Q1 2025 Carpenter Technology Corp Earnings Call

Operator: Good day and welcome to the Carpenter Technology Fiscal First Quarter 2025 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there would 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.

Good day and welcome to the Carpenter technology fiscal first quarter 2025 earnings conference call.

Speaker Change: All participants will be in a listen only mode.

Speaker Change: Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Speaker Change: After today's presentation.

Speaker Change: That would be an opportunity to ask questions.

Speaker Change: You ask a question you May press Star then one on your telephone keypad.

Speaker Change: To withdraw your question. Please press Star then two.

Speaker Change: Please note this event is being recorded.

John Huyette: I would now like to turn the conference over to Mr. John Huyette. Please go ahead.

Speaker Change: I would now like to turn the conference over to Mr. John Hewitt.

Speaker Change: Please go ahead.

Speaker Change: Yeah.

John Huyette: Thank you, operator.

John Hewitt: Thank you operator, good morning, everyone and welcome to the Carpenter Technology earnings Conference call for the fiscal 2025 first quarter ended September 32024.

John Huyette: Good morning, everyone, and welcome to the Carpenter Technology earnings conference call for the fiscal 2025 first quarter ended September 30 of 2024. This call is also being broadcast over the Internet along with presentation slides. For those of you listening by phone, you may experience a time delay in slide movement.

John Hewitt: This call is also being broadcast over the Internet along with presentation slides for those of you listening by phone you may experience a time delay in slide movement.

John Huyette: Speakers on the call today are Tony Tain, President and Chief Executive Officer, and Tim Lane, Senior Vice President and Chief Financial Officer. Statements made by management during this earnings 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 filings, including the company's report on Form 10-K for the year ended June 30 of 2024 and the exhibits attached to those filings. Please also note that in the following discussion, unless otherwise noted, when management discussed the sales or revenue, that reference excludes surcharge.

John Hewitt: Speakers on the call today are Tony <unk>, President and Chief Executive Officer, and Tim Lain, Senior Vice President and Chief Financial Officer.

John Hewitt: Statements made by management. During this earnings presentation that are forward looking statements are based on current expectations.

John Hewitt: 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, including the company's report on Form 10-K for the year ended June 32024, and the exhibits attached to those filings.

John Hewitt: Please also note that in the following discussion unless otherwise noted when management discusses the sales or revenue that reference excludes surcharge.

John Huyette: When referring to operating margins that is based on adjusted operating income excluding special items and sales excluding surcharge.

John Hewitt: When referring to operating margins that is based on adjusted operating income excluding special items and sales excluding surcharge.

Tony Thene: I will now turn the call over to Tony.

Speaker Change: I will now turn the call over to Tony.

Tony 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 for the first quarter of fiscal year 2025. Our total case incident rate was 1.2. This improvement represents a step in the right direction. Our rate has been elevated over the last couple of years as we integrated a large number of new employees into our operations. Many of them with little or no experience with an engaged safety culture. During this time, we have invested in training programs for employees with a focus on identifying potential risks and minimizing the severity of injuries.

Tony: Thank you John and good morning to everyone on the call today.

Tony: I will begin on slide four with a review of our safety performance.

Tony: The first quarter of fiscal year 2025, our total case incident rate was 1.2.

Tony: This improvement represents a step in the right direction.

The rate has been elevated over the last couple of years as we integrate a large number of new employees into our operations.

Tony: Any of them with little or no experience with an engaged safety culture.

Tony: During this time, we have invested in training programs for employees with a focus on identifying potential risks and minimizing the severity of injuries.

Tony Thene: As our employees gain experience and develop in our safety focus culture, we are seeing an improvement in our safety performance.

Tony: Our employees gain experience and developed in our safety focused culture, we are seeing an improvement in our safety performance, but we still have more to do our goal is to be a zero injury workplace and we will continue to invest and work to achieve that goal.

Tony Thene: But we still have more to do. Our goal is to be a zero injury workplace, and we will continue to invest and work to achieve that goal.

Tony Thene: Let's turn to slide five for an overview of our first quarter performance. Obviously a great start to fiscal year 2025 with record first quarter earnings and a positive step up to our full fiscal year 2025 earnings guidance.

Tony: Let's turn to slide five for an overview of our first quarter performance.

Tony: Obviously, a great start to fiscal year 2025 with record first quarter earnings and a positive step up to our full fiscal year 2025 earnings guidance, specifically in the first quarter of fiscal year 2025, we generated $117 million and adjust.

Tony Thene: Business. Specifically, in the first quarter of fiscal year 2025, we generated 117 million in adjusted operating income, the most profitable first quarter on record. This 70% increase over our then record first quarter of fiscal year 2024 is the result of continued improvement and productivity, product mix, optimization, and pricing actions. It is a testament to our solid execution, strong market position, and unique capacity and capabilities that we are able to achieve these record earnings during a time of near-term uncertainty in the aerospace supply chain. This is a strong indicator of our ability to produce continued earnings growth acceleration as the aerospace supply chain not only stabilizes but embarks on an aggressive bill rate ramp in the near term.

Tony: Operating income the most profitable first quarter on record.

Tony: This 70% increase over our than our record first quarter of fiscal year 2024 is the result of continued improvement in productivity and product mix optimization and pricing actions.

Tony: It is a testament to our solid execution strong market position and unique capacity and capabilities.

Tony: We are able to achieve these record earnings during a time of near term uncertainty in the aerospace supply chain.

Tony: This is a strong indicator of our ability to produce continued earnings growth acceleration as the aerospace supply chain not only stabilizes, but embarked on an aggressive build rate ramp in the near term.

Tony Thene: Notably, the SAO segment continues to exceed expectations, delivering 134.5 million in operating income with an adjusted operating margin of 26.3%. This is a meaningful step up from the 19.4% in the first quarter of the previous year. The focus productivity efforts are evident within the SAO results as we were able to increase adjusted operating margin even with lower sequential shipments. Further, we generated 13.3 million of adjusted free cash flow during the quarter, with 40.2 million of cash from operations. In addition, we repurchased 32 million in shares during the first quarter as a part of our 400 million share repurchase program, which was announced on the last earnings call.

Tony: Notably the sales segment continues to exceed expectations, delivering $134 5 million and operating income with an adjusted operating margin of 26.3%.

Tony: This is a meaningful step up from the 19, 4% in the first quarter of the previous year.

Tony: The focus productivity efforts are evident within the ACO results as we were able to increase adjusted operating margin, even with lower sequential shipments.

Tony: Further we generated $13 3 million of adjusted free cash flow during the quarter with $42 million of cash from operations.

Tony: In addition, we repurchased $32 million in shares during the first quarter as a part of our 400 million share repurchase program, which was announced on the last earnings call.

Tony Thene: Altogether, our first quarter performance sets a strong foundation for our fiscal year 2025 financial goals, which I will discuss in more detail later in the presentation.

Tony: Altogether, our first quarter performance sets a strong foundation for our fiscal year 2025 financial goals, which I will discuss in more detail later in the presentation.

Tony Thene: Now let's turn to slide six and take a closer look at our first quarter sales and market dynamics. In the first quarter of fiscal year 2025, sales decreased 9% sequentially and increased 17% year over year. Sales were roughly as expected, with the majority of the sequential sales decline driven by our planned maintenance outages, as we discussed on the last earnings call. In the aerospace and defense in-use market, sales were down 7% sequentially and up 34% year over year. Aerospace and defense first quarter sales represented our best first quarter on record, being in our next best first quarter by over 20%.

Tony: Now, let's turn to slide six and take a closer look at our first quarter sales and market dynamics.

Tony: In the first quarter of fiscal year, 2025 sales decreased 9% sequentially and increased 17% year over year say.

Tony: Sales were roughly as expected with the majority of the sequential sales decline driven by our planned maintenance outages as we discussed on the last earnings call.

Tony: In the aerospace and defense end use market sales were down 7% sequentially and up 34% year over year aerospace and.

Tony: In Defence first quarter sales represented our best first quarter on record, beating our next best first quarter by over 20%.

Tony Thene: Within aerospace and defense, engine sales were roughly flat sequentially. Engine sales continued to see strong MRO demand, and customers continued to work to get caught up on past due demand. Defense sales were up sequentially as defense demand remains robust due to ongoing world events and strong pull for advanced critical solutions. The other aerospace submarkets were down sequentially, largely reflecting available manufacturing capacity in the quarter, as I mentioned earlier.

Tony: Within aerospace and defense engine sales were roughly flat sequentially.

Tony: Engine sales continue to see strong MRO demand and customers continue to work to get caught up on past due demand.

Tony: Defense sales were up sequentially as defense demand remains robust due to ongoing world events and strong pull for advanced critical solutions.

