ATI - Earnings call transcript Q2 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the ATI Q2 2022 Earnings Call. My name is Ruby, and I'll be your moderator for today's call. [Operator Instructions] I will now hand over to the team to begin the presentation.

Scott Minder

Thank you. Good morning, and welcome to ATI's second quarter 2022 earnings call. broadcast website. being is discussion on our Today's Participating President Executive and call are Vice Board Chair, Bob Wetherbee, CEO; and in CFO. today's President and Don Newman, key our Bob quarter focus Don on and highlights will and messages. second A supplemental website. on is presentation available our and provides results and on outlooks. It details our color additional After remarks, the we'll line questions. our prepared open for

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

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

Bob Wetherbee

joining us. time Thanks, many morning I Scott. thanks for for that the Good saying, of ramp, can today preparing has After we're are confidence and quarters and ramped. we say the with come

events. markets, to for. base, Admittedly, production moving Across That's Our we're after this of aerospace, in this we're energy, and is labor phases early largely increasing and fragile namely, to the end are This plan easy. markets technology global We're rising due demand, inflation feels we of match issue. is what are are say accelerating. reshuffling. it per challenging great. pandemic in geopolitical our core customer demand. We're asset defense and and ready a in ramp, not chain Supply operating circumstances, with tight, years we're confident going to are it's costs two positioned forward. but I'm shifts,

on hard We're reduction be matters proud positions. how I'm with to cost most. or our fill the what responding. dynamic Just initiatives on during is We laser-focused pricing. inflation like worked we're pandemic ahead offsetting team and open track to

translating every at our and in strong opportunities. our But our financial do we and it long-term Three owe materials and high-quality every are results. things strive manner. site. producing results for into our efforts. customers are for timely are QX We that we operations Our delivering ATI, actions appreciate me a parts and not significant Across they day perfect; perfection to in

is growth accelerating. revenue First,

exited XXXX. up were previous by of This that $XXX highest business quarter segments. demand our our stainless base the customer second pricing we tailwind; XX% worth Sheffield million the the marked both expanding higher driver. before provided QX supported real the standard in sequentially, Our and sales was business is It's since noting Flowform surcharge divested operation. and equally sheet sales The period quarterly both

to having the marks Actions Second, adjusted year-over-year. portfolio transform points This aerospace structures basis margins of results taken is EBITDA margins in line our were XX% government-related fewer in these quarter phases the continue more Sequentially, of XXX near improve. pandemic early improvement recovery. than in during benefits. paying the QX off. and significantly were Momentum to second are margins the second building quarter. business despite cost our an

as our than continues was second free and seasonal balance of full-year working anticipated. year. flow, We of still spender, organic growth. improvements. projects We'll increase use expect we're continue. our the a seeing an to quarter. modest And this in input third, the and improve We This cash forward cost cash order strengthen book in to performance was for stealing the the cash Without in down our trends capital increasing and for with target ramp normal production these all better we're for performance line reflect ongoing flow to our capital we find had

year-end XX% toward net of As converting XXXX. we long-term of progress to do, we're making goal by income our cash

I put to picture our context. three have Let's in ATI's observations step big back short-term take performance results. a from

both not still international point. should of next Each years. for levels. returned production Wide-body unexpectedly, than to projected moving relevant airframe both airlines demand to to shares around rates the we for benefit makes have our OEMs at next-generation the travel. supply strong show itself, Completely desert ATI team? flights, narrow shareholders to few recently world. significantly the have orders the to Well, has and all jet pandemic fuel-efficient One, the two spiking sent engines our content. My grow grown; At our from narrow-body start did clearly people parts of is markets is record-setting Farnborough are Airshow in address recovering customer ways. travels and and the ramp chains wide These bodies vast with they announced several the the strength consistently reasons. the almost trends model exclusively for have on and returned row to even recent a narrow global has First, engine for is jammed for XXXX, the travel two, how this was air full bodies. demand majority the where Same the And to in experienced international bumps, as spare that more more industry service.

ever, fly observation, in Now, changing picture big of second Russia's is more ATI. My than ways. the world you can't without Ukraine many invasion

are most come. be sticky to but small, for some time others big, to are going Some

the tragic forcing Let's is having impact other It's of migration to of Europe. lives. millions be people's clear, on parts a Russian primarily aggression significant

of continue particularly who helped impacted directly Poland We people in have Ukrainians. support Ukraine. in to the of those We stand employees, thank our

