the strategic alternative process beyond what's already been said. As I stated earlier, there is a serious interest from many highly credible bidders, right. And it also said we're very flattered by that interest. Rest assured, we're running a robust, fair, and rigorous process. We remain focused on maximizing the stockholder value, and we'll provide updates when it's appropriate, but not before then. And until then, we're just not going to be able to give you additional details.

Fair enough, I respect that. Thank you very much.

Thank you. And that was the final question. I'll turn it back now to over back to U.S. Steel CEO, Dave Burritt, for closing comments.

Thank you to everyone for joining us this morning and for the discussion. We truly appreciate your interest and engagement with U.S. Steel. Thank you, as always, to our stockholders. We appreciate your feedback as we progress on our strategic alternative process to maximize stockholder value. Thank you as well to our customers. We're honored to partner with you and help you fulfill your needs by serving you with the best steel solutions available anywhere. Of course, there wouldn't be so much interest in U.S. Steel if weren't for the incredible employees we have who are enabling our success every single day. So thank you to the U.S. Steel employees everywhere. We're truly -- you guys are truly the best in the industry and in your hard work, your innovation, your commitment to safety first are taking U.S. Steel to new heights. At U.S. Steel we value each of these stakeholders. We are pleased to deliver differentiated steel solutions that are best for not only people, but for the planet as well. Now let's get back to work safely.

Thank you. That does conclude the conference call for today. We thank you for your participation, and we ask you please disconnect your lines. Have a good day, everyone.

Good morning, everyone, and welcome to the United States Steel Corporation Second Quarter 2023 Earnings Conference Call and Webcast. As a reminder, today's call is being recorded. I'll now hand the call over to Kevin Lewis, Vice President, Finance. Please go ahead.

Okay, thank you, Tommy. Good morning, and thank you for joining our second quarter 2023 earnings call. We hope everybody is having a great summer. Joining me on today's call is US Steel President and CEO, Dave Burritt, Senior Vice President and CFO, Jessica Graziano; and Senior Vice President and Chief Strategy and Sustainability Officer, Rich Fruehauf. This morning, we posted slides to accompany today's prepared remarks. These can be found on the US Steel Investor Relations page, under the overview section. We also recently launched a new Investor Relations website, which includes a Quarterly Investor and Strategy Presentation. We hope that you've had a chance to review the slide deck and have found it useful. Before we start, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties, as described in our SEC filings, and actual future results may vary materially. Forward-looking statements in the press release that we issued yesterday, along with our remarks today are made as of today, and we undertake no duty to update them as actual events unfold. I would now like to turn the conference call over to US Steel President and CEO, Dave Burritt. And he will begin this morning's call on slide four.

