ATI - Earnings call transcript Q1 2022

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Operator

Hello, everyone and welcome to the ATI's First Quarter 2022 Results Call. My name is Charlie, and I'll be the coordinator for today's call.

You'll have the opportunity to ask a question at the end of the presentation. [Operator Instructions] I will now hand over to your host Adam Pechart to begin. Adam, please go ahead.

Adam Pechart

you. Thank welcome quarter and earnings ATI's to morning, XXXX first call. Good us for Adam Treasurer, ATI's with illness. Pechart is Scott who due filling not and This Relations in Minder, to Investor VP is today of discussion Today's being our broadcast website. is on Wetherbee, are and Executive and today's President President Newman, Chair, Bob in and Board Participating Vice CFO. call CEO; Don and will focus and messages. Don on highlights Bob key our first quarter presentation available on is supplemental A website. our details and provides our and outlook. color It results on additional we'll After the open our questions. for remarks, prepared line

statements subject the earnings to forward-looking and our These are the assumptions reminder, in caveats. release a As are slide various noted in and presentation.

turn Bob. I'll call Now, over the to

Robert Wetherbee

year Good morning ATI. Adam. for What additional joining us. momentum we strong accomplished what we Thanks, be for thanks quarter will builds and this anticipate for very a

to is operationally performing continuing team strategically. well, and execute Our

market to you earnings. Customer are the added me These accelerated all latter rate out stand the use our I'll about things improving. my to quarter. our for in tell and part performance. topline about today growth three of enhanced that really our conditions Our demand time

margins lower delivered a rate This XX%. achieved are XXXX QX basis. sales was favorable. to margin EBITDA nearly year XXX of versus on we First, of level That's an XXXX. were that XXXX and despite than basis points XXXX overall XX% increase full Comparisons run even more

two the years. fundamentally have past business our We over transformed

the reflect increasingly value of the results taken. Our we've actions

segment's the in truly but mix, were in tailwinds, were profile. is Second, driving few over there actions improvements question our and AA&S results. really the No a QX what's structural product value our of EBITDA customer this XX%. evident segment footprint, segment margins strategic results, beneficial

inevitably business know headwinds. the We the all robust. turn they profitable cycle. these solidly third, will ensure also bottom is do, margins through increasing incremental were the discipline changes operational structural to And our Continued a When line. tailwinds

remains improve on volatility. ATI. XX% optimism uncertainty world It's our with create XXXX energy We impressive. recognize volatility, to an the lockdowns in events raw by consumer norm the to in the short material we These a for all Geopolitical is every EBITDA all and chain lining. latest doubled. that Europe demand term COVID-related year-over-year, additions team's global disruptions grew corner list. and and cloud What sales price China a issues to that Yet testament focus started While supply adjusted the to transparency. That's has truly reduced silver are return companies.

core to conditions. demand us, we For underlying it's react the ability to focus to environment improve, ongoing particularly aerospace. are commercial where nimbly in to markets our And ever changing we in on continues an our operating continue uncertainty, serving executing on well can at the expertise markets We're material things aerospace our our science the and we growing an defense that Investor we powerhouse. way capabilities. our control, with shared unique and Day. process becoming to strategy We're Amidst

mid-year progress longer of final facility from continue the the We're remaining the steps business closure stainless we benefit in We our a plan. on the In products. of and are producing sites. to standard quarter, the the two sale related sheet Stainless nearing recognized transformation no

pension with stay accretive This on sanctions aerospace defined and commercial benefit ensure has carries flows ATI. liability the focuses announced part that will that UK to we for the facility by end, UK the facility. material quarter. sale purpose-built material prices. invasion The a of conducting segment take Sheffield created in only Russia. To strategy. have Disruptions is its created to challenges, availability by It's the we transaction continue to close our are We have materials. legacy of to that struggled customary second a global Russian Ukraine be dynamics HPMC industrial including to and but opportunities with Recent markets aligned the recently actions on post being it also sale. higher and government business economic review our not to portfolio and expect gas have oil of primarily Raw to of we led impacted market material the margin

case in the than in Exchange As With financial prices by point, price volatility and a availability London disrupted extreme several for the market, days nickel caused March. rose close XX% to primary in Metal quarter. more no

and We molybdenum. a safety for is ability to question. increased on requirements an significant we demand ensure actions our other what we material customer we respond meet including cobalt, actions also quarter in balance fewer also our capital first create to the meet took cost QX, decisive key quarter. working we're protected nickel offset overcoming will customers. first production the quarter. we're supply the materials product our new flow We in insurance, lag will increasing We How rising with ensure control. increases on oriented Current inflation opportunities. increasing about saw long-term customer ATI focused benefiting raw In of inputs rates, ATI's prices did could In impact to events of the and a These To managed provide demand. uninterrupted in adding the LTA near-term price flow line appropriate by ultimately, it's experiencing. and our lines are procurement stock. This shortages, ferrochrome long-term agreements, higher able fully raw customers' bottom but We're businesses raised to focused to offset protecting prices costs supply a chain additional products employees. labor expanding to material, continuous meet

to is a third fear customers western customers global where in for quality Aerospace to evident is melt. chains a Titanium Aerospace access close As rethink to This losing of of there capacity the industry's supply most reallocation likely suppliers. demand

sudden process We'll exploring be coming governmental to to and quarters. and industry changes supply. customers As the lock are as many out react agreements certifications, in over this plays disciplined future policy long-term

speak, we to well positioned clear abundantly our As it's of part this business. we're that grow

strategically near-term ATI. can capacity. Customers to economical and and qualifications, aligned are be with and capabilities efficient needed the have making We more decisions