Tony: The other aerospace Submarkets were down sequentially, largely reflecting available manufacturing capacity in the quarter as I mentioned earlier.

Tony Thene: here. Altogether, our Aerospace and Defense shipments ended in line with our expectations and represent another very strong quarter.

Tony: Altogether, our aerospace and defense shipments ended in line with our expectations and represent another very strong quarter.

Tony Thene: Moving to our medical in-use market, sales were down 20% sequentially and up 10% year over year. Together with Aerospace and Defense, the two in-use markets continued to grow and share overall revenue at approximately 74% of our total sales. Patient demand and patient backlogs continued to grow, and the overall outlook for market demand remains positive. We have realized very strong growth in medical, well above market rates, as indicated by our year-over-year growth. The sequential decrease in sales is partly driven by lower shipments due to fewer operating days in the quarter. We also had some delayed shipments in our dynamite facility due to the hurricane in Florida, and we are coming off a record sequential quarter for comparison.

Tony: Moving to our medical end use market sales were down 20% sequentially and up 10% year over year together with aerospace and defense. The two end use markets continued to grow in share of overall revenue at approximately 74% of our total sales.

Tony: Patient demand and patient backlogs continue to grow and the overall outlook for market demand remains positive.

Tony: And we have realized very strong growth in medical well above market rates as indicated by our year over year growth.

Tony: The sequential decrease in sales is partly driven by lower shipments due to fewer operating days in the quarter. We also had some delayed shipments in our dynamic facility due to the hurricane in Florida, and we're coming off a record sequential quarter for comparison.

Tony Thene: We are reminded daily of how critical our solutions are in the medical in-use market as our customers continue to emphasize the desire to grow further with us in a variety of new applications that require our unique material solutions.

Tony: We are reminded daily of how critical our solutions are in the medical end use market as our customers continue to emphasize the desire to grow further with us in a variety of new applications that require our unique material solutions.

Tony Thene: Looking at the energy in-use market, sales were up 8% sequentially and up 35% year over year, driven by ongoing high demand and positive long-term fundamentals. Notably, in power generation, we have seen increasing urgent demand for our materials, giving us the ability to opportunistically shift production to support the demand. The alloys that go into these applications are similar to our aerospace materials and carry similar margins. We are working with our power generation customers to continue to identify opportunities to slot the demand into our production schedules. Altogether, underlying demand in our key in-use markets remains robust, and our long-term outlook continues to be strong.

Tony: Looking at the energy end use market sales were up 8% sequentially and up 35% year over year, driven by ongoing high demand and positive long term fundamentals.

Tony: Notably in power generation, we have seen increasing urgent demand for our materials, giving us the ability to opportunistically shift production to support the demand.

Tony: The alloys that go into these applications are similar to our aerospace materials and carry similar margins.

Tony: We are working with our power generation customers to continue to identify opportunities to slot the demand into our production schedules.

Tony: Altogether underlying demand in our key end use markets remains robust and our long term outlook continues to be strong now.

Tim Lane: Now, I will turn it over to Tim for the financial summary.

Speaker Change: Now I will turn it over to Tim for the financial summary.

Tim Lane: Thanks, Tony. Good morning, everyone.

Tim Lain: Thanks, Tony Good morning, everyone.

Tim Lane: I'll start on slide 8, the income statement summary. Starting at the top, sales excluding surcharge increased 17% year over year on 3% higher volume. Sequentially, sales were down 9% with a similar reduction in volume. The year-over-year growth in net sales was driven by our improving productivity combined with the ongoing shift in product mix as we continue to focus our capacity on our most profitable products, as well as the realization of higher prices. The improving productivity in product mix is evident in our growth profit, which increased to 176.3 million in the current quarter, up 42% from the same quarter last year.

Tim Lain: I'll start on slide eight the income statement summary.

Tim Lain: Starting at the top sales, excluding surcharge increased 17% year over year on 3% higher volume.

Tim Lain: Sequentially sales were down 9% with a similar reduction in volume.

Tim Lain: The year over year growth in net sales was driven by our improving productivity combined with the ongoing shift in product mix as we continue to focus our capacity on our most profitable products as well as the realization of higher prices.

Tim Lain: The improving productivity and product mix as is evident in our gross profit, which increased to $176 3 million in the current quarter up 42% from the same quarter last year.

Tim Lane: SCNA expenses were 59.1 million in the first quarter, up 4 million from the same quarter last year and down roughly 6 million sequentially. Note the SCNA line includes corporate costs, which total 24.4 million in the recent first quarter when excluding the special item. As we said last quarter, we expect corporate costs to be approximately 23 to 24 million per quarter for the balance of fiscal year 2025. Operating income was 113.6 million in the current quarter, where 117.2 million of adjusted operating income, which is 70% higher than the 69 million in our first quarter of fiscal year 2024.

Tim Lain: SG&A expenses were $59 1 million in the first quarter up 4 million from the same quarter last year and down roughly $6 million sequentially.

Speaker Change: No. The SG&A line includes corporate costs, which totaled $24 4 million in the recent first quarter when excluding the special item.

Speaker Change: As we said last quarter, we expect corporate cost to be approximately 23% to $24 million per quarter for the balance of fiscal year 2025.

Speaker Change: Operating income was $113 6 million in the current quarter were $117 2 million of adjusted operating income, which is 70% higher than the $69 million in our first quarter of fiscal year 2024.

Tim Lane: As Tony mentioned earlier, this represents a record first quarter operating income result. We continue to build operating momentum and expand margins, delivering total company adjusted operating margin of 20.3% in the current quarter. Moving on to our effective tax rate, excluding special items, which was 16.4% in the current quarter. The effective tax rate was comparable to the same quarter last year due to benefits associated with vesting of certain equity awards in both quarters. For fiscal year 2025, we continue to expect the effective tax rate to be in the range of 21 to 23%. Adjusted earnings per diluted share was $1.73 per share for the quarter.

Speaker Change: As Tony mentioned earlier this represents a record first quarter operating income result.

Speaker Change: We continue to build operating momentum and expand margins delivering total company adjusted operating margin of 23% in the current quarter.

Speaker Change: Moving onto our effective tax rate, excluding special items, which was 16, 4% in the current quarter.

Speaker Change: The effective tax rate was comparable to the same quarter last year due to benefits associated with vesting of certain equity awards in both quarters.

Speaker Change: For fiscal year 2025, we continue to expect the effective tax rate to be in the range of 21% to 23%.

Speaker Change: Adjusted earnings per diluted share was $1 73 per share for the quarter.

Tim Lane: The adjusted earnings per diluted share results exclude the impact of restructuring and asset impairment charges associated with actions to streamline our additive operations.

The adjusted earnings per diluted share results exclude the impact of restructuring and asset impairment charges associated with actions to streamline our additive operations.

Tim Lane: In summary, the adjusted earnings per diluted share results for the quarter of $1.73 demonstrate solid execution in a challenging near-term operating environment, given the supply chain uncertainty in the aerospace industry.

Speaker Change: In summary, the adjusted earnings per diluted share results for the quarter of $1 73 demonstrates solid execution in a challenging near term operating environment, given the supply chain uncertainty in the aerospace industry.

Tim Lane: Now turning the slide 9 in our SAO segment results. Net sales excluding search charge for the first quarter were 510.9 million. On a year-of-a-year basis, sales were up 22% on flat volume. The year-of-year comparison reflects the impacts of higher realized prices and an improving product mix as we actively managed our portfolio to focus on using our capacity for the highest margin solutions. As we had anticipated, sales were down 9% sequentially on 12% lower volume, reflecting the impacts of equipment availability across the operations due to planned maintenance activities and fewer working days, offset by realization of higher prices.

Now turning to slide nine and our Sao segment results.

Speaker Change: Net sales excluding surcharge for the first quarter were $510 9 million.

Speaker Change: On a year over year basis sales were up 22% on flat volume.

Speaker Change: The year over year comparison reflects the impacts of higher realized prices and an improving product mix as we actively managed our portfolio to focus on using our capacity for the highest margin solutions.

Speaker Change: As we had anticipated sales were down 9% sequentially on 12% lower volume, reflecting the impacts of equipment availability across the operations due to planned maintenance activities and fewer working days offset by realization of higher prices.

Tim Lane: Moving operating results: SAO reported operating income of $134.5 million in the first quarter of this year 2025. As Tony mentioned, the operating results exceeded our expectations and represented a record first quarter for SAO. The improvements we have made in areas of productivity, product mix, and pricing are evident in the adjusted operating margin, which has increased to 26.3% in the current period. Some additional contacts are the current quarter's results. On a sequential basis, operating income was down 6.4 million, despite a 48.6 million reduction in sales. This is meaningful and demonstrates the team's efforts to realize further price increases and closely manage costs while enhancing productivity.

