Q3 2024 Carpenter Technology Corporation Earnings Call
And welcome to the Carpenter Technology Corporation third quarter 2024, physical conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask.
Questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to John Hewitt, Vice President of Investor Relations. Please go ahead.
John Huyette: Thank you, Operator. Good morning, everyone, and welcome to the Carpenter Technology Earnings Conference Call for the Fiscal 2024 Third Quarter ended March 31st, 2024. This call is also being broadcast over the Internet along with presentation slides. Please note, for those of you listening by phone, you may experience a time delay on slide 1. Speakers on the call today are Tony Thene, President and Chief Executive Officer, and Tim Lain, Senior Vice President and Chief Financial Officer.
John Hewitt: Thank you operator, good morning, everyone and welcome to the Carpenter Technology earnings Conference call.
John Hewitt: 2020 for third quarter.
John Hewitt: At March 31 2024.
John Hewitt: This call is also being broadcast over the internet along with presentation slides.
Operator: Please note for those of you listening by phone you may experience a time delay in Sweden.
Operator: Speakers on the call today are Tony James President and Chief Executive Officer.
Speaker Change: Timberlake Senior Vice President and Chief Financial Officer.
John Huyette: Statements made by management during this presentation that are forward-looking statements are based on current expectations. Risk factors that could cause actual results to differ materially from these forward-looking statements can be found in Carpenter Technology's most recent SEC filing, including the company's report on Form 10-K for the year ended June 30, 2023. Forms 10-Q for the quarters ended September 30th, 2023 and December 31st, 2023, and the exhibits attached to this filing. Please also note that in the following discussion, unless otherwise noted, when management discusses sales or revenue, that reference excludes surcharge. I'm referring to operating margins that are based on adjusted operating income excluding special items and sales excluding surcharge.
Speaker Change: Statements made by management. During this presentation that are forward looking statements are based on current expectations.
Speaker Change: Risk factors that could cause actual results to differ materially from these forward looking statements can be found in carpenter technology's most recent SEC filings.
Speaker Change: Including the company's report on Form 10-K for the year ended June 32023.
Speaker Change: Forms 10-Q for the quarters ended September 32023, and December 31, 2023, and the exhibits attached to those filings.
Speaker Change: Please also note that in the following discussion unless otherwise noted when management discuss the sales or revenue that reference excludes surcharge.
Speaker Change: I'm, referring to operating margins that is based on adjusted operating income excluding special items and sales excluding surcharge.
John Huyette: I'll now turn the call over to Tony.
Speaker Change: I will now turn the call over to Tony.
Tony R. Thene: Thank you, John. And good morning to everyone on the call today. I will begin on slide four with a review of our safety performance. Through the third quarter of fiscal year 2024, our total case incident rate was 1.7.
Tony: Thank you John and good morning to everyone on the call today.
Tony James: I will begin on slide four with a review of our safety performance through.
Tony: Through the third quarter of fiscal year 2024, our total case incident rate was 1.7 this.
Tony R. Thene: This marks an improvement over the last quarter, reflecting the impact of ongoing employee engagement programs. We continue to diligently work towards our goal of a zero-injury workplace. Now, let's turn to slide five for an overview of our financial performance and outlook. Our third quarter performance was exceptional and has set us up for an unprecedented finish to fiscal year 2024. We beat our third quarter guidance by approximately 18 percent, generating $90 million in adjusted operating income.
Tony James: This marks an improvement over the last quarter, reflecting the impact of ongoing employee engagement programs.
Tony James: Continue to diligently work towards our goal of a zero injury workplace.
Tony James: Now, let's turn to slide five for an overview of our financial performance and outlook.
Tony James: Our third quarter performance was exceptional and has set us up for an unprecedented finish to fiscal year 2024.
Tony James: It beat our third quarter guidance by approximately 18% generating $90 million and adjusted operating income.
Tony R. Thene: This was our most profitable quarter on record, up 29% from the second quarter of fiscal year 2020, and we expect to take another historic step forward in the fourth quarter. We are raising our guidance for the fourth quarter to a range of $110 million to $115 million in operating income. This marks an 8% increase over our previous fourth-quarter guidance and a 25% increase over our all-time record third-quarter performance just achieved.
Tony James: This was our most profitable quarter on record up 29% from the second quarter of fiscal year 2024 and.
Tony: And we expect to take another historic step forward in the fourth quarter.
Tony: We are raising our guidance for the fourth quarter to a range of $110 million to $115 million and operating income.
Tony: This marks an 8% increase over our previous fourth quarter guidance and a 25% increase over our all time record third quarter performance just achieved.
Tony R. Thene: With our third-quarter earnings beat and increased fourth-quarter guidance, we expect to end fiscal year 2024 with $339 million to $344 million in adjusted operating income, which would be an annual earnings record for Carpenter Technology.
Tony: Our third quarter earnings beat and increased fourth quarter guidance, we expect two in fiscal year 2024, with 339 million to $344 million and adjusted operating income, which would be an annual earnings record for Carpenter technology.
Tony R. Thene: Let's move to the next slide for additional detail on third quarter performance. The strong beat for the third quarter is the result of continuing improvement and productivity. Product Mix Optimization and Pricing Action. Notably, the SAO segment exceeded expectations, delivering $103.5 million in operating income, well above the outlook we provided on last quarter's call and 24 percent above the second quarter performance. In addition, SAO continued to expand margins, achieving an adjusted operating margin of 21.4%, a step up from the 20% in the previous quarter. Importantly, we generated $61.9 million of free cash flow during the quarter, as this quarter serves as a clear turning point into a period of significant free cash flow generation.
Tony: Let's move to the next slide for additional detail on third quarter performance.
Tony: The strong beat for the third quarter is a result of continuing improvement in productivity.
Tony: Product mix optimization and pricing actions.
Tony: Notably the <unk> segment exceeded expectations, delivering $103 5 million and operating income well above the outlook, we provided on last quarter's call and 24% above the second quarter performance.
Tony: In addition.
Tony: <unk> continued to expand margins achieving an adjusted operating margin of 21, 4% a step up from the 20% in the previous quarter importantly.
Tony: Importantly, we generated 61 9 million of free cash flow during the quarter as this quarter serves as a clear turning point into a period of significant free cash flow generation.
Tony R. Thene: And to wrap up this slide, we continue to see strong current and future demand for our impressive portfolio solution. Now, let's turn to slide seven and take a closer look at our third quarter sales and market dynamics. In the third quarter of fiscal year 2024, sales increased 14% sequentially on higher volumes, improving product mix, and pricing action. Across our in-use markets, we continue to see demand for our premium material solutions well above supply levels. In the third quarter, increased productivity at key milk work centers was a primary driver of our performance.