January we capital for times to of We're forward, discussion commercial let's and for to evaluate the are labor the XXXX still long-term February travel first sure, in capital our year-over-year is advantage we International still trends in to Demand opportunities. and levels. potential restrictions brief need for are key travel in what travel aerospace. XX% February, were ahead. and nearly exciting body par move encouraging. shortages I'll narrow additional a positioned strong, order portion market XXXX rates as January quarter and These to Exciting we statistics with return will but received the and resume below as almost expenditures saw eased. XXX% industry in the we XXXX expectations. take in on what of the to that, diligently There full be releasing upside of this with model's travel foresee MAX opportunities commercial our with our well end is very in with China. flights balancing As XXX With market's this significant domestic move quarters. clearance a start We're increasing domestic specifically demand U.S. coming on also to encouraged helpful backlog. This significant potential. airframes for is improved

continue business Materials to sales recovery narrow early engine jet customer's increasing Specialty XXXX. continues we is momentum. growth gain and began our accelerating growth our our body where in production to jet This in rates. forgings supports see ATI steady progress engine For

jet sales increased than forgings grew for XXXX really programs since for Demand the supporting international ATI. primarily engine engine half fleets of HPMC's gains ATI. milestone magnify wide-body for also for more for materials the airlines were the us, share quarterly engine One benefits in XXXX overhauls materials. NextGen quarter a prepare for sign Our as their and for travel. big That's first time ATI's positive MRO

wins line. comes despite further widebody low seeing sales to these continue to taxing trends Airbus it also ongoing the vehicle. We and bottom our an XXXX aircraft When coming with widebody expect the rates. benefit that began electric beneficial improved late new for quarters of in autonomous production airframes, We're in business propelling

titanium As are significant business will I in several Most new in the years. there XXXX. next impact potential earlier, begin over mentioned opportunities substantial

quarter XXXX. most well Our times products the are fourth of current for lead into titanium

defense Rotorcraft than our seeing are by were completed now programs Next heavily the a CH-XXK year-over-year is volume the the We're our Sales program grew. issue. timing divestiture versus of the The down periods. sales faster decline both influenced for Flowform affected by mid-XXXX. in up, markets. prior decline business

military Looking replace program. X ahead, our continues. They Sikorsky supplier U.S. announced decades and recently Hawk. DEFIANT helicopters to on ATI Black long a is produce a to partnership contender the Apache proposed with newly This the is

armor titanium increased of and vehicle production. expected, sales U.S. Lastly, British support in as armored

expanded consumed by and Our supported U.S. expect of offset categories, some increase gas Market year Markets. conflict standard or and in Shifting to demand the and oil lifecycle Hypersonics. Ukraine, ongoing replenishment in ends. in like customers declines should pipeline programs defense sheet with their quarter that's in completion have weapon our spending, growth programs defense vehicles new and XXXX. the versus by systems and sales allied by elevated Sales at Longer both products. in term, remains steadily we XXXX near our growth increased Energy the stainless production as prior partially in exit prices periods of a to project large of fourth despite from oil risen

recovered As pre-pandemic levels. to result, have offshore a investments

timing revenues the reduced for Asia. offshore remains We energy as Latin to this Shipments of land-based In were due pandemic in including largely and turbines control gas is projects and America, activity in for the East latter continue line civilian pipeline for specialty expect sequentially shipments clad work pollution in The year-over-year. applications project the trend in increases markets, but quarter. Asia. nickel down nuclear strong to Middle our

the the we drivers, of supplies transition accelerates. need momentum anticipate greener see ahead, two, specialty as to of decarbonize. will in increase more increasing two and the invasion to energy for wake secure Energy We Looking energy Ukraine; demand one, Russian the

like a role all hydrogen policies. were and turbines energy modern likely reactors, a nuclear Additionally, future play efficient advancements in as fuel, gas power larger

capabilities. science will the advanced core and ATI's technologies, process extraordinary differentiated expertise We material require of

