Q1 2026 Carpenter Technology Corp Earnings Call
Speaker #3: Thank you for standing by . At this time , I would like to welcome everyone to today's CARPENTER TECHNOLOGY CORP Q1 fiscal Year 26 earnings presentation .
Operator: Thank you for standing by. At this time, I would like to welcome everyone to today's Carpenter Technology Q1 Fiscal Year 2026 earnings presentation. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. If you'd like to withdraw your question, simply press star one again. Thank you. I would now like to turn the call over to John Huyette, Vice President, Investor Relations. John?
Speaker #3: All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question and answer session .
Speaker #3: If you'd like to ask a question during this time , simply press star followed by the number one on your telephone keypad . Once again , star one .
Speaker #3: And if you'd like to withdraw your question , simply press star one again . Thank you . I would now like to turn the call over to John Hewitt , Vice President , Investor Relations .
Speaker #3: John .
Speaker #4: Thank you . Operator . Good morning , everyone , and welcome to the CARPENTER TECHNOLOGY CORP earnings conference call for the fiscal 2026 first quarter ended September 30th , 2025 .
John Huyette: Thank you, Operator. Good morning, everyone, and welcome to the Carpenter Technology Corporation earnings conference call for the fiscal 2026 first quarter ended September 30, 2025. This call is also being broadcast over the internet along with presentation slides. For those of you listening by phone, you may experience a time delay in slide movement. Speakers on the call today are Tony Thene, Chairman and Chief Executive Officer, and Tim Lain, Senior Vice President and Chief Financial Officer. Statements made by management during this earnings presentation that are forward-looking statements are based on current expectations. Risk factors that could cause actual results to differ materially from these forward-looking statements can be found in Carpenter Technology Corporation's most recent SEC filings, including the company's report on Form 10-K for the year ended June 30, 2025, and the exhibits attached to that filing.
Speaker #4: This call is also being broadcast over the internet , along with presentation slides . For those of you listening by phone , you may experience a time delay in slide movement .
Speaker #4: Speakers on the call today are Tony Tan , Chairman and chief executive Officer . And Tim Lane , senior vice president and chief financial officer .
Speaker #4: Statements made by management during this earnings presentation that are forward looking statements are based on current expectations . Risk factors that could cause actual results to differ materially from these forward looking statements can be found in CARPENTER TECHNOLOGY CORP .
Speaker #4: Most recent SEC filings , including the company's report on Form 10-K for the year ended June 30th , 2025 and the exhibits attached to that filing .
Speaker #4: Please also note that in the following discussion , unless otherwise noted . When management discussed the sales or revenue that reference excludes surcharge when referring to operating margins that is , based on adjusted operating income , excluding special items and sales .
John Huyette: Please also note that in the following discussion, unless otherwise noted, when management discusses the sales or revenue, that reference excludes surcharge. When referring to operating margins, that is based on adjusted operating income, excluding special items and sales excluding surcharge. I will now turn the call over to Tony.
Speaker #4: Excluding surcharge . I will now turn the call over to Tony .
Speaker #5: Thank you John , and good morning to everyone . I will begin on slide four with a review of our safety performance . We ended the quarter with a total case incident rate of 1.6 .
Tony Thene: Thank you, John, and good morning to everyone. I will begin on slide four with a review of our safety performance. We ended the quarter with a total case incident rate of 1.6. As we continue to drive improvement in multiple leading indicators, I expect to see continued progress. As always, we remain committed to our ultimate goal, a zero-injury workplace. Let's turn to slide five for an overview of our first quarter performance. The first quarter was a great start to fiscal year 2026. Let me highlight the four major takeaways. One, record earnings. In the quarter, we generated $153 million in adjusted operating income, exceeding the fourth quarter of fiscal year 2025, which was then a record quarter. It is a 31% increase over the first quarter of fiscal year 2025, a meaningful step up year over year.
Speaker #5: As we continue to drive improvement in multiple leading indicators , I expect to see continued progress . As always , we remain committed to our ultimate goal a zero injury workplace .
Speaker #5: Let's turn to slide five for an overview of our first quarter performance . First quarter was a great start to fiscal year 2026 .
Speaker #5: Let me highlight the four major takeaways . One record earnings in the quarter . We generated 153 million in adjusted operating income , exceeding the fourth quarter of fiscal year 2025 , which was then a record quarter .
Speaker #5: And it is a 31% increase over first quarter of fiscal year 2025 , a meaningful step up year over year . The earnings exceeded our strong first quarter guidance , driven by increased productivity , product mix , optimization and pricing actions .
Tony Thene: The earnings exceeded our strong first quarter guidance, driven by increased productivity, product mix optimization, and pricing actions, a positive step towards our full fiscal year 2026 earnings outlook. Two, expanding operating margins. The SAO segment continued to expand margins, reaching an adjusted margin of 32% in the quarter. The 32% margin compares to 26.3% a year ago and 30.5% in the prior quarter. We do not believe this is the peak margin level over the long term. Our ability to continue to expand margins can be attributed to our solid execution, strong market position, and unique capacity and capabilities. As a result of the expanding margins, the SAO segment recorded $170.7 million in operating income, an increase of 27% year over year and an all-time record for the segment. Three, strengthening market demand.
Speaker #5: A positive step towards our full fiscal year 2026 earnings outlook, contributing to expanding operating margins. The Psao segment continued to expand margins, reaching an adjusted margin of 32% in the quarter.
Speaker #5: The 32% margin compares to 26.3% a year ago , and 30.5% in the prior quarter . And we don't believe this is the peak margin level over the long term .
Speaker #5: Our ability to continue to expand margins can be attributed to our solid execution , strong market position , and unique capacity , and capabilities as a result of the expanding margins .
Speaker #5: The Psao segment recorded 170.7 million in operating income , an increase of 27% year over year , and an all time record for the segment .
Speaker #5: Three strengthening market demand . We continue to see demand environment strengthen , especially in the aerospace supply chain , as it gains confidence in the Boeing and Airbus build rate ramp .
Tony Thene: We continue to see the demand environment strengthen, especially in the aerospace supply chain as it gains confidence in the Boeing and Airbus build rate ramp. As a result, September was the highest order intake month in over a year. Specifically, in the quarter, we saw bookings for aerospace and defense accelerate, up 23% over the previous quarter. Four, pricing continues to be a tailwind. In this strengthening demand environment, our pricing remains elevated and consistently increasing, as evidenced by our financial results. Our customers continue to be focused on securing their supply of our critical materials. As evidenced in the last quarter, we negotiated five large LTAs with aerospace customers with significant price increases, reflecting their strong outlook on the market.
Speaker #5: As a result , September was the highest order intake month in over a year , specifically , in the quarter , we saw bookings for aerospace and defense accelerate up 23% over the previous quarter .
Speaker #5: For pricing continues to be a tailwind in this strengthening demand environment . Our pricing remains elevated and consistently increasing as evidenced by our financial results .
Speaker #5: Our customers continue to be focused on securing their supply of our critical materials as evidenced in the last quarter . We negotiated five large ltas with aerospace customers with significant price increases , reflecting their strong outlook on the market .
Speaker #5: If I were to write the headline for this quarter's performance , it would be CARPENTER TECHNOLOGY CORP delivers all time record quarterly earnings driving Sao margins to an impressive 32% even in a quarter where they smartly completed planned maintenance activities in addition , they shatter the narrative held by some of a seasonally weak quarter , a weakening demand environment and decreasing pricing power .
Tony Thene: If I were to write the headline for this quarter's performance, it would be Carpenter Technology Corporation delivers all-time record quarterly earnings, driving SAO margins to an impressive 32%, even in a quarter where they smartly completed planned maintenance activities. In addition, they shatter the narrative held by some of a seasonally weak quarter, a weakening demand environment, and decreasing pricing power by achieving record earnings, strong sequential growth in aerospace and defense orders, and negotiating five aerospace LTAs with substantial price increases. Let's turn to slide six and a closer look at first quarter sales and market dynamics. In the first quarter of fiscal year 2026, our total sales excluding raw material surcharge were up 4% over the first quarter of fiscal year 2025 and down 3% sequentially.
Speaker #5: By achieving record earnings, strong sequential growth in aerospace and defense orders, and negotiating five aerospace LTAs with substantial price increases, let's turn to slide six and take a closer look at first quarter sales and market dynamics.
Speaker #5: In the first quarter of fiscal year 2026 , our total sales excluding raw material surcharge , were up 4% over the first quarter of fiscal year , 2025 .
Speaker #5: And down 3% sequentially . As expected , the sequential sales decline was driven by the planned maintenance outages . We discussed on the last earnings call .
Tony Thene: As expected, the sequential sales decline was driven by the planned maintenance outages we discussed on the last earnings call, offset by increased productivity, improved product mix, and pricing actions. Sales in the aerospace and defense in-use market were up 1% sequentially and up 11% year over year. Notably, sales in the engine submarket were up 14% sequentially. Our engine customers continue to be concerned about surety of supply as they navigate high MRO demand while managing the ongoing and accelerating build rate ramp. Across all submarkets, the aerospace supply chain continues to increase activity as build rates ramp and confidence grows in the OEM's ability to perform. As evidence of this, we saw aerospace and defense bookings accelerate in the quarter, increasing 23% sequentially. As I mentioned earlier, we also completed five LTA negotiations with aerospace customers in the quarter, all with significant price increases.
Speaker #5: Offset by increased productivity , improved product mix , and pricing actions . Sales in the aerospace and defense and Use market were up 1% sequentially and up 11% year over year .
Speaker #5: Notably , sales in the engine submarket were up 14% sequentially . Our engine customers continue to be concerned about surety of supply as they navigate high MRO demand , while managing the ongoing and accelerating build rate ramp across all submarkets .