Tony: And to wrap up this slide we continued to see strong current and future demand for our impressive portfolio of solutions.
Tony: Let's turn to slide seven and take a closer look at our third quarter sales and market dynamics.
Tony: In the third quarter of fiscal year, 2024 sales increased 14% sequentially on higher volumes, improving product mix and pricing actions.
Tony: Across our end use markets, we continue to see demand for our premium materials solutions well above supply levels.
Tony: In the third quarter the increased productivity of key work centers was a primary driver of our performance.
Tony R. Thene: We continue to remain focused on allocating capacity to where customers value it most, and over the last quarter, we realized higher sales to the aerospace and defense and medical in use markets. In our aerospace market, customers continue to stress their near and long-term supply needs. They remain focused on surety of supply, with increasing requests to extend or secure long-term agreements with us. Additionally, MRO-related needs have emerged as very acute, and we are actively prioritizing areas to help customers mitigate lying-down situations.
Tony: We continue to remain focused on allocating capacity to where customers value at most and over the last quarter realized higher sales to aerospace and defense and medical end use markets.
Tony: And our aerospace market customers continued to stress their near and long term supply needs.
Tony: <unk> remained focused on surety of supply with increasing request to extend or secure long term agreements with us.
Tony: Additionally, MRO related needs have emerged as very acute and we are actively prioritizing areas to help customers mitigate line down situations.
Tony R. Thene: In the defense market, our customers remain very active, given ongoing world events. Our defense customers remain highly concerned with long lead times and are asking for more of our capacity to serve. We have worked over the last quarter to accommodate emergency drop-in needs for critical defense applications. We will continue efforts to prioritize critical defense orders given the essential nature of our support.
Tony: In the defense market, our customers remained very active.
Tony: Given ongoing world events, our defense customers remain highly concerned with long lead times and are asking for more of our capacity to serve them.
Tony: We have worked over the last quarter to accommodate emergency drop in need for critical defense applications.
Tony: We will continue efforts to prioritize critical defense orders given the essential nature of our support.
Tony R. Thene: All together, sales to our aerospace and defense customers, 57% of revenue for the current quarter, were up 28% sequentially and up 30% year over year. Our long-term outlook for airspace and defense continues to remain strong, given the fundamentals of increasing air travel and air demand, as well as defense needs. Moving to our medical in-use market, our customers continue to see strong forward market demand and maintain very positive outlooks based on robust patient backlogs.
Tony: Altogether sales to our aerospace and defense customers, 57% of revenue for the current quarter were up 28% sequentially and up 30% year over year.
Tony: Our long term outlook for aerospace and defense continues to remain strong given fundamentals of increasing air travel and air demand as well as defense needs.
Tony: Moving to our medical end use market our customers continue to see strong forward market demand and maintained very positive outlooks based on robust patient backlogs.
Tony R. Thene: As in aerospace, lead times for premium medical products are very long. More and more, our medical customers are discussing with us the need for tight engagement to secure their supplies and view specialty material supply as a key strategic area. In addition to surety of supply, our medical customers also remain focused on new product innovation, driven by the increasing use of robotics, minimally invasive surgeries, and alloy sensitivities, among others. Engagement with customers on new products and applications remains high, with multiple product areas we supply seeing high growth projections.
Tony: As an aerospace lead times for premium medical products are very extended.
Tony: More and more our medical customers are discussing with us the need for tight engagement to secure their supply and view specialty materials supply is a key strategic area.
Tony: In addition to surety of supply our medical customers also remain focused on new product innovations driven by increasing use of robotics minimally invasive surgeries and alloy sensitivities among others.
Tony: Gateway with customers on new products and applications remains high with multiple product areas, we supply seen high growth projections.
Tony R. Thene: All together, our medical sales in the quarter were 15% of total revenue, increasing 15% sequentially and 35% year over year. This was another record quarter for medical sales following a very strong first half and reflects concerted efforts to accelerate the shift. Taken together, our aerospace and defense and medical in-use markets are nearly three-quarters of our overall business. Across our other in-use markets, customer engagement is high, and demand for our premium solutions remains positive.
Tony: Altogether, our medical sales in the quarter were 15% of total revenue, increasing 15% sequentially and 35% year over year.
Tony: This was another record quarter for medical sales following a very strong first half and reflects concerted efforts to accelerate shipments.
Tony: Taken together, our aerospace and defense and medical end use markets are nearly three quarters of our overall business.
Tony: Across our other end use markets customer engagement is high and demand for our premium solutions remains positive.
Tony R. Thene: We continue to see strong bookings and an increasing lead time. In addition, our backlog remains at record levels, despite ongoing efforts to limit order intake. Specifically, backlog is up 3% sequentially and 12% year over year, currently at three times the pre-COVID level. Altogether, the near and long-term demand outlook for carpenter technology remains very positive. The bottom line is that we are operating in a strong market environment right now, and we anticipate that to continue and expand in the near and long term.
Tony: We continue to see strong bookings and increasing lead times.
Tony: In addition, our backlog remains at record levels, despite ongoing efforts to limit order intake.
Tony: Pacifically backlog is up 3% sequentially and 12% year over year.
Tony: Currently at three times, the pre Covid level.
Tony: Altogether, the near and long term demand outlook for Carpenter technology remains very positive.
Tony: Adam line is that we are operating in a strong market environment right now and we anticipate that to continue and expand in the near and long term.
Tony R. Thene: We are reminded every day of the critical role we play in supply chains across our markets and will proudly continue to work to deliver high-quality solutions that our customers rely on to drive performance. Now, I will turn it over to Tim for the financial summary.
Tony: We are reminded every day of the critical role we play in supply chain across our markets.
Tony: And we'll probably continue to work to deliver a high quality solutions that our customers rely on to drive performance.
Tony: Now I will turn it over to Tim for the financial summary.
Timothy Lain: Thanks, Tony. Good morning, everyone.
Tim: Thanks, Tony Good morning, everyone.
Tim: I'll start on slide nine the income statement summary.
Timothy Lain: I'll start on slide nine, the income statement summary. Net sales in the third quarter were $684.9 million, with sales excluding surcharge totaling $553.8 million. Sales excluding surcharge increased 14% sequentially on 2% higher value. The growth in net sales in excess of volume growth is the result of the ongoing shift in product mix as we continue to focus our capacity on more complex, higher value materials. As Tony highlighted in his remarks, this is driving significant growth in our key end-use markets of aerospace and defense and medical.
Tim: Net sales in the third quarter were $684 9 million with sales excluding surcharge.