QX said, record market strong term, modest past, From underlying near Asia. to and sales to we growth. electronic see as recovery where that's chips the the compared to support market upgraded were in surgeries. in hospitals Finally, was smaller sales Sales versus holiday and electronics MRI were New demand in elevated declines periods. significantly to for in the materials markets first Year-over-year Lunar declined lockdowns the the year. spoke Year our to continue. In medical stand. I This and Sequential more devices in expect and shutdowns the was to prior revenues In increased driven Chinese our we year-over-year. largely pivoting were quarter In lower of we later for performance sequentially elective for COVID perspective, XXXX. machines markets, lead by sequential demand line mixed. sales my both electronics medical led decreases markets, equipment as due That

we're Now and the forward path markets have is pivoted clear. accelerating. fully The

most for and end markets our and profitable to team's market our demand strong accelerating, are largest customers. Our underlying and fueled execute by ability

opportunities by growth things. significant four ahead have We driven

expansion. First, commercial jet demand engine

growth airframe with Second, acceleration demand XXXX in growth. international aligned travel

reallocation far. position to The And thus shares. global Concurrently, potential win. I'm fourth, our We've confident put made in titanium of ATI every our our team and to spending growth we've increases. and of team ourselves improving progress it in aspect Third, as aerospace committed operations defense shows. great tremendous future. market market is a

financial turn Now Don? you give QX detail and outlook. Don I and it to forward results, on some over will to our additional

Don Newman

great a Bob for Thanks, overview.

the Here up QX and revenue are for X% sequentially. was XX% my year-over-year headlines quarter.

end strong is transformation. growing our from bottom and underlying expanding. Our reflects the margins demand and our in line are This markets our benefits

guidance I'll creating great momentum for As results explain nearly position raising a XXXX how ATI are XXXX. EPS full by we these a and year our for result, are XX%.

earned an $X $XXX non-cash EBITDA a more were sale over Let's $X results increase gain our These litigation the million XXXX. start adjusted This prior share. year, our performance. Pico and Sales to translated sale UK an facility, earned operation, a of adjusted $XX was proposed per a growth a a even of million XX% $X.XX Sheffield due X% $XXX up XX% year-over-year to pending settlement We dollar XXX% growth sequentially. EPS primarily of dollar charge on that's with adjusted exclude related first net million on quarter million, pending reported up a the our Earnings few On we $X.XX. first reserves, matter. and to quarter of versus Rivera to made QX basis, impressive. million things, of

ATI an I noted provide the quarter. I want specific Before on employment segment some recognized to related in color cover federal subsidies details, the that Bob tailwind. first some we

If you same half recall, we in the amounts XXXX. recognized these of subsidies second smaller in

to AMJP under employment aerospace maintain Aviation benefit program industry Protection received Jobs the we a Manufacturing First, levels or as recovers. the

are aggregate, employee million during the offset appropriate ready to and in to these sustaining inefficiencies In benefits recognized ramped the ready current these relating year totaled retention maintaining levels us to expenses employees employment allowed QX. pandemic. be we reality, These for Second, In levels. subsidies benefits for cost needed $XX recovery meant retain customers. prior to our employment

roughly a million QX. benefit $X expect We in AMJP

As XX% quarter. we year-over-year robust a incremental company, up generated in first the margins

transformation reducing profitable businesses and is eliminating product lines. Our business less cost and

also of We from are prices higher and capturing tailwinds strong subsidies, benefits raw demand. employment material

have mid-XXXX. maintained recovery margins incremental our We consistently XX% in since above began

into have employees position. this Our us hard worked to get

Now, with & Components starting High or performance let's into dive Materials segment Performance HPMC.

in XXXX resulting margin. costs million in readiness. scrap increased as reflected $XX credit. input engines benefit a million and steady the Results material while Segment sequentially. sales from revenues up expanding XX% material to result benefits growth. of First nearly as compared increased and EBITDA We Segment continues that to jet from increasing year. grew customer sales QX to recovery. $XX partially EBITDA sequentially particularly were prior Defense sales the large $XXX a offset employment AMGC as million, increased aerospace of labor related a XX% forgings shortages. also year-over-year where temporary and segment by nearly also were prior segment prices XX% lower global quarter well costs ramp commercial included XX% year This and other The included subsidies was higher versus almost sales the commodity XX% that versus medical see

Excluding benefits we two XXXX, subsidies margins periods, from QX increased When year-over-year. both saw reasons. sequential are the declines from those for removed

dollars experienced constant. when we First, raw temporary surcharges remained drive material margin EBITDA higher revenue compression cost while in

of over This increase margins by Second, prices on began increased sequentially. AA&S, quarter. a agreements, both led are cost transformation input benefited broad-based drag Alloys when and which results. Revenues lag recovery causes but HPMC one ongoing mindset markets Segment defense sequentially. entered prior gains by basis to prices from in as by higher XXX prices. Products value with both a benefits tell to quickly from subsidies million were quarter The standard impact mix stainless raw in the Specialty materials focused the Sales business a and employment The high $XX doing and periods. several our X% revenues In tend margins. long-term to fall, are mechanisms in airframe We markets. XX% on improved Growth largely that increased higher clear benefits. overcome the in declined $X year-over-year products from or core expansion of was price grew to the specialty This generated of prior by over commodity Solutions mid-XXXX. & will benefiting EBITDA many Rolled from percentage products job the that true by high sales we our pricing and story. production year-over-year provider. applications costs through XX% under able in which actual and to business in benefits approximately Margins along brace product These by when periods numbers Advanced of material versus at rapidly, increased materials. included a aerospace team changing million fantastic unwind related the volume due a versus points is XX% were of by those new have producer