Speaker #5: The Aerospace supply chain continues to increase activity as build rates ramp and confidence grows in the OEMs ability to perform . As evidence of this , we saw aerospace and defense bookings accelerate in the quarter , increasing 23% sequentially .
Speaker #5: And as I mentioned earlier , we also completed five LTA negotiations with aerospace customers in the quarter , all with significant price increases .
Speaker #5: Moving on to the medical and use market , our sales were down 20% sequentially and 16% compared to the prior year . First quarter .
Tony Thene: Moving on to the medical in-use market, our sales were down 20% sequentially and 16% compared to the prior year first quarter. The large majority of the sequential decrease is from medical distribution customers as they continue to see quarter-over-quarter volatility. Recall that coming out of COVID, there was a rapid recovery in patient procedures, generating significant activity in the supply chain. As the medical field caught up on the backlog of procedures and growth rates normalized, the supply chain, especially our distribution customers, has been working to manage working capital levels. As we've highlighted in previous quarters, this has impacted a portion of our medical business and it is continuing longer than anticipated. Even so, we have still been able to produce record quarterly earnings and see the medical market as an increasing tailwind going forward.
Speaker #5: The large majority of the sequential decrease is from medical distribution customers , as they continue to see quarter over quarter volatility . Recall that coming out of Covid , there was a rapid recovery in patient procedures , generating significant activity in the supply chain as the medical field caught up on the backlog of procedures and growth rates normalized the supply chain , especially our distribution customers , has been working to manage working capital levels as we've highlighted in previous quarters , this has impacted a portion of our medical business , and it is continuing longer than anticipated .
Speaker #5: Even so, we have still been able to produce record quarterly earnings and see the medical market as an increasing tailwind going forward.
Speaker #5: Our medical customers report a positive long term outlook on the market as the fundamental demand drivers remain strong . Further , our broad portfolio of medical alloys is unique and critical to our customers focus on improving patient outcomes .
Tony Thene: Our medical customers report a positive long-term outlook on the market as the fundamental demand drivers remain strong. Further, our broad portfolio of medical alloys is unique and critical to our customers' focus on improving patient outcomes. Shifting to the energy in-use market, sales were down 5% sequentially and up 8% year over year. As discussed during our last several earnings calls, the energy market is currently driven by the accelerating demand for power generation, and we see this only getting stronger with order intake up 41% in the quarter. As we have stated before, sales in the power generation submarket will fluctuate quarter to quarter due to the frequency of orders and our practice of strategically slotting them into our production process.
Speaker #5: Shifting to the energy end use market , sales were down 5% sequentially and up 8% year over year . As discussed during our last several earnings calls , the energy market is currently driven by the accelerating demand for power generation , and we see this only getting stronger with order intake up 41% in the quarter .
Speaker #5: As we have stated before , sales in the power generation submarket will fluctuate quarter to quarter due to the frequency of orders and our practice .
Speaker #5: A strategically slotting them into our production process. Of course, the key in the U.S. market for our increasing profitability is aerospace and defense, where we see demand strengthening, as evidenced by accelerating order intake and increasing pricing actions.
Tony Thene: Of course, the key in-use market for our increasing profitability is aerospace and defense, where we see demand strengthening as evidenced by accelerating order intake and increasing pricing actions. Altogether, we are operating in a strengthening demand environment across the high-value in-use markets that we believe will drive meaningful growth in both the near term and long term. Now, I will turn it over to Tim for the financial summary.
Speaker #5: Altogether , we are operating in a strengthening demand environment across the high value in use markets that we believe will drive meaningful growth in both the near term and long term .
Speaker #5: Now , I will turn it over to Tim for the financial summary .
Speaker #4: Thanks , Tony .
Tim Lain: Thanks, Tony. Good morning, everyone. I'll start on the income statement summary. Starting at the top, sales excluding surcharge increased 4% year over year on 10% lower volume. Sequentially, sales were down 3% on 5% lower volume. The improving productivity, product mix, and pricing are evident in our gross profit, which increased to $216.4 million in the current quarter, up 1% sequentially and 23% from the same quarter last year. SG&A expenses were $63.1 million in the first quarter, essentially flat sequentially and up slightly from the same quarter last year. The SG&A line includes corporate costs, which were $26.6 million. This is flat sequentially and up slightly when excluding the special item from the first quarter of fiscal year 2025. For the second quarter of fiscal year 2026, we expect corporate costs to be about $25 million, which is in line with our quarterly average of fiscal year 2025.
Speaker #6: Good morning everyone . I'll start on the income statement . Summary starting at the top . Sales excluding surcharge increased 4% year over year .
Speaker #6: On 10% lower volume . Sequentially , sales were down 3% on 5% lower volume . The improving productivity product mix and pricing are evident in our gross profit , which increased to 216.4 million in the current quarter .
Speaker #6: Up 1% sequentially and 23% from the same quarter last year . SG&A expenses were 63.1 million in the first quarter , essentially flat sequentially and up slightly from the same quarter last year .
Speaker #6: Yesterday , line includes corporate costs , which were 26.6 million . This is flat sequentially and up slightly when excluding the special item from the first quarter of fiscal year 2025 .
Speaker #6: For the second quarter of fiscal year 2026 , we expect corporate costs to be about 25 million , which is in line with our quarterly average of fiscal year 2025 .
Speaker #6: Adjusted operating income was 153.3 million in the current quarter , which is 31% higher than the 117.2 million in our first quarter of fiscal year 2025 , and up 1% from our recent fourth quarter .
Tim Lain: Adjusted operating income was $153.3 million in the current quarter, which is 31% higher than the $117.2 million in our first quarter of fiscal year 2025 and up 1% from our recent fourth quarter. As Tony mentioned earlier, this represents another record quarterly operating income result, breaking the previous record set last quarter. This is even more impressive considering we were able to deliver the results in a quarter with planned maintenance activities. Moving on to our effective tax rate, which was 15.4% in the current quarter. This quarter's effective tax rate was lower than anticipated and comparable to the same quarter last year due to discrete tax benefits associated with the vesting of certain equity awards in both quarters.
Speaker #6: As Tony mentioned earlier , this represents another record quarterly operating income result , breaking the previous record set last quarter . This is even more impressive considering we were able to deliver the results in a quarter with planned maintenance activities .
Speaker #6: Moving on to our effective tax rate , which was 15.4% in the current quarter . This quarter's effective tax rate was lower than anticipated and comparable to the same quarter last year due to discrete tax benefits associated with the vesting of certain equity awards in both quarters for the balance of the fiscal year , we expect the effective tax rate to be between 22 to 23% , and the effective tax rate for the full fiscal year 2026 is expected to be on the low end of the full year guidance .
Tim Lain: For the balance of the fiscal year, we expect the effective tax rate to be between 22% to 23%, and the effective tax rate for the full fiscal year 2026 is expected to be on the low end of the full-year guidance we provided of 21% to 23%. Finally, the earnings per diluted share was $2.43 for the quarter. Again, our recent first quarter was a record quarter for profitability. Our teams continue to drive higher profitability with the manufacturing organization's focus on increasing productivity while managing the product mix to optimize profit and realizing the benefits of pricing actions that we continue to pursue and capture. Now turning to more detail on each of the segments, starting with our SAO segment. Net sales excluding surcharge for the first quarter were $533.9 million.
Speaker #6: We provided earnings growth of 21% to 23%. Finally, the earnings per diluted share were $2.43 for the quarter. Again, this recent first quarter was a record quarter for profitability.
Speaker #6: Our teams continue to drive higher profitability with the manufacturing organization’s focus on increasing productivity while managing the product mix to optimize profit and realizing the benefits of pricing actions that we continue to pursue and capture.
Speaker #6: Now , turning to more detail on each of the segments , starting with our Sao segment net sales , excluding surcharge for the first quarter were 533.9 million compared to the same quarter last year .
Tim Lain: Compared to the same quarter last year, sales were up 5% on 11% lower volume, reflecting the impact of product mix optimization and pricing actions. Sequentially, sales were down 3% on 5% lower volume. The sequential decline in volume was in line with expectations given the planned maintenance activities in the quarter. SAO reported operating income of $170.7 million in the first quarter. I think the most impressive measure for the SAO segment is the adjusted operating margin of 32%. This marks the 15th consecutive quarter of margin expansion. The record margin is being driven by the growth levers that we consistently highlight, specifically the SAO team's ability to increase productivity at key work centers to drive an improving mix while realizing higher selling prices.
Speaker #6: Sales were up 5% on 11% lower volume, reflecting the impact of product mix optimization and pricing actions sequentially. Sales were down 3% on 5% lower volume.
Speaker #6: The sequential decline in volume was in line with expectations, given the planned maintenance activities in the quarter. Sao reported operating income of $170.7 million in the first quarter, but I think the most impressive measure for the Sao segment is the adjusted operating margin of 32%.
Speaker #6: This marks the 15th consecutive quarter of margin expansion . The record margin is being driven by the growth levers that we consistently highlight , specifically , the Sao teams ability to increase productivity at key work centers to drive an improving mix while realizing higher selling prices .
Speaker #6: These areas are as relevant as ever as we actively manage our production schedules to optimize the highest value margins while carefully managing costs and executing thoughtful planned maintenance activities .
Tim Lain: These areas are as relevant as ever as we actively manage our production schedules to optimize the highest value margins while carefully managing costs and executing thoughtful planned maintenance activities. Tony will talk in detail about the pricing environment. Altogether, we continue to see opportunities to expand profitability and margin further as we execute against our growth levers. Looking ahead to our upcoming second quarter of fiscal year 2026, we anticipate SAO will generate operating income in the range of $168 million to $172 million, in line with the record first quarter. The SAO guidance for the second quarter considers our available effective capacity. This accounts for the impact of time off for the holidays, which is important to our employees, and downtime associated with upgrades to key testing work centers.