Tim: <unk> $553 8 million.
Tim: Sales, excluding surcharge increased 14% sequentially on 2% higher volume.
Tim: Growth in net sales in excess of volume growth is the result of the ongoing shift in product mix as we continue to focus our capacity on more complex higher value materials.
Tim: As Tony highlighted in his remarks. This is driving significant growth in our key end use markets of aerospace and defense and medical.
Timothy Lain: Gross profit was $147 million in the current quarter, compared to $122.6 million in our recent second quarter. SG&A expenses were $57 million in the third quarter, up roughly $4 million sequentially. Note the SG&A line includes corporate costs, which totaled $23.3 million in the recent third quarter. As we look ahead to the upcoming fourth quarter of fiscal year 2024, we expect corporate costs to remain at approximately $23 million. Operating income was $75.9 million in the current quarter, or $90 million of adjusted operating income, which is 29% higher than $69.8 million in our recent second quarter of fiscal year 2024.
Tim: Gross profit was $147 million in the current quarter compared to $122 6 million and our recent second quarter.
Tim: SG&A expenses were $57 million in the third quarter up roughly 4 million sequentially.
Tim: Note. The SG&A line includes corporate costs, which totaled $23 3 million in the recent third quarter.
Tim: As we look ahead to the upcoming fourth quarter of fiscal year 2024, we expect corporate costs to remain at approximately $23 million.
Tim: <unk> income was $75 9 million in the current quarter or $90 million of adjusted operating income, which is 29% higher than the $69 8 million and our recent second quarter of fiscal year 2024.
Timothy Lain: The record-adjusted operating income result for the quarter reflects the impact of an improving product mix, ongoing pricing actions, and our focused efforts to increase productivity across our manufacturing operation. And it continues the momentum we've been building over the last several quarters, going back to the start of fiscal year 2023.
Tim: The record adjusted operating income result for the quarter reflects the impact of an improving product mix ongoing pricing actions and our focused efforts to increase productivity across our manufacturing operations.
Tim: And it continues the momentum we've been building over the last several quarters going back to the start of fiscal year 2023.
Timothy Lain: Notably, we continue to expand our operating margins, reaching an adjusted operating margin of 16.3% in the current quarter. Although we are pleased with the results, we continue to see opportunities to carry this momentum even further, as you can see from the outlook we provided for our upcoming fourth quarter. Moving on to our effective tax rate, for the recent third quarter, our effective tax rate was 37.6%. When excluding the impact of the special items, the effective rate for the quarter is closer to 21%.
Tim: Notably we continue to expand our operating margins, reaching adjusted operating margin of 16, 3% in the current quarter.
Tim: Although we are pleased with the results we continue to see opportunities to carry this momentum even further as you can see from the outlook, we provided for our upcoming fourth quarter.
Moving onto our effective tax rate for the recent third quarter, our effective tax rate was 37, 6%.
Tony: When excluding the impact of the special items, the effective rate for the quarter is closer to 21%.
Timothy Lain: The adjusted rate is slightly lower than our expectations due to benefits associated with certain changes in prior year tax positions taken in the current quarter. For the upcoming fourth quarter, we expect the effective tax rate to be in the range of 21 to 23 percent.
Timothy Lain: The adjusted rate is slightly lower than our expectations due to benefits associated with certain changes in prior year tax positions taken in the current quarter.
For the upcoming fourth quarter, we expect the effective tax rate to be in the range of 21% to 23%.
Timothy Lain: Adjusted earnings per share was $1.19 for the current quarter. The adjusted earnings-per-share result excludes the impact of non-cash charges for goodwill impairment related to our distribution business in the PEP segment, as well as a non-cash pension settlement charge. I will highlight that the pension settlement charge is the result of proactive risk reduction steps we took in the current quarter to annuitize a portion of future pension obligations. Adjusted earnings per share results for the quarter of $1.19 demonstrate our improving profitability, driven by solid execution in a strong demand environment. Now turning to slide 10 in our SEO segment.
Timothy Lain: Adjusted earnings per share was $1 19 for the current quarter.
Timothy Lain: The adjusted earnings per share results exclude the impact of noncash charges for goodwill impairment related to our distribution business and the Pep segment as well as a noncash pension settlement charge.
Timothy Lain: I will highlight that the pension settlement charge is the result of proactive risk reduction steps, we took into the current quarter to a new <unk> a portion of future pension obligations.
Timothy Lain: The adjusted earnings per share results for the quarter of $1 19 demonstrate our improving profitability driven by solid execution and a strong demand environment.
Tim: Now turning to slide 10 in our <unk> segment results.
Timothy Lain: Net sales excluding surcharge for the third quarter were $483 million, up 16% sequentially on slightly higher volume. The improvement in net sales was driven by the impacts of a favorable product mix and pricing actions across our key end-use markets, as Tony reviewed earlier. Moving to operating results, SEO reported operating income of $103.5 million in our recent third quarter, which outpaced our expectations and represents a significant new record in the history of SAO.
Timothy Lain: Net sales excluding surcharge for the third quarter were $483 million up 16% sequentially on slightly higher volumes.
Timothy Lain: The improvement in net sales was driven by the impact of a favorable product mix and pricing actions across our key end use markets.
Tim: As Tony reviewed earlier.
Tim: Moving to operating results <unk> reported operating income of $103 5 million and our recent third quarter, which outpaced our expectations and represents a significant new record in the history of Etsy.
Timothy Lain: As shown on the slide for context, SAO operating income improved by $54.5 million, more than doubling profitability from the same quarter last year. And on a sequential basis, operating income improved by $20.2 million, or a 24% increase. The improvements in productivity, product mix, and pricing are evident in the adjusted operating margin, which has increased to 21.4% in the current quarter. Again, these operating results for the quarter for SAO represent record levels by historical standards.
Timothy Lain: As shown on the slide for contacts.
Tim: Operating income improved by $54 5 million more than doubling profitability from the same quarter last year.
Timothy Lain: And on a sequential basis operating income grew by $20 2 million or 24% increase.
Timothy Lain: The improvements in productivity product mix and pricing are evident in the adjusted operating margin, which has increased to 21, 4% in the current quarter.
Timothy Lain: Again these operating results for the quarter for F. C O represent record levels by historical standards and we believe they are only milestones on the path towards our future profitability goals.
Timothy Lain: Yet we believe they are only milestones on the path towards our future profitability goals. The SEO team remains focused on executing actions to further increase production levels and continue to actively manage the product mix to maximize capacity for high-value products. Looking ahead to our upcoming fourth quarter of fiscal year 2024, we anticipate SAO will generate operating income in the range of $124 million to $127 million, which would represent a 20% growth over our third quarter results. Now turning to slide 11 in our PEP segment.
