Q1 2025 ATI Inc Earnings Call

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Operator: Hello, and welcome everyone to the ATI First Quarter 2025 Earnings Call. My name is Becky and I'll be your operator today. During the presentation, you can register a question by pressing star followed by 1 on your keypad.

Becky: Hello, and welcome everyone to be a T. I first quarter 2025 earnings call. My name is Becky and OBO operated today during.

Becky: During the presentation that you can register your question by pressing Star Philip I want no key part.

Operator: I will now hand over to your host.

Becky: I'll now hand over to your hoist.

David Weston: David Weston, Vice President of Investor Relations. To begin, please go ahead. Thank you.

Speaker Change: David Westin Vice President of Investor Relations to begin. Please go ahead.

David Weston: Good morning, and welcome to ATI's first quarter 2025 earnings call. Today's discussion is being webcast online at atimaterials.com. Participating in today's call to share key points from our first quarter results are Kim Fields, President and CEO, and Don Newman, Executive Vice President and CFO.

Speaker Change: Good morning, and welcome to Ati's first quarter 2025 earnings call.

Speaker Change: Today's discussion is being webcast online at ATI materials Dot com.

Speaker Change: <unk> in today's call to share key points from our first quarter results are Kim fields, President and CEO.

Don Newman: Don Newman Executive Vice President and CFO.

David Weston: Before starting our prepared remarks, I would like to draw your attention to the supplemental presentation that accompanies this call. Those slides provide additional color and details on our results and outlook, and can also be found on our website at atimaterials.com.

Don Newman: Before starting our prepared remarks, I would like to draw your attention to the supplemental presentation that accompanies this call.

Don Newman: Those slides provide additional color and details on our results and outlook. It can also be found on our website at ATI materials Dot com.

David Weston: After our prepared remarks, we'll open the line for questions.

Don Newman: After our prepared remarks, we'll open the line for your questions.

David Weston: As a reminder, all forward-looking statements are subject to various assumptions and caveats. These are noted in the earnings release and in the accompanying presentation.

Don Newman: As a reminder, all forward looking statements are subject to various assumptions and caveats.

Kim Fields: These are noted in the earnings release and in the accompanying presentation now I will turn the call over to Kim.

Kimberly Fields: Now, I'll turn the call over to. Thanks, Dave. Good morning, everyone, and thank you for joining us. Q1 was an excellent start to 2025 for ATI, continuing the strong momentum we built in the fourth quarter. Our focus is firmly on execution and our results reflect that. Demand remains strong in our core aerospace and defense market. Customers continue to turn to ATI for our differentiated products, recognizing us as a critical supplier in their value chain.

Kim Fields: Thanks, Dave Good morning, everyone and thank you for joining us.

Kim Fields: Q1 was an excellent start to 2025 for hei continuing the strong momentum we built in the fourth quarter.

Kim Fields: Our focus is firmly on execution and our results reflect that.

Kim Fields: Demand remains strong and our core aerospace and defense market.

Kim Fields: Customers continue to turn to ATI for our differentiated products recognizing us as a critical supplier in their value chain.

Kimberly Fields: Our ability to deliver high quality consistently at scale has led to expansion of long-term contracts and increased share positions across key platforms. Before we discuss our growth drivers, let's look at the Q1 results we announced this morning. Revenues grew 10% year over year, exceeding $1.1 billion for the quarter. Adjusted EBITDA reached $195 million, surpassing the top end of our guidance range by $15 million. Adjusted earnings per share came in at $0.72, again, beating the top of our guidance range of $0.55 to $0.61.

Kim Fields: Our ability to deliver high quality consistently at scale as lunch expansion of long term contracts and increased share positions across key platforms.

Kim Fields: Before we discuss our growth drivers, let's look at the Q1 results we announced this morning.

Kim Fields: Revenues grew 10% year over year exceeding $1 $1 billion for the quarter.

Kim Fields: Adjusted EBITDA reached $195 million.

Kim Fields: Surpassing the top end of our guidance range by $15 million.

Kim Fields: Adjusted earnings per share came in at 72 cents again, beating the top of our guidance range of 55 to 61.

Kimberly Fields: And last week, we reported that 1000 USW represented employees in our AANF segment ratified a six year labor agreement. This is a good outcome for ATI and our team. It brings long-term labor stability to a critical part of our operations and sets the foundation for continued success.

Kim Fields: And last week, we reported that 1000 USW represented employees in our E&S segment ratified a six year labor agreement.

Kim Fields: This is a good outcome for hei and our team.

Kim Fields: It brings long term labor stability to a critical part of our operations and set the foundation for continued success.

Kimberly Fields: Don will walk through the financials in greater detail shortly, but the takeaway is clear. ATI started the year strong. We're confident in our position, particularly given the sustained strength in A&E demand.

Speaker Change: Don will walk through the financials in greater detail shortly but the takeaway is clear.

Kim Fields: <unk> started the year strong.

Kim Fields: We're confident in our position, particularly given the sustained strength in A&D demand at the same time, we're staying prudent amid the recent trade related uncertainty affecting the industrial markets.

Kimberly Fields: At the same time, we're staying prudent amid the recent trade-related uncertainty affecting the industrial market. As such, we're maintaining our full year 2025 guidance for adjusted EBITDA and free cash flow as we monitor how the environment evolves.

Kim Fields: As such we're maintaining our full year 2025 guidance for adjusted EBITDA and free cash flow as we monitor how the environment evolves.

Kimberly Fields: Our capital deployment reflects that confidence. We continue to prioritize returning value to the shareholders. In Q1, we repurchased shares worth $70 million in line with our plan. Looking ahead, we intend to repurchase as much as $250 million in the second quarter, effectively pulling forward our full year buyback program.

Kim Fields: Our capital deployment reflects that confidence we continue to prioritize returning value to the shareholders. In Q1, we repurchased shares were $70 million in line with our plan.

Kim Fields: Looking ahead, we intend to repurchase as much as $250 million in the second quarter effectively pulling forward our full year buyback program.

Kimberly Fields: We see clear value in our current share price and recognize the opportunity to cap.

Kim Fields: We see clear value in our current share price and recognize the opportunity to capture it.

Kimberly Fields: Now turning to the evolving trade and tariff environment, we recognize this is top of mind for many. While the headlines continue to shift, we remain confident in our view that ATI is uniquely positioned to navigate the evolving tariff and trade landscape. Here's why. One, ATI is a US-based producer with the majority of our production footprint located domestically, even as we serve global aerospace and defense programs. Two, we have a flexible, diversified global supply chain. While certain raw materials must be imported due to the lack of domestic availability, our sourcing strategy allows us to adapt our supply chain to maintain quality and manage cost effectively.

Kim Fields: Now turning to the evolving trade and tariff environment. We recognize this is top of mind for many.

Kim Fields: While the headlines continue to shift we remain confident in our view that ATI is uniquely positioned to navigate the evolving tariff and trade landscape.

Here's why.

Kim Fields: One ATI is a U S based producer with the majority of our production footprint located domestically, even as we serve global aerospace and defense programs.

Kim Fields: Two we have a flexible diversified global supply chain.

Kim Fields: While certain raw materials must be imported due to the lack of domestic availability our sourcing strategy allows us to adapt our supply chain to maintain quality and manage cost effectively.

Kimberly Fields: And three, our customer contracts are built to handle volatility. Many include built-in mechanisms like pass-throughs and surcharges to help offset inflation, raw material swings, and tariff costs. I'm pleased to report that to date, these tools are working as intended. Preserving income and limiting financial exposure.

Kim Fields: And three our customer contracts are built to handle volatility. Many include built in mechanisms like pass throughs and surcharges to help offset inflation raw material swings and tariff costs.

Kim Fields: I am pleased to report that to date. These tools are working as intended.

Kim Fields: Preserving income and limiting financial exposure.

Kimberly Fields: We're actively deploying all available levers, including duty drawback programs, defense-related exemptions, and ongoing operational efficiencies to mitigate remaining impacts.

Kim Fields: We're actively deploying all available levers, including duty drawback programs defense related exemptions and ongoing operational efficiencies to mitigate remaining impacts.

Kimberly Fields: Let's talk about the tariffs announced in 2025 and currently in effect, including those paused. These represent approximately $50 million in annual cost exposure prior to offset. Thanks to these mitigation offsets, we anticipate minimal impact on our full-year earnings, allowing us to reaffirm our current guidance.

Kim Fields: Let's talk about the tariffs announced in 2025 and currently in effect, including those Pos.

Kim Fields: These represent approximately $50 million in annual cost exposure prior to offset.

Kim Fields: Thanks to these mitigation offsets, we anticipate minimal impact on our full year earnings, allowing us to reaffirm our current guidance.

Kimberly Fields: From a demand standpoint, tariffs are having little effect on the aerospace and defense markets. Both airframers have recently reaffirmed robust backlogs and ATI continues to see strong engine material orders with no cancellations or back push out. On the industrial side, which represents approximately 20% of our total business, some customers are taking a wait-and-see posture.

Kim Fields: From a demand standpoint tariffs are having little effect on the aerospace and defense markets. Both air Framers have recently reaffirmed robust backlog and ATI continues to see strong engine material orders with no cancellations or push outs.

Kim Fields: On the industrial side, which represents approximately 20% of our total business. Some customers are taking a wait and see posture.

Kimberly Fields: That impact, if any, would be confined to our AANF segment.

Kim Fields: That impact if any would be confined to our <unk> segment.

Kimberly Fields: To illustrate how ATI creates value, particularly in A&E, consider a recent example. In Q1, we renewed a profitable sole source contract for an advanced alloy co-developed with a major engine OEM. This material is critical in MRO applications due to its unique performance characteristics. This agreement extends well into the next decade and reinforces ATI's role as a trusted partner in delivering high-performance materials for the most demanding applications.

Kim Fields: To illustrate how hei creates value, particularly in A&D consider a recent example in Q1, we renewed a profitable sole source contract for an advanced alloy co developed with a major engine Oems this materials critical and MRO applications due to its unique performance characteristics.

Kim Fields: This agreement extends well into the next decade, and reinforces <unk> role as a trusted partner in delivering high performance materials for the most demanding applications.

Kimberly Fields: Commercial jet engine remains our most strategic and market accounting for 37% of total Q1 revenue. Sales in this area grew 35% year-over-year. Our alloys for the rotating components in the hot section of the current and coming generation engines are essential. We're the sole source supplier for five of the seven alloys found in the hot section, secured under long term contracts that extend well into the 2030s and even 2040. Our relationships span all three major commercial engine manufacturers. As engine production ramps up, ATI is growing with it. We're proud to earn contract extensions and increased share by consistently delivering innovation, quality, and scale.

Kim Fields: Commercial jet engine remains our most strategic end market accounting for 37% of total Q1 revenue.