Speaker Change: Moving operating results <unk> reported operating income of $134 5 million in the first quarter of fiscal year 2025.

Speaker Change: As Tony mentioned, the operating results exceeded our expectations and represented a record first quarter for ICF.

Speaker Change: The improvements we have made in areas of productivity product mix and pricing are evident in the adjusted operating margin, which has increased to 26, 3% in the current period.

Speaker Change: Some additional context for the current quarter's results.

Speaker Change: On a sequential basis operating income was down $6 4 million, despite a $48 6 million reduction in sales.

Speaker Change: This is meaningful and demonstrates the team's efforts to realize further price increases and closely manage costs, while enhancing productivity.

Tim Lane: The SEO team remains focused on executing actions to further increase and maintain consistent production levels and to actively manage the product mix to maximize capacity for our most profitable products. The SEO's team focus remains unchanged from the last several quarters. In the current environment, the focus is even more relevant as we actively manage our production schedules to adjust to changing customer priorities. Looking ahead to our upcoming second quarter of fiscal year 2025, we anticipate SAO will generate operating income in a range of 134 to 139 million.

Speaker Change: The <unk> team remains focused on executing actions to further increase and maintain consistent production levels and to actively manage the product mix to maximize capacity for our most profitable products.

Speaker Change: The <unk> team focus remains unchanged from the last several quarters.

Speaker Change: In the current environment. The focus is even more relevant as we actively manage our production schedules to adjust to changing customer priorities.

Speaker Change: Looking ahead to our upcoming second quarter of fiscal year 2025, we anticipate <unk> will generate operating income in a range of $134 million to $139 million.

Tim Lane: Now, turning to slide 10 in our PEP segment results. Net sales excluding surcharge in the first quarter of fiscal year 2025 were 92.4 million, roughly flat from the same quarter a year ago and down 10 percent sequentially. In the current quarter, PEP reported operating income of 7.3 million compared to 9.1 million in the same quarter a year ago and 10.6 million in the fourth quarter of fiscal year 2024.

Speaker Change: Now turning to slide 10 in our Pep segment results.

Speaker Change: Net sales excluding surcharge in the first quarter of fiscal year 2025 were $92 4 million.

Speaker Change: Flat from the same quarter, a year ago and down 10% sequentially.

Speaker Change: In the current quarter Pep reported operating income of $7 3 million compared to $9 1 million in the same quarter, a year ago, and $10 6 million in the fourth quarter of fiscal year 2024.

Tim Lane: As we said in the past, Dynamite is the driver of the PEP segment, as Dynamite represents a significant portion of PEP sales and an even greater percentage of PEP's profitability. Dynamite's fundamentals are very comparable to SAO, including a strong market demand backdrop in the medical and aerospace end-use markets, which accounts for approximately 95 percent of their sales. The focus of Dynamite has been and will continue to be working to improve productivity and expand capacity to increase our output. Those efforts have driven improved results in Dynamite, which has increased profitability by 50 percent in our recent first quarter compared to the same period last year.

Speaker Change: As we said in the past Dynamed as the driver of the Pep segment as Dynamed represents a significant portion of Pep sales and an even greater percentage of <unk> profitability.

Speaker Change: Dynamite fundamentals are very comparable to <unk>, including a strong market demand backdrop, and the medical and aerospace end use markets, which accounts for approximately 95% of their sales.

The focus of dynamic has been and will continue to be working to improve productivity and expand capacity to increase our output.

Speaker Change: Those efforts have driven improved results in Dynamo, which has increased profitability by 50% and our recent first quarter compared to the same period last year.

Tim Lane: With that said, Dynamite is not the only business in PEP. Our additive business, although not material to overall corporate technology, has recently seen a pushout of demand from certain key strategic customers.

Speaker Change: With that said <unk> is not the only business in pet.

Speaker Change: Our additive business, although not material to overall Carpenter technology has recently seen a push out of demand from certain key strategic customers.

Tim Lane: With that in mind, we currently anticipate that in the upcoming second quarter of fiscal year 2025, the PEP segment will deliver operating income in the range of 6 million to 7.5 million.

Speaker Change: With that in mind, we currently anticipate that in the upcoming second quarter of fiscal year 2025.

Speaker Change: Pep segment will deliver operating income in the range of 6 million to $7 5 million.

Tim Lane: Now, turning to slide 11 and a review of cash flow. In the current quarter, we generate a 40.2 million of cash from operating activities compared to 7.4 million in the same quarter last year. The results are driven by improving profitability and discipline in working capital management. The cash generation in the current quarter is an important step towards delivering our full fiscal year-adjusted free cash flow target. For the current quarter, we spent just under 27 million on capital expenditures. Our target for capital spending in fiscal year 2025 remains at 125 million. With those details in mind, we reported adjusted free cash flow of 13.3 million in the first quarter of fiscal year 2025.

Speaker Change: Now turning to slide 11, and a review of cash flow.

Speaker Change: In the current quarter, we generated $40 2 million of cash from operating activities compared to $7 $4 million in the same quarter last year.

Speaker Change: The results were driven by improving profitability and disciplined working capital management.

Speaker Change: The cash generation in the current quarter is an important step towards delivering our full fiscal year adjusted free cash flow targets.

Speaker Change: For the current quarter, we spent just under $27 million on capital expenditures.

Speaker Change: Our targeted for capital spending in fiscal year 2025 remains at $125 million.

Speaker Change: With those details in mind, we reported adjusted free cash flow of $13 3 million in the first quarter of fiscal year 2025.

Tim Lane: Beyond the cash flow we generated, we began executing against the recently authorized share repurchase program. In the first quarter of fiscal year 2025, we purchased $32 million of shares against the $400 million authorization. The Share Repurchase Program reflects our balanced approach to capital allocation and complements the longstanding quarterly dividend. Finally, our liquidity remains healthy. We ended the first quarter of fiscal year 2025 with $499.1 million of total liquidity. That includes $150.2 million of cash and $348.9 million of available borrowings on our credit facility.

Speaker Change: Beyond the cash flow, we generated we began executing against our recently authorized share repurchase program.

Speaker Change: In the first quarter of fiscal year 2025, we purchased $32 million of shares against the $400 million authorization.

Speaker Change: The share repurchase program reflects our balanced approach to capital allocation and complements our long standing quarterly dividend.

Speaker Change: Finally, our liquidity remains healthy.

Speaker Change: We ended the first quarter of fiscal year 2025, with $499 1 million of total liquidity.

Speaker Change: That includes $150 2 million of cash and $348 9 million of available borrowings under our credit facility.

Tony Thene: With that, I'll turn the call back to Tony.

Speaker Change: With that I'll turn the call back to Tony.

Speaker Change: Okay.

Tony Thene: Thanks, Tim. Now let's turn to the fiscal year 2025 out. We have been on a remarkable journey over the last two years. At our Investor Day in May 2023, we laid out a path to double our fiscal year 2019 operating income by fiscal year 2027. That four year goal represented a 40% compounded annual growth rate for operating income from our expected fiscal year 2023 performance. Even with such impressive growth, there were opportunities to exceed expectations by improving productivity, optimizing product mix, and realizing pricing actions. As many of you followed along, we did just that, accelerating our earnings growth through fiscal year 2024.

Tony: Thanks, Tim.

Tony: Now, let's turn to the fiscal year 2025 outlook.

Tony: We have been on a remarkable journey over the last two years.

Tony: At our Investor day in May 2023, we laid out a path to double our fiscal year 2019 operating income by fiscal year 2027.

Tony: That four year goal represented a 40% compounded annual growth rate for operating income from our expected fiscal year 2023 performance.

Tony: Even with such impressive growth there were opportunities to exceed expectations by improving productivity optimizing product mix and realizing pricing actions.

Tony: As many of you followed along we did just that accelerating our earnings growth through fiscal year 2024.

Tony Thene: This led us to pull in our goal twice. First, during our April 2024 earnings call, we pulled our goal ahead at least one year into fiscal year 2026. This increased operating income compounded annual growth rate to approximately 55% over a three-year period. Then, in our July 2024 earnings call, we pulled our goal in another full year following a record year of profitability. The goal pulled in two full years now represents an operating income compounded annual growth rate of over 90% from FY 23 to FY 25. After a strong start to fiscal year 2025, we are now increasing our guidance again to the high end of the $460 million to $500 million range.

Tony: This led us to pull in our gold twice first during our April 2024 earnings call. We pulled our goal ahead at least one year into fiscal year 2026.

Tony: This increased the operating income compounded annual growth rate to approximately 55% over a three year period.

Tony: Then in our July 2024 earnings call report our goal in another full year following a record year of profitability.

Tony: Nicole pulled in two full years now represents an operating income compounded annual growth rate of over 90% from FY2023 to FY 'twenty five.