Thank you, Kevin and good morning to all of you joining us. We are grateful for your continued interest in US Steel and look forward to updating you on our business. We delivered a strong second quarter, reflecting solid market fundamentals and strong operational performance. We generated $804 million in adjusted EBITDA and 16% EBITDA margin. This includes an industry leading 23.5% adjusted EBITDA margin for our Mini Mill segment. Of course, strong performance begins with safe operations. Operations run best when safety is best. Frankly if companies aren't talking about safety that sends a strong message about not only how they treat their people and customers, but also about how their operations are performing. The summer has historically been a high-risk time of year for the steel industry. I'm pleased with our continued focus across the organization on working safely and we would like to remind all of those listening today to stay safe, follow high heat protocols and look out for others. We are on pace for another record best year of safety performance following record best in 2020, record best in 2021, and record best in 2022. I know of no other steel company that approaches our great safety results. So as we kick-off the call, I'd like to thank the US Steel team for always putting safety first for themselves, for their families, for their communities and for our company. Operations always run best when they are running safely and efficiently. Our flat-rolled segment ran at an adjusted utilization of 86%. And our Mini Mill segment ran at 91% utilization. These high levels of utilization drive efficiencies throughout the business. US Steel's best for all strategy is to provide customers with profitable steel solutions for people and planet to reward stockholders. And I'm pleased to say that we expect to continue rewarding stockholders as we continue to execute extraordinarily well. We have returned an outsized amount of cash to investors in-stock repurchases since the fourth quarter of 2021, nearly $1.2 billion or approximately 18% of our market capitalization at quarter-end. Meanwhile, we're advancing strategic projects on-time and on-budget, no permitting delays, none. This team found ways to offset high inflationary pressures. On-time and on-budget is now standard work at US Steel. Our strategy will reposition US Steel to benefit from long-term macro trends, which we believe signal a renaissance for American steel making, more on this later. Said very directly, I am bullish on the United States, I am bullish on American steel and I am very bullish on US Steel. That's why we're looking forward to getting to our best for all future faster. Yes, some challenges remain, but the challenge has become the way. We embrace this historic philosophy what stands in the way, becomes the way and we are making great progress transitioning to a less cost, less capital and less carbon intensive business model to become the best steel competitor. We're doing this by expanding existing competitive advantages, enhancing our balanced capital allocation and leveraging bipartisan support for strong trade enforcement. Our path is delivering on our best for all strategy. Let's get into today's discussion on slide five. To get to our best for all future, we must focus on the things that we can control. We are ensuring we have best safety performance, best environmental performance, best operations and are the best partner to our customers, employees, suppliers, communities, and of course our stockholders. At the same time, we're expanding best capabilities in the US Steel portfolio to deliver the new US Steel today. Our strategic process is accelerating with favorable external mega trends and setting up a period of tremendous opportunity for US Steel and for our stockholders. Broadly speaking, those external factors are de-carbonization, de-globalization and digitization. Let me begin with de-carbonization on slide six. The push towards a greener future is undeniable. That's why we were an early industry adopter of interim and net zero-emission goals. Our customers want to partner with companies that help them meet their own de-carbonization targets. That's where our strategic investments come into play. Later this summer, we'll start producing non-grain oriented or NGO electrical steel, on-time and on-budget. We've combined our state-of-the art sustainable steel making assets at Big River Steel with a model for next-generation NGO electrical steel right here in the United States. Our investments in sustainable steels continue to strengthen domestic supply chains and bring advanced manufacturing back to our shores. The attractive electrical steel market is one of the fastest-growing markets with considerable margin expansion potential. We forecast a 7% compounded annual growth rate, just in NGO and in motor laminate, compared with 1% for the broader sheet market. Our new InduX branded electrical steel product will provide the most capable and efficient NGO steel in the market today. To those that think this is new to us, we've been making electrical steel in Europe for over 20 years with our Slovakian team providing essential support for the successful completion of our NGO project. I am so confident in our ability to be not only successful, but disruptive to the electrical steel market in the United States. You'll see what I mean on slide seven. These next-generation electrical steels will be unmatched in scale. We can produce 200,000 tons of NGO steel, more than any other domestic competitor. Unmatched in capabilities, we'll be able to produce electrical steels that are thinner, able to go 0.1 millimeters to 0.8 millimeters thin, wider up to 1,650 millimeters wide and bigger up to 30 metric tons, better than what the domestic market can produce today. Why does that matter? Because it allows customers to improve their production yields and process efficiencies. Our NGO will also be unmatched in customer value, strategically located to support manufacturing concentration in the US, Canada and Mexico and producing next-generation steels that aren't widely available today. When we set out to build this line, we went straight to the customers to hear what's most important to them and here's what we heard. Customers want thinner steels. The thinner we can make our NGO steels, the further their electric vehicle motors can go between charges. Customers want bigger coils, bigger coils mean more throughput and less downtime. And customers want wider coils, wider coils mean less yield loss, more efficient stamping and optimize slitting for less waste. We'll be able to offer NGO electrical steel that can do all of this and more. For instance, we'll go thinner than what electric vehicle manufacturers currently require. This means we can meet their requirements today and tomorrow. The future of electrical steel is combining state-of-the art sustainable steel-making with world-class electrical steel technology and that future for customers starts now. We are pleased and excited to recently have earned our first customer orders for industrial and ex-EV auto grades. Those are orders in hand before the assets are running. So not only are we confident in our NGO steels, so are our customers. The sales team tells me, when we make it, we take it, meaning we will take market-share, since no competitor comes close to our NGO steels. We are delivering the new US Steel today. NGO is part of Big River Steel, our state-of-the art Mini Mill operation that is crucial to US Steel's ongoing and accelerating de-carbonization strategy. We're also constructing a new continuous galvanizing line at Big River Steel that is slated for start-up next year. This project remains on-time and on-budget. We know that making our business more environmentally sustainable is the best thing to do for our customers, for our planet and for our bottom line. That's why we're building Big River 2 right next door. The new state-of-the art Mini Mill remains on track for a 2024 start-up and in-line with its $3 billion budget. Once complete this cutting-edge facility in combination with the existing Big River Steel will form a 6 million ton mega mill, supplying the most advanced and sustainable steels in North America. Slide eight illustrates the considerable construction progress to-date. 87% of the project's spend has already been committed and 59% of the project execution is complete. As you can see we're past the peak execution risk phase and are approaching the equipment installation and commissioning milestones. So while others in the industry haven't started construction, we are well on our way to greater free cash flow for stockholders from our Mini Mill investment. 