Timothy Lain: The <unk> team remains focused on executing actions to further increase production levels and they continue to actively manage the product mix to maximize capacity for high value products.
Timothy Lain: Looking ahead to our upcoming fourth quarter of fiscal year 2024, we anticipate will generate operating income in the range of $124 million to $127 million, which would represent a 20% growth over our third quarter results.
Tim: Now turning to slide 11, and our Pep segment results net.
Timothy Lain: Net sales excluding surcharge in the third quarter of fiscal year 2024 were $94.6 million, an 8% sequential increase. In the current quarter, PEP reported operating income of $9.2 million, up from $7.1 million in the second quarter of fiscal year 2024. Sequential sales and profitability growth are primarily driven by our dynamite titanium, which, like SAO, is seeing strong demand in key end-use markets and is working to further increase production rates across
Timothy Lain: Net sales excluding surcharge in the third quarter of fiscal year, 2024 were $94 6 million up 8% sequentially.
Tim: In the current quarter Pep reported operating income of $9 2 million.
Timothy Lain: Up from $7 1 million in the second quarter of fiscal year 2024.
Timothy Lain: Sequential sales and profitability growth is primarily driven by our <unk> titanium business, which like <unk> is seeing strong demand in key end use markets and is working to further increase production rates across the operations.
Timothy Lain: With that in mind, we currently anticipate that the PEP segment will deliver operating income in the range of $9.5 million to $11 million for the upcoming fourth quarter of fiscal year 2024. Now turning to slide 12 and a review of adjusted free cash. In the current quarter, we generated $83.4 million of cash from operating activities, compared to $14.6 million in our recent. As we outlined last quarter, for the first half of fiscal year 2024, we increased in-process inventory as we continue to ramp manufacturing activity to meet the strong demand environment, while we focused our efforts on increasing production rates across our operations. And, as planned, we held inventory relatively flat in the third quarter, driven by higher activity and sales. This was also driven by increased productivity at key work centers, improving the flow of material through our facilities.
Timothy Lain: With that in mind, we currently anticipate that the Pep segment will deliver operating income in the range of 95 million to $11 million for the upcoming fourth quarter of fiscal year 2024.
Timothy Lain: Now turning to slide 12, and a review of adjusted free cash flow.
Timothy Lain: In the current quarter, we generated $83 4 million of cash from operating activities compared to $14 6 million and our recent second quarter.
Tony R. Thene: As we outlined last quarter for the first half of fiscal year 2024, we increased the in process inventory as we continue to ramp manufacturing activity to meet the strong demand environment, while we focused our efforts on increasing production rates across our operations.
Timothy Lain: And as planned we held inventory relatively flattened in the third quarter driven by higher activity in sales levels.
Timothy Lain: This was also driven by increased productivity at key work centers, improving the flow of material through our facilities. The inventory management focus combined with increased profitability drove the significant improvement in cash flow from operations.
Timothy Lain: The inventory management focus, combined with increased profitability, drove a significant improvement in cash flow from operators. With those details in mind, we reported adjusted free cash flow at $62 million in the third quarter of fiscal year 2024. The strong results for the third quarter more than offset the negative free cash flow in the first half of fiscal year 24 and resulted in year-to-date free cash flow generation of $37 million compared to negative $212 million in the same period last year.
Timothy Lain: With those details in mind, we reported adjusted free cash flow of $62 million in the third quarter of fiscal year 2024.
Timothy Lain: The strong results for the third quarter more than offset the negative free cash flow in the first half of fiscal year 'twenty four and resulted in year to date free cash flow generation of $37 million compared to negative $212 million in the same period last year.
Timothy Lain: As we look ahead to the upcoming fourth quarter of fiscal year 2024, we anticipate inventory levels to trend down further to finish out the fiscal year. We expect to spend about 100 million in capital expenditures for the full fiscal year 2024, which is down from our previously communicated target of 125. With our outlook for earnings and working capital, we expect to increase our liquidity even further and generate over $100 million in adjusted free cash flow in the upcoming fourth quarter of fiscal year 2024. With that, I will turn the call back to Tony.
Timothy Lain: As we look ahead to the upcoming fourth quarter of fiscal year 2024, we anticipate inventory levels to trend down further to finish out the fiscal year.
Timothy Lain: We expect to spend about 100 million in capital expenditures for the full fiscal year 2024, which is down from our previously communicated target of $125 million.
Timothy Lain: With our outlook for earnings and working capital, we expect to increase our liquidity, even further and generate over $100 million and adjusted free cash flow in the upcoming fourth quarter and fiscal year 2024.
Timothy Lain: With that I will turn the call back to Tony.
Timothy Lain: Yeah.
Tony: Thanks, Tim.
Tony R. Thene: So far on this call, Tim and I have provided the details of our record financial performance in the third quarter and how that is expected to continue into the fourth quarter. For those of you who have been following our story, the strong performance and outlook are probably not a surprise. We are executing against the plan we communicated a year ago.
Tony: So far on this call Tim and I provide the details of our record financial performance in the third quarter and how that is expected to continue into the fourth quarter.
Tony R. Thene: For those of you who have been following our story the strong performance and outlook is probably not a surprise we are executing against the plan, we communicated a year ago.
Tony R. Thene: And for those of you who are new to our story, I'd like to take a moment to review Carpenter Technology's unique value proposition. We are a capabilities company committed to our strategy of serving customers with high-value applications in high growth markets that value our unique material solution. For the end markets that we serve, the near-term and longer-term demand outlook is strong, as evidenced by our record backlog. In particular, we continue to experience meaningful growth in the aerospace and defense and medical in-use markets, as detailed earlier in the call.
Tony R. Thene: But for those of you who are new to our story I'd like to take a moment to review carbon technologies unique value proposition.
Tony R. Thene: We are a capabilities company committed to our strategy of serving customers with high value applications in high growth markets that value our unique material solutions.
Tony R. Thene: For the end markets that we serve the near term and longer term demand outlook is strong as evidenced by our record backlogs.
Tony R. Thene: In particular, we continued to experience meaningful growth in the aerospace and defense and medical end use markets as detailed earlier in the call.
Tony R. Thene: To create our unique portfolio of material solutions, we have leading capabilities with a difficult-to-replicate system of assets. In addition, we are qualified to supply materials for applications with significant and highly stringent qualification standards in the aerospace and defense and medical industries.
Tony R. Thene: To create our unique portfolio of materials solutions, we have leading capabilities with a difficult to replicate system of assets.