It's example to the Ukraine goes to the and ways ATI. response. short-term interests On titanium has of in best our we're issue, same are increasingly need Russia's disciplined to western time, subject our Customer the lively. balancing of shareholders help this commitment to how with our the supply at GKN great in a aerospace chain aggression and active both. We're have discussions three beyond We're shifts. that for the finding business pervasive, in our benefit The in of the are gain impact tight share focused share aerospace benefit. strategic We industry repositioning capacity our situation allocate their purchases the and to on long-term significant greatest announced on balancing customers this examples meaningful side Ukraine well sources. of shifting I Aerospace. with titanium July a

national near-term, all In and this development. the increasing some extending is In defense into increasing new some require demand near-term, and are spot. vehicles, means like connected First, is of Hypersonics the priority countries ATI's seeing hotspots increased capabilities We're which replenished. These are weapons expertise, in the types systems to investments. geopolitical combat demand are sweet their medium-term. also science military extreme for material a for longer-term

environmentally-friendly beyond Second where scale. and fossil impacted other At in Russian-made markets are built in shifts. sources serves service note, ATI ATI these chain hydrogen supply are My become inputs working critical. will a required for third, and looking other security aerospace Countries and the Western-based is are of created XXX% the energy final be has observation is assessing Again procuring medical as same both. supply the markets is new until renewables, of well-positioned to time such potential national most. sourced fuel by input are energy This our customers adversaries, at nuclear, defense, vulnerabilities usage differently long-term own be increased shifting visible to titanium solution the solar can sourcing And materials. ATI clearly key eliminate to suppliers. from making.

last is best operation the and but actually facility as those are transformation time in left be facility Products. Pennsylvania at quarter the operation, be line Vandergrift, expect stainless our my products. We're call of product Specialty winding specialty for in first Expansion finishing we I remarks our one at mention Ohio sold fully track last closed coil I sheet materials. operations on We our who operation Illinois, we've facility, out -- work. our in second in the last Rolled standard team weeks this the the of is one all great this earnings will now will facility. our The of July, down in doing that of idled fourth

embraced team city. our of portfolio Sheffield, and complete. as expanding headquarter largely achieve. a the can and new our divestiture ATI quarter's of the energies With investing is what's official second core. our more-focused that, transformation we've strategic leaner, what the adopted name, growing exit know the vision We're our is you Dallas our name company. We're We're we We've standards

transformed physically. haven't We our evolved culture. We've also just

percentage business increase team to building under Products fluctuations. agreements continues material raw for long-term Our Specialty mitigations OEM, with the Rolled and of

uses to and together working more High materials Materials can and It's where and our Components Performance our & Our ever are valuable alloys exotic Specialty within the team force produce. closely said segment, be Components same Alloys before. businesses continues & The for time we Materials explore lead products than innovative delivery, quality. Specialty and about

We market. have the this winning combination in

see quick our shift performance for the overview and Let's to we what ahead. quarters a by market QX of

from What wide-body and rates, week's the our share ATI’s before OEM rates a largest related sales and increased end industry. share wins. outside possible well XXX increases XX% aerospace by deliveries First, engine nearly consecutive low in as can ATI With and is out Early We're increases market, Russian sales in XXXX. but the XXXX, and and of Rounding of business trend channel catalyst an commercial announcement Bottom in rate aerospace, commercial drives are lines in clarity positive demand service good production XX% demand, resurgence gains previously weighted accelerating with resumption underway. and aircraft gains perhaps quarter subdued and wide-body the to these Growth on significant aircraft LEAP work important realized engines. part is relatively expected wide-body field share are our for Last production year-over-year upward engine inventory, discussed for significant over for suppliers. increased cycle. Jet sequentially. new phases additional airframe second narrow-body with. sales from news the the volumes up we remain shift solid. we is likely into the

space category grow. airframe to expect we which includes Our applications, also

year, Next program nuclear Sales shipment compared volumes. due for rotorcraft naval up sequentially naval sales timing improved nuclear to When higher let's were defense. and and to down customers. to about largely prior talk due

geopolitical broad-based business Looking our sales by events ahead, to expect ongoing efforts. and development driven defense advance new

oil grew prior growth processing. markets drive well materials our beyond in turbines, disruptions continue quarter, pushed control for the emissions across technologies push the markets, The prior and energy reduced global carbon coming gas will for and ATI's pollution over supply ongoing and XX% to as renewables. energy nearly demand accelerated demand projects Specialty energy energy the customers chain including components and systems, quarters. natural and versus increasing from High second downstream XX% year A&D to expansion to and quarter. compared exploration core prices fund Moving security