Kim Fields: Sales in this area grew 35% year over year.

Kim Fields: Our alloys for the rotating components in the hot section of the current and coming generation engines are essential.

Kim Fields: We are the sole source supplier for five of the seven alloy found in the Hot section secured under long term contracts that extend well into the 20 <unk> and even 2040.

Kim Fields: Our relationship span all three major commercial engine manufacturers as engine production ramps up ATI is growing with it we're proud to earn contract extensions and increase share by consistently delivering innovation quality and scale.

Kimberly Fields: Beyond engines, our airframe business is also growing, representing 18% of Q1 revenue. Our titanium capabilities are in high demand. We've just recently finalized a major new contract with the leading airframe OEM, establishing ATI as one of their top suppliers for flat products. In defense, our momentum continues to build. We are well positioned across a variety of funded platforms. We've recently qualified a new material for a long-term classified program and our R&D pipeline has strong backing from the U.S. government and our allies. Our defense sales grew 11% year-over-year in the first quarter.

Kim Fields: Beyond engines, our airframe business is also growing representing 18% of Q1 revenue.

Kim Fields: Our titanium capabilities are in high demand. We've just recently finalized a major new contract with a leading airframe OEM, establishing ATI is one of their top suppliers for flat products.

Kim Fields: In defense our momentum continues to build we are well positioned across a variety of funded platforms. We've recently qualified a new material for a long term classified program and our R&D pipeline has strong backing from the U S government and our allies are defense sales grew 11% year over year in the first quarter.

Kimberly Fields: The bottom line, our strategy is working. We're increasing yields, strengthening reliability, expanding capabilities, and unlocking capacity through de-bottleneck. The investments we have made in press, forging, and downstream assets for testing and finishing are translating into higher output, improved reliability, and enhanced customer value.

Kim Fields: The bottom line our strategy is working we're increasing yields strengthen your reliability expanding capabilities and unlocking capacity through debottlenecking. The investments you've made in press forging and downstream assets for testing and finishing are translating into higher output improve reliability.

Kim Fields: Ability and enhance customer value with.

Kimberly Fields: Strong order rates and a robust backlog. The message from our customers is clear. They need our products and ATI is delivering.

Kim Fields: With strong order rates and a robust backlog the message from our customers is clear they need our products and ATI is delivering.

Kimberly Fields: Since 2020, we've been executing our growth strategy to focus on high-value A&D applications. This transformation is evident in our results. In Q1, A&D represented 66% of our total revenue.

Kim Fields: Since 2020, we've been executing our growth strategy to focus on high value A&D applications. This transformation is evident in our results in Q1, A&D represented 66% of our total revenue.

Kimberly Fields: We are pleased to announce that effective today, ATI's Global Industry Classification Standard, or GICS code, has been reclassified to aerospace and defense. This reclassification validates our strategic evolution and provides greater visibility of ATI as a world-class A&E supplier. All of this is made possible by our ATI team who continue to deliver high quality products safely on schedule and at scale. It's the result of strategic focus, operational discipline, and execution. Our customers are gaining momentum and with them so too is ATI.

Kim Fields: We are pleased to announce that effective today hei as global industry classification standard our gigs code has been reclassified to aerospace and defense.

Kim Fields: This reclassification validates our strategic evolution and provides greater visibility of ATI as a world class A&D supplier.

Kim Fields: All of this is made possible by our ATI team, who continue to deliver high quality products safely on schedule and at scale.

Kim Fields: It's the result of strategic focus operational discipline and execution.

Kim Fields: Our customers are gaining momentum and with them. So too is ATI with that I will turn it over to Don.

Donald Newman: With that I will turn it over to Don. Thanks, Kim. I'll provide additional insights into our first quarter performance and then look ahead to the Q2 and full year outlook. We finished the quarter well ahead of expectations from a revenue and profit standpoint. Revenue in the first quarter was approximately $1.14 billion, an increase of 10% year over year. You may recall that we expected a modest sequential decline in sales and earnings this quarter, driven by some accelerations in seasonality as we completed Q4. Our guidance also considered anticipated slow recovery for commercial aero customers, particularly and Expected Seasonal Timing and Defense.

Don Newman: Thanks Kim.

Don Newman: To provide additional insights into our first quarter performance and then look ahead to the Q2 and full year outlook.

Don Newman: We finished the quarter well ahead of expectations from a revenue and profit standpoint.

Don Newman: Revenue in the first quarter was approximately 114 billion, an increase of 10% year over year.

Don Newman: You may recall that we expected a modest sequential decline in sales and earnings this quarter driven by some accelerations in seasonality as we completed Q4.

Don Newman: Our guidance also considered anticipated slow recovery for commercial aero customers, particularly airframe.

Don Newman: And expected seasonal timing in defense.

Donald Newman: Even with all of that, our adjusted EBITDA at $195 million was $20 million higher than the midpoint of our Q1 guidance. That's 11% favorable. Strong operational performance in both segments and robust customer demand drove results. Our consolidated adjusted EBITDA margins were 17%, reflecting HPMC margins of 22.4% and AANS margins of nearly 15%. In HPMC, margin increases were driven by the building strength in our A&E core, which is 92% of Q1 segment revenue. HPMC margins were up 240 basis points sequentially and 400 basis points year over year. Even more than we expected, positive pricing and demand powered the step up in March.

Don Newman: Even with all of that our adjusted EBITDA $195 million was $2 million higher than the midpoint of our Q1 guidance.

Don Newman: That's 11% favorable.

Don Newman: Strong operational performance in both segments and robust customer demand drove results.

Don Newman: Our consolidated adjusted EBITDA margins were 17%.

Don Newman: Reflecting each PMC margins of 22, 4% and E&S margins of nearly 15%.

Don Newman: And HP EMC margin increases were driven by the building strength in our A&D core which is 92% of Q1 segment revenues.

Don Newman: <unk> margins were up 240 basis points sequentially, and 400 basis points year over year.

Don Newman: Even more than we expected positive pricing and demand powered the step up in margins.

Donald Newman: solid, reliable production from our key melt and forging assets, support enhanced sales, and improve absorption. We expect greater gains in the coming quarter. In AANS, we expected a sequential step back in first quarter margins due to the timing of above the line tax reserve releases and 45x manufacturing credits in Q4 2024. As anticipated, margins were down 140 basis points sequentially. year over year, ANS margins were up 90%. Segment results this quarter exceeded our expectations. We realize timing benefits in specialty role products as our team worked with customers to mitigate risks and accelerate deliveries during our ongoing labor negotiations and the dynamic tariff environment.

Don Newman: Solid reliable production from our key Melton forging assets support and enhanced sales and improve absorption.

Don Newman: We expect greater gains in the coming quarters.

Don Newman: And thus we expected a sequential step back in first quarter margins due to the timing of above the line tax reserve releases and 45 ex manufacturing credits in Q4 2024.

Don Newman: As anticipated margins were down 140 basis points sequentially.

Don Newman: Year over year.

Don Newman: Margins were up 90 basis points.

Don Newman: Segment results this quarter exceeded our expectations.

Don Newman: We realized timing benefits in specialty rolled products as our team worked with customers to mitigate risks and accelerate deliveries during our ongoing labor negotiations and the dynamic tariff environment.

Donald Newman: The SRP business also generated substantial gains in conventional energy centered on a prioritized project delivery.

Don Newman: <unk> business also generated substantial gains in conventional energy centered on a prioritized project delivery.

Donald Newman: Congratulations to our team for delivering under a tight schedule, supporting our customers when they needed us most. Turning to cash flow, Q1 pre-cash flow usage was $143 million. That was a lower cash burn than Q1 2024 and modestly favorable to our 2025 S&P. Better-than-expected performance was supported by improvements in cash used in operations and lower capital. We expect to be cash flow positive for each remaining quarter of the year as we drive a tightened cycle for working capital and profitable growth.

Don Newman: Congratulations to our team for delivering under a tight schedule supporting our customers when they needed us most.

Don Newman: Turning to cash flow Q1 free cash flow usage was $143 million.

Don Newman: That was a lower cash burn in Q1, 2024 and modestly favorable to our 2025 estimates.

Don Newman: Better than expected performance was supported by improvements in cash used in operations and lower Capex.

Don Newman: We expect to be cash flow positive for each remaining quarter of the year as we drive our tightened cycle for working capital and profitable growth.

Donald Newman: With that, let's turn to our 2025 As we look ahead, many of our core assumptions and our outlook remain consistent. We are encouraged by the progress we see in ANDE. At the same time, we appreciate that some customers still anticipate inventory drawdowns next quarter, largely tied to airframes. That keeps our first half outlook balanced. This timing is compounded by near-term uncertainty on the transactional side of the business as the world economy adjusts to the new norm of increased tariff. With those conditions in place, we expect Q2 to look like the first quarter, with more ramp and recovery expected later this year.

With that let's turn to our 2025 outlook.

Don Newman: As we look ahead many of our core assumptions in our outlook remains consistent.

Don Newman: We are encouraged by the progress we see in A&D.

Don Newman: At the same time, we appreciate that some customers still anticipated inventory drawdowns next quarter largely tied to airframe sales.

Don Newman: That keeps our first half outlook balanced.

Don Newman: This timing is compounded by near term uncertainty on the transactional side of the business as the world economy adjusts to the new norm of increased tariffs.

Don Newman: With those conditions in place, we expect Q2 to look like the first quarter with more ramp and recovery expected later this year.

Donald Newman: For the second quarter, we are setting our guidance range for Adjusted EBITDA at $195 to $205 million. That equates to an adjusted earnings per share range of 67 to 73 cents per share. For the full year, we strive to balance positive signals of A&E demand and growth. conservatism tied to non A&D markets such as industrial We are affirming our full-year Adjusted EBITDA guide of $800 to $840 million. We are increasing our full year EPS guidance to a range of $2.87 to $3.09. This higher view of 2025 EPS is thanks to the benefit of the accelerated share repurchases Kim highlighted.

Don Newman: For the second quarter, we're setting our guidance range for adjusted EBITDA at $195 million to $205 million.

Don Newman: That equates to an adjusted earnings per share range of 67 to 73 per share.

Don Newman: For the full year, we strive to balance positive signals of A&D demand and growth.

Don Newman: With conservatism tied to non A&D markets such as industrials.

Don Newman: We are affirming our full year adjusted EBITDA guide of $800 million to $840 million.

Don Newman: We are increasing our full year EPS guidance to a range of $2 87 to.

Don Newman: To $3 nine per share.

Speaker Change: This higher view of 2025 bps, thanks to the benefit of the accelerated share repurchases Kim highlighted.