Tony R. Thene: Further we are qualified to supply material for applications with significant and highly stringent qualification standards in the aerospace and defense and medical industries.
Tony R. Thene: As a result, over the last several quarters, we have consistently delivered strong financial performance with expanding margins quarter after quarter. By continuing to improve our productivity, optimize our capacity, and expand our profit margins, we have a strong growth outlook in both the near term and the longer term, with opportunities to further accelerate and increase profitability. Let's move to the next slide and review how we are accelerating our earnings growth. As you can see from the chart on the left, we are rapidly increasing our quarterly earnings performance.
Tony R. Thene: As a result over the last several quarters, we have consistently delivered strong financial performance with expanding margins quarter after quarter.
Tony R. Thene: By continuing to improve our productivity optimize our capacity and expand our profit margins.
Tony R. Thene: We have a strong growth outlook in both the near term and longer term with opportunities to further accelerate and increase profitability.
Tony R. Thene: Let's move to the next slide and review, how we are accelerating our earnings growth.
Tony R. Thene: As you can see from the chart on the left we are rapidly accelerating quarterly earnings performance.
Tony R. Thene: Multiple initiatives such as improved productivity, product mix optimization, and pricing actions are exceeding expectations and driving this quickly accelerating performance. The third quarter adjusted operating income of $90 million was up 29% sequentially and is the highest in the history of Carpenter Technology.
Tony R. Thene: Multiple initiatives, such as improved productivity and product mix optimization and pricing actions are exceeding expectations and driving as quickly accelerating performance.
Tony R. Thene: Third quarter adjusted operating income of $90 million was up 29% sequentially and is the highest in the history of Carpenter technology, and we increased our fourth quarter guidance to be another significant sequential increase of 25%.
Tony R. Thene: And we increased our fourth quarter guidance to be another significant sequential increase of 25%, which would be another quarterly earnings rate. Moving to the chart on the right, you can see that given the strong third quarter performance and our fourth quarter guidance, we are increasing our full year adjusted operating income guidance to a range of $339 to $344 million. As I stated earlier, this would be an annual earnings record for Carpenter Technology.
Tony R. Thene: It would be another quarterly earnings record.
Tony R. Thene: Moving to the chart on the right you can see that given the strong third quarter performance and our fourth quarter guidance. We are increasing our full year adjusted operating income guidance to a range of $339 million to $344 million.
Tony R. Thene: As I stated earlier this would be an annual earnings record for Carpenter technology.
Tony R. Thene: It is clear to see that fiscal year 2024 will be a meaningful step towards the current FY27 goal, realizing approximately 60% of the opportunity in the first year of a four-year goal. Concerning the FY27 target, it is also clear that it has proven to be conservative based on our current profitability and near-term outlook. With that in mind, we are taking the incremental step of pulling forward the FY27 target by one year at this time.
Tony R. Thene: It is clear to see that fiscal year 2024 will be a meaningful step towards the current FY 'twenty seven goal realizing approximately 60% of the opportunity in the first year of a four year goal.
Tony R. Thene: Concerning the FY 'twenty seven target. It is also clear that it has proven to be conservative based on our current profitability and near term outlook.
Tony R. Thene: With that in mind, we are taking the incremental step of pulling forward. The FY 'twenty seven target by one year at this time.
Tony R. Thene: This update maintains our conservative approach to our external guidance and the importance we place on doing what we say. We do see a path to pulling the FY27 target in even sooner than one year, and we'll certainly keep you updated as we continue to accelerate performance. In closing, let me leave you with five big takeaways from this. One, we beat our guidance for the third quarter, up 29% sequentially from an already strong second quarter.
Tony R. Thene: This update maintained our conservative approach to our external guidance and the importance we place on doing what we say.
Tony R. Thene: We do see a path to putting the FY 'twenty seven target in even sooner than the one year and we'll certainly keep you updated as we continue to accelerate performance.
Tony R. Thene: Two. We increased our guidance for the fourth quarter, guiding it to be up another 25% sequentially off a record third quarter. 3. We generated meaningful cash flow for the current quarter, and we expect to increase cash flow in the fourth quarter. 4. Due to our exceptional performance and strong outlook, we are pulling forward our FY27 guidance by one year at this time, maintaining our conservative approach to external guidance. And five, in terms of earnings growth, we are just getting started and early in our cycle.
Tony R. Thene: In closing, let me leave you with five big takeaways from this call.
Tony R. Thene: One we beat our guidance for the third quarter up 29% sequentially off an already strong second quarter.
Tony R. Thene: Two we increased our guidance for the fourth quarter guiding to be up another 25% sequentially off a record third quarter.
Tony R. Thene: Three we generated meaningful cash flow for the current quarter and we expect to increase cash flow in the fourth quarter.
Tony R. Thene: Or.
Tony R. Thene: Due to our exceptional performance and strong outlook, we're pulling forward our FY 'twenty seven guidance by one year at this time, maintaining our conservative approach to external guidance.
Tony R. Thene: And five in terms of earnings growth. We are just getting started in early in our cycle. We have beat guidance raise guidance and pulled forward aggressive four year target and we have line of sight to even exceeding that by staying focused on our execution and living our values.
Tony R. Thene: We have beat guidance, raised guidance, and pulled forward an aggressive four-year target. And we have a line of sight to even exceeding that by staying focused on our execution and living our values. Thank you for your attention, and I will now turn the call back to the operator.
Tony R. Thene: Thank you for your attention and I will now turn the call back to the operator.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question.
Speaker Change: We will now begin the question and answer session.
Operator: To ask a question you May press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time.
Operator: We will pause momentarily to assemble our roster.
Operator: The first question comes from Gautam Khanna with TD Cowen. Please go ahead.
Gautam J. Khanna: Hey, good morning, guys. Was wondering if you could just frame for us any impact you've seen whatsoever from the lower production rates on the 737 Max and the 787, if at all. And Good morning, Gautam. I hope you're doing well.
Speaker Change: Hey, good morning, guys.
Gautam J. Khanna: Was wondering if you could just frame for us any impact you've seen whatsoever from the lower <unk>.
Gautam J. Khanna: Production rates on the seven to seven <unk>.
Gautam J. Khanna: Seven if at all.
Gautam J. Khanna: Yeah.
Tony R. Thene: We see no impact near term and anticipate no impact longer term. As you all know, there are always going to be disruptions in a supply chain that's this large and complex. And when you're in this environment where demand significantly outpaces supply, any gaps caused by such disruptions are immediately filled, whether in this case, it's increased MRO, other platforms, ramping competing markets, but absolutely no impact in the near term, and we see none going forward. And could you talk a little bit about that?