Tony: After a strong start to fiscal year 2025, we are now increasing our guidance again to the high end is a $460 million to $500 million range.

Tony Thene: We believe we can achieve this despite the current uncertainties in the aerospace supply chain because of our continued execution, strong market position, and unique capacity and capabilities. And the team is not satisfied with just meeting targets. Our team is focused on exceeding expectations. To that end, we have line of sight activities that could push operating income for fiscal year 2025 even higher above the $500 million mark. They include improving productivity to unlock incremental capacity and working with customers to pull in high-value orders.

Tony: We believe we can achieve this despite the current uncertainties in the aerospace supply chain because of our continued execution strong market position and unique capacity and capabilities.

Tony: And the team is not satisfied with just meeting targets our team is focused on exceeding expectations.

Tony: To that end, we have line of sight to activity that could push operating income for fiscal year 2025, even higher above the $500 million Mark.

Tony: They include improving productivity to unlock incremental capacity and working with customers to pull in high value orders.

Tony Thene: And as we look ahead, what is now our fiscal year 2025 target will not be the peak of our earnings growth based on our current projections. The same dynamics that are driving our current performance are expected to only get stronger into the future. The fundamentals of the aerospace industry remain strong, with more people wanting to fly than ever before. And macro trends are pushing our customers across our end use markets to our highly specialized material solutions, as we've seen in the medical end use market. As a result, our customers remain focused on the surety of supply to meet their long-term growth needs.

Tony: And as we look ahead, what is now our fiscal year 2025 target will not be the peak of our earnings growth based on our current projections.

Tony: The same dynamics that are driving our current performance are expected to only get stronger into the future.

Tony: Fundamentals of the aerospace industry remains strong with more people wanting to fly than ever before.

Tony: And macro trends are pushing our customers across our end use markets to our highly specialized material solutions as we've seen in the medical end use market.

Tony: As a result, our customers remain focused on the surety of supply to meet their long term growth needs.

Tony Thene: We believe that through solid execution, our strong market position and our unique capabilities, we are well positioned to continue our earnings growth momentum.

Tony: We believe that through solid execution, our strong market position and our unique capabilities. We are well positioned to continue our earnings growth momentum.

Tony Thene: Now let's turn to the next slide for my closing comments.

Tony: Now, let's turn to the next slide for my closing comments.

Tony Thene: To close, let me summarize our first core performance and outlook. Corporate Technology just delivered a record first quarter, a 70% increase over the first quarter a year ago, which was then a record for the company. We increased margins in our SAO segment again, reaching 26.3%, a new all-time high. We generated positive, adjusted free cash flow in the quarter. We began executing against our $400 million share repurchase program, returning cash to our shareholders.

Tony: To close let me summarize our first quarter performance and outlook.

Tony: Carpenter technology, just delivered a record first quarter, a 70% increase over the first quarter a year ago, which was then a record for the company.

We increased margins in our <unk> segment again, reaching 26, 3% a new all time high.

Tony: We generated positive adjusted free cash flow in the quarter, we began executing against our 400 million dollar share repurchase program returning cash to our shareholders.

Tony Thene: And after pulling a four-year target in by two years, today we've increased our guidance again to the top end of the $460 to $500 million range for fiscal year 2025, with a drive to go beyond the $500 million mark. All of this, despite the current near-term uncertainties in aerospace supply chain.

And after pulling a four year target in by two years today, we've increased our guidance again to the top end of the $460 million to $500 million range for fiscal year 2025, with a drive to go beyond the $500 million Mark.

Tony: All of this despite the current near term uncertainties in the aerospace supply chain.

Tony Thene: Further, we see our long-term growth outlook strengthening. Demand across in-use markets continues to grow as we expand relationships with our customers to address their challenges and capture growth opportunities. And we remain focused on improving our execution, as demonstrated by our accelerating performance over the last several quarters.

Tony: Further we see our long term growth outlook strengthening demand across end use markets continues to grow as we expand our relationship with our customers to address their challenges and capture growth opportunities.

Tony: And we remain focused on improving our execution as demonstrated by our accelerating performance over the last several quarters. We believe we are in the early stages of our growth journey and we will continue to live our values as we drive to exceptional near term and long term performance.

Tony Thene: We believe we are in the early stages of our growth journey, and we will continue to deliver values as we drive to exceptional near-term and long-term performance.

Tony Thene: Thank you for your attention, and now I will turn the call back to the operator. Thank you.

Tony: Thank you for your attention and now I will turn the call back to the operator.

Tony: Yeah.

Speaker Change: Thank you.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, 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.

Speaker Change: We will now begin the question and answer session.

Speaker Change: The last quick question you May Press Star then one on your telephone keypad.

Speaker Change: 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.

Speaker Change: Please press Star then two.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Okay.

Gautam Khanna: We have the first question from the line of Gautam Kanna with TD Kavan. Please go ahead.

Speaker Change: We have the first question from the line haul forgot them.

Speaker Change: Okay.

Speaker Change: Please go ahead.

Tony Thene: Hi, good morning, guys. Hey, good morning, Gautam. Tony, I wanted to get you some color from you on. What is going on with respect to the aerospace customers? Are you seeing any destocking or deferral requests, and is it still in which product areas? You mentioned backlogs remain at near record highs. I am just curious: did incoming orders slow down? Just giving the strike and everything else wanted to get your perspectives on that. Thanks.

Speaker Change: Hey, good morning, guys Hey.

Speaker Change: Hey, good morning Gautam.

Speaker Change: Yeah.

Speaker Change: Tony I wanted to get your.

Speaker Change: Some color from you on what's going on with respect to the aerospace customers are.

Speaker Change: Are you seeing any destocking or deferral requests and if so kind of.

Speaker Change: And which product areas and.

Speaker Change: And then you mentioned backlogs remain at near record highs I'm, just curious like the incoming orders.

Speaker Change: Slow down just given the strike and everything.

Speaker Change: Everything else wanted to get your perspective on that thanks.

Tony Thene: Thanks, Gautam. Good questions. There is a couple in there, so let me kind of take them one by one. First, orders for the quarter. I don't want to get into specific figures, but I can't say the incoming orders were down sequentially, although they accelerated towards the end of the quarter. Obviously, we are coming off a record book in quarter or last quarter, so we are comparing to a very high point. I can also add that, obviously, what is going on in the market today, you have some of the aerospace customers taking a bit of a wait-and-see approach, especially those that are very heavily weighted towards Boeing.

Speaker Change: Thanks, Scott Good question, there's a couple in there so let me kind of take them.

Speaker Change: One by one.

Speaker Change: First orders for the quarter.

Speaker Change: I don't want to get into specific figures, but I can't say the incoming orders were down sequentially, although they accelerated towards the end of the quarter, obviously, we're coming off a record booking quarter last quarter. So it's a we're comparing to a very high.

Speaker Change: Very high point I can also add it.

Speaker Change: Obviously with what's going on in the market today, you have some of the aerospace customers.

Speaker Change: Taking a bit of a wait and see approach, especially those that are very heavily weighted.

Speaker Change: Towards Boeing, but that's been offset with strengthening orders in other end use markets specifically power generation.

Tony Thene: But that has been offset with strengthening orders in other in-use markets, specifically power generation. When you see the big demand from AI data centers, so that has been a positive offset. Overall, the backlog still is above $2 billion; lead times and key products still remain extended. Certainly, there is some uncertainty in the aerospace market today, but we have a very healthy order backlog, and the order of intakes coming in seems strong as well.

Speaker Change: Do you see the big demand.

Speaker Change: AI data centers. So that's been a positive offset I mean overall the backlog still is above $2 billion lead times on key products still remain extended so certainly.

Speaker Change: There is some uncertainty and uncertainty in the aerospace market today, but we have a very healthy order backlog in and the orders intake coming in teams.

Tony Thene: So that covers your backlog and your order intake question. I think the other question I have was really about how customers are reacting right now, and do we see any type of deferrals or, I think you said, inventory build in the system. And I can address that one by saying, you know, obviously, we don't have perfect visibility into the inventory throughout such an extensive supply chain, and certainly, you know, the supply chain doesn't always operate smoothly, as you well know, so there's always been this tendency of building it and then, and then debility. What I can say, though, with a high level of confidence is, first, as it relates to MRO demand, we continue to see emergency requests from customers for more material.

Speaker Change: Our strong as well so that covered your backlog and your order intake.

Speaker Change: Question I think the other question you had was really about how customers are reacting right now and do we see any type of differ.

Speaker Change: Deferrals or or I think you said inventory build in the system and I can address that one by saying you know.

Speaker Change: Obviously, we don't have perfect visibility into that inventory throughout such an extensive supply chain.