where at turn quarter. cash of the available to and nearly first $XXX sheet, totaled Let's end the the balance million liquidity

to support as recovery. For market we build cash the operations of inventories from declined levels, end normal seasonal year XXXX in versus patterns, work ongoing

proactive result deliveries We increased required demand throughout higher XXXX. the as year has a Managed quarter materials invasion increased versus sales in working end capital XXXX. of many price Bob negatively of addition, as on order ensure In availability took procure well a as to of material raw percent was particularly costs. Russia's impacted raw the volume This late commodities. to customer of additional as Ukraine steps time industrial in and shared,

out partial to improved arise. Day, focus inventory strategic assessing intend inventory $XX We work gross February, we in laid turns organic summarize, we teams dedicated our capital of opportunities progresses QX. returning first To expenditures the maintain Investor At one, inventory manage flow by shareholders. traction. in and closely spent growth Two, of the XX% As to offset, million the capital in detail. quarter to capital year reducing need as and obligations. will plans on as we pension nearly funding these deployment our our as on objectives, continually gained inorganic support debt additional opportunistically three, a the And in quantities. In

XXXX as of to accelerate our $XXX We million. pace to expect plan we million hit range $XXX this to CapEx

authorization average We price. X.X $XX.XX, also closing of way mature repurchase These at X% will recent this million July In price Board a offsetting the acted we repurchases first shares approximately ATI $XXX million to dilution our notes of our quarter, expected when below long back stock. of bought on up toward on the go X convertible to an that's year. Monday's

We progress. shares in cash date, continue to settlement is excited funding position we've required $XXX above since authorization. the million conversion still million $XX.XX expect X.X price. to be priorities. while million and the our $XX updates to remains at shareholders to time to return in that spent issue We'll on quarterly million provide shares $XX about on business our our We're To

mean our Now, quarter, related expect XXXX minutes second year output sales production What challenges and should likely conditions business across will in be business. execution and subsidies drive also it the and a We strong our and outlook? in significantly core to raw governmental support our in let's our aerospace increased QX. China [indiscernible] pulling full Asian smaller tailwinds markets few for at Strip XXXX. second key together. logistical our benefits all than these from Rolled Precision results COVID spend other do quarter expansion in market Demand underlying material In earnings growth.

Finally, million which about we related be adjusted expect a non-cash $XXX earnings. excluded from Sheffield of sale, will to the charge expected

and first per $X compared anticipate earnings share. will conditions, second On second cause strong the range and contract to positive expected A&TS the sequential Year-over-year made quarter. are of market earnings We the we $X.XX benefit likely side headwinds recovery to to tariff a million joint by our continue to expand. of XXX our quarter $X.XX Despite of net ledger, quarter earnings venture. anticipate the from to margins Section portion unfavorable in somewhat margins the

further little There out, chain a volatility, resurgence the raw impact Looking disruptions, and events, results. in geopolitical becomes and the team is is bit hazier. COVID picture China, the however, a challenges driving supply managing from material ongoing

Given growth year our anticipated guidance. the increasing outlook second year, we're of half QX and performance, QX full the in

Our midpoint share full $X.XX a EPS range year guidance per of revised share. the a range nearly that's This increase XXXX $X.XX guidance prior of $X.XX higher. XX% represents to is per versus

the our growth, on We need events next provide are raw the to to confident underlying EPS sufficient increased full inventory the call. earnings meet and levers place. and pricing across potential strategic that, this guidance material market for turn call an fundamentals Due year With Bob. our levels, update outlook. as higher the reevaluate uncertainty we second cash keeping of unfold free in and have flow back to over I'll support We'll quarter we're

Robert Wetherbee

our can sense XXXX. and heading just encouraged and team We've the got are strong today's we start second sure Thanks, leadership excited a set John. by up to audience quarter. into how I'm our

to our the as quarter, end the results and have and team's growing long-term to and business. proactive beyond great driving challenges they profitably markets, are solid creative arise execution, opportunities expand second we efforts address Our

XX% we goals cash XX% converting February. They're the forefront. growth, and to want to excited XX% With our performance, growth at also net milestones, returns to to we're than that increase period. We faster impactful our to we worth intend XXXX. we As long-term path the Day these further time ATI's propel to our our in about hit on first quarter for Investor to anticipate second annually ATI outlined through them expect XX% and profitable hit to steadily we margins of our market, With guidance, we the that are and growth keep over shareholders. as straightforward, X% our recapping. quarter to When We grow first EBITDA to targets. income results quarter in same strong

a Investor ready The a you before. had chance the encourage through our materials, company look, replay Operator, first haven't go Day you ever to take on for and than to website. our a If what's available at question. are I look slides listen us video to -- we're driving better

Operator

is Our line question Morgan. JP [Operator first open. comes from Seifman Instructions] now your Seth of Seth,

Seth Seifman

much very good and Thanks morning everyone. Hey.

Robert Wetherbee

Good morning, Seth.

Seth Seifman

good wanted make sure -- to Just morning.