Speaker #6: Tony will talk in detail about the pricing environment . Altogether , we continue to see opportunities to expand profitability and margin further as we execute against our growth levers .
Speaker #6: Looking ahead to our upcoming second quarter of fiscal year 2026, we anticipate Sao will generate operating income in the range of $168 million to $172 million, in line with the record first quarter.
Speaker #6: The Sao guidance for the second quarter considers our available effective capacity . This accounts for the impact of time off for the holidays , which is important to our employees , and downtime associated with upgrades to key testing work centers .
Speaker #6: This is an area where it makes sense to spend modest capital to upgrade certain equipment to ensure capacity is available to support our highest value materials, which means we see significant payback on small investments.
Tim Lain: This is an area where it makes sense to spend modest capital to upgrade certain equipment to ensure capacity is available to support our highest value materials, which means we see significant payback on small investments. Now turning to slide 10 and our PEP segment results. Net sales excluding surcharge in the first quarter of fiscal year 2026 were $87.2 million, down 10% sequentially, and down 6% from the same quarter a year ago. In the current quarter, PEP reported operating income of $9.4 million compared with $11.7 million in the fourth quarter of fiscal year 2025 and $7.3 million in the same quarter a year ago. The year-over-year increase in profitability despite lower sales reflects the impact of a favorable shift in product mix. We currently anticipate the PEP segment's operating income to be relatively flat in the second quarter of fiscal year 2026.
Speaker #6: Now turning to slide ten and our Pep segment results . Net sales , excluding surcharge in the first quarter of fiscal year 2026 were 87.2 million , down 10% sequentially and down 6% from the same quarter a year ago .
Speaker #6: In the current quarter , Pep reported operating income of 9.4 million , compared with 11.7 million in the fourth quarter of fiscal year 2025 and 7.3 million in the same quarter a year ago .
Speaker #6: The year over year increase in profitability , despite lower sales , reflects the impact of a favorable shift in product mix we currently anticipate the Pep segment's operating income to be relatively flat in the second quarter of fiscal year 2026 .
Speaker #6: A few additional comments to keep in mind . Pep represents roughly 6% of the company's overall segment profitability on a trailing 12 month basis .
Tim Lain: A few additional comments to keep in mind. PEP represents roughly 6% of the company's overall segment profitability on a trailing 12-month basis. In other words, SAO dwarfs PEP, and SAO will continue to be the growth driver for Carpenter Technology Corporation. From an outlook perspective, we anticipate PEP results will improve, but would point out that our total company outlook is based largely on our growth expectations for the SAO segment, which will continue to outpace PEP performance. With that said, the PEP business is a small but strategic part of Carpenter Technology Corporation's portfolio. We believe that PEP can be a growth accelerator in the future. Before we move to cash, I just wanted to pull together the pieces that make up our outlook for operating income in the second quarter of fiscal year 2026. We anticipate total operating income of $152 million to $156 million.
Speaker #6: In other words, Sao dwarfs Pep, and Sao will continue to be the growth driver for Carpenter Technology Corp. From an outlook perspective, we anticipate Pep results will improve, but we would point out that our total company outlook is based largely on our growth expectations for the Sao segment, which will continue to outpace Pep's performance.
Speaker #6: With that said , the Pep business is a small but strategic part of Carpenter portfolio . We believe that Pep can be a growth accelerator in the future .
Speaker #6: Before we move to cash, I just wanted to pull together the pieces that make up our outlook for operating income in the second quarter of fiscal year 2026.
Speaker #6: We anticipate total operating income of 152 million to 156 million . This includes Sao at 168 to 172 million . Pep , roughly at 9 million .
Tim Lain: This includes SAO at $168 million to $172 million, PEP roughly at $9 million, and corporate costs at $25 million. Now turning to the next slide to talk about our cash generation and capital allocation priorities. In the current quarter, we generated $39.2 million of cash from operating activities and spent $42.6 million on capital expenditures, which resulted in negative adjusted free cash flow of $3.4 million. For fiscal year 2026, we continue to anticipate generating between $240 million to $280 million of adjusted free cash flow, which includes $175 million to $185 million of spending for our Brownfield capacity expansion project. To be clear, the Brownfield capital expenditures are on top of the $125 million of annual capital expenditures to fund our normal maintenance and sustaining capital, as well as smaller growth projects. As an update on the Brownfield expansion project, construction activities are in full swing.
Speaker #6: And corporate costs at 25 million . Now turning to the next slide to talk about our cash generation and capital allocation priorities in the current quarter , we generated 39.2 million of cash from operating activities and spent 42.6 million on capital expenditures , which resulted in negative adjusted free cash flow of 3.4 million for fiscal year 2026 .
Speaker #6: We continue to anticipate generating between 240 million to 280 million of adjusted free cash flow , which includes 175 million to 185 million of spending .
Speaker #6: For our brownfield capacity expansion project . To be clear , the brownfield capital expenditures are on top of the 125 million of annual capital expenditures to fund our normal maintenance and sustaining capital , as well as smaller growth projects .
Speaker #6: As an update on brownfield expansion project construction activities are in full swing . Site work is underway . Currently focused on building foundation work at Our Athens , Alabama site .
Tim Lain: Site work is underway, currently focused on building foundation work at our Athens, Alabama site. The project is currently on budget and on schedule. As the project progresses, we expect the capital spending will begin to accelerate in the second half of fiscal year 2026 as construction activities broaden and equipment delivery and installation begins in earnest. Moving on to our capital allocation philosophy. As we've discussed before, our primary focus areas for capital deployment are investing cash in attractive and accretive growth and returning cash to shareholders. Our commitment to investing for growth is evident in our Brownfield expansion project I just mentioned. In terms of returning cash to shareholders, we continue to execute against our $400 million stock buyback authorization. In the current quarter, we repurchased $49.1 million of our shares, bringing the cumulative total to $151 million.
Speaker #6: The project is currently on budget and on schedule , as the project progresses . We expect the capital spending will begin to accelerate in the second half of fiscal year 2026 , as construction activities broaden and equipment delivery and installation begins in earnest .
Speaker #6: Moving on to our capital allocation philosophy, as we've discussed before, our primary focus areas for capital deployment are investing cash in attractive and accretive growth, and returning cash to shareholders.
Speaker #6: Our commitment to investing for growth is evident in our brownfield expansion project . I just mentioned in terms of returning cash to shareholders , we continue to execute against our $400 million stock buyback authorization in the current quarter .
Speaker #6: We repurchased $49.1 million of our shares , bringing the cumulative total to $151 million . In addition to the buyback program , we also continue to fund a recurring and long standing quarterly dividend .
Tim Lain: In addition to the buyback program, we also continue to fund a recurring and long-standing quarterly dividend. Our capital allocation philosophy is enabled by our healthy liquidity and strong balance sheet. Liquidity, as of the most recent quarter, is $556.9 million, including $208 million of cash and $348.9 million of available borrowings under our credit facility. Our credit metrics remain very strong, with net debt to EBITDA ratio remaining well below 1x. Altogether, we believe our strong balance sheet and outlook for significant cash generation positions us well to fund continued growth and deliver significant shareholder returns. With that, I will turn the call back to Tony.
Speaker #6: Our capital allocation philosophy is enabled by our healthy liquidity and strong balance sheet liquidity . As of the most recent quarter is 556.9 million , including 208 million of cash and 348.9 of available borrowings .
Speaker #6: Under our credit facility . Our credit metrics remain very strong , with net debt to EBITDA ratio remaining well below one times . Altogether , we believe our strong balance sheet and outlook for significant cash generation positions us well to fund continued growth and deliver significant shareholder returns .
Speaker #6: With that, I will turn the call back to Tony.
Speaker #5: Thanks , Tim . Over this past quarter , a couple of important topics have garnered the attention of the investment community . I would like to address them to make sure CARPENTER TECHNOLOGY CORP position is 100% clear .
Tony Thene: Thanks, Tim. Over this past quarter, a couple of important topics have garnered the attention of the investment community. I would like to address them to make sure Carpenter Technology Corporation's position is 100% clear. There has been much written on the current pricing environment in the nickel-based superalloy market. We have two basic categories that we break our customers into: those that work with us under long-term agreements and those that don't have long-term agreements with us, which we call transactional. Customers in both categories are extremely important and strategic. The customers who do not work with us through a long-term agreement are transactional customers. In almost every case, our long-standing customers with highly specialized and exact specifications. Quoting for these transactional customers requires significant time and effort, with multiple levels of internal technical reviews and discussions with the customer.
Speaker #5: There has been much written on the current pricing environment in the nickel-based superalloy market. We have two basic categories that we break our customers into.
Speaker #5: Those that work with us under long term agreements , and those that don't have long term agreements with us , which we call transactional customers .
Speaker #5: In both categories are extremely important and strategic . The customers who do not work with us through a long term agreement , our transactional customers , in almost every case , our long standing customers with highly specialized and exact specifications .
Speaker #5: Quoting for these transactional customers requires significant time and effort . With multiple levels of internal technical reviews and discussions with the customer . As a result , we do not entertain spot pricing as it is typically defined .