Speaker Change: And certainly you know the supply chain doesn't always operate smoothly.

Speaker Change: As you will note so theres always been this Timothy building it and then <unk>.

Speaker Change: What I can say, though with a high level of confidence is first as it relates to MRO demand. We continue to see emotionally requests from customers for more material. So that remains very strong as an offset to what you see maybe more so on the OEM side and I can give you. An example, it just happened a couple of days ago, we're on the phone with that particular OEM.

Tony Thene: So, that remains very strong, as an offset to what you see, maybe more so on the OEM side. And I can give you an example. Just after a couple of days ago, we're on the phone with a particular OEM discussing, you know, a likely line down for them, a production line being down for them, and how could we adjust our manufacturing plants to support that urgent need? So, our strong sense of demand in this area is that more is needed, and, you know, the majority of people are still behind. So, certainly, we've got to work through this period of uncertainty right now, but overall, I mean, for Carpenter Technology.

Speaker Change: Discussing.

Speaker Change: <unk> lined down for them a production line being down with them and how can we adjust our manufacturing plants to support that urgent need so our strong sense demand in this area is that more is needed and.

Speaker Change: People are still behind so certainly we've got to work through this.

Speaker Change: This period of uncertainty right now, but overall I mean for Carpenter technology, and again I will say, it's going to be different for everybody in the supply chain Gautam as you well know right I mean people that are much more concentrated with a specific customer are going to have a different outcome for us because of our breadth of services and capabilities. We believe we're able to up to <unk>.

Tony Thene: And again, I will say it's going to be different for everybody in the supply chain, got them, as you well know, right? I mean, people that are much more concentrated with a specific customer are going to have a different outcome for us because of our breadth of services and capabilities. We believe we're able to navigate that very strongly over the next, over the near term.

Speaker Change: Have a gate that very strongly over the next over the near term.

Tony Thene: And as a follow-up, do you feel like you guys are, you mentioned the backlogs are still excited, but do you feel like you're kind of caught up with underlying demands? Or because in prior quarters, you've mentioned, hey, if we could ship more, if we had more throughput, we would have customers willing to take more product. Is that cushion kind of evaporated, or is that still the case? No, I mean, that's a good question. Thanks, Brad. And again, it's customer-specific. I mean, if we have customers that have a very high percent of their portfolio dedicated to one specific customer, are they taking a more weight and see approach?

Speaker Change: And as a follow up do you feel like you guys are.

Speaker Change: You mentioned the backlogs are still extended but do you feel like youre kind of caught up with underlying demand.

Speaker Change: Because in prior quarters, you've mentioned, hey, if we could ship more.

We have more throughput, we would have customers willing to take more product.

Speaker Change: Is that Cushing kind of evaporated or is that still the case, so like where that's a good thing.

Speaker Change: Again, it's customer specific I mean, if we have customers that have a very high percent of their portfolio dedicated to one specific customer.

Speaker Change: Are they taking a more wait and see approach absolutely, but we have other customers can have referencing. The example, I gave you earlier.

Tony Thene: But we have other customers that can have referencing the example I gave you earlier that are still trying to catch up, that have exposure to other areas in aerospace supply chain, to other customers, and they're moving forward. That's really an advantage that corporate technology has with this large backlog. Obviously, we know exactly what's in that backlog. And we're able to pull those forward to inside our production schedule now, because not everybody is in the same situation. And certainly, we have people that are still trying to move forward in the supply chain, I mean, the production schedule.

Speaker Change: That are still trying to catch up that have exposure to other areas in the aerospace supply chain to other customers and Theyre moving forward.

Speaker Change: Really an advantage that carpenter technology has with this.

Speaker Change: Large backlog, obviously, we know exactly what's in that backlog and we're able to pull those forward to inside our production schedule now because.

Speaker Change: Not everybody is in the same situation and uncertainty we have people that are still trying to move forward in the supply chain I mean that production schedule and some of this uncertainty.

Gautam Khanna: And some of this uncertainty, you know, with Boeing, is giving them the opportunity to do so. Right, thanks, Tony. I appreciate it. Yeah, thank you, sir.

Speaker Change: You know with with Boeing is giving them the opportunity to do so.

Speaker Change: Great. Thanks, Tony I appreciate it.

Speaker Change: Thank you Sir.

Operator: Thank you.

Speaker Change: Thank you.

Joshua Sullivan: The next question comes from Josh Sullivan with the Benchmark Company.

Speaker Change: The next question comes from Josh Sullivan with the Benchmark Company. Please go ahead.

Joshua Sullivan: Please go ahead. Hey, good morning. Hey, good morning, Josh.

Hey, good morning.

Speaker Change: Hey, good morning, Josh.

Joshua Sullivan: I just wanted to touch on, you know, how do we think of seasonality at this point? You know, historically, there's a reason you're part Q1, this quarter. You know, you're up, what, 70%? You're a reader. But how do we think of that historical seasonality in some of the changes versus the current underlying market conditions? You know, particularly when we're looking at some of the metrics, you know, incremental margins or others.

Josh Sullivan: I just wanted to touch on you know how do we think of seasonality at this point you know historically Theres. A reason you report Q1 this quarter.

Josh Sullivan: You are up 70% year over year, but how do we think of that historical seasonality in some of the changes versus the current underlying market conditions, particularly when we're looking at some of the metrics incremental margins there are others.

Tony Thene: Well, it makes it tough, doesn't it, Josh? It makes it tough to model when you can't, you can't rely on some of those historical norms anymore. I mean, we are effectively in a sold-out situation, even with this uncertainty that we have in the market today that we hope is behind us in the near term. So really, when you think about quarter over quarter or sequential quarter, the only real difference between the quarters or the number of days that you operate, right? And that's why you've heard us talk about solid, proactive plan maintenance to keep this earnings engine moving.

Speaker Change: Well it makes it tough doesn't Josh it makes it tough to model. When you can't you can't rely on some of those historical norms anymore. I mean, we are effectively in a sold out situation even with this uncertainty that we have in the market today that we hope is behind us.

In the near term, so really when you think about quarter over quarter or sequential quarter. The only real difference between the quarters or the number of days that you operate right and that's why you've heard US talk about you know solid proactive planned maintenance to keep this.

Earnings engine moving so.

Tony Thene: So the bottom line is the timing and the duration of those plan-prevented maintenance events is really the determining factor between quarters. Obviously, another determining factor is we continue to increase our productivity; new contracts continue to roll in that pushes that higher. But we're in a period now where you talk to folks inside of our plants. We're trying to maximize the output and optimize the product mix. So I mean, every quarter is going to be, you know, a significant quarter. And just because you have maybe a slight decrease in a sequential quarter certainly is no reason for a red flag.

Speaker Change: The bottom line is the timing and the duration of those planned preventative maintenance event is really the determining factor between quarters. Obviously, another determining factor as we continue to increase our productivity new contracts continue to roll in.

Speaker Change: Pushes.

Speaker Change: That that higher but we're in a period now where you talked to our folks inside of our plants, we're trying to maximize the output and optimize the product mix. So I mean every quarter is going to be a significant quarter in just because you have may be a slight decrease.

Speaker Change: Sequential quarter, certainly is no reason for a red flag is just because.

Tony Thene: It's just because we had less operating days in that quarter. Are we took more plan maintenance in that quarter? And that's really the only distinction between them right now.

Speaker Change: We had we had less operating days in that quarter or we took more planned maintenance in that quarter and that's really the only distinction between them right now.

Tony Thene: It's a good place to be. And I just given, you know, some of the cross currents in the industry, and you know, there's still a need for long-term capacity growth. I mean, what are your thoughts or what are the conversations around increasing capacity at this point? Well, we're always looking at that. I mean, if you see, again, one of the reasons why we have been able to continue to drive earnings growth, right? There's three big areas, and one of those areas is productivity. So we believe, I mean, our belief is there's always a, there's always hidden capacity in our factory.

Speaker Change: Good place to be.

Speaker Change: Yep.

Speaker Change: And then just given some of the crosscurrents in the industry and there's still a need for long term capacity growth I mean, what are your thoughts or what are the conversations around increasing capacity at this point.

Speaker Change: Well, we're always looking at that I mean, if you see again one of the reasons why we have been able to continue to drive earnings growth right.

Speaker Change: There is three big areas and one of those areas as productivity. So we believe I mean, our belief is there is always there is always hidden capacity in our factory. There is always the ability for us to get better a Prime example, and I think Josh we've talked about in the past and obviously you've visited our facilities. So you are very aware if you.

Tony Thene: There's always ability for us to get better. A prime example. And I think just we've talked about it in the past, and obviously you visited our facilities. So you're very aware if you look at primary melting and if you can find ways to safely and at a high quality increase that daily production. That's a massive impact on profitability. I mean, it's a massive impact. So that is a, that is an area that our folks out on the shop floor are keenly focused on and making great strides. And that's what you've seen over the last three or four quarters.