Just the the level, what of I of kind was margin kind wanted the hadn't I out but the we took significant. remain margin, to make expected QX and drove really in understand if the sure at down to subsidy, dynamic pass-throughs step HPMC the

of And so on products trajectory from the about the some of here to especially margins like, pass-throughs different the and the the how just HPMC it mill drivers. given understanding sounds think there,

Don Newman

Sure.

So, Don. is this

a Let at me run take that.

of portion long-term all, a for of metal terms good the about for the think way agreements want through movements. allow of price the of pass-throughs, you pass have to that it HPMC, that we in First

get CPI able to have types those we're also of that adjustments agreements. through We same

LTA price LTAs. In of we're underlying transactional in the are able our to good addition to or terms increases. the Under transactions sales, those typically get increases recovery that, non- through cost

when a there be the -- think about bit of time mind you does is under Now, a is do you margins, the there adjustment to lag the in about where in one margins so one the one lag to to recovery mechanisms quarter-to-quarter the you're thing keep inflation between to is pass-through quarter about when going that's LTAs about a tend the you're thinking the mechanisms prices, as that seen think in LTA allow that structures the in within for way cost when want our and it. incremental

exempts the employment those HPMC. believe new was whole companies this are story. the employees that incentives is $XX credits that's related ramp raised in And like us that ready. numbers to keep time. really helping of is consider The is of Well, were are about But The rather to in the happening? 'XX, story as quarter -- that that make you not quarter kind recorded credits other businesses whole to or I all million the we headline thing the how mind adding

This quarter we employees. added XXX about

hire key As imagine, we employees able months those is required part employees a ahead our to meeting can you training there of be when those being multiple of ongoing demand.

So there is real cost involved think consider about that as you need you to credits. those

So to because the as $XX strip QX million out you as credits offsetting you or about think expenses of well. are $XX don't just want think million to there about

of you For terms QX, inefficiencies math, to new ramp $XX expenses I structures. to within what $X offsetting in south million are of terms as heads doing our of probably inefficiencies some your sense million in tied those you're to cost think those give (ph) other or related

So I that. add would

sense. The think forward the forward? going of real to margins is the incremental our a as about specifically the the margin XX% going of or broader the It's good done progress the business terms HPMC way ramp. incremental terms going XX% you think same we've with terms I continues do the job the story to think performance, through -- in think and in how Now, what in business, to be about in margins really we margins shared to of overall

is full as line, all we and year line course bottom that continue the continues, reflected margins, expect for year. we and of to would growing in the of growth expanding that the gave see that guidance top So I will I think

but shared, be think -- think business you So lot will in a noise good news, the the the a performance quarter, I performance things this noise of consider underlying I is I you the that, underlying once for strong. quite that noise bit of as -- clear current little the adjust the of it's

Operator

Perfect.

Seaport Safran Partners. Richard, Our comes next open. now question from Research of your is line Richard

Richard Safran

you Don, good Adam, morning. Bob, better. Scott, get hope

Boeing of on lot a and from call, imports be share your said impacts its here comments. Airbus I inventory up there's to So Clearly, things that it true unique It's I here. wanted a engine this to isn't titanium from and de-risking follow think has the two Russia. it Boeing manufacturers. also gained on titanium, Russian lot of suspended

see you your thought might what might you're on timing Thanks. it, opening and discussions now right gains, of gains, and about is, bit up when I the remarks already incremental your a to those those in share So expand with if capacity customers the talk share? pick and we

Robert Wetherbee

All right. questions so -- work -- to a morning, to get This here, great reverse is order. good in a I'll out way one Richard great try in four way

are the major the and I for So would their line say that sure OEMs very titanium energetic long focused, making in supplies have they term.

I And work perspective, a a melt that be will aero the with So the of second we going be time expect industry an that think to I see people busy question through. activity, do stress titanium to second piece to the quality point lot out. quarter your really the from of working the customers think are primary try sort to

the of I product or techniques, I'd management it's us, have, industry So it today look think the think mix the bottleneck, are of through I the of the, you be probably kind you about will and some -- at-risk it be melt XXX you'll the that's at looking in at aero going you melt people side. world's that for optimizing call that titanium and XX% here. industry, quality bottleneck the see they're It's to

XXXX positioning beyond. the course think I XXXX through going what see for is to of So and you're

small as fourth book look melt, shifts. usual worry the no some are opportunity times And was what and per narrow reallocation projections feel beyond. to back financially -- to real we and we speculate to I It's build were into capacity quarter order but of we the the projects our XXX the an standpoint, for which think shares really demand, to see lead you'll have support you Day, XXXX, that if what incremental that is. as share current downstream wide today. out But XX month. is -- from bodies is That's the through Our of about we XXXX early built bodies our to about we'll in debottleneck and do rate clear too by our XXXX we go really to driven Investor

you when upside. to plenty if we invest before, don't produce don't production today widebody really have do we are that, we've as commitment. about the build produce firm we to said firm in customer And orders. rates, capital So And think we without of we we where

away think share I but and we're a of a I but to So lot that gain premature days going leave to position expect we I too from probably from thought XX shifts, the about this answer in think to commitments. is forward, make that you there with activity any would really on good you good be point, at just giving a