Speaker Change: Well good morning Hope you.
Speaker Change: Got it yes.
Speaker Change: I hope you're doing well.
Tony R. Thene: We if we see no impact near term and anticipate no impact longer term as you well know theres always going to be disruptions in our supply chain at this large and complex and then when you're in this environment, where demand significantly outpaces supply any gaps.
Tony R. Thene: Caused by such disruptions there immediately filled whether in this case, it's with increased MRO other platforms ramping competing markets, but absolutely no impact in the near term and we see none going forward.
Tony R. Thene: And could you talk a little bit of ball.
Gautam J. Khanna: The various end markets within aerospace and defense. So, like the engine channel, I assume that's where you're referencing it, but what about fasteners? What about some of the structural deals you make? Yeah, maybe a couple numbers there, Gautam to answer that question on the engine sub market sales up 29% sequentially, 40% year over year, fasteners up 25% sequentially, up 35% year-over-year, so strong bookings across all of our submarkets continue, and we see that continue.
Tony R. Thene: The various end markets within aerospace and defense so like the engine channel I assume that's what you're referencing.
Gautam J. Khanna: What about fasteners, what about some of the structural DLP make them alike.
Speaker Change: I didn't give you a couple of numbers there.
Gautam J. Khanna: Got them to answer that question on the engine sub market sales up 29% sequentially, 40% year over year fasteners up 25% sequentially.
Gautam J. Khanna: Up 35% year over year, so strong.
Gautam J. Khanna: Bookings across all of our Submarkets inside of that space continue and we see that continuing going forward.
Gautam J. Khanna: Did you guys see any perturbations in orders though, with respect to, I understand, you may be able to, backfill, you know, with other demand if, It's like leap related orders were a little softer? Did you see any change to order intake that was unusual relative to a typical quarter, or I'm just curious if you actually saw some and then it's just been backfilled by better wide body demand, MRO demand, or if you haven't seen any in the first place? Any change on the line?
Speaker Change: Did you guys see.
Speaker Change: Any perturbations in orders, though with respect to I understand you may be able to.
Gautam J. Khanna: Backfill.
Gautam J. Khanna: Other demand.
Gautam J. Khanna: Yeah like leap related.
Gautam J. Khanna: Orders were a little softer did you see any change to our.
Gautam J. Khanna: Order intake that was unusual relative to a typical quarter or.
Gautam J. Khanna: I'm just curious if you actually saw some amount of caffeine backfill bags that are wide body demand MRO demand or if you haven't seen although on the first one Andy.
Gautam J. Khanna: Yeah, there's always adjustments that are being made across the supply chain. As you know, there are many, many levels. So there could be people out there that are making slight adjustments. I will say that a lot of that, though, is backed by the fact that nobody wants to get out of line. Nobody wants to pull an order.
Gautam J. Khanna: He changed yes, there is always a judgments that are being made across the supply chain as well there's many many levels.
Gautam J. Khanna: So there could be people out there, they're making slight adjustments I will say that a lot of that though.
Gautam J. Khanna: But by the fact that nobody's going to get out of line nobody wants to pull on order off.
Gautam J. Khanna: Instead of, you know, taking an hour off, it's some type of repositioning of that order. So we just did not see that at all. I appreciate that Tony and just wanted to give your comments on pulling forward the six to $7 earnings target by a year. Do you have any preliminary view on the September or December quarters? Anyway, you want to frame it, whether it's kind of, not a typical seasonality relative to the June quarter or however you want to characterize it. I was about 100% sure, Gautam, that you were going to ask that question. So I'm prepared for you.
Tony: Instead of you know.
Gautam J. Khanna: I have taken an hour off it's some type of repositioning of that order. So we just did not see that at a at a high level.
Gautam J. Khanna: I appreciate that Tony and just given your comments on pulling forward.
Tony: Six to $7 earnings target by a year.
Tony: Do you have any preliminary view on the timber or December quarters.
Tony: Or any way you want to frame that weather kind of.
Gautam J. Khanna: Non.
Tony: Typical seasonality relative to the June quarter, or however, you want to characterize it as we can.
Tony: I was about 100% sure Gotham you were going to ask that question.
Tony: So and prepared for you I mean, certainly you understand you've been around this business.
Tony R. Thene: I mean, certainly you understand you've been around this business for a long time. The magnitude of these results that we just submitted and then what we say we're going to do for the fourth quarter is a significant step change in where we're going from a financial performance standpoint for this company and certainly should cause a reset in the valuation of this company. I mean, this is a significant turning point. And to get more specific to your question, you know, as you noted, historically, our first quarter of the fiscal year has been down due to seasonality. Sometimes that has been significant.
Tony R. Thene: Hi.
Tony R. Thene: The magnitude of these results that we just submitted and then what we say we're going to do for the fourth quarter. It is a significant step change in where we're going financial from a financial performance standpoint for this company and certainly is should cause a reset.
Tony R. Thene: In the valuation of this company I mean this is Jay.
Tony R. Thene: Second turning point and to get more specific to your question.
Tony R. Thene: As you noted you know historically, our first quarter. This fiscal year has been down.
Tony R. Thene:
Tony R. Thene: Also, as you remember, last year, we broke that norm. In fact, our first quarter, I believe the numbers were about 10% higher than the fourth quarter. So you saw us move past that because demand was so, so strong. I can tell you that next quarter, as we always do, we will give you guidance for the first quarter by segment, but at a high level, Gautam, I can tell you that it's going to be in line with the fourth quarter, plus or minus 10%.
Tony R. Thene: Due to seasonality and sometimes that that.
Tony R. Thene: Been significant and also as you remember.
Tony R. Thene: Remember last year, we broke that Nuomi in fact, our first quarter I believe the numbers, we were about 10% higher than the fourth quarter. So you saw us move past that because demand.
Tony R. Thene: So so strong I can tell you that.
Tony R. Thene: Next quarter as we always do we will give you guidance for the fourth for the first quarter by segment, but at a high level Gotham I can tell you that it's going to be in line with the fourth quarter, plus or minus 10%, but just put that into context I. Just told you that the fourth quarters going to be a 110 to 100.
Tony R. Thene: But just put that into context. I just told you that the fourth quarter is going to be $110 to $115 million, twenty-five percent higher than what we just did in the third quarter. And now I'm telling you that our first quarter of fiscal year 2025 is going to be in line with that. I mean, that is an off the charts type of performance.
Tony R. Thene: $15 million.
Tony R. Thene: 25% higher than what we just did in the third quarter and now I'm, telling you that the fourth or first quarter of fiscal year 2025 is going to be in line with that I mean that is off the charts type of performance and I am sure you of all people recognize just the massive step change the data.