Donald Newman: as we plan to reduce total share count ahead of our previous schedule. Let me add some color about how we are thinking about the top line, mix, and adjusted EBITDA margin so that you can better model our As we shared, A&E continues to show strength, especially in jet engine and defense. Based upon customer demand signals and Q1 performance, we expect full year 2025 jet engine sales to grow between 15 and 20% over 2024 levels. Defense, which grew 11% in Q1, also remains robust. We expect to maintain a growth rate in the upper single digit percentages for full year 2025.

Speaker Change: As we plan to reduce total share count ahead of our previous schedule.

Speaker Change: Let me add some color about how we are thinking about the top line mix and adjusted EBITDA margin. So that you can better model our outlook.

Speaker Change: As we shared A&D continues to show strength, especially in jet engine in defense.

Speaker Change: Based upon customer demand signals and Q1 performance, we expect full year 2025 jet engine sales to grow between 15 and 20% over 2024 levels.

Speaker Change: Defense, which grew 11% in Q1 also remains robust.

Speaker Change: We expect to maintain a growth rate in the upper single digit percentages for full year 2025.

Donald Newman: Overall, we anticipate AMD sales will grow 12 to 14% in 2025, as momentum and jet engine and defense combines with modest airframe Degrowth is expected to more than offset lower year over year sales in industrials and other areas impacted by lower U.S. demand and China's slowed economy. Our EBITDA margins are expected to continue to improve during the year. We anticipate full year consolidated 2025 adjusted EBITDA margins to be in the range of 18%. Consolidated Q2 margins should be similar or modestly better than our Q1 performance of 17%. Margins should expand in the second half of the year as A&E sales continue to grow.

Speaker Change: Overall, we anticipate <unk> sales will grow 12% to 14% in 2025 as momentum in jet engine and defense combined with modest airframe growth.

Speaker Change: <unk> growth is expected to more than offset lower year over year sales and industrials and other areas impacted by lower U S demand.

Speaker Change: And China's slowed economy.

Speaker Change: Our EBITDA margins are expected to continue to improve during the year.

Speaker Change: We anticipate full year consolidated 2025, adjusted EBITDA margins to be in the range of 18%.

Speaker Change: Yeah.

Speaker Change: Consolidated Q2 margins should be similar or modestly better than our Q1 performance of 17%.

Speaker Change: Margins should expand in the second half of the year as A&D sales continue to grow.

Donald Newman: At the segment level, in the second half of the year, we anticipate HPMC margins to exceed 24% and ANS margins to be in the range of 15 to 16%. These margin expectations exclude potential impact of tariff pass.

Speaker Change: At the segment level in the second half of the year, we anticipate <unk> margins to exceed 24% and E&S margins to be in the range of 15% to 16%.

Speaker Change: These margin expectations exclude potential impact of tariff pass throughs.

Donald Newman: Stock prices for many A&E businesses have been impacted by recent volatility. Yet our conviction around the opportunity for ATI value creation has never been stronger. Compare the contractually covered profitable growth in our forecast with our stock's current valuation model. We are compelled to invest in ourselves, returning even more cash to shareholders this coming quarter than previously planned. At this stock price, how can we not? In the second quarter, we expect to buy back as much as $250 million in shares, moving notably ahead of our previously planned time. The strength of our balance sheet and our confidence in current liquidity and favorable cash generation fuel this acceleration.

Speaker Change: Stock prices for many A&D businesses have been impacted by recent volatility.

Speaker Change: Yet our conviction around the opportunity for ATI value creation has never been stronger.

Speaker Change: Compare the contractually covered profitable growth in our forecast with our stock's current valuation multiple.

Speaker Change: We are compelled to invest in ourselves returning even more cash to shareholders this coming quarter than previously planned.

Speaker Change: At this stock price how can we not.

Speaker Change: In the second quarter, we expect to buy back as much as $250 million in shares moving notably ahead of our previously planned timeline.

Speaker Change: The strength of our balance sheet and our confidence in current liquidity and favorable cash generation fuel this acceleration.

Donald Newman: With this confidence, we are reaffirming our full year free cash flow range of $240 to $360 million. Our full year capex range remains at $260 to $280 million, with continuing opportunities emerging for customer funding of these investments. The CapEx range includes redeployment of cash generated from sale of non-core assets and businesses in late 2024.

Speaker Change: With this confidence we are reaffirming our full year free cash flow range of $240 million to $360 million.

Speaker Change: Our full year Capex range remains at $260 million to $280 million with continuing opportunities emerging for our customer funding of these investments.

Speaker Change: The Capex range includes redeployment of cash generated from the sale of noncore assets or businesses in late 2024.

Donald Newman: To summarize, we remain on track for profitable growth. We'll adjust and be agile as the world around us changes. The underlying strength of our A&EN markets, coupled with highly differentiated contractually secure products in high demand, guide our course for the future. We are on or ahead of schedule to deliver every day for our customers and our shareholders.

Speaker Change: To summarize we remain on track for profitable growth.

Speaker Change: We will adjust and be agile as the world around us changes.

The underlying strength of our A&D end markets, coupled with highly differentiated contractually secure products in high demand guide our course for the future.

Speaker Change: We are on or ahead of schedule to deliver every day for our customers and our shareholders.

Kimberly Fields: With that, I will turn the call back over to Thanks, Don. Q1 was a great start to 2025, and we have so much more to look forward to. In summary, strong Q1 results demonstrate consistent execution. Aerospace and defense demand is continuing to grow.

Kim Fields: With that I will turn the call back over to Kim.

Kim Fields: Thanks, Don.

Speaker Change: Q1 was a great start to 2025, and we have so much more to look forward to it.

Speaker Change: In summary, strong Q1 results demonstrate consistent execution.

Speaker Change: Aerospace and defense demand is continuing to grow.

Kimberly Fields: for Navigating Trade Uncertainty Strategically and Effectively. And ATI is growing, well positioned to deliver increasing value in the quarters and years ahead. We're confident in our team's ability to execute. The strength of our people, our products, and our customer relationships continues to drive our performance. Our long-term strategy is not just delivering results, it's unlocking greater promise ahead. The world around us is not without risk, but we believe the opportunities ahead far outweigh them. We are proactive in anticipating and mitigating these risks, backed by the expertise and dedication of our 8,000 team members. That collective experience positions us to maximize the tremendous opportunities we've created together with our customers in this moment for aerospace and defense.

Speaker Change: Navigating trade uncertainty strategically and effectively.

Speaker Change: And ATI is growing well positioned to deliver increasing value in the quarters and years ahead.

Speaker Change: We're confident in our team's ability to execute the strength of our people our products and our customer relationships continues to drive our performance. Our long term strategy is not just delivering results is unlocking greater promise ahead.

The world around us is not without risk, but we believe the opportunities ahead far outweigh then we are proactive in anticipating and mitigating these risks backed by the expertise and dedication of our 8000 team members.

Speaker Change: That collective experience positions us to maximize the tremendous opportunities we've created together with our customers in this moment for aerospace and defense.

David Weston: And with that, let's open the line for your questions.

Speaker Change: And with that let's open the line for your questions.

Operator: Thank you. If you wish to ask a question please press star followed by one on your telephone keypad now. If for any reason you want to remove your question from the key please press star followed by two. We ask today that you limit yourself to one question and one follow-up. When preparing to ask your question please ensure your device is unmuted locally.

Speaker Change: Thank you.

Speaker Change: You wish to ask a question. Please press star followed by one on your telephone keypad now.

Speaker Change: Is there any reason you want to remove your question from the queue. Please press star followed by T.

Speaker Change: We asked today that you limit yourself to one question and one follow up.

Speaker Change: To ask a question. Please ensure your device is only you could likely.

Andre Madrid: Our first question comes from Andre Madrid from VTIG. Your line is now open, please go ahead. Thanks. Good morning, Kim and Don. Real quick, good morning to start out.

Speaker Change: Our first question comes from Andre <unk> from <unk>. Your line is now open. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Thanks, Good morning, Kevin.

Speaker Change: Real quick good morning to start out.

Kimberly Fields: Can you provide more color on aftermarket or MRO contribution to A&D growth this quarter? Well, why don't we we'll do that in two parts. Let me just share a little bit of color and then Don can share some of the financials and so forth behind it. We continue to see strong demand from MRO, as we've shared in, you know, the past calls. MRO is running 40 to 50 percent, and it does seem that that's continuing, that demand is continuing to rise there. We're seeing it both on the materials as well as the foraging side. You know, we've talked in the past about some of the work that we're doing with the GTF, and that's continuing to grow.

Speaker Change: Can you provide more color on aftermarket or MRO contribution to <unk> growth this quarter.

Don Newman: Well why don't we we'll do that in two parts, let me just share a little bit of color and then Don can you share.

Don Newman: Some of the financials and so forth behind it.

Don Newman: We continue to see strong demand from MRO as we've shared in the past calls.

Don Newman: And when I was running 40% to 50% and it does seem that that is continuing but demand is continuing to rise there.

Don Newman: We're seeing it both on the materials as well as the forging side, we've talked in the past about some of the work that we're doing with the GTS and that's continuing to grow.

Kimberly Fields: You know, if I step back, in 2024, we doubled our revenue from the work that we were doing with Pratt and supporting the GTF program. This year, we're anticipating doubling or slightly more than that in 2025. And I think as we look forward, you know, there is an opportunity for us to continue to double that even again between now and the end of the decade. And so that strength that we're seeing in the GTF program, we're seeing it across the board for all of the OEM manufacturers as they are continuing to see strong demand on the MRO side.

Don Newman: If I step back in 2024, we doubled our revenue from the work that we're doing with Pratt and supporting the G. TF program. This year, we're anticipating doubling or slightly more than that in 2025, and I think as we look forward. There there is an opportunity for us to.

Don Newman: Continued to double that even again between now and the end of the decade, and so that strength that we're seeing in the DTF program, we're seeing across the board for all of the OEM manufacturers.

Speaker Change: Manufacturers as they are continuing to see strong demand on the MRO side and it is driving both our margins and our revenues up Dan I don't know if you want to share any details.

Donald Newman: And it is driving both, you know, our margins and our revenues up. Don, I don't know if you want to share any details. What I would add, and one clarification, Andre, I thought I heard you say MRO related to defense. Is it MRO and defense, or just defense, you're asking? Just overall, and then if you want to dig deeper into the fence too, that's fine. No, you're good. You're good. My hearing is no, it's very good. So, you know, I'll echo what Kim said when it comes to aerospace and defense and how MRO is impacting with the jet engine sales, which are now a substantial part of our overall A&D.

Speaker Change: I would add one clarification Andre you I thought I heard you say MRO related to defense and Aero and defense are just debenture asking.

Speaker Change: Doug just overall and then if you wanted to dig deeper into this okay Thats fine.

Speaker Change: No you're good youre good at my hearing is not always very good so.