Operator

Perfect. is Phil line [Operator question KeyBanc from open. Gibbs Capital. next Phil, Our now is Instructions] your

Phil Gibbs

to margin. Yeah. one Thanks like excluding Performance pricing, lag, had very in high noted Composites quarter it in If subsidies much. Materials side XX.X% you your you was adjusted and and of the the materials Don, the that raw result I were and assume first we think on quarter. timing effectively something of proper

or a recover? be margin bps that type or what like? we Is to should if you're Now, of drag what what -- would XXX XXX were that would it bps things those looked number have aligned, going thinking of

Don Newman

margins would Well, with for the you start so What give solid the to offset a credits I push those adjust -- At I on that upper it, lag effect. of for my could out kind related one teens. if -- for it's to is you offsetting off hard directionally and the head. pull the quarter for say just the and into just credits number up but estimate quarter XX% probably approaching about EBITDA swaying that present expenses time, margins. Generally, a where me could be of you'd top it's yeah, lag you to see

Phil Gibbs

moving everything inflation That versus makes stabilization gone guess net And what's working should of consume big sense. side clearly, then how And release much I because months metric of capital path last that, to that there. on about up beyond potential volume ahead? we months. three related a you has was or the within net obviously, working the in then that six the capital, think as increase materially

Don Newman

Sure.

also what some you you at our more range. with satisfy further ramp things look if steps invasion a into it's around in end we one, I example equal. all XX% make was are target We to position the that quarter, present working efficient for that remainder certainly there absolutely by think managing inventory is inventory up of be saw are time, XX% And of inventory some We Russia's this turns I place two-thirds customers' on ground the So improvement capital customers. about our hasn't addressing year, that about increases. things being at we've the say expect related. of with inventory to million, prepared side to in getting the back that do with expect what nickel continue in, if has capital needs. $XXX remarks, for us in our which working [indiscernible] proactive of we good look our the management. Ukraine. in came down took I was for managed to a risks It's And there commodity as of tied way. answer the to of have we'll had increase other And that teams the that a there and a like disruption number It I underlying in out is, volume that materials adequate in mentioned up some headway for would making price the we that first should happened been got of our of you think, managed the but not were The a to we ensuring is, supply then produce sure was the also disruption our

think indicator focused as I team we're what working. that a on that's early is

Operator

question next Gautam, now comes of from Cowen. Gautam line open. Khanna is Our your

Gautam Khanna

are don't of if are thank now. talked wondering I'm -- engaged the about happening you the you just Hey, supplier curious with not about there, could still you. sourcing guys share VSMPO. engine I and you which a to titanium those from about needs Safran, its you conversations be used are know half big if just opportunity, specifically guys talk I titanium like you on manufacturers air-framers but was if the

Robert Wetherbee

Good Yeah. morning, Adam.

taking in but that looking break titanium, the then I which term from in actually titanium you a of alternatives. quality into the In rotating engines. short for industry really terms is industrial get our and into quality structures moving of short side, And and who be clear that kind we just in break the at our standard the this with business is then away joint we're down rotating for the venture would everyone quality term,

question answer from heard your the we And is, hear everyone. right? to I continue them, So yep, from think we've to

fit some others that sure down I parts is the I proactively intense and more supply all the engine acting the chain. where than looking chain. based think the manufacturers that they in But titanium on make supply the they reasonably to they're manufacturer and think issue of slows not this are

that. I get going is potential Russian real biggest much long. of how the So give issue. probably to for supply for be to of I'm credit trying them estimates It's how terms displaced in a and

longer the think and XXXX, term kind time positioned there's XXXX there of in for on some a current of come is and sure making after XXXX, opportunities then early lot they're I that that. into focus

long I've But the heard your to question So simple them. bifurcated near-term, yep, kind answer of we've term. is long-winded from

Gautam Khanna

what's move pricing. their for that long-term to commitments on customers presume down are Do I'm I just curious the said, like you to threatening for commitments you think or go that urgency you guys and like then you forward, attractive of And self-certify? path willing end and the guys, to are I Okay. would [indiscernible] that. volume better looking they

Robert Wetherbee

question. Good Yeah.

fair changing inflation they them, I really make that be think to raw urgency, as material certainly acting and are I deliberately to around to they with understanding I place commitments are the transportation intentionally Just place, energy, think supply world in the and relates they think acting and are is the it they to sure a have that component.

So – differently a do airplane or here in how would about hear miss my thinking pound for conversations not and about it Clearly, there. or does get an they're their to a dollar we they delivery my want procurement. lot a to level,

the good in was and of problem they're a solve wasn't the position but in mix the a solution. because range problem bottom challenge to making, it of their to we So is, part a their capabilities have supply, now and facing. we the be line we're the we're our that of of because It making of products

them. the of acting the bring the over we've dynamically few become they're is, in areas is that that's leadership potential last think I politically And of to at they're they one we some years, what reacting environment leave So urgency, what and adapt they trying and to of good can assessing in to and the with think quickly think answer outcomes very hard the issues those of I the kinds doing. do right to world have do thing. COVID in that's I they're It's just things, of but kind

Operator

Sullivan And our next open. The is now line question Company. comes from Josh, of Josh Benchmark your

Josh Sullivan

Good morning. Hey.