Gautam J. Khanna: And I'm sure you, of all people, recognize just the massive step change. Yeah, I appreciate it. I'll get back in the queue. Thank you.
Gautam J. Khanna: Yes.
Speaker Change: Yeah I appreciate it I'll get back in the queue. Thank you.
Speaker Change: Thank you Sir.
Joshua Ward Sullivan: The next question comes from Josh Sullivan with the Benchmark Company. Please go ahead.
Gautam J. Khanna: The next question comes from Josh Sullivan with the Benchmark Company. Please go ahead.
Joshua Ward Sullivan: Hey, good morning. Congratulations on the results here. [inaudible] As far as the free cash flow yield expectations on the new long-term guidance, what are some moving factors there? What do you think the long-term naturalized yield is at this point?
Joshua Ward Sullivan: Hey, good morning, congratulations on the results here.
Speaker Change: Good morning, Josh.
Joshua Ward Sullivan: Just as far as the free cash flow yield expectations on the new long term guidance what are some moving factors. There what do you think the long term naturalized yield is at this point.
Tony R. Thene: Let me just stay at a high level with free cash flow. You know, we obviously almost a year ago at our investor day not only gave an operating income target, which is the most talked about target, but we also gave free cash. So as you see us moving this in, for now, I would say you can keep that same type of relationship, right, as far as you're going to see that exploration of free cash flow. So keep the same type of relationship that you had from our last investor day.
Speaker Change: Let me just stay at a high level with the free cash flow, we honestly almost a year ago at our Investor day, not only gave an operating income target which is the most.
Tony R. Thene: Talked about target. We also gave free cash flow. So as you see us moving this year and for now I would say you can keep that same type of relationship right as far as youre going to see that exploration also of the of the free cash flow. So keep the same type of relationship that you've had from our from our last Investor day and as we go forward.
Tony R. Thene: And as we go forward, too, I mean, there's a lot of moving parts here as we're accelerating very quickly. As I said in my prepared comments, a lot of our initiatives we are overexceeding on. So we're continuously updating all of those guidance points, if you will. And we'll give you some more over the next couple of quarters as we see that come together. But for now, keep free cash flow while increasing operating income, as we've seen.
Tony R. Thene: Forward to I mean, there's a lot of moving parts here as we're accelerating.
Tony R. Thene: Quickly as I said in my prepared comps allowed our initiatives we are over exceeding on so we are continuously updating all of those those guidance points.
Tony R. Thene: And we'll be we'll give you some more over the next coming quarters as we see that come together, but for now.
Tony R. Thene: Free cash flow, while the operating income as we've said before.
Speaker Change: Got it.
Joshua Ward Sullivan: And then what do lead times, you know, look like? What are some of the moving parts there? You know, previously, you talked about the fact that, you know, you didn't really want to extend them if you could because of the pricing that you were getting. Any comments you can give us just kind of on lead times at this point?
Tony R. Thene: And then what lead times look like what are some of the moving parts. There. You know previously you had talked about the fact that you didn't really want to extend them. If you could do uses the pricing that you were you were getting any comments you can give us just kind of on lead times at this point.
Tony R. Thene: Last quarter, I believe I said 65 Plus, in terms of weeks, and we always use, you know, engine, bill it as a proxy. And we're standing there now, if not a little bit more extended. So 65 plus weeks, in some cases, maybe some specific products, even a little bit.
Joshua Ward Sullivan: Last quarter I believe I said 65.
Tony R. Thene: Plus in terms of weeks and we always use.
Tony R. Thene: And bill it adds the proxy and we're standing there now if not a little bit more extended so 65 plus weeks.
Tony R. Thene: In some cases, maybe some specific products, even a little longer.
Joshua Ward Sullivan: And then just one last one. Did I hear you right on the production and CapEx expectation for this year? Just what's changing in the schedule? And then maybe what are your thoughts on capacity expansion and what you would need from the industry to think about that at some point?
Speaker Change: Got it and then just one last one did I hear you right on the production and Capex expectation for this year, just what's changing in the schedule and then maybe what are your thoughts on capacity expansion and what you would need from the industry to think about that at some point.
Joshua Ward Sullivan: Yeah, I'll let Tim take the first one on CapEx, and then I'll come back. Yeah, Josh.
Joshua Ward Sullivan: Yeah, I'll, let Tim take the first one on Capex and then I'll come back.
Timothy Lain: The number for Fiscal 24 is about 100 for the full year. That's down from the 125 where we started the year. It's more a function of timing; a lot of good projects are in there, but getting those projects complete and getting the materials we need and subcontractors and things like that, it's pushing the timing a little bit. So that's why we're reducing expectations to about 100.
Timothy Lain: Yeah, Josh. Good morning. You heard me correctly.
Tim: Yes, Josh.
Timothy Lain: You heard me correctly.
Timothy Lain: The number for fiscal 'twenty four is about 100 million for the full year, that's down from 125, when we started the year its more a function of timing a lot of good projects in there, but getting those projects complete and getting the materials, we need and subcontractors and things like that.
Timothy Lain: Pushing the timing a little bit so that's why we're reducing expectations to about 100 this year.
Tony R. Thene: And then, Josh, I'll come back to your question about adding capacity. Again, as you well know, you're very familiar with the market.
Timothy Lain: And then Josh I'll come back to your question around adding capacity again as you well know you're very familiar with the market.
Tony R. Thene: This is very complex capacity that takes a long time to build, install, and then qualify. So it is difficult from a financial return standpoint to make the numbers work on some of this capacity. And even if you have, you know, even if you can make that work, the process knowledge that has taken decades.
Tony R. Thene: This is very complex capacity that takes a long time to build install and then qualify so it is difficult from a from a financial return standpoint.
Tony R. Thene: To make the numbers work on some of these capacity.
Tony R. Thene: And even if you have you know even if you can make that work.
Tony R. Thene: The process knowledge that has taken decades to.
Tony R. Thene: Accumulate to be able to make these very, stringent products if there's only a few people in the world that can do it, as you all know now. What said We've talked about the fact that over the next couple years, we're going to be generating a lot of cash. What do we want to do with that cash? We've been very clear that we want to look at growth projects for us but also return a lot of cash to shareholders.
Tony R. Thene: Accumulate to be able to make these very strange.
Tony R. Thene: Stringent products.
Tony R. Thene: Only a few people in the world that can do it as you well know now.
Tony R. Thene: Said, we've talked about the fact that over the next couple of years, we're going to be generating a lot of cash.