Speaker Change: I'll Echo what Ken said, when it comes to aerospace and defense and how and MRO is impacting with a jet engine sales, which are now a substantial part of our overall A&D.

Donald Newman: You're, this is a category that we really don't have specific discernment in terms of the split between what's driving revenue growth due to the MRO versus what is new builds. But clearly, MRO continues to be an area of strength for us. So we think that a meaningful amount of the growth you're seeing period over period around jet engine sales, for example, is certainly tied to. God, God, that's super helpful. I guess, um...

Speaker Change: You're this is.

Speaker Change: The category that we really don't have specific discern and in terms of the split between what's driving.

Speaker Change: Revenue growth due to the MRO.

Speaker Change: Versus what is new builds but clearly MRO continues to be an area of strength for us. So we think that.

Speaker Change: Meaningful amount of the growth Youre seeing.

Speaker Change: Period over period around jet engine sales for example is certainly tight.

Speaker Change: Tied to it.

Speaker Change: Got it got out of that Super helpful.

Speaker Change: Yes.

Kimberly Fields: beyond that, and this might be a little bit more of a High level question. And I mean, given the timing, it might be hard to give a definitive answer. But you know, we did see the US and Ukraine sign the mineral deal yesterday. Apparently, 6% of global production, you know, comes from titanium mines. Do you think this could have any impact on ATI and sourcing of feedstock? Well, certainly, as you said, probably not in the near term. You know, historically, Ukraine was a supplier and one of our partners in the joint venture that we had here.

Speaker Change: Beyond that I missed.

Speaker Change: Good morning.

Speaker Change: <unk>.

Speaker Change: High level question, I mean, given the timing it might be hard to give a definitive answer but.

Speaker Change: We did see in the U S in Ukraine side in the mineral deal yesterday.

Speaker Change: Apparently 6% global production comes from titanium mines do you think this could have any impact.

Speaker Change: On ATI in sourcing of feedstock.

Speaker Change: Well certainly as you said probably not in the near term, yes, historically, Ukraine was a supplier in one of our partners.

Speaker Change: In the joint venture that we had here.

Kimberly Fields: But I do believe that that will be a positive as we go forward and we look at this aerospace ramp in demand and continue to diversify the titanium sponge supply into the melters here in the US. So, I do think, again, getting that deal confirmed and finalized will, as they start to develop in Ukraine, and they get the word behind them, you know, and they start to develop it out, and then we start to get access to that. There's a lot of here, but you have to go through any levels of qualification. First, to get into the airframe and then to get into jet engine, but historically, they've been at that place.

Speaker Change: But I do believe that that will be a positive as we go forward and we look at this aerospace ramp in demand.

Speaker Change: And continue to diversify the titanium sponge supply into the melchers I'm here in the U S.

Speaker Change: So.

Speaker Change: I do think again getting that deal confirmed and finalize will as they start to develop in Ukraine, and they get the more behind them.

Speaker Change: They start to develop that sound and we start to get access to that you're done as you say theres a lot of it here, but you have to go through any levels of qualification.

Speaker Change: To get there.

Speaker Change: To get into jet engine, but historically they've been at that play. So I do think that there's opportunity for for this to maybe expand that supply chain from a titanium sponge standpoint.

Kimberly Fields: So I do think that there's opportunity for this to maybe expand that supply chain from a titanium sponge standpoint. Got it, got it, that's super helpful.

Speaker Change: Got it got it that's super helpful. I'll leave it there thanks so much.

Kimberly Fields: I'll leave it there, thanks so much. Thanks. Thank you.

Speaker Change: Thanks.

Speaker Change: Thank you next.

Richard Safran: Our next question comes from Richard Safran from Seaport Research Partners. Your line is now open, please go ahead. Thanks. Tim, Don, Dave, good morning.

Speaker Change: Next question comes from Richard Safran from Seaport Research Partners. Your line is now open. Please go ahead.

Richard Safran: Thanks, Tim.

Dave: <unk>, Dave good morning.

Donald Newman: I wanted to know if you could talk more about pricing. Good morning. I want to know if we could talk a bit more about pricing at HP. It's just that it appears to be improving in the face of higher volume, and that's a bit counter to, you know, typical step down pricing. I'm curious as to how much of the pricing was impacting your 1Q results, and just, you know, how we should think about pricing from here in the face of higher volume. So I'll tell you what, I'll take that question. We are seeing price. And to give you some perspective on the HPMC side, the way to think about the Q1 price year over year, we saw prices increase both in titanium and nickel, generally in the 6 to 7% range.

I wanted to know if you could talk more about pricing.

Dave: Good morning.

Dave: I don't know if you could talk a bit more about pricing at HP.

Dave: It's just that it appears to be improving in the face of higher volume and Thats a bit countered.

Dave: Typical step down pricing.

Dave: I'm curious as to how much of the pricing was impacting your <unk> results and just how we should think about our pricing from here in the face of higher volume.

Dave: So I'll tell you what I'll take that question, yes, we are seeing price and to give you some perspective on the HP EMC side, the way to think about.

Dave: The Q1 price year over year, we saw prices increase both in titanium and nickel generally in the 6% to 7% range.

Donald Newman: And we also saw some nice increase in terms of volumes for nickel in that segment. From a titanium standpoint, the volumes were down a bit, but we're very, very pleased with the direction of price. You know, of course, a lot of our HPMC business is tied to LTA, and with each of the renewals of a contract, we are very purposeful in going after appropriate price increases. And because they're long-term agreements, when we capture those price increases, they stay with us for multiple years.

Dave: And we also saw some nice increase in terms of volumes for for Nicole in that segment from a titanium standpoint.

Dave: The volumes were down a bit but we're very very pleased with the direction of price of course, a lot of our <unk> business is tied to LTA and.

Dave: And with each of the renewals of our contract, we're very purposeful and going after appropriate price increases and because they are long term agreements when we capture those price increases they stay with us for multiple years. So those trends are are certainly looking in our favor.

Donald Newman: So those trends are certainly looking in our favor. Okay, thanks for that.

Dave: Okay. Thanks for that.

Kimberly Fields: Um, what one on just follow up on Kim, on your opening remarks about the $50 million tariff impact, but mitigated by offsets, I thought you might elaborate a bit more get more specific about those offsets, what's driving you to maintain your outlook. And I'm just kind of wondering if the macro situation were to deteriorate, I mean, do you have further offsets that you can use to mitigate that? Sure, yeah, it's certainly been dynamic time with tariff headlines changing almost daily, it seems. But, you know, as you mentioned, we do believe our overall cost impacts can be manageable with, you know, that where you might see from tariffs.

Speaker Change: One just follow up on Kim.

Dave: On your opening remarks about the <unk>.

Dave: $50 million tariff impact, but mitigated by offsets I thought you might elaborate a bit more get more specific about those offsets what's driving you to maintain your outlook and I'm just kind of wondering if the macro situation were to deteriorate.

Dave: Do you have further offsets that you can use to mitigate that.

Dave: Sure Yeah, it's it's certainly been a dynamic time.

Dave: Time with tariff headlines changing almost daily it seems but you know as you mentioned, we do believe our overall cost impacts can be.

Dave: <unk> ball with that where you might see from tariffs one of them is like you said the cost management I think you know we've got multiple levers there that we can Paul you mentioned why you know one of the big ones, which we talked about here earlier is we have a pretty diversified nimble supply chain, we're able to move our supply to low cost sources.

Kimberly Fields: One of them is, like you said, the cost management. I think, you know, we've got multiple levers there that we can pull. You mentioned what, you know, one of the big ones, which we talked about here earlier, is we have a pretty diversified nimble supply chain, we're able to move our supply to low cost sources, depending on how the trade and tariff environment evolves and how those trade deals evolve. So we're continuing to monitor that and use those levers to make sure that we're tapping into the lowest cost supply. Secondarily, you know, we're also looking at taking cost out, driving productivity to help offset this for our customers as well.

Dave: Depending on how the trade and tariff environment evolves and how those trade deals evolve. So we're continuing to monitor that and use those levers to make sure that we're tapping into the lowest cost supply.

Dave: Secondarily, we're also looking at taking cost out driving productivity to help offset this for our customers as well and so those are things that yes, you mentioned you've seen some of the uptick from the improvements in reliability and productivity that we've got already starting to come through.

Kimberly Fields: And so those are things that, as you mentioned, you know, you've seen some of the uptick from the improvements in reliability and productivity that we've got already starting to come through. Then there's levers like duty drawback and defense exemptions that we can utilize as well. And, you know, we are taking advantage of those and we've used those in the past. So we anticipate doing that. I think the last one, and we talked a lot about this, our contracts are really built to manage this type of volatility. They're set up with surcharges and mechanisms to pass through material fluctuations, to pass through inflation, and to pass through tariffs, which, frankly, you know, we started implementing and incorporating this into our contracts back in like 2017, 2018, during the first administration when we started to see the use of these tariffs become more prevalent.

Dave: Then there's levers like duty drawback and defense exemptions.

Dave: That we can utilize as well and you know we are taking advantage of those and we've used those in the past. So we anticipate doing that I think the last one and we talked a lot about this are our contracts are really built to.

Dave: Manage this type of volatility there set up with surcharges and mechanisms to pass through material fluctuations.

Dave: Pass through inflation and to pass through tariffs, which frankly, we started implementing in incorporating this into our contracts back in like 2017 2018. During the first administration. When we started to see the use of these carriers become more prevalent and so.

Kimberly Fields: And so that allows us, if there are any of these tariff costs that we aren't able to offset, to pass through to our customers to make sure that it doesn't impact our financial results.

Dave: That allows us if there are any of these tariff costs that we are able to offset to pass through to our customers to make sure that doesn't impact our financial results now.

Kimberly Fields: Now, I think the one area that we are looking at is on the demand side. I do think it's going to take a little bit more time for us to fully understand what the impact might be. Clearly, if there's a recession, the industrial markets will start to feel that. I'd say today, as I mentioned, we do see some behavior of people kind of taking a wait-and-see approach, a pause, trying to process and determine where the markets are going. Clearly, the outcome of these trade negotiations will have an impact into both domestic with distribution and others, but also international customers and how they think about their supply chains.

Dave: Now I think the market.

Dave: The one area that we are looking at is on the demand side I do think it's going to take a little bit more time for us to fully understand what the impact might be clearly if there is a recession. The industrial markets will start to feel that I'd say today as I mentioned, we do see some behavior of people kind of taking a wait and see.

Dave: Approach, a pause trying to process and determine where the markets are going clearly the outcome of the trade negotiations will have an impact into both domestic with distribution and others, but also international customers and how they think about their supply chains and so we're continuing to me.

Kimberly Fields: And so, we're continuing to monitor that. I'd say, though, our defense and aerospace is very, strong and growing demand. Strong backlog, obviously, with airplane orders, new builds, and strong MRO, which we just spent some time talking about, that continues to build. And the engine guys are continuing to try to get on pace with the demand that they're seeing.