Tony Thene: As a result, we do not entertain spot pricing as it is typically defined. There is not a moving daily price, and we do not typically quote for immediate or short-term delivery. In fact, our transactional business pricing is generally higher than LTA pricing. Certainly, we do not provide transactional customers with better pricing than our LTA customers, as that would be illogical. For customers who work with us through long-term agreements, their primary focus during renewal discussions remains the surety of supply of our products. With each contract renewal, we have been able to realize price increases that demonstrate the value of our products in the supply chain and reflect the underlying supply-demand imbalance that is only expected to tighten in the future.
Speaker #5: There is not a moving daily price , and we do not typically quote for immediate or short term delivery . In fact , our transactional business pricing is generally higher than LTA pricing .
Speaker #5: Certainly , we do not provide transactional customers with better pricing than our LTA customers , as that would be illogical for customers who work with us through long term agreements .
Speaker #5: Their primary focus during renewal discussions remains the surety of supply of our products , with each contract renewal . We have been able to realize price increases that demonstrate the value of our products in the supply chain and reflect the underlying supply , demand imbalance that is only expected to tighten in the future .
Speaker #5: I will note again to support our view of the pricing dynamic for our materials that in the quarter we completed negotiations on five ltas with aerospace customers with significant price increases .
Tony Thene: I will note again to support our view of the pricing dynamic for our materials that in the quarter we completed negotiations on five LTAs with aerospace customers with significant price increases. It is also important to note that in turn, our customers also benefit greatly as they are getting surety of supply of our products, which is highly valuable to them in an extraordinarily high demand environment. You can see the results of our pricing actions in our SAO segment financials as our total sales dollars per shipment pound remained elevated and increased significantly year over year. For more insight, I will note that the year-over-year increase is 10% higher for the aerospace and defense in-use market. The results demonstrate we are consistently increasing the pricing level of our aerospace products.
Speaker #5: It is also important to note that , in turn , our customers also benefit greatly as they are getting surety of supply of our products , which is highly valuable to them in an extraordinarily high demand environment .
Speaker #5: You can see the results of our pricing actions in our Sao segment. Financials, as our total sales dollars per shipment, pound remained elevated and increased significantly year over year.
Speaker #5: For more insight, I will note that the year-over-year increase is ten percentage points higher for the aerospace and defense in-use market.
Speaker #5: The results demonstrate we are consistently increasing the pricing level of our aerospace products . If we were discounting aerospace products or seeing immense pricing pressure , you would have seen a significant sequential decrease in the price per pound .
Tony Thene: If we were discounting aerospace products or seeing immense pricing pressure, you would have seen a significant sequential decrease in the price per pound. Clearly, that is not the case. With that said, it is important to repeat something that I've said before. Price per pound may not move in a linear fashion quarter to quarter as a product mix in any given quarter influences results. However, we expect that the pricing trend will continue to be favorable. Final point on this topic. We have communicated publicly many times and state again today that we believe pricing actions will continue to be a positive tailwind into the future due to the supply-demand imbalance that exists today and that is expected to intensify in the future for nickel-based superalloys.
Speaker #5: Clearly , that is not the case . With that said , it is important to repeat something that I have said before . Price per pound may not move in a linear fashion .
Speaker #5: Quarter to quarter . As a product mix in any given quarter influences results . However , we expect that the pricing trend will continue to be favorable .
Speaker #5: Final point on this topic . We have communicated publicly many times and state again today that we believe pricing actions will continue to be a positive tailwind into the future due to the supply demand imbalance that exists today and that is expected to intensify in the future .
Speaker #5: For nickel based superalloys . In addition , another topic that has been written about is the Aerospace demand environment and more specifically , the potential weakness in the titanium market .
Tony Thene: In addition, another topic that has been written about is the aerospace demand environment and more specifically the potential weakness in the titanium market. Let me address the titanium portion first. Carpenter Technology Corporation does not mill titanium or produce large titanium forgings for aerospace structural applications. To be very clear, any current or future weakness in the titanium raw material or structural markets has no material impact on Carpenter Technology Corporation. In stark contrast to titanium raw materials, nickel-based superalloys, which is our primary focus, are in sharp supply, have only a few qualified producers globally with high barriers to entry and rapidly accelerating demand. As I mentioned earlier, our aerospace and defense in-use market orders have been steadily increasing over the last couple of quarters. In this quarter, they were up 23% sequentially. That is after a similar sequential increase in the prior quarter.
Speaker #5: Let me address the titanium portion first . CARPENTER TECHNOLOGY CORP does not melt titanium or produce large titanium forgings for aerospace structural applications .
Speaker #5: To be very clear , any current or future weakness in the titanium raw material or structural markets has no material impact on CARPENTER TECHNOLOGY CORP .
Speaker #5: In stark contrast to titanium , raw materials , nickel based superalloys , which is our primary focus , are in short supply , have only a few qualified producers globally with high barriers to entry , and rapidly accelerating demand .
Speaker #5: As I mentioned earlier , our aerospace and defense induced market orders have been steadily increasing over the last couple of quarters . In this quarter , they were up 23% sequentially .
Speaker #5: That is , after a similar sequential increase in the prior quarter . This strong sequential growth in bookings was driven by increased volume , which is a very encouraging sign .
Tony Thene: This strong sequential growth in bookings was driven by increased volume, which is a very encouraging sign, and continued pricing actions. Obviously, the accelerating bookings is a very positive trend developing and signals continuing expansion as the airframers drive for higher build rates. To support this position, let me provide more color on what we are seeing in each of the aerospace submarkets. I will start by saying that in general, the tone with all of our aerospace customers is one of increasing positivity as they see large demand on the horizon. Our aerospace structural customers experience the most disruption from the OEM build rate issues we have seen over the last year and a half. This is due to the relatively low MRO needs on structural versus engine parts. Over this period of time, they have been carefully managing their near-term working capital needs.
Speaker #5: And continued pricing actions . Obviously , the accelerating bookings is a very positive trend . Developing and signals continuing expansion as the airframes drive for higher build rates to support this position .
Speaker #5: Let me provide more color on what we are seeing in each of the aerospace submarkets . I will start by saying that in general , the tone with all of our aerospace customers is one of increasing positivity as they see large demand on the horizon .
Speaker #5: Our aerospace structural customers experienced the most disruption from the OEM build rate issues we have seen over the last year and a half.
Speaker #5: This is due to the relatively low MRO needs on structural versus engine parts . Over this period of time , they have been carefully managing their near-term working capital needs .
Speaker #5: Encouragingly, some have begun reordering on increasingly positive momentum from Boeing, while other states are expecting more earnest ordering to begin soon.
Tony Thene: Encouragingly, some have begun reordering on increasingly positive momentum from Boeing, while others state they are expecting more earnest ordering to begin soon. Collectively, our aerospace structural customers universally agree that strong demand is on the near-term horizon and are considering when and how to ramp activity back up. Our aerospace fastener customers report steady improvement in their demand. Some customers are already placing orders with us to cover all of calendar 2026. They are continuing to expect improvements in demand, and our quoting activity has increased notably over the last few months. Fastener customers are generally expecting very solid double-digit growth next year based on ongoing improvements in the aerospace OEM build rates. Our aerospace engine customers continue to remain busy as they generally have been over the last several quarters. Engine OEMs are very active across the supply chain, working to ensure material availability.
Speaker #5: Collectively , our aerospace structural customers universally agree that strong demand is on the near term horizon and are considering when and how to ramp activity back up .
Speaker #5: Our aerospace fastener customers report steady improvement in their demand. Some customers are already placing orders with us to cover all of calendar 2026.
Speaker #5: They are continuing to expect improvements in demand and are quoting activity has increased notably over the last few months . Fastener customers are generally expecting very solid double digit growth next year based on ongoing improvements in aerospace OEM build rates .
Speaker #5: Our aerospace engine customers continue to remain busy, as they generally have been over the last several quarters. Engine OEMs are very active across the supply chain, working to ensure material availability.
Speaker #5: Customers continue to report high MRO activity and a need for more material from us . In summary , our engine customers continue to be very positive , as evidenced by the 14% sequential increase in aerospace engine sales in the quarter .
Tony Thene: Customers continue to report high MRO activity and a need for more material from us. In summary, our engine customers continue to be very positive as evidenced by the 14% sequential increase in aerospace engine sales in the quarter. I don't usually mention the space submarkets as a business, but I will note that we have seen large increases in activity over the last few quarters, and our space customers report expectations for significant ongoing demand. Finally, I will mention our defense customers because we have seen a significant increase in activity here as well. Our defense customers are expecting very strong increases in demand based on new programs being worked on, as well as the expected fiscal year 2026 defense budget. With those insights, let me state where we believe the aerospace market stands today.
Speaker #5: I don't usually mention the space submarkets , as a business , but I will note that we have seen large increases in activity over the last few quarters , and our space customers report expectations for significant ongoing demand .
Speaker #5: Finally , I will mention our defense customers because we have seen significant increase in activity here as well . Our defense customers are expecting very strong increases in demand based on new programs being worked on , as well as the expected fiscal year 2026 .
Speaker #5: Defense budget . With those insights , let me state where we believe the aerospace market stands today . The aerospace market has seen large cyclicality over many years , and we have seen the same pattern play out cycle after cycle .
Tony Thene: The aerospace market has seen large cyclicality over many years, and we have seen the same pattern play out cycle after cycle. That is, the supply chain gets a little ahead of OEMs and then decides to pull back or pause. That is followed quickly by a time when the supply chain realizes they do not have enough material on order and there is an urgent scramble to place orders. This results in what the industry describes as the bullwhip effect, where there is effectively a run on material. In this case, I am speaking specifically of nickel-based aerospace materials. This cycle we are emerging from right now is similar as before, except for one major factor. That is, the total demand targets from OEMs are significantly higher than before.