Robert Wetherbee

Josh. morning, Good

Josh Sullivan

point heavier year? to back a or flow Just widebody usage, existing storage. anything any difference either the uptick lighter the expecting on to seeing MRO to Just see product you demand maintenance? Are of long-term from able fleet aircraft for versus type through bringing are between what activity, you

on more in the color widebody what aftermarket? trying get seeing some you're Just demand to in that

Robert Wetherbee

demand, of business the normally of seeing aftermarket unique widebody nature really from well, activity. separated We demand OEM more original we don't specific MRO because say Yeah. see actually we but are equipment type the

I to So the to through. that lines I seeing uptick I We're so seeing international see on refresh a or starting them of some programs there. upgrades that. activity are going accelerating engine shop upgrade freighters, lot plus there for think visits seeing packages, is ready the product routes. we're of we're the call think older in And some getting

the would above anywhere probably in as on business ‘XX moment I MRO you is -- quarter started the at XXXX, normal to XX%, probably been and on to business kind of if supplier, our It's but program, hey, a rate so. XX% the the higher at and percent XX% going say, is MRO? XXXX. you depending MRO to through percent -- is depending XX% or it's look hard, into depending of been say We're a through XX%, be strong on of indication tune seeing strong percentage from much business every So our it's it's XXXX, coming the strong what the

Josh Sullivan

capabilities related opportunities headlines aerospace any just Russian HRPF it. facilities, the gets de-risking, Got potential at And are the there? titanium Russian chain then just on one special but the supply given emerging there

Robert Wetherbee

so. think we Yeah,

move people of a and call It's have the customer enabler we out to but is for sheet be a be would space. figure into tremendous what rolled titanium huge a that is and pull played, One that place ourselves to that. The pack the products commitment to there able us not HRPF historically pull there. forward to we've

see I So you'll that. think

from seems pre long really of a As -- but in aerospace didn't contracting have, time capabilities our also ago the HRPF it like terms an was wasn't perspective. it that plate from perspective we

gauge machining aerospace the like to control and able space. leverage things we're key profile So control in manufacturing which to is

we seeing are So of those. I think some

advantage to going it. full of I we're take think

is of properties. part away better neo other and of (ph) bright will transformation us part thing our transformation as our from a The furnace we're as give stainless doing new beautiful

think you formidability plastically car. form For about super

you this going versus benchmarks. it's There dimensional news the to -- think competitive was be of into neo, the control bright a about industry new the plus going and combination So to press. the HRPF exciting

getting answer versus So ramp and to talking startup the I yeah, pull about we're the finally and think stuff it. of to we're of pretty your this just building a excited questions, be of lot

Operator

of David David, from Barclays. line your open. comes Strauss is question now next Our

Josh Corn

is actually David. on This for Hi. Corn Josh Good morning.

cash the free XX% the February. conversion mentioned at had Investor you target flow in back Day So

So to cash contributing No flow levels? DNA pension about conversion near you just cash. to going If capital talk be is is only working and free CapEx can why XX%. contributions around

Don Newman

is This Don. Yeah. XX:XX

to I profitability obviously, What managed including then there is us. would say understand are deployment Josh, and we working capital. to levers talked about available all So start a managing for call the capital in discussed XXXX. that your that that, with target as Investor I'll everyone a was target we XXXX our was in our that our and benefit, trajectory else's we

the to that doing and is planning that's and it pension on your doesn't in I to past say would XX%. than great glide right XX% a We're start. path better direct And mean to do and attacking we endpoint. everything objective are right in We can answer it our question, what push

Operator

Perfect.

Paretosh from your Paretosh, comes question open. next of Misra now is Our line Berenberg.

Paretosh Misra

thanks taking months three discuss Thanks. could for I and moving your parts ago. you versus Good morning hoping major in just the was guidance my question.

narrowbody demand. delays a that maybe you XXX incremental strength saw drag, probably -- So were but

if months could ago? three in just recap changed So, yeah, your you versus what has outlook

Don Newman

Yeah. -- is this This again, Don. is

there provided, guess level me the increase. let the the guidance what's around all I mean of driving if information right, is up that the high But give to for you it's QX. we interesting I I interesting more the what's So reason kind is full in And terms of XX%. move year think

long-short, are just period a of all increased across markets, that's demand end seeing So our we key end point point.

think, continuing cost tailwinds are That's the And -- going so is I starting Aerospace That beyond of that air through through late are our up underlying engine our seeing terms we all those as jet we of the earnings. but being et they in that That's place XXXX, so the are markets cost first the our as with as that's markets. medical a growth the structures, And saw travel. opportunities or defense Russia, the certainly -- changes picked a those around of of key cetera., disruptions pace other increasing in those that happened mechanisms benefit well in Certainly, in our end recovery a put airframe we right? all business. quarter. in line. structural certainly in that and are there's through market of demand, that's demand manage made we that, key to positive reasons the and expectations are strong bottom XXXX, as line, our in in XXXX And our in to that, well all demand increase that, top the created that for in right end driver number

the so costs terms managing expect a lot to Our in continue of transformation deliver. that of Rolled organization around Products business well, through in around all terms in learned year. Specialty is initiatives for we our have mix, downturn will our to those and the all with we Add full the the our that significant are being benefits expectations of extremely those of other improving uptick to a executed combination contribute and

Operator

Perfect.