Lastly, we down markets, and medical almost and and for sales medical sales were implant volumes X%. demand demand surgery This MRI materials. revenue comparisons continue electronics. saw increase customer XX% mixed post-pandemic. with year-over-year elective medical up drives in electronic Sequential In growth to

trend as somewhat and a devices slowed Russian by result In demand electronics, discretionary shifts has customer spending. to reduced this customer chain consumer expect materials. ongoing continue of away issues made from augmented We supply for

and lower position as lockdowns laser-focused up and executing makes in magnetic reliability. result coupled strong Hafnium were alloys sales our operational I'll produces and XG support what we're Additionally, advanced execution Strip ATI a of deliver great. a to We Asian Material in put for ATI's strong science to saying Rolled our expand with Precision continues microchip QX. wrap Demand COVID-related part incredible in by ourselves process strong on product and on demand. quality that we're to technologies production.

I'll back Don. into conclude from Don? and that hear be Q&A. let's take us to after Now

Don Newman

Thanks Bob.

Let's with upfront. line bottom start the

EBITDA a strong sequentially Year-over-year revenue in compared prior by labor impacted That's least was year growth Each were is period Adjusted quarter. XX%. by is substantial. and the and a segment in second growth Our more top-line the strike. segments. both nearly grew even XX% to the accelerating business margins pandemic at

$X.XX adjusted strong guidance volumes transformation. our earnings per by business accelerating share is our range, and driven of above of benefits Our

time increasing full-year the by guidance guidance we're As for forward year, cash flow increasing our well. nearly improving With visibility, confidence earnings this time we're second XX%. free a result, as in this our

below amount of of standard sheet a a second back threshold the Sheffield, in getting to rate mark million. into recovery to quarter's billion Flowform fully We in stainless just products QX expect let's results. that's little and sales cross basis. That's Now, that time. exiting divesting at deeper a after on XXXX $XXX quarters, stunning coming dive and $X were dollar the billion levels a short the run

Our QX, we earnings were impressive. EBITDA and generated of margin $XXX adjusted improvement million. equally In

mix we end roughly to a achievement. reflects margins the by we and streamlining also negative team's of For hard to pandemic. the work product XXXX. their to emerge the through full-year XXXX EBITDA impact inflation improving testament XX% the during mid-year structures, They of We're margin of XXXX. cost In gave February EBITDA proud guidance our offsetting margins Investor This fully second adjusted this compares ramp-ready. quarter in a hard our It It's long-term XX% of row, work from ensured XX.X%. XX%. Day,

momentum. results Our that show building we're XXXX clearly year-to-date

adjusted first This in $X.XX. QX is from quarter. loss we federal the $X.XX, an posted up $X.XX lower despite in a an at second impressive significantly grants basis, credits GAAP EPS EPS the Our and came employment quarter. On of

of adjusted second The EPS sale quarter operations. our non-cash excludes the Sheffield related to charges

because You'll negative recall was Sheffield focus well it and that their we with aligned sold generated XXXX. EBITDA in strategic not

divestiture a is by subtraction. us this For of case addition

jet strong forgings. Revenue a year-over-year, those XX% XX% to Earnings the Materials decreased results. and million driven $X Manufacturing and government as defense & do our value in prior $XX start and an of a XX% market. take into for growth cost-cutting long-term the offsetting sales a aerospace sequential of $XX difference our reaching Revenues aerospace EBITDA adjusted accelerating, toward the financial segment next-generation benefits sales improvement the increased revenues High-Performance from employment decline, from second came The included more the $XXX by deeper QX dive segment That's was XX% let's the potential, HPMC. only employment recovery accounted lower sequentially, these similar efforts. quarter, almost programs. materials, the benefits In in to over engine significant benefits. Aviation by specialty showcase? earnings included Now, milestone million results million Components What Act and benefits. I'll or demand journey the goals. increased performance. QX is with of first materials HPMC markets. largely and The our increase sequentially Recall mix driving representing were operating other $X in important for Protection than our quarter of from that year. Jobs results about result million million,

progress this the continue to aerospace during expect ramp. We commercial

Alloys Advanced & AA&S. to shift or Let's Solutions

revenues positively $XXX significantly impacted QX Our nearly an of transformation, increase our up again, XX%. XX% million, QX. and were were versus results. financial Year-over-year