Tony R. Thene: What do we want to do with that cash we've been very clear that we want to look at growth projects for us, but also return of.
Tony R. Thene: Uh huh.
Tony R. Thene: Cash to shareholders. So those are our two priorities when it comes to capacity, adding theyre going to have to be.
Tony R. Thene: So those are our two priorities. When it comes to capacity addition, they're going to have to be very strong returns and, you know, accretive very quickly. We're looking at different areas that we can do that in very specific ways. And, you know, certainly, if any of those come to fruition, we'll let everyone know.
Tony R. Thene: Very strong returns and.
Tony R. Thene: Accretive very quickly we're looking at different areas that we can you can do that in a very specific areas and you know certainly if any of those come to fruition we'll.
Tony R. Thene: We'll let everyone know.
Joshua Ward Sullivan: Great, thank you for your time.
Speaker Change: Great. Thank you for the time.
Speaker Change: Thank you.
Operator: Again, if you have a question, please press star then 1. The next question comes from Michael Leshock with KeyBank Capital Markets. Please go ahead.
Joshua Ward Sullivan: Again, if you have a question. Please press Star then one the next question comes from Michael The shock with Keybanc capital markets. Please go ahead.
Michael David Leshock: Hey, good morning. I wanted to ask about the aftermarket. You had alluded to strength in the aerospace MRO markets. It sounds like that strong demand could last for several years, so I'm just wondering, what are the biggest opportunities for Carpenter within the aftermarket going forward? Is that price and mix or volumes?
Michael David Leshock: Hey, good morning, I wanted to ask on the aftermarket you had alluded to strength in aerospace MRO market.
Michael David Leshock: Any way you could frame that opportunity?
Michael David Leshock: It sounds like that strong demand could last for several years. So I'm just wondering what are the biggest opportunities for carpenter within aftermarket going forward is that price and mix or volumes any way you could frame that opportunity.
Tony R. Thene: Well, Michael, I think the overall aerospace and defense market, in general, is growing and going to be growing for quite some time. I agree with the phrase some people use, that we're in a super cycle. And I agree with that. And I think anytime you see build rates being pushed out, that just extends the super cycle. So there is demand across all sub segments of aerospace, as you know, I believe in Carpenter. We supply to OEM, MRO, narrow body, wide body, Boeing, Airbus, what it might be. So, you know, from our standpoint, you're setting you're setting here effectively sold out, uh... right now, and I don't see that changing over the next year or longer.
Speaker Change: Well, Michael I think the overall aerospace and defense market. In total is is growing and going to be growing for quite some time I agree with that.
Tony R. Thene: The phrase some people use is we're in a super cycle and I agree with that and I think anytime you see even build rates being pushed out that just extends the super cycles. So that.
Tony R. Thene: There is demand across all sub segments of aerospace as you know I believe in Carpenter, we supply to two OEM MRO narrow body wide body Boeing Airbus what it might be so.
Tony R. Thene: From our standpoint, Youre, saying youre sitting here effectively sold out.
Tony R. Thene: Right now and I don't see that changing.
Tony R. Thene: The next near or longer term.
Tony R. Thene: Okay.
Michael David Leshock: And then just on your guidance, you came in well above your prior guide and raised 4Q. What were the main moving pieces that exceeded your expectations versus three months ago? Is that primarily a function of more favorable mix, or is there something else? And then, as we look forward, what could potentially drive results above your revised expectations? Well, as I said in the prepared remarks.
Speaker Change: And then just on your guidance you came in well above your prior guide and raised <unk>.
Michael David Leshock: What were the main moving pieces that exceeded your expectations versus three months ago is that.
Michael David Leshock: Primarily a function of more favorable mix or is there something else in and then as we look forward what could potentially drive results above your revised expectations.
Tony R. Thene: Well, as I said in the prepared comments, there are really three main drivers, and we're exceeding on all of them. We're improving productivity. I mean, improving productivity is the name of the game in this environment right now. Capacity is hard to bring on. I should say new capacity.
Speaker Change: Well as I said in the prepared comments, it's really three main drivers and we're exceeding on all of them, we're improving productivity I mean, improving productivity is the name of the game in this in this.
Tony R. Thene: Environment right now capacity is hard to bring on I should say new capacity. So we're trying to get everything we can out of existing equipment and at the same time.
Tony R. Thene: So we're trying to get everything we can out of our existing equipment and, at the same time, treating it the right way and doing all the preventive maintenance that we need to do. That's all about productivity and running your facility. This has been quicker than we had anticipated. That's good news. From a product mix standpoint, we continue to push on that and finally operate our facility as efficiently as possible. That's good news.
Tony R. Thene: And doing all the preventive maintenance that we need to do it's all about productivity and running the facility.
Tony R. Thene: It's been quicker than what we had anticipated that's good news from a product mix standpoint, we continue to push on that and.
Speaker Change: Okay great.
Tony R. Thene: As efficiently as possible that's good news and also on the pricing action. You can you continue to see and this is a reflection of the of the tight market improvements above what we had anticipated in that area as well. So it's really all three of those.
Tony R. Thene: And also on the pricing action, you continue to see, and this is a reflection of the tight market, improvements above what we had anticipated in that area as well. So it's really all three of those working together to get that, you know, exceeding that performance. We're going to push in the fourth quarter, and as we go forward over the next couple of years, we're going to push on all those three. And the good thing for Carpenter Technology is, as I said at the end, we're not maxed out.
Tony R. Thene: Working together to get that.
Tony R. Thene: Exceeding that performance.
Tony R. Thene: In the fourth quarter and as we go forward in the next over the next couple of years with all of those three.
Tony R. Thene: And the good technology is as I said at the end were not maxed out Theres a lot of runway in front of us there's a lot of opportunities we see out on the shop floor on how we can get better how we can become more efficient. So that's great news for current and future shareholders of Carpenter technology.
Tony R. Thene: There's a lot of runway in front of us. There are a lot of opportunities we see out on the shop floor for how we can get better, how we can become more efficient. So that's great news for current and future shareholders of Carpenter Technology.
Speaker Change: Great. Thank you.
Speaker Change: Yes, Sir.
John Huyette: This concludes our question and answer session. I would like to turn the conference back over to John Huyette for any closing remarks.
Tony R. Thene: This concludes our question and answer session I would like to turn the conference back over to John Hewitt for any closing remarks.
John Huyette: Thank you, operator. Thank you, everyone, for joining us for your 2024 third quarter conference call. Have a great rest of your day.
John Huyette: Thank you operator, and thank you everyone for joining the.
John Huyette: Fiscal year 2024 third quarter conference call have a great rest of your day.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: Okay.
Operator: [music].