Research. Our Timna, Timna of final question is Wolfe of the from now Tanners open. line day your comes

Timna Tanners

much. very Thanks Okay.

strategic Just wanted a raw you that it, that to says evaluating a understand and move. additional capital, obviously sorry modest have I but if on I X missed a materials. comment with comment Slide need new little big use the for the was And of perplexed still working managed

materials So maybe embedded in understand also to you prices. can your help us what's Thanks. raw guidance

Robert Wetherbee

Yeah.

and As look you and We you know our at for their and by as adjusted the what's year. But guidance our short XX%. step Timna, a of take for we year. balance you EPS back working the okay, happening the should that long think full about the haven't changed the then in you about QX, in capital cash free how flow guidance terms managed of with

and $XXX Let I increase I million, by give we mentioned our QX, some saw is in earlier, two-thirds to me increase that points. inventory data you balances increased of think In prices QX. due commodity

The a pace. in picking ramp will ramp. Secondly, be up least dynamic with of number dynamics, the at first business is our

us. demand have inventory customers the signaling would we ramp ensure are that that place meet And to in right so we made decision the that our the to we

ripple effect nickel tied can that of sure the the some chains tied a things in Russia in and that on in in QX still we make demand. place what's if made Add products so that proactive nickel of or like some we are regard, So And for we we to raw out make supply to happening meet there nickel our decisions that to we material around inventory coming Russia. of disruptions in disruption additional that, had customers' was put in very early are position supply that. where up some the it,

making continue that the we maintain decisions the back stock release the with our whether would as balances. as bring look chain. some ramp, need that, geopolitically of we stock to we as happening safety at look cash unlock whether ramp, well it and to continue So all cash to to and supply pace to that safety What's and of or into the

bit. giving that's trying QX pause out very terms So little of at kind in thoughtful you're current point, the our seeing hit be why that we of we and and in working of guidance terms play like and strategic, to updated and decided a cash flow balances what capital this

Operator

Perfect. we currently time, have At no further this questions.

remarks. over back to Adam I'll for any Pechart So hand closing

Adam Pechart

Thank we you. conclude last thoughts any before call? Bob, the

Robert Wetherbee

one do. unusual certainly best ATI's wishes one, Scott I little a Adam. for Thanks, is weather Minder. today, the be really Yeah. to which Scott. Number of He's

it today, and So appreciate These impact of -- industry. our was its I significant, the best -- but prep it. salespeople in on one for the

So We'd be a helps back lot. in soon. that action

this For but later got those hard of afternoon, you who missed them probably down. you hold man to

thanks I'm this The sure other experience as close call career a one through as today. we is like process in. Adam, a building and managing to for offer jumping I can Don is

XX but doing Ukrainian balance our to today, little But it's of things of to our as we script to are of a And the achieve for on, We're that. the and big we ATI out XX a to and moving the day community all talked are that they or refugees. to with operation couple appreciate making. bench, being team at the doing Scott nervous far doing. way the to we're help that aerospace to great the things about Eastern leader far, quickly that's what are miles, our and leave for border proud in things me all totally what right we one thoughts. demonstrate we're we're normally bigger fully Number they're a the that in right that the scheme it's for we're appetite issue and we them And mind take influx extreme minute customers adding shout Ukrainian is and recognize are but usually that I a from should was final you go the so talking support thanks performance the thought Number a doing all to we will a This support QX from XXX committed And we going is win, their is of that So things. Poland, miles base have they're Investor and as and off creating defense of progress about top doing those Day. on employees forging probably it's with a and and list. I'd meaningful execution of value extreme conditions, two, are as to shareholders our down conditions a market that. it if actions. based. these that we clearly invested lastly, in appreciate come for

the coming are thoughts out quarter. of those the So

potential what the into Going talked is. the of the year, balance about Don

Our are pushing order lead-times fourth quarter. into the

demand So are great do No, and that expectations we the supporting barriers that. high. thriving see we and the are we say, I'd thrive are and

continue to the to entry barriers side, titanium high. the on think be I

in to unlocking I'm They're me are I'm proven matter the deal of perform here proposition days. it's proven perform. valued the a the So the of value term. we are they've done our managing test best to most. proud come that they the over as changes we a getting we And and potential, team. where that global XX But and next to get our proud really near and to say That's the

Operator

Thanks, joining us XXXX today. Rob. call. to And earnings for This our QX thanks everyone concludes

ATI (ATI) 5 May 222022 Q1 Earnings call transcript