Dave: Monitor that I'd say, though our defense and aerospace is very very strong and growing demand.

Dave: Strong backlog, obviously with airplane orders Newbuild and strong MRO, which we just spent some time talking about that continues to build in and the engine guys are continuing to try to you too.

Dave: Get on pace with with the demand that they're seeing so I.

Kimberly Fields: I think across the board, this is You know, it's going to be an evolving situation. I do feel comfortable that we're going to be able to mitigate or pass through any of the costs and then we'll react to the changing demand situation on those industrial markets. Thank you very much. Sure. Thank you.

Dave: I think across the board you know.

Dave: This is.

Dave: Yeah, it's going to be an evolving situation I do feel comfortable that we're going to be able to mitigate or pass through any of the class and then we will react to the changing demand situation on those industrial markets.

Speaker Change: Thank you very much.

Dave: Sure.

Dave: Thank you <unk>.

Scott Deuschle: Our next question comes from Scott Deuschle from Deutsche Bank. Your line is now open, please go ahead. Hey, good morning, nice results. Thanks, Scott. Don, just to be clear and follow up on that last question, does the reiterated guide include significant contingency for software sales and other industrial end markets for the second half of the year? Just wanted to double check on that and get a further sense for what specifically. Yeah, I'm glad you asked the question. Just for clarity, when you look at our guide for 2025, we have built in risk that we see and the trend that we're seeing around those industrial ordering patterns.

Speaker Change: Next question comes from Scott Bush left from Deutsche Bank. Your line is now open. Please go ahead.

Speaker Change: Hey, good morning nice results.

Speaker Change: Thanks Scott.

Speaker Change: Don just to be clear on follow up on that last question does the reiterated guide includes significant contingency for softer sales in other industrial end markets for the second half of the year I just wanted to double check on that and get a further sense for what specifically is being assumed there. Thank you.

Speaker Change: Yes, Im glad you asked the question just for clarity when you look at our guide for 2025, we have built in risk that we see and the trend that we're seeing around those industrial ordering patterns. So yes. It should be included.

Donald Newman: So yes, it should be included.

Donald Newman: Great, thank you.

Speaker Change: Great. Thank you and then Don you spoke recently about spending a greater share of your growth Capex on nickel alloys I just wanted to get maybe a better sense as to what that looks like in terms of any specific product areas that gross capex might focus on.

Donald Newman: And then Don, you spoke recently about spending a greater share of your growth capex on nickel alloys. I just wanted to get a maybe a better sense as to what that looks like in terms of any specific product areas that growth capex might focus on. how much capacity that might add on a percentage basis. And for what period of time that would come online. And it may be more for Kim, just generally curious for how you're thinking about balancing the need for a capacity to discipline. The Current Demand Impulse that you're seeing. So I'm going to take a run at that.

Speaker Change: How much capacity that might add on a percentage basis.

Speaker Change: For what period of time that would come online and it may be more for Cam just generally curious for how youre thinking about balancing the need for capacity discipline with the current demand and pulse that you're seeing from customers. Thank you.

Speaker Change: So I'm going to take a run at that I think that was one question was 10 sub parts to it. So there's a high probability Scott that I won't Miss something but.

Donald Newman: I think that was a one question with 10 subparts to it. So there's a high probability, Scott, that I won't miss something. But, you know, long short.

Speaker Change: Long short so let me just to hit from a history standpoint, let me touch on one thing.

Donald Newman: So let me just, from a history standpoint, let me touch on one thing. With titanium, we saw titanium demand really ramping. In 2022, it was accelerated by the invasion of Ukraine and we reacted. We reacted really accelerating a strategy we already had in place, restarted a plant very cost-efficiently, built some additional capacity through Brownfield. The outcome of all of that is the titanium business is performing well, even though right now there's a destocking. And if you look at what we've done with that titanium business, between 2022 and 2024, we have doubled the titanium revenues. Back in 2022, they were about 400 million.

Speaker Change: With titanium we saw titanium demand really ramping in 2022 was accelerated by the invasion of Ukraine, and we reacted we reacted really accelerating our strategy. We already had in place restarted the plant very cost efficiently built.

Speaker Change: The additional capacity through brownfield the outcome of all of that is the <unk>.

Speaker Change: The titanium business as.

Speaker Change: It is performing well, even though right now there's a destocking.

Speaker Change: And if you look at what we've done with that titanium business between 2022 and 2024, we have doubled the titanium revenues back in 2022. They were about $400 million 2024, there were about $800 million you asked about nickel why am I talking about titanium.

Donald Newman: 2024, they were about 800 million. You asked about nickel. Why am I talking about titanium? Because the plays that we are running for nickel will look a lot like the plays we ran for titanium. For nickel, the demand for nickel, which is primarily, I mean, it's many areas of our book, but think jet engine, right? The hot section of the jet engine is where we have our greatest competitive advantages and where we are quite focused, whether it be in melt or it's in isothermal forgings or it can be in powder applications. We are interested in defending our competitive advantage in market positions, which are very, very powerful.

Speaker Change: Because of the plays that we're running for Nicole will look a lot like the place we ran for titanium for Nicole the demand for nickel, which is primarily I mean, there's many areas of our of our book but.

Speaker Change: Jet engine right Hot section of the jet engine is where we have our greatest competitive advantages and where we are quite focused whether it would be.

Speaker Change: <unk> melt or it's an isothermal forgings or it can be in powder applications. We are interested and defending our competitive advantage and market positions, which are very very powerful.

Donald Newman: We're interested in defending those. Our expenditures are gonna reflect running those plays. So where are we thinking about spending from a capital standpoint? First, as a reminder, we said we're gonna spend on average about $200 million a year on CapEx. So the nickel investments we're talking about to meet the current demand and our contract commitments are all encompassed in that guide. And so our prioritization within there is first, you have to be able to melt. If you can't melt at purity and at scale, you can't unlock the value. So we have great melt assets. We've invested in de-bottlenecking in that area.

Speaker Change: We're interested in defending those are expenditures are going to reflect running those plays so where are we where are we thinking about spending from a capital standpoint first as a reminder, we said we're going to spend on average about $200 million a year on capex. So the nickel investment.

Speaker Change: We're talking about to meet the current demand and our contract commitments are all encompassed in that guide.

Speaker Change: And so our prioritization within there.

Speaker Change: Is first you have to be able to melt if he can't melt at purity and at scale. Yet you can unlock the value. So we have great melt assets, we've invested and debottlenecking and that area. We're getting we're reaping the rewards of that we are investing in new.

Donald Newman: We're reaping the rewards of that. We are investing in new, discreet pieces of equipment that will help with that de-bottlenecking. And we're going beyond just de-bottlenecking and saying, hey, we can add incremental VIM capacity, for example, and other elements in production that could be really well-returning investments. So all of that is being driven by this underlying consistent demand around jet engine materials and components, which our customers, it's not an exaggeration, Scott, every day we are hearing from the major OEMs, they're communicating to us, we're a critical part of this supply chain, they want us to be a critical partner and a consistent partner, and our discrete investments are all pointed toward helping to meet those needs, but with discipline on our side.

Speaker Change: New discrete pieces of equipment that will help with that Debottlenecking and we're going beyond just debottlenecking and saying Hey, we can add incremental.

Speaker Change: Vim capacity for example, and other elements in our and production that could be really well returning investments. So all of that is being driven by this underlying consistent demand around it.

Speaker Change: Around jet engine.

Speaker Change: Materials and components, which our customers I would.

Speaker Change: It's not an exaggeration Scott every day, we are hearing from the major Oems. They are communicating to US we are a critical part of the supply chain.

Speaker Change: You want us to be a critical partner in a consistent partner and our discrete investments are all are all pointed toward helping to meet those needs, but with discipline on our side. So.

Donald Newman: So I don't know if I hit one of your sub points or if I hit half of them. So what else would you like me to answer in that regard? I don't know.

Speaker Change: So I don't know if I heard one of your sub points are if I hit half of them. So what other what else would you like me to answer in that regard.

Donald Newman: I think I took up enough of the call. I appreciate that, Don. That was a good answer. I don't think you took up the call. I figured it was me taking up the call. So, all right. Fair point. Thanks guys. I'll pass it along though. Thank you.

Speaker Change: No I think I took up enough to call I appreciate that Don does it got answered.

Speaker Change: I don't think you took up the call has really taken off the ball so alright.

Speaker Change: Alright Fair point, Thanks, guys I'll pass it along though thank you.

Speaker Change: Thank you.

Seth Seifman: Our next question comes from Seth Seifman from J.P. Morgan. The line is now open, please go ahead. Thanks very much and good morning and good results. Maybe to follow up quickly on the last question, when we think about the 15 to 20% growth in jet engine that you're looking for this year, you know, there's some additional CapEx this year. But I assume that that's probably not yet contributing much and that'll be in front of us. So, you know, first of all, is that sort of correct? And then when we think about that 15 to 20% increase on the jet engine side this year, you know, how much of that comes from maybe, you know, additional capacity and capital spending that's been done in recent years?

Speaker Change: Next question comes from Seth <unk> from J P. Morgan.

Speaker Change: Line is now open. Please go ahead.

Speaker Change: Thanks, very much and good morning, and good results.

Speaker Change: Maybe to follow up quickly on the last question.

Speaker Change: When we think about the <unk>.

Speaker Change: 15% to 20% growth in jet engine that you're looking for this year.

Some additional capex this year.

Speaker Change: But I assume that that's that's probably not yet contributing much.

Speaker Change: And that'll be in front of US first of all is that sort of cracked and then when we think about that 15% to 20%.

Speaker Change: The increase on the on the jet engine side this year.

Speaker Change: How much of that comes from maybe.

Additional capacity in capital spending that's been been done in recent years and how much comes from kind of the improved maybe some improved productivity versus versus last year.

Donald Newman: And how much comes from kind of the improved, you know, maybe some improved productivity versus last year?

Donald Newman: Yeah, I'll take a crack at that and just add a little color to what, as you said, Don just talked a little bit about. So we have been spending on capacity. We've talked about some of our downstream de-bottlenecking, ultrasonic inspection, heat treat. We have a brand new heat treat facility that's come on with our Forge products. And as you mentioned, additionally, the work we're doing about de-bottlenecking and reliability upstream in our MELPS are all coming and we're seeing good results and momentum from the work that we've been doing. We do have several projects in the pipeline that have been installed or getting installed and are coming up to speed.

Speaker Change: Yeah, I'll take a crack at that and just to add a little color to it as you said, Don just talked a little bit about so we have been spending on capacity that we've talked about some of our downstream debottlenecking ultrasonic inspection heat treat we have a brand new heat treat facility that's come on with our forged products.