25% to 30% of Big River 2 equipment is already onsite, which again largely derisks the next phase of construction. Most of the critical equipment not onsite has been physically inspected by the team to ensure the equipment is ready for installation once delivered. We have the best in-house construction project team in the industry by far and they are proving their expertise time and time again. First, by successfully delivering Big River Steel under budget and ahead of schedule and by achieving world-class commissioning. Then by successfully delivering NGO later this quarter. And today, Big River 2 is on-track and on-budget in-spite of extraordinary supply-chain and inflationary pressures. With an average of 25 years’ experience across the team, there is considerable experience at the helm that you can't easily replicate. This is a true and differentiated competitive advantage for US Steel. Our iron-ore assets are also differentiated, competitive advantage. We continue to see the success of our Gary pig production as it supports our overall metallic strategy. Our investment at Keetac to add DR-grade pellet capabilities during 2024 also remains on-time and on-budget. Let's move to slide nine to discuss another trend moving in our favor, de-globalization. As you can see, we're investing in the place we've called home for 120 plus years, America. For decades, the big global trend was outsourcing and overseas investment. We saw the expansion of global supply chains, and we also just recently how delicate those supply chains really are. The COVID-19 pandemic exposed the fragility when lockdowns and labor shortages led to product shortage and the worst inflation in more than a generation. The opportunity, companies both American and foreign have realized they need to have operations here to access American markets and keep their supply chains resilient. The Inflation Reduction Act and Bipartisan Infrastructure law also provide meaningful incentives for investing in America. I'd say the IRA is misnamed. It's a manufacturing renaissance act. We applaud those that made it happen and we look-forward to the tailwinds we believe it will provide for the steel industry for years to come. I believe our country has finally realized how important it is to our national security, to have a strong and resilient manufacturing sector here at-home, supported by strong trade enforcement. Of course, US Steel has always been here. For 122 years, our steel has been mined, melted and made right here in the USA. So we say welcome back to the rest of these companies coming home and look-forward to partnering with them. And they really are charging back. In 2022, construction spending related to manufacturing was over $100 billion in the United States. And encouragingly, you can't have a manufacturing boom without steel. US Steel is poised to supply steel to builders of everything from automobiles to roofing. In a brutally competitive global marketplace, advantage United States. And advantage US Steel, because we are investing in new capabilities that expand our iron ore, Mini Mill and finishing line advantages. Hope you can hear the excitement in my voice, when I discuss these global trends, de-globalization, de-carbonization and how they align with US Steel strategy. These are long-term tailwinds that will provide uplift as we execute our strategic transformation to being a less cost intensive,, less capital-intensive and less carbon intensive business. The path to value creation is clear. I'm also energized by another trend on slide 10, one, where we've only begun to scratch the surface. That's digitization. New digital tools like generative AI provide us with tremendous opportunity to become a more productive and more profitable US Steel. At US Steel we've been working with multiple forms of AI with our recent strong focus on generative AI. We are already seeing results. Here are just a few examples. At US Steel Europe, we've achieved a $5 million annual run-rate savings by deploying energy cost optimization models based on market price and electricity purchase recommendations. Also at US Steel Europe, we're leveraging machine-learning with exhaust gas sensors to predict final values for carbon temperatures to recommend process actions. The benefit has been a $3 million annual run-rate savings. At Gary Works, we're utilizing advanced analytics to reduce natural gas usage at our boilers by monitoring key performance indicators to improve boiler operations and reduce fuel consumption, the value, $4 million of savings. And at our mines in Minnesota, we are leveraging advanced analytic models for operator recommendations to increase productivity at our concentrator. This has achieved nearly $3 million of value. This is only the beginning of our digital and AI journey. To accelerate our work, we also recently launched a partnership with Carnegie Foundry, a leading robotics and AI studio here in Pittsburgh. The Carnegie Foundry team are clear leaders and innovators in autonomy and this partnership will ensure we are at the forefront of emerging innovation in robotics and autonomous solutions. The bottom line, we may be 122 year-old company, but we are intensely future focused, and we have a bias for speed. Now before we turn to Jess to go over the numbers, I'd like to briefly recap my opening remarks. We had a terrific second quarter. We're making great progress on strategic projects and remain on-time and on-budget. And we're extremely well-positioned for what we believe will be the best American steel market in a generation and to capitalize on global trends of de-globalization, de-carbonization and digitalization to build a stronger, more resilient and more profitable US Steel. We are excited by and committed to a capital allocation framework that consistently rewards stockholders. We're executing with confidence and incremental EBITDA from strategic projects will continue to strengthen our already strong balance sheet. We're building a stronger business for you, our stockholders. As we get stronger, you will see the direct returns. We've returned nearly $1.2 billion of capital to stockholders through buybacks since 2021 and I expect that to continue. And as we continue to think about capital allocation, we'll consider opportunities for the dividend given our confidence in generating resilient cash flows. This is the power of our strategy. I'm bullish on the future of US Steel. And I couldn't be more pleased to lead the steel company with United States right there in the name. Now let's turn it over to Jess, who will go over the financials. Jess?