Speaker Change: Look at primary mill team and if you can find ways to safely and at a high quality increase that daily production.

Speaker Change: That's a massive impact on profitability I mean, it's a massive impact so that is a that is a area that our folks out on the shop floor are keenly focused on and making great strides and thats, what <unk> seen over the last three or four quarters and they're very motivated to keep moving forward so that one.

Tony Thene: And, you know, they're very motivated to keep moving forward. So that ability to continue to increase capacity through productivity is a big deal, right? Now, second, secondly, is what can we do internally, organically, to increase capacity? And I think I've said this more than once externally. Is we're looking at those. It's our job to look at those as shareholders; you want us to look at ways that we can add capacity organically, spend some capital, get a higher rate of return project to push it to the next level. So we said this many, many times; any capacity like that we add is not going to upset the supply-demand situation we're in.

Speaker Change: To continue to increase capacity through productivity is a big deal right. Now second secondly is what can we do internally organically to.

Speaker Change: To increase our capacity and I think I've said this more than once externally is we're looking at adults. It's our job to look at those as shareholders you want us to look at ways that we can add capacity organically.

Speaker Change: Spend some capital get a higher rate of return projects to push out to the next level. We said this many many times any capacity like that we add is not going to upset the supply demand situation oriented I mean, we have demand far outstripping supply and that's not going to change by by what we may do.

Tony Thene: I mean, we have demand far outstripping supply, and that's not going to change by what we may do. But it certainly can increase our profitability, even as an accelerator to the next level. So we're looking at those as we speak to try to see what we can do in that areas. as well.

Speaker Change: But it's certainly can increase our profitability, even as an accelerator to the next level. So we're looking at those as we speak.

Speaker Change: To try to see what we can do can do in that area as well.

Joshua Sullivan: Hopefully, that answers your question. Yeah, absolutely.

Speaker Change: Hopefully that answered your question.

Tony Thene: I just think one last one just to that point on productivity. I mean, is there anything you can provide us on, you know, scrap rates, you know, or throughput, or how are we measuring that productivity externally? Well, all those areas certainly, I mean, as you know, in productivity and running a product through a plant, there's multiple areas that drive into that overall productivity number, certainly scrap rate. Or if you would say, you know, first pass recovery, do we have to bring that product back for any rework? That's massive. You know, so that is where we're really focused.

Speaker Change: Yeah, absolutely and I just sneak one last one just to that point on productivity. I mean is there anything you can provide us on scrap rates or throughput or how are you measuring that productivity externally.

Speaker Change: Well all of those areas certainly I mean as you know in productivity.

Speaker Change: Running a product through the plant there was multiple.

Speaker Change: Sure.

Speaker Change: Areas that drive into that overall productivity number certainly scrap rate or if you would say you know first past recovery do we have to bring that product back.

Speaker Change: For a for any rework that's massive.

Speaker Change: It is where we're really focused I mean, I could probably say our primary focus outside of getting those rates up in some of those primary work centers is reducing the amount of that rework. Every every pound every ton that you can reduce that doesn't go back and get.

Tony Thene: I mean, I could probably tell you our primary focus outside of getting those rates up and some of those primary work centers is reducing the amount of that rework. Every, every pound, every ton that you can reduce that doesn't go back and get, you know, a little extra grinding or whatever it might be. It's massive impact again on the product. On the productivity. So those are two areas that are really a forefront for us on a daily basis.

Speaker Change: A little extra grinding or whatever it might be.

Speaker Change: Is it it's massive impact again on the product on the productivity. So those are two areas that are a really a forefront for us on a daily basis.

Joshua Sullivan: Great. Thank you for the time.

Speaker Change: Great. Thank you for your time.

Operator: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you.

Scott Doisler: The next question is from Scott Doisler with Deutsche Bank.

Speaker Change: The next question is from Scott <unk> with Deutsche Bank. Please go ahead.

Scott Doisler: Please go ahead. Hey, good morning.

Speaker Change: Hey, good morning.

Tony Thene: Hey, Morris got Tony. Was the average price of what moved into the backlog for new orders, the shorter higher than the average price of what was already in the back? Clock at the start of the quarter. Yes, you're going to probably see that from now on going forward. There could be, I should say, yes, I mean, there could be some times where maybe that's a bit off, but I think certainly going forward, you're going to see that at least the trend line of that Scott going, going, going up. Yeah, okay. And if it didn't go up, it would just be because of the next probably of what would end.

Speaker Change: Hey, Good morning, Scott Tony was the average price of what moved into the backlog for new orders this quarter higher than the average price of what was already in the backlog at the start of the quarter.

Speaker Change: Yes, youre going to probably see that from now on going forward there could be I should say, yes, I mean, there could be some times, where maybe that's a bit of a bit off but I think certainly going forward youre going to see that at least the trend line of that Scott going going are going down yet and if it didn't go up it would just be because of the mix probably.

Tony Thene: Yeah, and that's why I had to take a little bit there to say the trend line. I mean, I guess there could be a, you know, situation where that mix of orders were very high in one area that could do that, but in totality going forward, you're going to see, you're going to see that rise with based on the as a contracts, you know, continue to renew.

Speaker Change: Correct, Yes, and that's why I hesitate a little bit there to say the trend line I mean, I guess, there could be a <unk>.

Speaker Change: Situation, where.

Speaker Change: That mix of orders were very high.

Speaker Change: In one area that could could do that but in totality going forward youre going to see you're going to see that rise with based on that as the contracts.

Speaker Change: <unk> continued to renew.

Tony Thene: Thank you. And then was the 35% growth in energy revenue this quarter? Was that entirely driven by I GT? And what are the non I GT pieces of revenue actually down? It's 100% driven by I GT. That's a great question. I mean, inside that market, as you know, we've got the I GT piece, and then the oil and gas. Oil and gas was down. In fact, a little bit sequentially and year over year. I'll give you a number that's really, that's really interesting the I GT piece of 200% year over here. So that's another area.

Speaker Change: Thank you and then was the 35% growth in energy revenue this quarter or is that entirely driven by IGT and what are the non IGT pieces of revenue actually down.

Speaker Change: It's a 100% driven by IGT. That's a great question I mean inside that market as you know we've got the IGT piece and then the oil and gas oil and gas was down in fact, a little bit sequentially and year over year I'll give you a number that's really that's really interesting the IGT IGT piece.

Speaker Change: Up 200% year over year.

Speaker Change: So that's another area.

Tony Thene: Yeah, when somebody says, "Wait a minute, how can carpenter technology produce these numbers?" You know, with all of this noise in the aerospace industry, and we say, well, listen, we have the ability. We have optionality. You know, we have a market here that we've been in for a long time that now is exploding, and we're able to take advantage of that. And we have these customers coming to us wanting to jump into the production line, willing to pay aerospace margins. And now, with some of the uncertainty in the aerospace chain, they supply chain, they have the ability to do that and looking to further extend that relationship.

Speaker Change: Yes, when somebody says wait a minute how can carpenter technology produced these numbers you know.

Speaker Change: With all of this noise in the aerospace industry, and we say well listen we have the ability we have optionality.

Speaker Change: Have a market here that we've been in for a long time that now is exploding and we're able to take advantage of that and we have these customers coming to us wanting to jump into the production line are willing to pay aerospace margins and now with some of the uncertainty in the aerospace chain.

Speaker Change: Supply chain, they have the ability to do that and looking to further extend that that relationship. So that's a big advantage for Carpenter technology that I think sometimes Scott maybe goes unnoticed and certainly not everybody enjoys it.

Tony Thene: So that they big advantage for carpenter technology that I think sometimes Scott maybe goes unnoticed and certainly not everybody enjoys. I think can you remind us where your alloys are found on typical industrial gas turbines and who you would be shipping to? Well, think about anybody without naming names. Think about anybody that's making the large IGT turbines. You know, I mean, you know, it's just it's a jet engine on land, right? So you have some of the same type of same type of products. I mean, now what we ship into that market is a little bit it's a different alloy than that goes into aerospace engines in this case, but it has similar production process, at least on the front end of the melting cycle. The finishing part is a little bit different.

Speaker Change: And then can you remind us where your alloys are found on typical industrial gas turbines until you would be shipping too.

Speaker Change: Well think about antibody without naming names thinking about anybody that's making the large IGT turbines.

Speaker Change: It's just it's a jet engine on land right. So you have some of the same type of.

Speaker Change: Same type of products I mean, now what we ship into that market is a little bit at a different alloy then it goes into aerospace engines.