Speaker #5: That is the supply chain gets a little ahead of OEMs and then decides to pull back or pause . That is followed quickly by a time when the supply chain realizes they do not have enough material on order , and there is an urgent scramble to place orders .
Speaker #5: This results in what the industry describes as the bullwhip effect , where there is effectively a run on material . In this case , I am speaking specifically of nickel based aerospace materials .
Speaker #5: This cycle we are emerging from right now is similar as before , except for one major factor . That is the total demand targets from OEMs are significantly higher than before .
Speaker #5: Our conversations over the last quarter with our closest customers have focused on advising them to ensure they have their orders placed now so they are not last in line.
Tony Thene: Our conversations over the last quarter with our closest customers have focused on advising them to ensure they have their orders placed now so they are not last in line. The pattern I have described is not a surprise to our nickel-based customers, who all understand the question is when, not if, this run occurs. Last week, we have the reporting of the FAA approving a 737 MAX rate increase from 38 to 42 per month, which we believe will support the bullwhip effect I just mentioned. Lastly, we have received questions about our confidence in our earnings guidance as the marketplace continues to move. To start with, just a couple of points on our earnings guidance philosophy. One, we believe it is important to provide. Two, we establish challenging targets that we have line of sight to achieving with disciplined action plans in place.
Speaker #5: The pattern I have described is not a surprise to our nickel based customers , who all understand the question is when , not if .
Speaker #5: This run occurs. And then, last week, we have the reporting of the FAA approving a 737 MAX rate increase from 38 to 42 per month, which we believe will support the bullwhip effect.
Speaker #5: I just mentioned . Lastly , we have received questions about our confidence in our earnings guidance as the marketplace continues to move . To start with , just a couple of points on our earnings guidance philosophy .
Speaker #5: One , we believe it is important to provide . Two , we established challenging targets that we have line of sight to achieving with disciplined action plans in place .
Speaker #5: Three we don't believe multiyear earnings targets should be back end loaded . Therefore , we commit to meaningful earnings growth in the first year of multiyear guidance .
Tony Thene: Three, we don't believe multi-year earnings targets should be back and loaded. Therefore, we commit to meaningful earnings growth in the first year of multi-year guidance. Four, not only do we have a track record of achieving our targets, we exceed them. That philosophy should give you confidence in our future performance. Now specifically to address our guidance. As a reminder, at our February 2025 investor update, we announced our fiscal year 2027 operating income target of $765 million to $800 million. More recently, on our last earnings call, we provided additional insight as we guided to a strong fiscal year 2026, projecting $660 million to $700 million in operating income. As I stated, this range for fiscal year 2026 represents a 26% to 33% increase over our record fiscal year 2025 earnings, and as we believe, the highest earnings growth trajectory among our industry peers. Quite impressive.
Speaker #5: And four , not only do we have a track record of achieving our targets , we exceed them . That philosophy should give you confidence in our future performance .
Speaker #5: Now , specifically to address our guidance . As a reminder , at our February 2025 investor update , we announced our fiscal year 2027 operating income target of 765 to 800 million .
Speaker #5: More recently , on our last earnings call , we provided additional insight as we guided to a strong fiscal year 2026 , projecting 660 to 700 million in operating income .
Speaker #5: As I stated in this range , for fiscal year 2026 , represents a 26 to 33% increase over our record fiscal year 2025 earnings .
Speaker #5: And as we believe , the highest earnings growth trajectory among our industry peers , quite impressive . Now we have just completed the first quarter of our fiscal year 2026 .
Tony Thene: We have just completed the first quarter of our fiscal year 2026 and remain confident in our full-year earnings guidance. Most importantly, we have line of sight to the high end of the range with increased volume, pricing actions, and productivity all contributing to higher profitability. As I just mentioned, the reporting that the FAA approved a 737 MAX rate increase from 38 to 42 per month is important. That was a material unknown that has now been revealed and should support a continued increase in aerospace bookings. As we look at fiscal year 2027, we also remain committed to that level of profitability, which, by the way, would be an approximately 50% increase over our recently completed record fiscal year 2025. Let me be clear, as this aerospace market continues to accelerate, our focus is not on achieving the fiscal year 2027 guidance.
Speaker #5: And remain confident in our full year earnings guidance . Most importantly , we have line of sight to the high end of the range with increased volume pricing actions and productivity .
Speaker #5: All contributing to higher profitability . As I just mentioned , the reporting that the FAA approved a 737 max rate increase from 38 to 42 per month is important .
Speaker #5: That was a material unknown . That has now been revealed and should support a continued increase in aerospace bookings . As we look at fiscal year 2027 , we also remain committed to that level of profitability , which , by the way , would be an approximately 50% increase over our recently completed record fiscal year 2025 .
Speaker #5: But let me be clear as this aerospace market continues to accelerate , our focus is not on achieving the fiscal year 2027 guidance .
Speaker #5: The focus is on exceeding that lofty target . Now let's turn to the final slide . To summarize this great story . Let me close with why I think CARPENTER TECHNOLOGY CORP is a compelling story for existing and potential shareholders .
Tony Thene: The focus is on exceeding that lofty target. Now let's turn to the final slide to summarize this great story. Let me close with why I think Carpenter Technology Corporation is a compelling story for existing and potential shareholders. Specifically, let's take a look at the three major areas most important to shareholders. One, we have an enviable market position in the industry. We are in the midst of a significant acceleration in demand, especially in the aerospace and defense in-use market. Demand for air travel has never been higher, and OEMs are pushing to ramp production build rates significantly over the next several years, which is just the beginning. With accelerating build rates driving higher demand for our materials, a fundamental supply-demand imbalance in nickel-based superalloys will tighten even further. Our world-class collection of unique manufacturing assets and related capabilities are difficult, if not impossible, to replicate.
Speaker #5: Specifically , let's take a look at the three major areas . Most important to shareholders one . We have an enviable market position in the industry .
Speaker #5: We are in the midst of a significant acceleration in demand , especially in the aerospace and defense , and use market . Demand for air travel has never been higher , and OEMs are pushing to ramp production build rates significantly over the next several years , which is just the beginning with accelerating build rates driving higher demand for our materials .
Speaker #5: A fundamental supply demand imbalance in nickel based superalloys will tighten even further . Our world class collection of unique manufacturing assets and related capabilities are difficult , if not impossible , to replicate .
Speaker #5: Our leading capacity and capabilities are further differentiated by stringent qualifications necessary to supply advanced materials for aerospace and defense and other key in-use market applications .
Tony Thene: Our leading capacity and capabilities are further differentiated by stringent qualifications necessary to supply advanced materials for aerospace and defense and other key in-use market applications. Two, we are committed to a balanced capital allocation approach. We have a healthy liquidity position and a strong balance sheet, combined with an impressive free cash flow generation outlook. We are focused on returning cash to shareholders via a long-standing dividend and a robust share repurchase plan. In addition, our strong performance allows us to invest in highly accretive growth projects, like our recently announced Brownfield capacity expansion that accelerates earnings growth but will not materially impact the nickel-based supply-demand imbalance. Three, we have delivered impressive financial results with a strong earnings outlook. We have just completed another record quarter of profitability driven by significant margin expansion in our SAO segment.
Speaker #5: Two we are committed to a balanced capital allocation approach . We have a healthy liquidity position and a strong balance sheet combined with an impressive free cash flow generation outlook .
Speaker #5: We are focused on returning cash to shareholders via a long standing dividend and a robust share repurchase plan . In addition , our strong performance allows us to invest in highly accretive growth projects like our recently announced brownfield expansion that accelerates earnings growth but will not materially impact the nickel based supply demand imbalance .
Speaker #5: And three , we have delivered impressive financial results with a strong earnings outlook . We have just completed another record quarter of profitability , driven by significant margin expansion and our Psao segment .
Speaker #5: Our outlook for fiscal year 2026 implies a 26 to 33% increase over our record fiscal year 2025 , and we are well on our way to achieving an even surpassing the ambitious earnings target for fiscal year 2027 .
Tony Thene: Our outlook for fiscal year 2026 implies a 26% to 33% increase over our record fiscal year 2025, and we are well on our way to achieving and even surpassing the ambitious earnings target for fiscal year 2027. I don't know of anyone in our industry who can say they have a stronger earnings outlook than Carpenter Technology Corporation. Of course, fiscal year 2027 is not expected to be our peak. We have plans and line of sight to further earnings growth beyond 2027. In summary, I believe Carpenter Technology Corporation checks every important shareholder criteria box. We have created significant shareholder value to date, but we are only at the beginning of this growth journey. The best is still to come. As always, we remain focused on supporting our customer needs, operational execution, and living our values as we drive to exceptional near-term and long-term performance.
Speaker #5: I don't know of anyone in our industry who can say they have a stronger earnings outlook than CARPENTER TECHNOLOGY CORP . Of course , fiscal year 2027 is not expected to be our peak .
Speaker #5: We have plans and line of sight to further earnings growth beyond 2027 . In summary , I believe CARPENTER TECHNOLOGY CORP checks every important shareholder criteria box we have created significant shareholder value to date , but we are only at the beginning of this growth journey .
Speaker #5: The best is still to come . As always , we remain focused on supporting our customer needs . Operational execution and living . Our values as we drive to exceptional near term and long term performance .
Speaker #5: Thank you for your attention . I will now turn the call back to the operator .
Tony Thene: Thank you for your attention. I will now turn the call back to the operator.
Speaker #3: Thank you so much . And at this time I would like to remind everyone , in order to ask a question , press star .
Operator: Thank you so much. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Once again, star one. We will pause just a moment to compile the Q&A roster. It looks like our first question today comes from the line of Gautam Khanna with TD Cowen. Gautam, please go ahead.