Thanks, Dave, and good morning to everyone on the call. I'll pick up on slide 11. We were very pleased with our second quarter performance with sizable sequential increases in both adjusted EPS and adjusted EBITDA. Adjusted EPS of $1.92 for the quarter is up nearly 150% sequentially in large part from higher net income, as well as a lower share count from our buyback activity in the quarter. Adjusted EBITDA of $804 million is up about 90% sequentially, in-part due to higher steel prices across our Flat-Rolled and Mini Mill segments and in Europe. Adjusted EBITDA also increased due to better mix, as we responded to customer demand with our diverse order book and from continued cost improvements we've seen across the segments. Adjusted EBITDA margin for the quarter with a healthy 16%, with our Mini Mill being a significant contributor. Robust EBITDA margin in our Mini Mill segment in the second-quarter was 23.5% after we adjust for construction and some onetime costs. More on the segments in a minute. We translated this strong performance across the business into a lot of cash, generating over $100 million of positive free cash flow in the second quarter and that's after investing $476 million in strategic CapEx for our in-flight projects and another $136 million for sustaining projects across the business. All that cash further strengthens our balance sheet and we ended Q2 with approximately $3.1 billion of cash and total liquidity of $5.5 billion. Our leverage at June 30th was 1.8 times adjusted debt-to-EBITDA, well below our through-cycle target range of 3 to 3.5 times. We're checking the box on each of our capital allocation priorities, maintaining a strong balance sheet, while we invest in and execute against our strategy. We're also checking the box on direct returns, with $75 million in share repurchases and $11 million in dividends returned to stockholders in the second quarter. As we near the completion of our current $500 million repurchase authorization and add to the nearly $1.2 billion of buybacks completed since Q4 2021, we'll continue to consider direct returns of priority in capital deployment with the potential for a new sizable repurchase authorization and a fresh review of our dividend policy. What's really exciting is seeing our key in-flight initiatives come online, we start to generate free cash flow in bigger and more resilient ways as we began producing NGO coils at Big River this quarter and we look forward to Big River 2's on-time start in mid-2024. Let's move to slide 12, remember, last quarter when I called Big River a lean green cash machine. It's lean, when you compare half of the sustaining CapEx needs per ton versus our legacy assets producing green feel with 70% to 80% fewer GHG emissions versus blast furnaces. And with over $1 billion of annual through-cycle free-cash flow we expect from the Big River campus, once Big River 2 is at run-rate, the cash machine continues to get closer and ring louder. Let's spend a few minutes within the segments and get into the details of the second quarter on slide 13. I'll then share our thoughts on Q3. Our Flat-Rolled segment delivered a sequentially strong second quarter, with EBITDA of $377 million, up over 2.5 times from Q1. The higher steel prices we saw building in Q1, were realized in Q2, coupled with a benefit in mix across a more diverse order book. Now for our second quarter results were also helped by the absence of seasonal headwinds in the mining operation that affected Q1. The Mini Mill segment was the star of the show this quarter with segment EBITDA of $173 million, up nearly 3.5 times sequentially in large part from higher steel prices. Reported margin for the quarter was 22%, but that includes certain startup costs for the new lines and for BR 2 as well as some one-time costs in the quarter. Together, if we exclude those $12 million of cost, the second quarter Mini Mill margin was the 23.5%, I mentioned earlier, a best across public peers. Our European operations also saw meaningful improvement in the second quarter. We delivered $97 million of EBITDA in Europe, reflecting price and volume tailwinds and lower energy costs. We also benefited from cost absorption and other efficiencies from running all three blast furnaces in Slovakia. While Q2 results have moderated from sequential gains in our Tubular segment, second quarter EBITDA for the segment remained robust at $169 million due to historically strong pricing, cost control and a focus on premium connections. Tubular delivered a very healthy 42% margin for the quarter. Now looking forward to the third quarter, where we will still see positive results, albeit slowing sequentially. The Flat-Rolled segment results should reflect lower steel prices than we experienced in Q2. Volumes are expected to be stable as we continue to focus on mix that keeps the segment nimble to changing market dynamics. In the Mini Mill segment, we expect lower steel prices will impact third quarter results and lower sequential EBITDA. However, with a strong level of EBITDA expected, margins in this segment should remain strong, approaching mid-teens for the third quarter. In Europe, current market dynamics are expected to pressure both steel prices and demand, which we expect will impact third quarter results. We're continuing to monitor the order book to ensure our production schedule and forward demand remain balanced. At our Tubular operations, we expect volumes and average selling prices to be negatively impacted by more muted demand as onshore rig counts decline and pipe inventory rebalances throughout the quarter. As we look forward for Tubular, we remain focused on keeping fundamentals extremely strong as we monitor the impact of higher imports, increasing inventory levels across the supply chain and lower rig counts. And we'll do that by serving our customers in strategic basins, leveraging our proprietary premium connections and enhancing our structurally improved cost profile. Taken together, we expect third quarter adjusted EBITDA to be between $450 million and $500 million. I'll wrap-up with this on slide 14. Our stock provides a unique opportunity for investors to invest in a growing business with a transformed balance sheet and continued and meaningful direct returns to stockholders, all at a significant discount versus peers. I'll turn it back to Dave before we take your Q&A. Dave?