Products revenues year keep the in post labor And impacted markets end multi-month Rolled July mind, Now, results. SRP energy. Sequential by and in strike, business. earning gains or which across major standpoint, from XXXX, to by prior strike the strong were led year-over-year were Specialty AA&S impacted aerospace an concluded and most our continues

points included QX margins Second EBITDA $XX quarter. That's XXXX million nearly an quarter impact. XXXX XX.X%. adjusted prior of were points, prior-periods. was and in strike That's $XX Section were an million. more increase year. AA&S sequentially, an of results a single recoveries that increase That tariffs labor in million, bears than basis the EBITDA impressive million $XX $XXX on XXX repeating. and versus about paid results XXX was for of XXX sequentially, almost QX $XXX million basis adjusted year-over-year on

its products. But As transformation beyond improved customer mix announced, the we're agreements. percentage our of of has Bob grown eliminating sheet long-term business standard of out business. impact the and reaches completely stainless far under low-value SRP simply the business The

have being recover to fairly ability working transformation our increased to we're more significantly exposure we're higher value materially for we've Most input metal our that volatility. The the is planned. delivering. result, as importantly, a reduced As compensated costs and

of additional second at facility. We in expect final idle. product and anticipate eliminate reduce times to mix facility as XXXX improvements we costs stainless Vandergrift capabilities as increase related is lead we the our further And half

let's sheet. about balance Now talk the

shares foundation. financial the converted Late To note $XX million More shares. in actions X.X in shareholder take roughly we've strengthen of roughly color that remaining moment. XXXX. our million convertible help repurchased to that in to reduce and in offset dilution, our continue million leverage We QX, a X.X into

adjusted our As net to dropped to debt X.Xx. debt ratio a and reduction, improving EBITDA of rapidly result EBITDA

hand. and closer half help metrics. on $XXX quickly second $XXX our results the reduce At leverage QX, financial should maintaining Looking our ahead, of business expected million moving across goal cash of ratio end liquidity the cash was available further total to debt generation million, of a We're net cycle. strong Xx including

This remains strategic our working it cash increase we of by a as percent as progresses. XXX sequentially points. largely expect year nearly at basis elevated end, ahead, improved At XX.X%. the ramp. two, Looking figure to stood three, sales the capital improve quarter one, prices; balance Managed to: purchased the rising commodity funding in onset for of half our were XXXX. the of metric should This second and materials due invasion; raw to continue growth Russian that inventory at

end to year target expect Capital year-to-date. to the We much our closer longer-term and expenditures million of sales. were million of $XX XX% QX $XX in

of due accelerate the this year. in projects expect the back organic to pace We half to growth-related

However, will $XXX likely million. $XXX the guidance range we million initial spend lower XXXX to of

our capital capital is allocation reflects we $XXX around Our and discipline today. highlight which our new where target to stand spending $XXX priorities deployment. want million continued capital per to million, XXXX I reiterate

First in and our at said foremost, February. Day we're consistent with Investor what we

Our strategy. are priorities our with and straightforward well-aligned

we'll growth. First, fund

organic robust of but growth We stay it's and current projects conditions and returns, Acquisitions list market have remain will. with a strong disciplined interest, investments. support we important to of

want we of debt is a result note the lower funder $XX as to pension Second, convertible Debt million obligations. and reduce maturity.

our intend pension, us in of defined could million terms benefit half the second In discount we move the the at meaningfully voluntary rates, our make XXXX. with This of coupled increased to funding contribution, to contribution end a pension of goals closer plans the to $XX year.

we're to our authorization. needs, priorities is purchased share the proactively The be that price thoughtful shareholders. capital mandate, our news on multiple priority board remains X.X cash million return interest. $XX good to simultaneously. Year-to-date, We'll million shareholder program $XX million. our in to cost position buyback is a tackle executing total third stock current and shares Our we've at under balancing of a

about talk let's Now, guidance.

expectations full-year position enviable We're due strong our back QX We're our our earnings mix, for to results, offset strong and to our QX in that to we healthy our today. QX. ability product expectations. Thanks After increased outpace QX strong our and expectations earnings. continue increasing We demand, inflation. to customer

a $X.XX this At expect QX adjusted the is mid-point, range We QX $X.XX. in to within results. to EPS fall with our of line

Our anticipate recoveries outages raising year-to-date additional costs. result federal EPS revised as QX from scheduled forecast into commodity employment substantially of guidance or expected and takes consideration, QX. full-year lower and adjusted our also Section business seasonality, don't negative impacts a in We're our And we tariff performance. incentives the XXX

prior at Our adjusted an earnings almost is XX% new is share. increase to $X.XX versus for XXXX range $X.XX of per mid-point guidance the This guidance.

For reference, our from of gas oil in of XXXX, $X.XX sale this to period. and adjusted rights compares in benefits the excluding EPS that

Our our accelerator. on businesses performing and keeping the we're foot

our updating we're Lastly, free flow cash guidance.