Speaker Change: As you mentioned Additionally, the work we're doing about debottlenecking in reliability upstream in our mouths are all coming and we're seeing good results and momentum from the work that we've been doing we do have several projects in the pipeline that have been installed they're getting installed and are coming up to speed and really were.

Donald Newman: And really what's driving this is the demand from that jet engine. And I'll direct everyone to kind of page 5 in our presentation materials. In that jet engine, we're producing most of the proprietary alloys at a sole source position well into 2030s. And in some cases into 2045. And so, as our engine customers are growing and their MRO needs are growing, they're really looking for us to keep pace with them so that we can continue to supply those critical alloys for that, for those applications. I would say just around the discipline around capital, we are being very disciplined where we see if customers want to put in capital or accelerate capital investment.

What's driving this is the demand from that jet engine and you know I'll direct everyone, who kind of page five in our presentation materials you know in that jet engine, we're producing.

Speaker Change: Most of the proprietary alloys at our sole source position well into 2030 and in some cases into 2045 and so as our engine customers are growing in their MRO needs are growing they are really looking for us to keep pace with that so that we can continue to supply those.

Speaker Change: <unk> alloys for that for those applications I would say just around the discipline around capital.

Speaker Change: We are being very disciplined where we see if customers want to put in capital or accelerate capital investment. We're looking for their contribution and participation in that capital to us and as we shared on past calls we are seeing multiple customers that are willing to do that again to have that surety of supply and position.

Donald Newman: We're looking for their contribution and participation in that capital cost. And as we've shared on past calls, we are seeing multiple customers that are willing to do that again to have that share your supply and position. So that's really, you know, what we're thinking about, and that's what's driving that demand. And so it is a combination, as you said, of both process and productivity improvements, reliability, as well as some of those prior investments in downstream testing and finishing. Great, thanks.

Speaker Change: So that's really.

Speaker Change: What we're thinking about and that's what's driving that demand and so it is a combination as you said are both process and productivity improvements reliability as well as some of those prior investments and downstream testing and finishing.

Speaker Change: Great Great. Thanks, and then.

Kimberly Fields: And then maybe as a quick follow-up in, you know, when you think about ANS and on the titanium side, when you think about the progression on wide bodies through the year and the pull from the OEMs, you know, how are you thinking about that with regard to, you know, 787, A350, and triple 7N? Well, yeah, I mean, from the airframe side, obviously, like you said, with the widebody, that has up to five times more titanium than the single aisles. And so that demand is starting to come. You know, we've gotten good news that Boeing is ramping well, and we are seeing some, we're starting to have conversations around what that demand will be as we're looking in the back half of this year and into next year.

Speaker Change: As a quick follow up in.

Speaker Change: Think about <unk> and on the <unk>.

Speaker Change: Titanium side, but when you think about the progression.

Speaker Change: On wide bodies.

Speaker Change: Through the year and the poll from the Oems.

Speaker Change: How are you thinking about that with regard to 787, <unk> hundred 50, and and triples avonex.

Well, yeah, I mean from the airframe side, obviously like you said with the wide body that has up to five times more titanium than the single aisles, and so that demand is starting to come you know we've got good news that Boeing is you know is ramping well.

Speaker Change: And we are seeing some were starting to have conversations around what that demand will be as we're looking at the back half of this year and into next year. If you remember our armel, it's going to be a very long lead time in advance of those rates up changes.

Kimberly Fields: Remember, our melt's going to be a very long lead time in advance of those rate step changes. I would like to share, you know, our new investment in titanium that we talked about out in Oregon and our brownfield is online and is melting now, and we are in qualification. So we've got new capacity coming online to support that ramp as they start to pull more need for demand.

Speaker Change: I would like to share our new investment in titanium that we talked about.

Speaker Change: Out in Oregon, and a brownfield is online and is melting now and we are in qualification. So we've got new capacity coming online to support that ramp as they start to pull more need for demand.

Kimberly Fields: And I say, lastly, I'm very excited to announce that we just signed this week, a new five year agreement with Airbus that approaches 1Billion dollars in sales over the next 5 years and puts really puts us in a position as the leading flat rolled supplier for them. So lots of good things happening there capacity coming on at the right time along to match the demand that's coming from both airframers, Airbus and Boeing. Great. That's super helpful. Thanks.

Speaker Change: And I'd say lastly, I am very excited to announce that we just signed this week and a five year agreement with Airbus that approaches $1 billion in sales over the next five years and puts really puts us in a position as a leading flat rolled supplier for them. So.

Speaker Change: Lots of good things happening there capacity coming on at the right time, along to match the demand Thats coming from both air Framers Airbus and Boeing.

Speaker Change: Great that's super helpful. Thanks.

Speaker Change: Thanks.

Bill Gibbs: Thank you. Our next question comes from Bill Gibbs from KeyBank Capital. The line is now open, please go ahead. Hey, thanks so much. Good morning. Morning.

Speaker Change: Thank you. Our next question comes from Phil Gibbs from Keybanc Capital. Your line is now open. Please go ahead.

Phil Gibbs: Hey, thanks, so much good morning.

Speaker Change: Good morning, good morning.

Phil Gibbs: Yes.

Kimberly Fields: The the isothermal forging business. Can you talk about how that business has developed and grown over the last several quarters and what you see moving ahead and sub-question to that? Where are your headcount additions specifically related to that business now and looking forward? And meaning, are you still adding folks to grow that business? Because I know it wasn't imperative last year. Yes. So, our FORGE products business has grown pretty substantially over the last few years. In fact, our lead times right now, we're booking out into 2027. So, isothermal demand is very high. And as you said, we have been focused on adding headcount and shifts to, one, get to a 24-7 schedule, but also we've put in, as I mentioned, some new capacity downstream from a finishing standpoint, both testing and heat treating, that we're getting up and running.

Phil Gibbs: The ISO thermal forgings business.

Speaker Change: Can you talk about how that business has developed and grown over the last several quarters and what you see moving.

Phil Gibbs: Moving ahead and sub question to that.

Speaker Change: Yeah.

Speaker Change: Where your head count additions specifically related to that business now and looking forward, meaning are you are you still.

Speaker Change: Adding adding folks to to grow that business, because I know it wasn't imperative last year.

Speaker Change: Yes, so our forged products business has grown.

Speaker Change: Pretty substantially over the last few years in fact, our lead times right now we're booking out into 2027.

Speaker Change: So isothermal demand is very high.

Speaker Change: And as you said, we have been focused on adding head count and shifts to.

Speaker Change: One get to a 24 seven schedule, but also we've put in as I mentioned, some new capacity downstream from a finishing standpoint, both testing and heat treating.

Speaker Change: That we are getting up and running we have finalized we finished adding crews and so now we're working on training and development I think I've talked in the past about some of our ultrasonic testers, that's a pretty extensive qualification period up to six months.

Kimberly Fields: We have finalized, we've finished adding new crews, and so now we're working on training and development. I think I've talked in the past about some of our ultrasonic testers. That's a pretty extensive qualification period, up to six months. Many, I think we're about two-thirds of the way through that qualification, and so we've got about another third of new employees that are coming, and they'll be qualified as a level two, and then hopefully get a few to level three. But we are, from a hiring standpoint, we've reached our stable points or our level points. All of our crews are now staffed.

Speaker Change: Many I think we're about two thirds of the way through that qualification and so we've got about another third.

Speaker Change: Of new employees that are coming in that will be qualified as a level two and then hopefully.

Hopefully it gets a few to level three so but we are from a hiring standpoint, we've reached.

Speaker Change: Our our stable point or a level point to all of our crews are now staffed we're training and theyre coming up to speed and you're seeing that benefit you know I talked a little bit about some of the productivity. We are starting to see improvements at productivity outputs.

Kimberly Fields: We're training, and they're coming up to speed, and you're seeing that benefit. I talked a little bit about some of the productivity. We are starting to see improvements at productivity outputs from both of my HPMC businesses, and they're doing a nice job at meeting this demand, but it's continuing to grow. They are on a path to be over a billion dollars here in the next five years, and the demand is there. Well, let me let me correct that there will be over a billion dollars this year, just to be very specific. And so that's off about 20-25% in the last year.

Speaker Change: Both of my age P&C businesses, and they're doing a nice job at meeting this demand, but it's continuing to grow and they are on a path to be over $1 billion here in the next five years and the demand is there.

Speaker Change: Well, let me let me correct that there will be over $1 billion. This year just to be very specific and so that's up about 20, 25% in the last year and with our lead times in our backlogs we have more opportunity. So we're clearly having conversations with customers around how do we continue to expand our capacity.

Kimberly Fields: And with our lead times and our backlogs, we have more opportunity. So we're clearly having conversations with customers around how do we continue to expand our capacity. Perfect.

Kimberly Fields: And then I have one, one question as it relates to to titanium. So, the new titanium upstream capacity that you talked about just a little bit ago, are you harboring some of those P&L costs given some of the qualifications you're talking about and early stage production prior to adding stronger volumes, meaning is that a drag on the results right now? And then secondly, the Airbus contract you talked about, the five years for one billion, was that specifically for titanium? Thank you. So, for the new facility, I would say, number one, it's certainly a use of cash.

Speaker Change: Perfect and then I have one one question as it relates to titanium.

Speaker Change: So.

Speaker Change: The new titanium upstream capacity that you talked about just a little bit ago are you harboring some of those P&L costs.

Given some of the qualifications you are talking about an early early stage production prior to adding stronger volumes, meaning meaning is that a drag on the results right now.

Speaker Change: Secondly.

Speaker Change: The Airbus contract you talked about the five years for $1 billion was that specifically for titanium. Thank you.

Speaker Change: So for the new facility I would say number one.

Speaker Change: Certainly a use of cash in terms of our adjusted earnings.

Kimberly Fields: In terms of our adjusted earnings, it is not a drag on our earnings at this point. And then in your last question, could you repeat that, Phil? I asked, was the billion that you mentioned, yeah, the billion that you mentioned for the five-year contract with Airbus, was that specifically for titanium? Yes, it is. It would largely be titanium. Thank you.

Speaker Change: It is not a drag on our earnings at this point.

Speaker Change: And then in your last question could you repeat that Phil.

Speaker Change: I guess was the last part of your $1 billion that you mentioned, yes, the $1 billion that you mentioned for the five year contract with Airbus was that specifically for titanium. Thanks.

Speaker Change: Yes. It is it was largely be titanium.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from David Strauss from Barclays. Your line is now open. Please go ahead.

David Strauss: Our next question comes from David Strauss from Barclays. Your line is now open, please go ahead. Hi, good morning.

Speaker Change: Hi, Good morning, this is Josh corn on for David.