Speaker #3: Then the number one on your telephone keypad . Once again , star one , and we will pause just a moment to compile the Q&A roster .
Speaker #3: And it looks like our first question today comes from the line of Gautam Khanna with TD Cowen . Gautam , please go ahead .
Speaker #7: Yeah , thanks . And great results guys . And good explanations . Yeah .
Gautam Khanna: Yeah, thanks and great results, guys, and good explanations.
Operator: Thanks.
Gautam Khanna: Fun.
Speaker #5: Good morning Gotham .
[Company Representative]: Yeah, good morning, Gautam.
Speaker #7: Good morning . You know Tony I did want to get your perspective on a couple of things a like what has happened if anything in your own jet engine alloy lead times .
Gautam Khanna: Good morning. Tony, I did want to get your perspective on a couple of things. A, what has happened, if anything, in your own jet engine alloy lead times? Are they still kind of fairly extended? Also, what is your best guess as to why some of those channel checks are so not representative of the business? There is such a dichotomy with what you guys have continued to put up and some of the chatter out there. Lastly, on your comments on Boeing, you guys have already endured a number of quarters of, if you will, destocking. I just wanted to get a sense for your perspective on had that not happened over the last year, whether you would have had even more profits and if that's what we're pivoting to, starting to see that recovery in the Boeing orders. A lot there, take it anywhere you want.
Speaker #7: Are they still kind of fairly extended, and also just what is your best guess as to why some of those channel checks are so not representative of the business?
Speaker #7: It is . I mean , there's such a dichotomy with what you guys have continued to put up and , you some of the chatter out there .
Speaker #7: And then lastly , just on your comments on Boeing , you know , it . You guys have already endured a number of quarters of , if you will , destocking .
Speaker #7: I just wanted to get a sense for like your perspective on, had that not happened over the last year, whether you would have had even more profits. And if that's what we're pivoting to, we're starting to see that recovery in the Boeing orders a lot there.
Speaker #7: Take it anywhere you want .
Speaker #5: Okay . Thanks , Gautham , for the for the questions . One yes , on engine lead times . They're still extended and in fact , I think we're at the point now where they're going to start pushing out again pretty quickly because , you know , the Boeing news , whereas of course , many people say , well , that's what they expected .
Tony Thene: Okay. Thanks, Gautam, for the questions. One, yes, on engine lead times, they're still extended. In fact, I think we're at the point now where they're going to start pushing out again pretty quickly because, you know, the Boeing news, whereas, of course, many people say that's what they expected, but it's a big deal for the FAA to come out and actually say that. The discussions we've had with customers just in the last couple of days, remember that was just reported, I think, last Friday, has turned. You've seen more push to start increasing orders. I think that's a very significant positive for us. As far as the news around the industry, it's hard for me to speak to that. That's why we took even extra time on today's call to explain very clearly. I appreciate that you recognize that. We take it really seriously, these earnings calls.
Speaker #5: But it's a big deal for the FAA to come out and actually say that . So the the discussions we've had with customers just in the last couple days , remember , that was just reported , I think last Friday has turned and you've seen more , you know , more push to start increasing orders .
Speaker #5: So I think that's a very significant positive for us as far as the news around .
Speaker #8: The the industry ,
Speaker #5: It's hard for .
Speaker #8: Me to speak to that . That's why we took even extra time on today's call to explain very clearly . And .
Speaker #5: I appreciate , you know , the that you recognize that we take it really seriously . These earnings calls , we try to communicate very clearly .
Tony Thene: We try to communicate very clearly. We believe we are different than other products, the capabilities, the capacity that we have, the broad customer base we have. The best thing to do for us is, you know, listen to what we have to say, follow what we have to say, and I think we'll do a good job of guiding you there. The third thing you mentioned is really important because a lot of people missed the fact that, you know, starting back in early calendar 2024 is really when you started seeing some issues in the Boeing supply chain. We were able to maintain and, in fact, produce record quarters during that time because of the flexibility that we have. Airbus was still making planes. We had a very robust backlog that we were able to pull in and use. Power generation then stepped up with more demand.
Speaker #5: We believe we are different from other products; the capabilities and capacity that we have, along with our broad customer base, set us apart.
Speaker #5: So the best thing to do for us is , you know , listen to what we have to say , follow what we have to say .
Speaker #5: And I think we'll do a good job of guiding you there . The third thing you mentioned was , was really is really important because a lot of people miss the fact that , you know , starting back in early of calendar 2024 is really when you started seeing some issues in the Boeing supply chain , and we were able to maintain and in fact produce record quarters during that time because of the flexibility that we have .
Speaker #5: Airbus was still making planes . We had a very robust backlog that we were able to pull in and use power generation . Then stepped up with more demand and and even in that very difficult time where you had one of the two airframes got them effectively making zero airplanes , because remember , then later in 2024 , they had their work stoppage that we were able to produce , record results during that time .
Tony Thene: Even in that very difficult time where you had one of the two airframers, Gautam, effectively making zero airplanes, because remember then later in 2024 they had their work stoppage, we were able to produce record results during that time, I think, went a bit unnoticed and maybe underappreciated. Now here we are where you've got Boeing performing very well, but only at the beginning. Airbus, who has quite a bit further they want to go, let's say, for example, on their A320 targets. I think now as we go into the second half of FY26, that's why you heard the confidence from me in terms of our guidance, and then also for FY27. I mean, I think there's more opportunities for increase.
Speaker #5: I think went a bit unnoticed and maybe underappreciated . And now here we are , where you've got Boeing performing very well , but only at the beginning .
Speaker #5: Airbus , who has quite a bit further they want to go , let's say , for example , on their A320 targets . And you know , I think now as we go into the second half of of FY 26 , that's why you heard the confidence from me .
Speaker #5: And then in terms of our guidance , and then also for FY 27 , I mean , I think there's more opportunities for increase over that guidance than there are than there are risks .
Operator: Over that guidance, there are risks. Hopefully, I answered all three of them for you.
Speaker #5: Hopefully I answered all three of them for you .
Speaker #7: Yeah . No , that was a very great answer . And just maybe a quick ask on fastener demand trends , how those tracked in the quarter .
[Company Representative]: That was a very great answer. Just maybe quick ask on fastener demand trends, how those tracked in the quarter?
Speaker #5: Oh yeah . Sorry about that . I know you usually ask about it fasteners for this quarter were down 7% sequentially , 40% up year over year .
Operator: Oh, yeah, sorry about that. I know you usually ask about it. Fasteners for this quarter were down 7% sequentially, 40% up year over year. As we look at the order intake coming in right now, as you well know, fastener orders can be a little lumpy. Those are strong coming into our second quarter. Like I said in the prepared remarks, which I think is a very important point, you're seeing a lot of these fastener companies already trying to place orders for the entirety of their calendar year 2026. That's a big deal, and that's really strong evidence of how they see the market playing out.
Speaker #5: But as we look at the order intake coming in right now , as you well know , fastener orders can be a little lumpy .
Speaker #5: Those are those are strong coming in to our second quarter . And like I said in the prepared remarks , which I think is a very important point , you're seeing a lot of these fastener companies already trying to place orders for the entirety of their calendar year 2026 .
Speaker #5: So that's a big deal . And that's a really , you know , strong evidence of how they see the market playing out .
Speaker #7: Thanks for the great answer . Great job .
[Company Representative]: Thanks for the great answer. Great job.
Speaker #5: Thank you .
Operator: Thank you.
Speaker #3: Thanks , Gautham . And our next question comes from the line of Andre Madrid with Btig . Andre , please go ahead .
[Company Representative]: Thanks, Gautam. Our next question comes from the line of Andre Madrid with BTIG. Andre, please go ahead.
Speaker #9: Tony . Tim , thanks for the thanks for the question and good morning .
[Analyst]: Tony Thene, thanks for the question and good morning.
Speaker #5: Yes . Good morning .
Operator: Yes, good morning.
Speaker #9: You know , you mentioned the five new Ltas and I was just wondering if you could speak more to the duration of these and how we can maybe expect duration mix to shift , moving forward .
[Analyst]: You mentioned the five new LTAs, and I was just wondering if you could speak more to the duration of these and how we can maybe expect duration mix to shift moving forward.
Speaker #5: On these five specific ones that I was referencing , they range between two years and five years .
Operator: On these five specific ones that I was referencing, they range between two years and five years.
Speaker #9: Got it . And I mean , you know , obviously these have come in from what you saw pre-COVID pre max pre , you know , post Covid boom and I mean I guess just how do you expect the duration to .
[Analyst]: Got it. Obviously, these have come in from what you saw pre-COVID, pre-Max, post-COVID boom. I guess just how do you expect the duration to, yeah, like what should it look like through the end of the decade, would you say? Would you say it'd be consistent at these levels, pull in even further, or push out a little bit longer?
Speaker #9: Yeah . Like what should it look like through the end of the decade . Would you say would you say it'd be consistent at these levels .
Speaker #9: Pulling even further or push out a little bit longer ?
Speaker #5: Well , I think that contract links will stay at this range versus a historical ten year contract . And that's all . I mean , that should be obvious that I mean , that's based on where you think the supply demand imbalance is going to go .
Operator: I think that contract lengths will stay at this range versus a historical 10-year contract. That should be obvious, that's based on where you think the supply-demand imbalance is going to go. I think it's interesting as well, I can provide a little bit more color of those five contracts. Only one of them was a renewal from prior to COVID. The other four, this is the second time we've renewed them, if you will, since the post-COVID, more robust ordering, especially now. That's an important point to make as well.
Speaker #5: So I think it's interesting as well . I can provide a little bit more color of those five contracts . Only one of them were a renewal from prior to Covid .