Thanks, Jess. So to recap on slide 15. We delivered record safety performance during a strong second quarter, while advancing strategic investments on-time and on-budget. With each passing quarter, we are saying, what we're doing and doing what we say. We are focused on the things we can control, to get to our best for all future faster. By delivering our best every day, we ensure continuous improvement, our best for all strategy is setting us up to capitalize on favorable external trends to create tremendous opportunity for US Steel. I truly believe we're entering an exciting time in the domestic steel market and I am very bullish for US Steel's future. Kevin, let's move to Q&A.

Okay, thank you, Dave. Our first question comes from Say Technologies. And just as a reminder, the Say Technologies platform is the platform that we use here at US Steel that allows retail and institutional investors to submit questions to management ahead of our earnings call. We've seen this platform used across other public companies like Tesla, like Chevron and Pfizer to name a few. So today, several of the pre-submitted questions that we saw from our investors focused on the expected impact from the Inflation Reduction Act and Infrastructure Bill. This isn't a new question but one I know continues to be top of mind. Dave you want to get us started with your latest thoughts on the topic?

Sure. Will be happy to do. The IRA and the Infrastructure bill offer unique opportunities, really validates some of the trends I spoke about earlier. We agree with what some of you have said. We are on the cusp of a once in a generational steel cycle. Our strategic projects, position us well to benefit from the favorable macro trends. The IRA Bill should be renamed as I said, the manufacturing renaissance act. Critical for industrial de-carbonization. De-carbonization includes steel and iron-making which is confirmation of the critical role our business plays in US manufacturing. And it's all about re-shoring. And our mantra of mined, melted and made in the USA and Rich I know you've been living this every day. Anything you'd like to add?

Yeah, thanks Dave. On the Infrastructure bill, we are well-positioned. As you mentioned mined, melted and made in the USA, that's what we do here at US Steel every day. Re-shoring of manufacturing to the US and regionalization of supply chains, that's right in our wheelhouse. As you noted, the Infrastructure bill includes so-called Buy American provisions and there's no better American steel than the steel that we make here at US Steel. And I think the industry is just really starting to see the benefit, about $220 billion of the Infrastructure bill has been announced, it takes time for these projects to get into the hands of the construction teams. But we're going to see more of that likely in the second half as it filters into actual projects on the ground. So a lot more come from the government spending here to be announced. And I think that points to additional upside for the industry and that's why we have increased confidence about this being the generational moment for steel that you mentioned before and other analysts have talked about it. So a lot to be optimistic about here and then you look at the $370 billion in climate investments in the Inflation Reduction Act. That's another policy support for the industry and another area of opportunity for us. The government is working through the process through various funding opportunity announcements from the Department of Energy, on where that spending is going to go, but certainly a potential tailwind for steel and also for the technologies that will be developed to allow the industry to decarbonize the lower carbon intensity. Obviously, that's something we've been working on for a long-time with our net zero goal and our 20% reduction of emissions intensity by 2030 goal. So we've positioned the company to benefit from these potential future funds and we think those can be very supportive future investments for us. So especially technologies that will lower our carbon intensity.

Well, thank you both, Dave, and Rich. And with that, Tommy, you may now queue the phone line for questions. We ask that you each please limit yourself to one question and a follow-up, so that everybody on the call has the opportunity to ask a question.

Thank you. [Operator Instructions] I will proceed with our first question on the line, from Tristan Gresser with BNP Paribas Exane. Please go right ahead.

Yes, hi, good morning, and thank you for taking my questions and for the presentation. The first one is maybe on the Q2 volume numbers, notably, the decline in external shipments at Big River. If you could provide a little bit of color there? And moving into Q3, I appreciate the color you gave on the moving pieces of the guidance. But what are the expectations for US volume into Q3? And is the volume guidance by division that you provided at the start of the year still valid? Or does it look a little bit ambitious now for Big River? And also on volumes in Europe, could you confirm if there has been a shutdown of the blast furnace for maintenance and also what does that mean for the volume guidance? That's my first question. Thank you.

Yeah, thanks for that question. I'll turn it to Kevin in a moment, but we appreciate you calling out Big River Steel, just because of the great performance that they've had. They've demonstrated that they can be incredibly nimble in a short period of time are competing with the best amongst the best. So Kevin, maybe you get into a volume question, and I think you had a tacked on question related to Europe.

Sure. Sure, Dave. Thank you and good morning. Good morning, Tristan. Related to volumes, we did see a sequential decline as you called it out and shipment volumes out of our Mini Mill segment. I think that just really relative to how the order book transpired in the quarter and strong levels of shipments in Q1. So as we look forward to Q3 would see shipment slightly down likely within the Mini Mill segment, but certainly still north of 0.5 million tons of volume that we kind of saw in Q2. So I think still a reasonable level of shipments coming out of that segment. If you think about just shipments more broadly. I think as Jess mentioned in her comments, we do see the potential to see shipment decline in Q3 relative to Q2. I think that's probably just a little bit across the board, if you think about all four of our segments and how we're seeing the order book shape up for Q3. So with that, I'm going to pass it Jess, and she going to comment on US SK and specifically your question around the blast furnace.

Hey, Tristan, good morning. Thanks for the question. So we take advantage of a seasonally slow summer kind of mid a Q3, let's call it a seasonally slow August to do a planned outage in Slovakia. So we've just started that outage on July 17th. That's going to run about 50 days. And again is sort of normal timing for us given the relatively slow summer. So we'll take advantage of doing that planned outage on one of the three blast furnaces. So you can expect that because of that, shipments are going to be, let's call it, as much as 100,000 tons lower versus what we saw in Q2. But we do expect to get back over a million tons in Q4 right now. As we mentioned in prepared remarks, we'll watch closely what's happening, just to make sure demand and production stay on balance. But for right now, we were feeling pretty comfortable underwriting that will again get back over those million tons shipping in Q4, out of Kosice.

I think the thing to remember on this too is that Europe's been exceptionally run well. And they are very nimble up, down and everything in-between with remarkable safety results. So these people know how to run operations and when they need to accelerate that can and when they need to dial back, they can and do their best to ensure we're EBITDA positive.