Donald Newman: This is Josh Korn on for David. So wanted to add, you mentioned that, good morning, you mentioned the potential for AANS, some of the industrial markets to see declines in the rest of the year. You know, in that scenario, how do you expect margins to hold up? So let me take a shot at that. I think I included in my prepared remarks some color around what we expect for margins. The bottom line with AANS is, you know, we're in the mid-teens right now, even with the headwinds that we can foresee with the industrials and potential pullback on sales demand there.

Speaker Change: So wanted to ask you mentioned good morning, you mentioned the potential for some of the industrial markets to see declines in the rest of the year.

Speaker Change: That scenario.

Speaker Change: How do you expect margins to hold up.

Speaker Change: So let me let me take a shot at that.

Speaker Change: Think I included in my prepared remarks, some color around what we expect for margins the bottom line with NFS is.

Speaker Change: We're in the mid teens right now even with the headwinds that we can foresee.

Speaker Change: With the industrials and potential pullback on bond sales demand there, we would still expect that business to be generating.

Donald Newman: You know, we would still expect that business to be generating even margins in those mid-teens. So 15 to 16%, I think is what I shared for the second half of the year. You know, that segment includes the industrial, but there's other good businesses in there. We've got what we call AeroLite, specialty energy, and our electronics business, as well as medical. They generate very, very nice margins, and we would expect that that would continue throughout this year, which will help to buoy the AANS margins for the balance. Great, thanks.

Speaker Change: EBITDA margins in them in those mid teens, so 15% to 16% I think is what I, what I share for the second half of the year is that.

Speaker Change: And then does that.

Speaker Change: That segment includes the industrial but there's other good businesses in there we've got we've got what we call it zero like specialty energy and.

Speaker Change: Our electronics business as well as medical they generate very very nice margins.

Speaker Change: We would expect that that will continue throughout this year, which will help to buoy.

Speaker Change: Hey, E&S margins for the balance.

Great. Thanks.

Kimberly Fields: And then just wanted to ask about any financial impact on the new labor contract. Yeah, I can let Don take that. I would say just generally that it was in line with what we expected. And it's built into our guidance. And we're very pleased that we came to a fair contract for the employees and for the business so that we can continue to support these aerospace customers that have come to rely on us in this new contract so that we can support their ramp. But Don, if you have any specifics, I can't add a single word.

Speaker Change: Just wanted to ask about any any financial impact on the the new labor contract.

Speaker Change: Yes, I can let Dan take that I would say just generally that it was in line with what we expected and it's all it's built into our guidance and we're very pleased that we came to a fair contract for the employees and for the business. So that we can continue to spur.

Speaker Change: Short these aerospace customers that have come to rely on us in this new contracts. So that we can support the ramp but Don if you have any specifics I can add a single word you hit it all thanks.

Kimberly Fields: You hit it all. Thanks. Okay, great. Thanks for taking the question. Thank you.

Speaker Change: Okay, great. Thanks for taking the questions.

Speaker Change: Thank you.

Gautam Khanna: Our next question comes from Gautam Khanna from TD Cowen. Your line is now open, please go ahead. Yes, thanks. Good morning, guys. Good morning. I had two questions. I was curious on the Airbus contract, which is very promising. Any sense, can you scale, size, how much of a increase? um the contract represents relative to what you have been doing kind of over the last five years is it 30 percent more 50 percent more do you have a sense that you can give us Yeah, I mean, I can give you a sense of that. Don can share more color if he'd like.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Gautam Khanna from TD Cowen. Your line is now open. Please go ahead.

Yes, thanks, good morning, guys.

Speaker Change: Good morning, good morning.

Two questions I was curious on the Airbus contract, which is very promising.

Speaker Change: Any sense can you scale.

Speaker Change: <unk>, how much of a increase.

Speaker Change: The contract represents relative to what you have been doing kind of over the last five years.

Speaker Change: Is it 30% more 50% more give us sense you can give us.

Speaker Change: Yeah, I mean, I can give you a sense of that Don can share more color if he'd like.

Kimberly Fields: You know, I just want to, if I step back, you know, and we go back to 2020, we had no share at that time with Airbus. I think we had just announced winning the convent and winning a position in that contract. And through the last five years, we really accelerated our support of them, especially with the conflict in Ukraine. And I say, as we look at this contract, it will double our participation next year with Airbus. That's great. Thank you. And I enjoyed that slide you mentioned you showed where the you have a number of sole source alloys in the nickel side.

Speaker Change: I just wanted to if I step back you know when we go back to 2020.

Speaker Change: We had no share at that time with Airbus I think we had just announced winning the combat and winning a position in that contract.

Speaker Change: And through the last five years, we really accelerated our support of them, especially with the conflict in Ukraine, and I'd say as we look at this contract it will double our participation next year.

Speaker Change: With Airbus.

Speaker Change: That's great. Thank you.

Speaker Change: Yes.

Speaker Change: I enjoyed that slide you mentioned you showed where you have a number of sole source.

Speaker Change: Alloys on the nickel side I'm curious what is the.

Kimberly Fields: I'm curious, what is the duration of the contracts there? Do you? And is there any risk that in the next five years, you'll see a second source? come in on any of those alloys and are any of them much more meaningful? that we should be paying closer attention to in terms of contribution to the business. Yeah, no, I appreciate you asking. There's been a lot of conversation about some of these alloys. So I would say, you know, the duration, I won't share any specifics about a specific customer or contract, but All of these alloys are contracted into the middle of the next decade and many of them go into the middle of 2040.

Speaker Change: Duration of the contracts are due.

Speaker Change: Is there any risk that in the next five years, you'll see a second source.

Speaker Change: Comment on any of those alloys are any of them much more meaningful.

Speaker Change: That we should be paying closer attention to in terms of the contribution of the business today.

Speaker Change: Yeah No I appreciate you asking I know there's been a lot of conversation about some of these alloys. So I would say the duration I won't share any specifics about a specific customer or contract but.

Speaker Change: All of these alloys are contracted into the middle of the next of next decade, and many of them go into the middle of 2014.

Kimberly Fields: Primarily because being a sole source provider of these critical alloys, these customers want to make sure they have the surety of the supply and they make sure they're aligning to us because this is critical, they don't have other alternatives. As I look at these alloys here, the ones that we think about around the Rolls-Royce or I'm sorry the R1000 is an integrated supply chain. We do both the foragings and the powder supply for that and so that is one that we are continuing to optimize the work that we're doing there and it hits both the specialty materials as well as the forage products business and so that's one that we spend a lot of time with them.

Speaker Change: Primarily because being a sole source provider of these critical alloys. These customers want to make sure. They have the surety of supply and they make sure. They are aligning to us because this is critical they don't have other alternatives.

Speaker Change: As I look at these alloys here you know the ones that we think about around the rolls Royce or I'm, sorry, the <unk> 1000.

As an integrated supply chain, we do both the forgings and the powder supply for that and so that is one that we are continuing to optimize the work that we're doing there and then.

Speaker Change: It hits, both the specialty materials as ware as well as the forged products business and so that's one that we spend a lot of time with them. We help co develop their new next generation alloy and we're continuing to work together for to expand that participation.

Kimberly Fields: We help co-develop their new next generation alloy and we're continuing to work together to expand that participation. I just want to mention these alloys as I mentioned they are critical to our customers. There is no substitution for these alloys. There isn't another alloy or another supplier that they can go to so again making sure that they have the capacity, the quality, the consistency to continue to support as you know since they go into the hot section of the jet engine predominantly in the discs that is a very very high frequency MRO part and that's where you're seeing that increase of 35% on jet engine growth.

Speaker Change: Just want to mention these alloys as I mentioned they are critical to our customers. There is no substitution for these alloys, there isn't another alloy or another supplier that they can go to so again, making sure that they have the capacity the quality the consistency to continue to support and ask.

Speaker Change: Since they go into the Hot section of the jet engine predominantly in the desks that is a very very high frequency MRO part and that's where you're seeing that increase of 35% on jet engine growth.

Kimberly Fields: May I just follow up? Is it is it one of those things where there's not a second supplier because there's exclusivity with ATI through the next decade? Or is it there's still the potential for a second supplier, they just haven't qualified? No, with these contracts, they are 100% share or most of them are 100% share. But I think more importantly to remember is the barriers to entry are pretty high. These are difficult alloys to produce. They take a lot of focus and discipline around controlling both the melt and the foraging process, heating times, forming times.

Speaker Change: Maybe just follow up is it isn't one of those things, where there's not a second supplier because it's perfect.

Speaker Change: Lucidity with ATI through the next decade or is it.

Speaker Change: There's still the potential for a second supplier they just haven't qualified yet.

Speaker Change: No with these contracts there are 100% share or most of them are 100% sure, but I think more importantly to remember is the barriers to entry are pretty high. These are difficult alloys to produce they take a lot of focus and discipline around controlling both of them.

Speaker Change: Milk and the forging process heating time, forming times they are again, they're very very difficult.

Kimberly Fields: They are, again, they're very, very difficult, primarily because of the composition that they've put in there to be able to withstand the temperatures as well as the stresses on them in that hot section of the engine. So, our contracts have long sole source, 100% share positions, and they've taken years to develop and perfect the process. Excellent. Thank you. Great job there. Thank you.

Speaker Change: Primarily because of the the composition that they've put in there to be able to withstand the temperatures as well as the stresses on them in that hot section of the engine. So our contracts have.

Speaker Change: Long sole source, 100% share positions and they've taken years to develop and perfect the process.

Speaker Change: Excellent. Thank you great job guys.

Speaker Change: Thank you.

Speaker Change: Thank you next.

Timna Tanners: Our next question comes from Kimna Tanners from Wolf Research. Your line is now open, please go ahead. Yeah, hey, thanks, and good morning.

Speaker Change: Next question comes from Timna Tanners from Wolfe Research. Your line is now open. Please go ahead.

Timna Tanners: Yeah, Hey, Thanks, and good morning I wanted.

Timna Tanners: I wanted to probe a little bit more on the industrial side, not taking away from all the strength, obviously, in A&D, but given that that is one area that you called out, how easy or desirable would it be to try to pivot some of that business to some of the stronger areas? Well, so the strategy of continuing to attack our product mix is something we work on a regular basis. It's one of the reasons why we've been able to really accelerate our focus on aerospace and defense. So as far as the industrial, we're going to continue to look for opportunities to maximize where the demand is as it aligns to our capabilities, and especially our core capabilities.

Timna Tanners: I wanted to probe a little bit more on the industrial side not taken away from all that strength, obviously in A&D, but given that that is one area that you've called out.

Timna Tanners: How easy or desirable would it be to try to pivot some of that business to some of the stronger areas.

Timna Tanners: Well so the strategy of continuing to attacks to attack our product mix is something we work on a regular basis. Its one of the reasons why we've been able to really accelerate our focus on aerospace and defense so as far as as far as the <unk>.