Speaker Change: In this case, but it has similar production process at least on the front end of the melting cycle, finishing part is a little bit different so it's a very.

Tony Thene: So it's a very, a very attractive product for us.

Speaker Change: Very attractive product for us okay.

Tim Lane: Okay, I'll sneak one last one last question, and Tim, are you are the pushouts at Dynamite? Are those just aerospace, or is that medical, or is that another end market? Thanks. Yes, God, the pushouts were actually an additive, not in dynamite. And yeah, I think you can characterize those as more aerospace-type materials in our additive business. Okay, God, thanks.

Speaker Change: And I'll sneak one last one last question on Tim are you are the push outs of dynamite.

Speaker Change: Are those just aerospace or is that medical or is that another end market. Thanks.

Speaker Change: Yes, Scott the push outs are actually an additive not 90 minute.

Tim Lain: I think you can characterize those as more aerospace type materials in our additive business.

Speaker Change: Okay got it thanks.

Operator: Thank you. Again, ladies and gentlemen, if you have a question, please press star, then one.

Speaker Change: Thank you.

Speaker Change: Again, ladies and gentlemen, if you have a question. Please press Star then one.

Andre Madrid: We have the next question from Andre Madrid with BTIG. Please go ahead. Hey, everyone, thanks for taking my question. I guess looking forward, I see power generation; obviously, you know, we just talked about that.

Speaker Change: The next question from Andre <unk>.

Speaker Change: Please go ahead.

Speaker Change: Hey, everyone. Thanks for taking my question.

Speaker Change: Hi.

Speaker Change: I guess looking forward I think power generation, obviously, we just talked about that doing a lot to fill in the gap in the interim or the immediate term, but looking long term I mean, maybe beyond 25, you know are these markets enough to offset any potential weakness at arrow.

Tony Thene: Doing a lot to fill in the gap in the interim or the immediate term, but looking long term, I mean, maybe beyond 25. You know, are these markets enough to offset any potential weakness at Arrow? Well, under I think most of us don't believe that any weakness in Arrow is going to be long term, right? I mean, the macro demand is just too strong. We all believe that in this case here, Boeing will find a way to reach an agreement that's good for both sides. And I believe that's going to happen, right? So I don't have any fear that in the long term that you're going to have aerospace weakness.

Speaker Change: Yes.

Speaker Change: Well Andrea I think most of US don't believe that any weakness in aero was going to be long term right. I mean, the macro demand is just too strong. We all believe that in this case here Boeing will find a way to reach an agreement that is good for both sides and I believe thats going to happen right. So I don't have any fear that in the <unk>.

Long term, if youre going to have the aerospace weakness this is a near term.

Tony Thene: This is a near term, you know, phenomenon right now that we'll get that we'll get through. And when that happens, I mean, you just you go into a whole different, you know, level of, you know, demand outstripping supply. So you could see for going forward, you know, you're going to have hydrogen competing to get on to the assets, not being a replacement. And I think that's the mindset you need to have as we get through this kind of choppy period for aerospace right now. Got it, got it.

Speaker Change: Right now that will get that we will get through and when that happens I mean, you just you go into a whole different.

Speaker Change: The level of.

Speaker Change: Demand outstripping supply. So you could see for going forward, you know youre going to have power Gen competing to get on to the assets not being a replacement.

Speaker Change: That's the mindset you need to have.

Speaker Change: As we get through this kind of choppy peer for aerospace right now.

Speaker Change: Got it got it and then I guess, just I know you mentioned in the slides on the call you know growth beyond 25 definitely expected and obviously your comments just now kind of further confirm that that's the expectation, but I mean, how should we think about the cadence you know like obviously 26 is going to be a really tough comp coming off this year.

Tony Thene: And then I guess just I know you mentioned in the slides and on the call, you know, growth beyond 25 definitely expected, and obviously your comments just now kind of further confirmed that that's the expectation. But I mean, how should we think about the cadence, you know? Like, obviously 26 is going to be a really tough comp coming off this year. Could it be exacerbated if issues continue any further? I mean, I know you say they won't, but what if, you know. Well, I mean, we can play a lot of what ifs, right? And I can just tell you from my experience in the industry, talking to other major players in the industry.

Speaker Change: Could it be exacerbated if issues continue any further I mean, I know you say that they won't but what if you know.

Speaker Change: Well I mean, we can play a lot of what Ifs right and I can just tell you from my experience in the industry talking to other major players in the industry. This is going to get resolved right. It's too big not to get resolved. So this gets resolved and I'll push back when you're saying that 2026, our fiscal two.

Tony Thene: This is going to get resolved, right? It's too big not to get resolved. So this gets resolved. And I'll push back on you saying that 2026, our fiscal 2026, will be a tough comp to 2025. I mean. We see it as being bigger than 2025. We're running a wide range of different build rate scenarios. I mean, with what we're doing on the productivity side, product optimization, you know, the repricing of contracts. From our viewpoint, we see 2026 is another meaningful step up versus 2025. And I think that's what everybody's got to get, you know, a line with. I mean, this is not, this is not a doom and gloom situation.

Speaker Change: 2026.

Speaker Change: It will be a tough comp to 2025 I mean.

Speaker Change: We see it as being bigger than 2025, even when we're running a wide range of different.

Speaker Change: Build rates scenarios, I mean, with what we're doing on the productivity side product optimization.

Speaker Change: You know the repricing of contracts.

Speaker Change: From our viewpoint, we see 2026 is another meaningful step up versus 2025, and I think that's what everybody's kind of gotta get get.

Speaker Change: All are aligned with I mean this is not this is not a doom and gloom situation. This is a particular point in time, where we have some significant uncertainty certainly with a large player.

Tony Thene: This is a particular point in time where we have some significant uncertainty, certainly with a large player in the industry. There's no doubt. But company fight, Carpenter Technology and others, I think the strength and the attractiveness of people that want to own our stock is the fact that we can pivot. It's the fact that we have optionality. It's the fact that we have the ability to move and support MRO, to support other customers that are using this as an opportunity to grow and move up in line in the production line. So to me, this is a very, very exciting time.

Speaker Change: In the industry, there's no doubt, but companies like Carpenter technology, and others I think the strength and the attractiveness of people that want to own our stock is the fact that we can pivot. It's the fact that we have optionality. It's the fact that we have the ability to move and support MRO to support other customers that.

Speaker Change: Using this as an opportunity to grow and move up in <unk> and in line in the production line. So.

Speaker Change: To me. This is a very very exciting time, it's actually a very positive time.

Tony Thene: It's actually a very positive time that you can see somebody like Carpenter Technology can perform like they do in this type of environment.

Speaker Change: You can see somebody like Carpenter technology can perform like they do in this type of environment and when we get back to a more.

Tony Thene: And when we get back to, you know, more normal, so if you will, and then an aggressive ramp, I mean, sky's the limit. Got it, got it.

Speaker Change: <unk>, if you will and then a progressive ramp I mean sky's the limit.

Speaker Change: Got it got it and if I could just sneak one more in.

Tim Lane: And if I could just sneak one more in, you know, more additive charges this quarter. Is this just overflow from last quarter's facility closure? Yes. So it's just to be, to be really transparent, that was just a little bit of inventory. That was leftover that, you know, arguably we probably should have taken in the prior quarter and just got to the point said, that's not going to work and just go ahead and move on and get that behind us. So we're probably full of it. Yeah, but, you know, Andre, let's just say that there's, there's not, I mean, we're, this, it's not even material.

Speaker Change: More additive charges. This quarter is this just overflow from last quarter's facility closure.

Speaker Change: Yes, so just to be to be really transparent that was just a little bit of inventory that was left over that.

Speaker Change: Arguably we.

Speaker Change: Probably should have taken in the prior quarter and just got to the point to say that's not going to work and just go ahead and move on and get that behind us.

Speaker Change: So we're probably followed it.

But Andre let's just say that there is not to me.

Speaker Change: It's not even material, while youre talking about $1 million on our 100, <unk> hundred $35 or so.

Andre Madrid: Why are you talking about a million dollars on a hundred and 135 in SAO. So it's not; it's not. Yeah. No, definitely. No, just, just, you know, just housekeeping. But now I really appreciate the color and all the answers. I'll jump back in. Thanks. Yeah. Thank you.

Speaker Change: It's not it's not yeah, yeah, no definitely no just Jess just.

Speaker Change: Just housekeeping, but no I really appreciate the color on all the answers I'll jump back in thanks.

Speaker Change: Yes. Thank you.

Speaker Change: Thank you.

Philip Gibbs: The next question is from Phil Gibbs with Key Bank Capital Markets. Please go ahead. Hey, good morning. Good call so far. Thank you. Yes. Good morning.

Speaker Change: The next question is from Phil Gibbs with Keybanc capital markets. Please go ahead.