All right. That's very clear and very helpful. My second question is a bit bigger-picture and more focused to Europe. I mean, we've seen many of your peers in Europe, unlocking vast sums of public funding to decarbonize. Do you have anything new to share about your operations there in Slovakia? I think you sent plan to the authorities and maybe got some approval. Have you made a decision of what you plan to do with the operations? And I think, to your point that you made in your presentation, that's also really relevant to the re-rating story, the valuation story. We've seen many steel makers in Europe for instance not re-rate because of this de-carbonization overhang. So if you could give us maybe a bit of color on the strategy and the plan there, that will be appreciated. Thank you.

Yeah, so thank you, Tristan. So this is Rich. Look, first of all, we're very pleased with the Slovakian government approved our grant application for EUR300 million, for de-carbonization under the recovery and resiliency plan, but this is just one of several steps that needs to be taken for us to move forward with de-carbonization of that facility. We need a timeline extension for use of those EUR300 million. We need more funding from the – there is a second fund called the EU Modernization Fund. So we need additional funding there as well from the Slovakian government and we've been clear we want investment partners to join us in this project. And of course, if you're going to move to an electric arc furnace technology, which is the obvious thing to do, you're going to need competitive long-term electricity rates. And then, of course, obviously, this is all subject to our Board of Directors approving it, but I mean I think, as Dave said, that facility has been very profitable through cycle. It's dealt with the challenges that have come and we look for the current government, which is, frankly it's a caretaker government. So there will be elections in September and we'll take it from there.

Yes, this has been a great asset, and we do know it's challenged by the Ukraine war that's just 60 kilometers away, but the support the employees have provided to the folks in Ukraine are more than commendable. And we do know that at some point, there's going to be a massive rebuilding, and we're right next door to help.

Thank you very much and we'll proceed with our next question on the line from the line of Carlos De Alba with Morgan Stanley. Please go right ahead.

Yeah, good morning, everyone. Thank you for taking the question. First one would be, if we can comment maybe, Dave, on how you see the -- or, Kevin, right, or Jess. But a lot of debate on market share, particularly around auto feed and the profitability of that share. So if you could maybe share your perspective on how your steel is doing in the market. Very important, really very important end market for you and for other flat testing producers is doing quite well relative to others. So any color as to how US Steel is still there and your perspective would be great.

Well, thanks for that question. And I'm sure it's no surprise to you or any others, especially not our customers, but we're focused on creating win-win opportunities with our customers. We've earned additional market share with auto OEMs by having a value-added mindset. Our customers see themselves in our strategy. They're right there with us. They want us to grow our capabilities with them. The customers, they see we're not standing still while others are. Others may not be investing in the future like we are to meet the specific needs of our customers. And when we invest in the future, it's a signal to those customers that we want them to be successful. So we've got our balance sheet cleaned up. We've got a fully-funded strategic CapEx program, and our approach to the auto market is working very well. They're approaching us. They want us to do more. I'd just say that the loudest voices don't earn market share, but value-focused partners do.

Fair enough. The second, sorry, well, my second question is on the NGO line. Great to hear that is on-time and on-budget. How should we think about the ramp up, the pace of the ramp-up after it starts off later this quarter?

Yes. Thanks for that question. Achieving the right product mix, as you know, is integral to realizing the true value of the NGO line. As I said before, we're listening to the customers. They wanted thin or higher silicon content. The demand is going to drive higher price premiums and things like this. This is reflective in our ramp-up, which we've said, is like $140 million of EBITDA by 2026. So Rich I know you've got some comments you'd like to make on this.

Yes. No, I think that's right, Dave. So first of all, we're in a good spot ahead of the start-up in the coming weeks. As you said and Jess talked about in the opening remarks. That project is on-time, on-budget. It was one of the first things we did when we closed on the acquisition of Big River. The second part was approve the NGO project, and so now we're in a great position. So on commissioning and ramp-up, we've already cold commissioned critical components, the reversing cold mill, the hydraulics, the cleaning section. We've been working closely with our customer base for some time to accelerate trial and qualification time lines. The volume ramp-up schedule, the overall volume alignment is really great. We've actually, in fact, sold the first volumes just last week to industrial and auto customers because of all the prequalification work the team had done. The NGO and our transition teams have been working on this for months, obviously, to get these steel grades qualified for customers based on the end market. And remember, this facility will supply both industrial and the higher quality, higher specification EV grades. We -- and I think it's overlooked a lot, but we already make electrical steels in Europe. Our Kosice facility has been making electrical steels for over 20 years. So we've leveraged that expertise and partnership in Europe so that we can be out of the gate fast once the new NGO line in Osceola comes online. So we didn't provide guidance. Dave talked about it for 2023, the contribution from the NGO line, but we're confident we can get some EBITDA off the line this year. We're on our way to probably $60 million or so in 2024, and then we'll get up to around run rate by 2026 of about $140 million.