Speaker #5: So the other four , this is the second time we've renewed them . If you will , since the post Covid , you know , more robust ordering , especially now .
Speaker #5: So that's an important point to make as well .
Speaker #9: Got it , got it . No that's that's very helpful . And then I think if I could squeeze in one more , you know , when you look at it's very clear on the aero side what the moving pieces are .
[Analyst]: Got it. No, that's very helpful. I think, if I could squeeze in one more, when you look at, it's very clear on the aero side what the moving pieces are, but can we maybe peel back what some of those pieces are for defense? I know you highlighted still strong demand there, especially inside of a strong budget request.
Speaker #9: But can we maybe peel back what some of those pieces are for defense ? I know you highlighted still strong demand . There , especially inside of a strong budget request .
Speaker #9: So .
Speaker #5: Well we play across a lot of different areas in defense . I mean we offer products not just that are maybe traditional historically been offered , but the next level , you know , where we're looking at alloys and tweaking those alloys to get better performance based on the outcomes that they're looking for .
Operator: We play across a lot of different areas in defense. I mean, we offer products not just that are maybe traditional or historically been offered, but the next level, you know, where we're looking at alloys and tweaking those alloys to get better performance based on the outcomes that they're looking for. You see us across multiple segments inside the defense market. Quite frankly, our relationship there has grown significantly over time, mainly because they're looking for increased performance. They're looking to operate at a higher level, and our alloys and our innovations allow them to do that.
Speaker #5: So you see us across multiple segments inside the defense market and , you know , quite frankly , our relationship there has grown significantly over time .
Speaker #5: Mainly because they're looking for increased performance. They're looking to operate at a higher level. And our alloys and our innovations allow them to do that.
Speaker #9: Got it . Got it . Okay . That's helpful . I'll I'll leave it there . Thanks so much , gentlemen .
[Analyst]: Got it. Got it. Okay, that's helpful. I'll leave it there. Thanks so much, gentlemen.
Speaker #5: Yeah. Thank you, sir.
Operator: Yeah, thank you, sir.
Speaker #3: Thank you Andre . And our next question comes from the line of Josh Sullivan with Jones trading . Josh , please go ahead .
[Company Representative]: Thank you, Andre. Our next question comes from the line of Josh Sullivan with Jones Trading. Josh, please go ahead.
Speaker #9: Hey . Good morning .
Speaker #10: Tony . Tim . John , congrats on the quarter .
John Huyette: Hey, good morning. Tony Thene, congratulations on the quarter.
Speaker #6: Josh .
[Analyst]: Thanks, Josh.
Speaker #10: I , I think I have the title of my note wrapped up , but just had some other questions . Tony on the the aerospace backlogs up nicely .
John Huyette: I think I have the title of my note wrapped up, but just had some other questions, Tony. On the aerospace backlogs up nicely, you know, that bullwhip dynamic that just always seems to happen in this industry. Are customers receptive to that messaging, you know, to get in now? Or is it your sense that, you know, most of the industry is just going to get hit with the rush as it comes?
Speaker #10: You know that bulwark dynamic that just always seems to happen in this industry . Our customers receptive to to that messaging , you know , to get in now or is it your sense that most of the industry is just going to get hit with with the rush as it comes ?
Speaker #5: Well , that's a really good question . And you know this , you've been around long enough . Aerospace customers . There are differences based on whether they're an engine .
Operator: That's a really good question. You know this, you've been around long enough. Aerospace customers, there are differences based on whether they're an engine customer or structural, they're in the distribution side. I think that I can tell you they're very receptive to that message. The discussions we've had over the last couple of weeks, they're very receptive. All of them are in a little bit different point on where their working capital levels are, but clearly, you've seen an inflection point that says, we see this demand coming. We see Boeing continuing to perform well. We see Airbus pushing higher and higher. I think that has become a pretty uniform feel that now's the time to start increasing the order intake. You've seen that. I mean, 23% sequential this year on aerospace. If I remember right, last quarter it was aerospace was up over 20% as well.
Speaker #5: You know , customer or structural . They're in the distribution side . I think that I can tell you they're very receptive to that message .
Speaker #5: The discussions we've had over the last couple weeks , they're very receptive . Now , all of them are a little bit different .
Speaker #5: Point on where they're working capital levels are , but clearly you've seen an inflection point that says , we see this demand coming .
Speaker #5: We see Boeing continuing to perform well . We see Airbus pushing higher and higher , and I think that has become a pretty uniform feel that now's the time to start .
Speaker #5: You know , increasing the order intake . You've seen that I mean , 23% sequential this year on aerospace . If I remember right , last quarter , it was , you know , aerospace was up over 20% as well .
Speaker #5: So you might not get 20% sequentially . Josh , every quarter for the next 3 or 4 quarters . The point is that linear trend upward , I think is going to be pretty strong as we as we go through the rest of this fiscal year .
Operator: You might not get 20% sequentially, Josh, every quarter for the next three or four quarters. The point is that linear trend upward, I think, is going to be pretty strong as we go through the rest of this fiscal year.
Speaker #10: Got it . And then kind of relatedly , into your comments just on Ltas versus transactional customers , you know , you got the five new ones signed up here .
John Huyette: Got it. Kind of relatedly, in your comments just on LTAs versus transactional customers, you got the five new ones signed up here. How should we think about that optimal mix between the two customer sets and how that layers into Athens? I think you had mentioned at Paris, there's a lot of interest in Athens.
Speaker #10: How should we think about that optimal mix for between the two customer sets ? And then how that layers into Athens ? And I think you had mentioned at Paris there was a lot of interest in Athens .
Speaker #5: Yeah , there's really nothing overly magic about that . I mean , whether somebody is on an LTA or not has a lot to do with their point of view .
Operator: There is really nothing overly magic about that. Whether somebody is on an LTA or not has a lot to do with their point of view. Certainly, our point of view is that what is best for them is to have an LTA. Some customers prefer not to do that. On the distribution side, Josh, that is not their mode of operation. I think the point that I was trying to make there is that there is really not a big distinction for us between an LTA customer and a transactional customer. This idea that a non-LTA customer walks in randomly from the street and orders a random aerospace alloy just does not exist. These are customers that we have had for decades that order very specific material, and it commands the same type of price, as I said in my prepared remarks.
Speaker #5: Certainly our point of view well is that what's best for them to have an LTA , some customers prefer not to do that on the distribution side .
Speaker #5: Josh, you know, that's not their mode of operation. So I think the point that I was trying to make there is that there's really not a big distinction for us between an LTA customer and a transactional customer.
Speaker #5: This idea that a non LTA customer walks in randomly from the street and orders a random aerospace alloy just doesn't exist . These are customers that we've had for decades that order very specific material .
Speaker #5: So and it commands the same type of price . As I said in the in my prepared remarks . So there's really not a percentage that I'm trying to to get to .
Operator: There is really not a percentage that I am trying to get to. We manage each of our customers as individuals, and we will keep doing it that way.
Speaker #5: We manage each of our customers as individuals , and we'll keep doing it that way .
Speaker #10: That's great . Again , congratulations on the quarter . Thank you .
John Huyette: That's great. Again, congratulations on the quarter. Thank you.
Speaker #5: Thank you .
Operator: Thank you.
Speaker #3: Thanks , Josh . And our next question comes from the line of Scott , which with Deutsche Bank . Scott , please go ahead .
[Company Representative]: Thanks, Josh. Our next question comes from the line of Scott Deuschle with Deutsche Bank. Scott, please go ahead.
Speaker #11: Hey good morning Tony . Do you already have line of sight to another quarter of sequential and growth in the quarter you're in right now ?
John Huyette: Hey, good morning. Tony, do you already have line of sight to another quarter of sequential A&D growth in the quarter you're in right now?
Speaker #3: Oh .
Speaker #5: Right . And that's what I just was telling Josh I don't I can't tell you it's going to be exactly 23% . But I think over these next several quarters they're going to see continued growth in in order intake for sure .
Operator: Right. That's what I just was telling Josh. I can't tell you it's going to be exactly 23%, but I think over these next several quarters, you're going to see continued growth in order intake for sure.
Speaker #5: .
Speaker #11: Okay . And then the Ebit per pound at Sao was up 42% year over year on down volumes . So if the volumes actually start to return to growth on the back of this order , improvement , is there an upside opportunity in which you could have a repeat of the Ebit growth profile ?
John Huyette: Okay. The EBIT per pound at SAO was up 42% year over year on down volumes. If the volumes actually start to return to growth on the back of this order improvement, is there an upside opportunity in which you could have a repeat of the EBIT growth profile you experienced over the last couple of years?
Speaker #11: You experienced over the last couple of years?
Speaker #5: We're certainly the math works out in our favor , right ? If we're producing these types of numbers and you still have volume , that's not at the point where we think it's going to going to go to .
Operator: Certainly, the math works out in our favor, right? If we're producing these types of numbers and you still have volume that's not at the point where we think it's going to go to, that's a pretty good equation.
Speaker #5: That's a pretty good equation.
Speaker #11: Okay . And then last question for the ltas that you said reprice this quarter , do we see that benefit hit in the fiscal second quarter or do those become effective in January .
John Huyette: Okay. For the long-term agreements that you said repriced this quarter, do we see that benefit hit in the fiscal second quarter, or do those become effective in January of the third quarter?
Speaker #11: So the third quarter .
Speaker #5: I don't want to give specifics on each of the contracts , Scott . But as you know , it varies , right ? Some of them will be more .
Operator: I don't want to give specifics on each of the contracts, Scott, but as you know, it varies, right? Some of them will be more, what should I say, earlier, maybe in the second half of this fiscal year. Some of our customers will negotiate a little bit farther out.