Phil Gibbs: Hey, good morning, good call so far thank you.

Speaker Change: Yes, good morning.

Philip Gibbs: Tony, on the SAO bridge for Q2, looks to be flat to a little bit up in terms of profitability. Is that more driven by volume or more driven by prices? Yes, I can't remember if this quarter typically is seasonally a little bit stronger or weaker relative to the one you just use up the preventative maintenance on an acute one. Yeah. Thanks, Phil. You know, this, this is really just the same answer that that Josh asked earlier about quarter over quarter, right? I mean, listen, you're going to take preventive maintenance, some type of plain plan maintenance activity in every quarter.

Phil Gibbs: Tony on the <unk> bridge for Q2 looks to be flat to a little bit up in terms of profitability is that more driven.

Phil Gibbs: By volume or more driven by price mix, because I can't remember if this quarter typically is seasonally a little bit stronger or weaker relative to the one you. Just you took the preventative maintenance on in Q1.

Speaker Change: Yeah. Thanks, Phil.

Speaker Change: This is really it's the same answer that Josh asked earlier about quarter over quarter, right, I mean listen you're going to take preventative maintenance some type of plane planned maintenance activity in every quarter, if youre not youre not running your facility or the right way you are going to be doing planned maintenance every quarter.

Tony Thene: If you're not, you're not running your facility the right way; you're going to be doing plan maintenance every quarter. Are people that are visited our plant realize how our plant, how big they are. So you're doing plan maintenance every, every quarter. So if you look at Q1 to Q2, relatively, I think about the same amount of production days, comparing the two quarters together. Certainly, you've got two big holidays in there. It's the end of the calendar year for some other people, some, most other customers. So that's a little bit of noise. So I think the fact that we can guide to, you know, higher in the second quarter, even with those types of issues, is pretty, not pretty.

Speaker Change: Are people that have visited our plant realized how our plants how big they are so youre doing planned maintenance every every quarter. So if you look at Q1 to Q2.

Speaker Change: Relatively I think about the same amount of production days.

Speaker Change: They are comparing the two quarters together certainly you've got two big holidays. In there is the end of the calendar year for some other people. Some most of the customers. So that's a little bit of noise. So I think the fact that we can guide to you.

Speaker Change: Higher in the second quarter, even with those types of issues is pretty not pretty at a very strong. It's a very strong quarter. We're operating with some really big numbers, Phil <unk> been around for a while and knowing what they were even in 2018 2019, when we thought that.

Tony Thene: It's a very strong, it's a very strong quarter. We're operating with some really big numbers. Phil, you've been around for a while and knowing what they were. Even in 2018, 2019 when we thought that was a great aerospace time. I mean, more two and three times higher.

Speaker Change: That was a great aerospace time, I mean, we're two and three times higher than that right now.

Tony Thene: Thank you so much, and then on your full, your guidance toward the higher end, and you made some comments on there's, there's opportunities perhaps to exceed that guidance. Is that in your mind more volume or more volume, obviously excluding seasonality, which is stronger in the back half or more more pricing dependent? Well, all three of them, right? I mean, anytime we talk about how we're going to move forward, it's going to be all three of those major legs to the stool, right? It's going to be what happens from contract pricing, product mix optimization, and certainly productivity. So, we're looking at that all the time, and certainly, you know, we're very methodical with our guidance updates, and then we achieve them. So, we've earned that reputation, and you know, we took a step here by moving to the high end of the guidance. And as we speak, the folks out in the plant are, you know, working on how they can move past that and, you know, stay tuned as we go forth, our next couple calls, and seeing updates with that.

Speaker Change: Thank you so much and then on your full year guidance towards the higher end.

Speaker Change: And you made some comments on Theres theres opportunities, perhaps to exceed that guidance is that in your mind or.

Speaker Change: Home or more.

Speaker Change: Volume, obviously, excluding seasonality, which is stronger in the back half or more more pricing dependent.

While all three of them right I mean anytime we talk about how we're going to move forward. It is going to be all three of those major legs to the stool right, it's going to be what happens from Conor.

Speaker Change: Contract pricing.

Speaker Change: Mix optimization, and certainly productivity. So we're looking at that that all the time I mean certainly.

Speaker Change: We're very methodical with our guidance update.

And then we achieve them so we've earned that reputation and.

Speaker Change: We took a step here by moving to the high end of the guidance in <unk>.

Speaker Change: As we speak the folks out in the plant or are working on how they can move past that and stay tuned as we have as we go forward. The next couple of calls and seen updates of that.

Tony Thene: The last one for me this acceleration common that you made toward the tail end of the quarter was that more so on the MRO side essentially because you said that some some expedites you know gam and some emergency work there but where was the where would you have seen the acceleration I guess relative to early in the quarter thank you. Yeah, I would just I would just say in general in the aerospace side, whether it's for MRO or OEM, you know, depending on the customer, but the acceleration towards the end of the quarter was primarily on the aerospace side. Although, I mean, other areas as well, certainly power generation and others, but primarily aerospace was where we saw that pick back up towards the end of the quarter.

Speaker Change: And then last one for me and this acceleration comment that you made towards the tail end of the quarter was that more so.

Speaker Change: Is that more so on the MRO side, essentially because as you said that some some expedites.

Speaker Change: Gum and some emergency work, there, but where was the.

Speaker Change: Where would you have seen the acceleration I guess relative to early in the quarter. Thank you Yeah, I would say I would just say in general in the aerospace side, whether it's for MRO, our OEM, depending on the customer, but the acceleration towards the end of the quarter was primarily on the aerospace side, although I mean, other other areas as well certainly power generation and others, but prime.

Speaker Change: Merely aerospace was where we saw that pick back up towards the end of the quarter.

Philip Gibbs: Thank you absolutely thanks yep thank you sir.

Speaker Change: Thank goodness.

Speaker Change: Absolutely. Thanks, yes.

Speaker Change: Thank you Sir.

Tony Thene: Thank you. We have a follow-up question from Scott Doisler with Deutsche Bank. Please go ahead. Thanks, yeah, Tony, do you see much demand in the space market for allways from companies like SpaceX? And if you do, as has that demand reached a point where it's at all material yet. Yes, I mean specifically with the customer that you talked about. You know, I don't want to go too far. I mean, that's an additive customer, right? So, there are major players, so that's some of the choppiness that you see in orders. So, yes, strong.

Speaker Change: Thank you.

Speaker Change: We have a follow up question from Scott.

With Deutsche Bank. Please go ahead.

Scott Tony: Thanks, Yeah, Tony do you see much demand in the space market for alloys from companies like Spacex and if you do is that demand reached a point, where it's at all material yet.

Speaker Change: Yes, I mean, specifically with the customer that you you talked about.

Scott Tony: Uh huh.

Speaker Change: I don't want to go too far I mean, that's an additive customer right. So.

Speaker Change: They are a major player. So that's some of the choppiness that you're seeing in order so yes strong.

Tony Thene: Yes, still small, but it's not consistent, so for a very small business like additive, that's what you see: the swings in their profitability from quarter to quarter depending on how those orders come in. Right? I mean, if you look at the additive market, not to spend too much time on additive since it really doesn't drive the. The bus but you have a couple big players in that market and then you have a very long tail of smaller players, so if you have some movement in those big ones, it can really, it can really you know move move the profitability in a quarter to quarter.

Speaker Change: Yes, still still small, but it's not consistent so far very small business like additive. That's what you see the swings in their profitability from quarter to quarter, depending on how those orders come in right. I mean, if you look at the additive market not to spend too much time on additives since it really doesn't drive the bus.

Speaker Change: But you have a couple of big players in that market and then you have a very long tail of smaller players. So if you have some some movement in those big ones. It can really it can really.

Speaker Change: No.

Speaker Change: Our move to profitability in a quarter to quarter basis.

Scott Doisler: basis. Okay, thanks.

Speaker Change: Okay. Thanks, Thats, all I had I appreciate it thank you.

Operator: That's all I had for Shira. Yeah, yeah. Thank you.

Speaker Change: Thank you.

John Huyette: This concludes our question and answer session.

Speaker Change: This concludes our question and answer session.

John Huyette: I would like to turn the conference back over to Mr. John Huyette for any closing remarks. Over to you. Thank you, operator, and thank you everyone for joining us today for our fiscal year 2025 first quarter conference call.

Speaker Change: I would like to turn the conference back over to Mr. John Hewitt for any closing remarks.

Speaker Change: To you.

John Hewitt: Thank you operator, and thank you everyone for joining us today for our fiscal year 2025 first quarter conference call have a great rest of your day.

Operator: Have a great rest of your day. Thank you.

John Hewitt: Thank you.

Operator: The conference has now concluded.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: Thank you for attending today's presentation.

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