But it's going very well this commissioning. These people know how to do this. And what we like to see is when we take the legacy people at US Steel who have been around for a long time, they know how to do these things like electrical steel. The partnership in Europe that trips back and forth to Europe from our Big River team, it's a great environment for them to learn from one another. We're learning to be more nimble, and we're learning some expertise, and it's showing up very nicely in this because when you've been making electrical steels for 20 years, making that transaction, that transfer to the US, it really does make a difference.

Thank you very much. We'll proceed with our next question on the line. It's from Curt Woodworth with Credit Suisse. Please go right ahead.

Yeah, thanks. Good morning, Dave and team. Hope you are well? My first question is just with respect to the metallic strategy. I was wondering if you could give us an update on the plans for Granite City and there's a tentative agreement with SunCoke, too, I think, repurpose some of these furnaces into pig iron facilities. Is that still part of the framework? I know that's been a little while. And then I guess within that idea, the $1 billion of free cash flow to the Mini Mill segment, is that -- does that assume any captive metallics in that number? Would that be a third-party? And then how should we think about potential economics of what you would try to do to get more backward integration on metallics over at Big River 2?

Well, thanks for calling out that competitive advantage that we have with our iron range. It's a low cash cost in North America iron range and we ought be able to exploit that competitive advantage with the new pig facility in Gary. And then also the float plant that's well underway. I might say both of those on-time, on-budget. And then, of course, your more specific question is related to Granite City, which has been in discussions for some time. I know Rich is following that closely. I'm not sure we got a whole lot to update you on here, but Rich?

Well, I think you kind of hit it, Dave. So first of all, we got the 500,000 tons coming out of Gary from that pig project. That's already flowing down to Big River, and we've seen some meaningful cost improvements coming from that project. And I think the Granite City conversations with SunCoke, we continue to have conversations with them. We think things are going well and we hope to have a mutually acceptable agreement. But that's all I can say right now in terms of the Granite City project and I'll turn it to Kevin in terms of the free cash flow.

Sure. And Curt, great question. Thanks for highlighting the Big River free cash flow. We have not assumed in those projections that there are any incremental benefits from future metallics investments. So that really is just based off of being essentially a market participant for metallics across our metallic needs. So to the extent that we can continue to build out pig capabilities, continue to leverage the phenomenal work that Gary team has done to ramp up that asset very, very quickly and supply the existing Big River operations with more cost-effective internally sourced pig iron, that would all be additional value creation within the Mini Mill segment and an additional opportunity for us to extract value from our mining assets. So I think a lot more to be had. And our assumptions currently -- our assumptions to underwrite our free cash flow projections currently do not include the benefits of those potential opportunities.

Okay. And then as a follow-up, could you provide updated CapEx guidance for this year and next year? And then just given the liquidity profile and your leverage is well below your target, what would prevent you from -- you talked about the dividend -- increasing the dividend or becoming more aggressive on buyback. Is it simply you'd like to get closer to the finish line with respect to Big River 2? Or how should we think about capital return ahead? Thanks very much.

A great question. You can imagine we're talking about that every day because we're so excited about the future. And we keep putting up good numbers, we keep generating cash flow. Obviously, we're relooking this, as Jess said in her remarks. But I need to make sure we refer you to our capital allocation process, and we're going to have a refresh on that, as Jess had indicated. So Jess maybe you just update the team on where we are on CapEx and how that fits into our capital allocation strategy. I know it's in the deck, but I think it bears repeating because it's serving us well.

Sure. Thanks, Dave. And great question, Curt. Thank you. So let me take this in pieces here. So an update on 2023 capital spending. The CapEx is still going to run about $2.5 billion, which is consistent with the way we've been thinking about it even from the beginning of the year as we have a large slug, right, as you guys know, in the continued spend behind the strategic in-flight initiatives that we have. So you can assume that's still coming in around $2.5 billion for this year. Now for next year, I'd like to be helpful. It's still a little bit early for us to start underwriting those numbers. We're just starting our own forecasting process, but let me talk about it broadly for next year in the way that we're looking forward. So we've got that last slug of strategic CapEx for our in-flights. Big River 2, obviously, being the biggest chunk. So let's start with probably about $800 million of additional strategic CapEx next year in '24. Early read on sustaining at this point is probably something in the neighborhood of $600 million to $700 million of CapEx. So let's call it somewhere in the neighborhood of $1.4 billion to $1.5 billion for 2024. That's sort of where we're targeting right now. That's obviously going to change as we get further along in our budgeting process. I think if I'm going to go that far very preliminarily, I'll also go far enough to say to the next part of your question, right? We have come at it a few different ways with the notes I just shared, and there is a path for us next year to be positive free cash flow, right? So just taking together, again, this last slug of capital that we have and thinking about our strategic initiatives continuing to, as I mentioned in my prepared remarks, starts to really ring that cash register. Again, a path to positive free cash flow in 2024. So what does that mean from a capital allocation perspective? That's optionality, right? We're going to go back to checking our boxes in terms of prioritizing how we think about capital deployment. Super strong balance sheet to start. I mean, obviously, all of this funding that I'm talking about is prefunded on our balance sheet when you think about the strength of the cash and liquidity we have on hand right now. Then we're focused on, to your point, focused on getting to the end of these initiatives, right? Continuing to deliver them on-time and on-budget and really remain focused on the processes that allow us to get to run rate EBITDA and generate run rate cash flow across the current in-flight initiatives. And then direct returns. We've said it a few times today. I'll put a very much finer point on it. Direct returns are a priority for us in terms of being able to provide those returns back to our stockholders. And that's going to be -- we don't want to get ahead of our board. But our current authorization is winding down. And we feel very, very comfortable and positive about what's next in terms of a next share repurchase program and a fresh dust off to our dividend policy, given the resiliency of the cash flow that's coming, right? And that doesn't even touch on 2025, which pun intended is when the cash really starts flowing off of all of these investments.