Timna Tanners: <unk>, we're going to continue to look for opportunities to maximize where the demand is as it aligns to our our capabilities and especially our core capabilities.

Kimberly Fields: And so if there's room there for us to create value and it makes sense to the core, of course, we would do that.

Timna Tanners: So if there's if there's room there for us to create value and it makes sense to the core of course, we would do that.

Timna Tanners: Yeah.

Kimberly Fields: And I would just add, that was a big portion of the transformation. Tim, I was just going to add, that was really what our focus on the transformation was, was to move into those higher-margined aerospace and defense alloys. And it's been very successful. You've seen the ANS margins come up over the last three or four years. And, you know, with this announcement, you know, we are now producing almost, we're reaching parity for both of the large air framers. So I think it's been very successful. We'll continue to drive in that direction and go after more opportunities to leverage the strengths of that business.

Speaker Change: And I would just add that made a big portion of the transformation Timna I was just going to add that was really what our focus on the transformation was was to move into those higher margin aerospace and defense alloys, and it's been very successful you've seen D E and F margins come up over the last three or four years and.

Speaker Change: With this announcement, we are now producing almost where we're reaching parity for both of the large air framers. So I'm I think it's been very successful will continue to drive in that direction and go after more opportunities to leverage the strengths of that business.

Kimberly Fields: Now, of course, I know, but you've also mentioned that because of the strength in A&D, you were able to have some leverage with some of the stronger components outside of A&D, so just wondering if that was still the case and wondering if there was opportunity to do further pivoting or if it would require further... I would say we wouldn't expect something like that to take any significant investment. But, you know, most certainly we're looking at opportunities that will more fully utilize our assets. And if there's an opportunity to expand business with customers and leverage other capabilities, we're keen to do that.

Speaker Change: No of course, I know you, but you've also mentioned that because of the strength and Andy are able to have some leverage with some of the stronger components outside of Andy. So I was just wondering if that was still the case and wondering if there was opportunity to do further pivoting or if it would require further investment.

Speaker Change: I would say, we wouldn't expect something like that to take any significant investment, but most certainly we're looking at opportunities that for you more and more fully utilize our assets and if there's an opportunity to expand business.

Speaker Change: With customers and leverage other capabilities, we're keen to do that one other thing to remember now in the you know clearly right now, we're seeing where the industrial demand is kind of pausing.

Kimberly Fields: One other thing to remember now in the, you know, clearly right now we're seeing where the industrial demand is kind of pausing as the distributors, for example, try to evaluate where all this stuff is going to settle in the macro, just like that pauses quickly, it can spring back very quickly. Now, we haven't baked into our guidance, Timna, the assumption that industrial will come back screaming in the third quarter. We've kind of assumed flatness in terms of that demand, but that truly can happen. And so we're looking to maximize the cash generation and bottom line across all of this.

Speaker Change: As the distributors for example.

Speaker Change: Try to evaluate where we're all this stuff is going to settle in the macro.

Timna Tanners: Just like that pauses quickly can spring back very quickly now we havent baked into our guidance timna. The assumption that all that industrial will come back screaming in the third quarter, we've kind of assumed flatness in terms of that demand, but that truly can happen.

Timna Tanners: So we're looking to maximize the cash generation and bottom line.

Timna Tanners: Across all of this.

Kimberly Fields: But keeping some spare capacity for that potential recovery is part of your strategy. Yeah, yeah, I would say, I would say, and, you know, whatever capacity we have, we certainly want to maximize it. We're also continuing to develop new products that open up new opportunities for us.

Timna Tanners: But keeping some spare capacity for that potential.

Timna Tanners: Recovery is as part of your strategy it sounds like.

Yeah, Yeah, I would say I would say.

Timna Tanners: Whatever capacity, we have we certainly want to maximize it. We're also continuing to develop new products that open up new opportunities for US. One example would be.

Kimberly Fields: One example would be, we built a titanium alloy sheet facility in South Carolina in 2024. That facility is in service. That's something we're bringing to the market that, you know, again, is a product offering that opens up not just capabilities to sell that product, but can open up opportunities to sell other products, you know, including some that you might classify as industrial, for example.

Timna Tanners: We've built a.

Timna Tanners: Titanium alloy sheet facility.

Timna Tanners: In South Carolina in 2020 for that facility is in service, that's something we're bringing to the market that.

Timna Tanners: Again, as a product offering that opens up not just capabilities to sell that product, but can open up opportunities to sell other products.

Timna Tanners: Including some that you might classify us as industrial for example.

Kimberly Fields: Okay, I'll leave it there. Thank you.

Timna Tanners: Okay I'll leave it there thank you.

Timna Tanners: Thank you.

Josh Sullivan: Our next question comes from Josh Sullivan from The Benchmark Company. Your line is now open, please go ahead. Thank you, morning. Good morning.

Speaker Change: Next question comes from Josh Sullivan from the Benchmark Company. Your line is now open. Please go ahead.

Josh Sullivan: Hey, good morning.

Speaker Change: Good morning.

Kimberly Fields: What is the buck stop with pass throughs as they relate to tariffs, you know, most of the supply chain outlining passing through tariff costs? And then this morning, another large, historically very vocal European airline talking about cancelling orders of tariffs materially affecting the price of aircraft. How does this evolve? Is there just greater leaning on MRO? Is this figured out or are there just only so many options for lift and that demand will move elsewhere? Maybe it's just too early to know, but curious on your thoughts. Yeah, I think it is early. It's going to evolve.

Speaker Change: What was the Buck stops with pass throughs as they relate to tariffs you know most of the supply chain outline passing through tariff costs and then this morning.

Speaker Change: Large historically very vocal European airline talking about canceling orders of tariffs materially affect the price of aircraft.

Speaker Change: How does this evolve as their spring Theres greater lenient MRO has figured out.

Speaker Change: They are just only so many options for lift and that demand will will move elsewhere, maybe it's just too early to know, but curious on your thoughts.

Speaker Change: Yes, I think it is early it's going to evolve and I've seen you know certain airlines either choose that take delivery or I think I, even heard yesterday in airlines, taking delivery in an Asian country to avoid tariffs.

Kimberly Fields: And I've seen, you know, certain airlines either choose to not take delivery, or I think I even heard yesterday an airline taking delivery in an Asian country to avoid tariffs here in the US and having them just do long haul flights. So yeah, it is very early. We'll have to see, you know, how this develops. But ultimately, you know, demand for air travel, we've seen the ages of the aircraft that are in the industry. That's, you know, not going to, that's not going to reverse without new airplanes. And there's two air framers in the world that are developing and building planes.

Speaker Change: Tariffs here in the U S and having them just do long haul.

Speaker Change: Flights. So yeah. It is very early we will have to see how this develops but ultimately.

Speaker Change: Demand for air travel, we've seen the ages of the aircraft that are in the industry, that's not going to that's not going to reverse without new airplanes, and there's two air framers and the world that are developing and building planes and so I do think that possibly in the short term in the near term you could see people slow down.

Kimberly Fields: And so I do think that possibly in the short term, in the near term, you could see people slow down on taking delivery of planes. I haven't heard, and I'll let, you know, Airbus and Boeing talk about their business specifically, but I haven't heard anything that says that they're seeing any cancellations or huge pushouts or anything that would say in the near term that there's concern. Now, long term, you know, I do think it will depend on how the trade deals continue to evolve and develop. And, you know, if that treaty back from 1979 gets put back in place, which, you know, the aerospace industry being very global, and I think Many would say successful because of that treaty that that would help resume, resume deliveries.

Speaker Change: On taking delivery of planes.

Speaker Change: Haven't heard and I'll, let you know Airbus and Boeing talk about their business, specifically, but I haven't heard anything that says that they're seeing any cancellations or huge push outs or anything that would say in the near term that there's concern now long term you know I do.

Speaker Change: Do you think it will depend on.

How the trade deals continue to evolve and develop and you know if that treaty back from 1979 get put back in place, which you know the aerospace industry being is very global and I think.

Speaker Change: Matti would say successful because of that treaty that that would help resume resume deliveries, but right now as I mentioned in my prepared remarks, we've seen no push outs, we've seen no cancellations everybody's continuing frankly to try to catch up with the demand and you know as they start to ramp.

Kimberly Fields: But right now, as I mentioned, in my prepared remarks, we've seen no push outs, we've seen no cancellations, everybody's continuing, frankly, to try to catch up with the demand. And you know, as they start to ramp the wide body, that's going to put even more demand into the system.

Speaker Change: <unk> body, that's going to put even more demand into the system.

Speaker Change: Got it.

Kimberly Fields: And then maybe just on that that wide body comment, you know, as we look at the airframe inventory drawdowns currently, and then just as you look at that skyline expectation, you know, what inning do you think we're in the D stock right I think early. I do think that they've had some good early success with their ramp and, you know, and that's good news for the whole industry. As I look at it, we've seen some small emergent demand and orders, but I think that's more offsetting where they might not have demand, but overall they're working that inventory level down and right-sizing it.

And then maybe just on that wide body comment as we look at the airframe inventory Drawdowns currently and then just as you look at that Skyline expectation.

Speaker Change: Do you think we are in the destock right now.

Speaker Change:

Speaker Change: I think early I do think that they've had some good early success with their ramp and.

Speaker Change: And that's all that's good news for the whole industry as I look at it we've seen some small emergent demand and orders, but I think that's more offsetting where they might not have demand, but overall, they're working that inventory level down and and right sizing. It. So as I look at opportunities are the faster they ramp what I would.

Kimberly Fields: So as I look at the faster they ramp, what I would say is that pulls, you know, and puts opportunity for 2026. And that's where we would start to see those orders coming in and that demand start to ramp much quicker than maybe that our outlook has today. Great.

Speaker Change: Say that pulls you know and puts opportunity for 2026, and that's where we would start to see those orders coming in and that demand start to ramp much quicker than maybe that our outlook has today.

David Weston: Thank you for the time. Thank you.

Speaker Change: Great. Thank you for the time.

Speaker Change: Sure.

Speaker Change: Thank you. We currently have no further questions. So I'll hand back to David for closing remarks.

David Weston: We currently have no further questions so I'll hand back to David for closing remarks. Thank you. We just want to thank everyone for their time today. We're very pleased with our first quarter results. Please reach out to Clay and myself and the Vest Relations team if you have any further questions. Have a great day. This concludes today's call. Thank you for joining. You may now disconnect your line.

David Westin: Thank you I just wanted to thank everyone for their time today, we're very pleased with our first quarter results. Please reach out to clay and myself and the Investor Relations team. If you have any further questions have a great day.

David Westin: This concludes today's call. Thank you for joining you may now disconnect your lines.

David Westin: Yeah.

David Westin: [music].