Speaker #5: What should I say earlier ? Maybe in the second half of this fiscal year , some of our customers will negotiate a little bit farther out .
Speaker #11: Okay . Thank you .
John Huyette: Okay, thank you.
Speaker #12: Yep .
Operator: Yep.
Speaker #3: Thank you Scott . And just a reminder folks . Again , if you'd like to ask a question , it is star . And the number one on your telephone keypad .
John Huyette: Thank you, Scott. Just a reminder, folks, if you'd like to ask a question, it is star and the number one on your telephone keypad. Once again, star one. Our next question comes from the line of Philip Gibbs with KeyBanc Capital Markets. Philip, please go ahead.
Speaker #3: Once again star one . And our next question comes from the line of Phil Gibbs with KeyBanc Capital Markets . Phil , please go ahead .
Speaker #13: Hey , good morning . Good job , Tony and team . I think you mentioned it earlier in the call . What were the engine sales up ?
[Analyst]: Hey, good morning. Good job, Tony and team. I think you mentioned it earlier in the call. Were the engine sales up 14% year on year, or was that sequentially, Tony?
Speaker #13: 14% year on year , or was that sequentially ? Tony .
Speaker #5: Yeah , thanks for for mentioning that . Phil . It was 14% sequentially . It was the about 20% year over year .
Operator: Yes, thanks for mentioning that, Phil. It was 14% sequentially. It was about 20% year over year.
Speaker #13: Okay . Excellent . And you mentioned in your prepared remarks on on space and in defense verticals , and you've had some , some space business be a little bit more recurring over the last few quarters .
[Analyst]: Okay. Excellent. You mentioned in your prepared remarks on space and in defense verticals, and you've had some space business be a little bit more recurring over the last few quarters. Any sense or color you can provide in terms of how much maybe the combination of space and defense is of the A&D business?
Speaker #13: Any sense or color you can provide in terms of how much maybe the combination of spaces , space and defense is , is of the A and business .
Speaker #5: Yeah . Well , I mean , space is small , right ? But the reason I mentioned it is because it's a growing area .
Operator: Space is small, right? The reason I mentioned it is because it's a growing area. I think it's just another example of our exposure to this very quickly growing market. I think probably going forward, you'll see me or see us speak about space more. It's very small, Phil, but I think it's going to be very strategic for us going forward.
Speaker #5: And I think it's just another example of our exposure to this very quickly growing market. And I think probably going forward, you'll see me or see us speak about space more.
Speaker #5: So it's very small . Phil , but I think it's going to be very strategic for us going forward .
Speaker #13: And then lastly , on the brownfield , can you just give us a give us an update in terms of what you expect in terms of the construction period ?
[Analyst]: Lastly, on the Brownfield capacity expansion, can you give us an update in terms of what you expect in terms of the construction period in the second half and deliveries, and then give us a view of the timeline as we try to envision the project?
Speaker #13: And the second half ? And deliveries and then give us a give us a view of of the timeline , just as we try to envision the project .
Speaker #5: Yeah, I'll give that one to Tim since he's overseeing that project for us.
Operator: Yeah, I'll give that one to Tim since he's overseeing that project for us.
Speaker #6: Yeah . Hey , Phil , in terms of timeline , just high level construction now , expected to be complete . Beginning late fiscal 27 , early fiscal 28 .
John Huyette: Yeah. Hey, Phil. In terms of timeline, just high-level, construction now expected to be complete beginning late fiscal 2027, early fiscal 2028. In my remarks, I said construction's underway. Most of the focus in these last several months has been about getting the site ready, doing the land site preparation, getting building foundations poured, things like that, getting the structure in place. Over the next several months, several quarters will shift pretty quickly to more building infrastructure, getting the equipment delivered, set up, installed. High-level, we're on track in terms of budget and schedule. Just to reiterate, the guidance for the capital, specifically for the Brownfield capacity expansion, we said $175 to $185 million of CapEx this year, fiscal 2026, on top of the normal CapEx of $125 million.
Speaker #6: In my remarks , I said , we're construction is underway . Most of the focus in these last several months has been about getting the site ready .
Speaker #6: So doing the land preparation site preparation , getting building foundations poured , things like that , getting the structure in place over the next several months , several quarters will shift pretty quickly to more building infrastructure , getting the equipment delivered , set up , installed so high level .
Speaker #6: We're we're on track in terms of budget and schedule and just to reiterate , the guidance for the capital , specifically for the brownfield expansion , we said 175 to 185 million of CapEx this year .
Speaker #6: Fiscal 26 , on top of the normal CapEx of 125 .
Speaker #13: Thanks so much . Best of luck . Great job .
[Analyst]: Thanks so much. Thanks a lot. Great job.
Speaker #3: Great . Thank you . Phil , and our next question comes from the line of Bennett Moore with J.P. Morgan Bennett . Please go ahead .
[Company Representative]: Great. Thank you, Phil. Our next question comes from the line of Bennett Moore with JPMorgan. Bennett, please go ahead.
Speaker #14: Good morning Tony and Tim . Congrats on another impressive quarter . And thank you for taking my questions .
Tony Thene: Good morning, Tony and Tim. Congrats on another impressive quarter, and thank you for taking my questions.
Speaker #5: Good morning .
Operator: Good morning.
Speaker #14: I was hoping you could maybe delineate on the A and D bookings growth sequentially . What this look like between engines and structural .
Tony Thene: I was hoping you could maybe delineate on the A&D bookings growth sequentially, what this looked like between engines and structural. I think you had a comment in there that part of this was volume-driven. Just trying to gauge, you know, if those Boeing-levered customers, to what extent they're coming off the sidelines.
Speaker #14: I think you had a comment in there . That part of this was volume driven . So just trying to gauge you know , if those Boeing levered customers to what extent they're coming off the sidelines .
Speaker #5: Well, I made the comment around that it was volume-driven as well because that's important, right? That it's certainly price is a big driver.
Operator: I made the comment around that it was volume-driven as well because that's important, right? It's certainly price is a big driver, but the point there was it's not just a price increase. The volume is coming from the marketplace, so that was an important point. I don't think I'm going to get into bookings for each one of the submarkets. That would get us into a level of detail that probably is not helpful overall. I'll just keep it at the total aerospace and defense level for you and keep it there.
Speaker #5: But the point there was it's not just a price increase . The volume is coming . From the marketplace . So that was an important point .
Speaker #5: I don't think I'm not going to get into bookings for each one of the submarkets . That would get us into a level of detail that probably is not helpful .
Speaker #5: Overall, I'll just keep it at the total aerospace and defense level for you and keep it there.
Speaker #14: All right . Thanks for that . I guess as we think about the fiscal 26 guidance then and the revision towards the high end , what were the prior assumptions around when those structural activity would resume , and how has that changed now , or is that really just what's reflected in this new guidance ?
Tony Thene: All right. Thanks for that. I guess as we think about the fiscal 2026 guidance then and the revision towards the high end, what were the prior assumptions around when the structural activity would resume, and how has that changed now, or is that really just what's reflected in this new guidance?
Speaker #5: Well , I mean , the guidance is the same . We've just said , you know , we're very open about what we're feeling right now and saying that we see it at the high end .
Operator: The guidance is the same. We've just said, you know, we're very open about what we're feeling right now and saying that we see it at the high end, right? We're always adjusting our forecast based on what we're hearing from our customers. The takeaway there is that you're seeing, as I think I said in my prepared remarks, a higher degree of positivity coming from them. Based on that, we have line of sight that will be on the higher side of that guidance. It's all based on what we're hearing from the market and directly from our customers.
Speaker #5: Right ? So we're always adjusting our our forecast based on what we're hearing from our customers . And the takeaway there is that you're you're seeing , as I think I said in my prepared remarks , a higher degree of positivity coming from them .
Speaker #5: So based on that , we have line of sight that we'll be on the on the higher on the higher side of that guidance .
Speaker #5: But it's all based on what we're hearing from , from , from the market and from directly from our customers .
Speaker #14: All right . And then if I could real quick , are you seeing any , you know , acceleration in the incremental value being realized in these LTA renewals ?
Tony Thene: Are you seeing any acceleration in the incremental value being realized in these long-term agreements renewals, or is the repricing similar to what we saw initially post-COVID?
Speaker #14: Or is kind of the repricing similar to what we saw initially post-COVID?
Speaker #5: A tough question only because it really depends on the submarket that you're in , Bennett . You know , I would tell you at a high level that you are seeing continued increase percentages , not always the same for each submarket .
Operator: Tough question, only because it really depends on the submarket that you're in, Bennett. I would tell you at a high level that you are seeing continued increase %, not always the same for each submarket, if that makes sense.
Speaker #5: If that makes sense .
Speaker #14: Certainly . Thank you for the color . Best of luck .
Tony Thene: Certainly. Thank you for the color. Best of luck.
Speaker #5: Yeah .
Speaker #12: Thank you .
Operator: Thank you.
Speaker #3: Thanks , Bennett . And it looks like there are no further questions so I will now hand it back over to John Hewitt for closing remarks .
[Company Representative]: Thanks, Bennett. It looks like there are no further questions, so I will now hand it back over to John Huyette for closing remarks. John?
Speaker #3: John .
Speaker #4: Thank you . Operator . And thank you , everyone for joining us today for our fiscal year 2026 first quarter conference call . Have a great rest of your day .
Tim Lain: Thank you, operator. Thank you, everyone, for joining us today for our fiscal year 2026 first quarter conference call. Have a great rest of your day.
[Company Representative]: Ladies and gentlemen, that concludes today's call. Thank you for joining, and you may now disconnect.