And Jess let me just kind of add to that because I want to make sure everybody understands the tone that we have on this. And we've got a great Board, very Challenging board, but there's no distance between us and the Board. And they know our strategy, our best for all strategy. And they know our three big goals are about best operations with safety and environment, quality, delivery, so on. Best relationships with our customers and our employees and the communities where we live and work and also with the stockholders, which gets to the really key thing which you guys care about. We're going to have the best improvement in EBITDA multiple. I feel very strongly about this, and we're going to make the kinds of improvements that you're going to be very pleased with.

Thank you very much. We'll get to our next question on the line from the line of Alex Hacking with Citi. Go right ahead.

Yes, good morning. Jess, just to quickly follow-up on your last answer. So there would be virtually no CapEx from existing strategic projects that would carry over into 2025. Is that correct?

Yes, that's right. Listen, there may be some straggling in just in terms of the timing of some of that cash going out the door, but it will be substantially done in '24.

Okay. And then a follow-up, just on the Tubular segment. If I look at the index price for welded, it's effectively fallen in half since the beginning of the year. And it suggests that -- with your comments around inventory and so on, it does suggest that there's going to be kind of a continued squeeze on tubular profits headed into the end of the year and into 2024, like we know this is historically a very cyclical segment. Could you maybe discuss the kind of longer term or the midterm outlook for that segment? Thanks.

Yes. Just first, just kind of level set here. Just to remind everybody that the Tubular segment had the best first half in the recent history with $1,700 a ton EBITDA in the first half. And this showcases the improvements that we've made over the last few years. We've narrowed the footprint, become very focused. We improved the cost structure with the new electric arc furnace, and we've prioritized the strategic basis to capitalize on the strong market backdrop, especially with premium connections, which are performing very well. So Jess, maybe a little bit more, if you could, on what we expect here.

Sure. Thanks, Dave. Appreciate that. So just to start, Alex, again, just to level set. So we don't make welded. We actually make seamless tube. And that -- a benefit for us, that's more differentiated across the market. Our Tubular segment, listen, it continues to perform at exceptionally high levels. We're benefiting from structural changes that we've seen across that business, right? You talk about the volatility through the cycle. But structurally, we've changed that business, right, focusing on those strategic basins, focusing on premium connections and this differentiation and, frankly, leveraging and continuing to enhance the improved cost base that we have with our Fairfield EAF, right? That's a game changer for us in the Tubular business. So we're keeping our eye on all the things that are posing current headwinds, let's say, within tubular, the imports that are out there, those inventory levels that you mentioned and the rig count. But as we think about maybe more nearer term, we're also keeping our eye and monitoring distributor inventories, specifically to your question. Right now, they're running around seven months, which is a little high. So we think in the very near term, let's call it, Q3 volumes, probably weaker sequentially, but we do expect as the restocking happens out to the end of the year, we'll get back to 120,000, 130,000 tons per quarter as we see, again, that inventory rebalance. So we are very pleased with not only the recent results within Tubular, but even more pleased at what we believe our Tubular business is going to be able to generate for us in the near term.

Thank you.

Thank you.

Thank you very much. And there are no further questions at this time. I will now turn the call back over to US Steel CEO, Dave Burritt, for closing comments.

Thank you for joining the earnings call, everybody. Thank you to all the stakeholders for your partnership and your interest in US Steel. We are delivering our best every day and remain focused on the things we can control. For our stockholders, our best for all strategy will generate industry-leading growth and returns to our stockholders in the near term and long term, and that's true today. We are following our capital allocation framework. For our customers, we're providing the quality steels you've grown accustomed to while investing to grow together. We can't wait for you to see what our NGO steels can do. Customers will love it, too. For our employees, we are investing in our business to be the mine, melted, made in the USA steel supplier of choice for a re-shoring of the nation, the nation has never seen before. We are critical to the countries and communities where we operate. We are committed to each of our stakeholders, including our collective stakeholder Planet Earth. In the second quarter, we issued our 2022 ESG report reaffirming our commitment to sustainable steelmaking and a greener economy. Our continued progress on ambitious sustainability goals is just one way we're delivering the US Steel today. Today, strategic projects are ramping on-time and on-budget. Today, our operations are generating significant cash, $894 million year-to-date. And today, we're rewarding investors with another $75 million of stock repurchases in Q2 with more to come. The future is now and we look forward to creating stockholder value together. Now let's get back to work safely.

Thank you. And that does conclude the conference call for today. We thank you for your participation and we ask that you please disconnect your lines. Have a great rest of the day everyone.