As we earnings our cash. convert to improved see

step of closing, in XX% at free is markets. For This This the full-year of working converting contributions. our flow, we right flow We're generate of pleased end expect the guidance net free building cash any increase in million conversion to momentum least hard strong cash represents direction. of the least in end by underlying rates key toward goal excluding with our a more XXXX, at in $XXX than to business the demand increase income an cash XXXX. to pension XX%. In voluntary free cash we're of and

Our investments in ramp readiness the the the of business and business transformation have fundamentally better. trajectory changed for

customers are back ability that, have and shareholders. strategy With for to benefit over of Bob. our successfully the confident execute turn team's right to call and I'll We the the our our in

Bob Wetherbee

Don. Thanks,

robust, describe moment, They a time. a As use actions us moment fair a word our QX to with taken for decisive lot, market to agree as I reflect this this our I it's think we this not appropriate but strong results to your recovery. commentary we this for position certainly morning, listened

these trends expect demonstrates momentum. positive outlook that to Our gain we

higher cash We sales, and earnings flows. expect

for aircraft are benefit commercial and new flying markets positive come. the materials are our business and contributing markets particularly expected defense energy and to end them to Our years Demand needed to our also The for improving, are to performance keep aerospace. outlook.

how of going done. ourselves of team on only to I a needed paying We've and team but what not We've It's I'm it's schedule, had a I'm word of been great well. gotten easy function proud effort. lot is our they've get proud done, fun, success markets, always also achievements, what a proud not but and their the heavy a as know at they've in off. put or I done they position they're lifting. And on simple purposefully. of Our total a It's team's to be ATI. successful use

are cost lean. Our structures

streamlined plans. accelerate place we to is customers' along footprint workforce with production Our in and the our have largely

Our unmatched. culture are our our transformed performance. assets We've and structure, and capabilities physical our

value have like Our incredible are expectations, setting we to we and unlock high new do. ourselves, We're never tools leveraging opportunities, before. And work people shareholder these to more create recognize we challenging to question. we're proven we do those us raise recognize the for higher. reward and we we say We're perform Operator, for first expectations it. what our will, ready customers truly and long-term

Operator

Thank Instructions]. you. [Operator

Safran Our first Richard Research question is from Seaport of Partners.

go Please ahead. open. now is line Your

Richard Safran

to an like a industry have then I'd and you follow-up. perspective Listen. get I from

rate. So a heard looking given rate think ramp? is view? And of higher in Airbus constraints, We is narrow-body you your ability what do supply rate But a narrow-body is see issues? Boeing the steep mentioned know possible support ramp chain the major XX to for the a to how you do We where month.

Bob Wetherbee

ramp, next narrow-bodies, but we it kind the the narrow-bodies kind I'm of to look morning at is maybe five. so in to intend this how about per and bottleneck. not that's for going good speed, they is every about your eight regularly five Bob. for the The and don't six Rich of months a question then I the though get a until think the on the good Rich, X months six I've and this rate months. to getting all talk to is ATI history of stable, months stability of ramp bottleneck, the next thanks make been question, the that But be up Well, build pretty six in We OEM news get question. the thing. next go last Yes. Good the

we only six until achieve factor months of for rates, we produce it stability. months I think planning to a with orders. every eight kind build into they long-term So We but five to to don't our produce

that is a at recognize chain along they critical. stable pace supply that's think really their coming I

think today? I was speak issue. second I part the the are won't your of problems castings the where around question to

of talked think supply that. on things, it's people a and And pop-up it, I issues become but broader about some problem of some specialty probably you have closest somewhat billet see the a lot that alloy it's and they're to little I think forging stuff. specialty than so

see melt You'll there a and a fire or a here shop. fire

You'll see maintenance break press deferred a causing down. to

and with really we're think sure the keeping in off forgings think industry's there've their what not I of we're issues, those that up. anybody forecasting lately, coming to announcements But been biggest see probably customer the the that the going is some the we're I castings have up up is we handoff kinds make foot accelerator take seeing issue confidence and dialogue throttle. that keeping and or then but demand recent

XXXX to ramp think due is XXXX levels time. for these I And in to a into good to get record be going we're the industry. going

question. your answer helps that hopefully So

Richard Safran

course, of it does. Yes,

just forecast GKN, and you like I'd Don, you you that up remarks on us to So spot, not to back ask put in margin. this trying made maybe further long-term because EBITDA Your of you you gains tell light what and this mentioned means gave the next just about February? what in for can share now I'm like about remarks but to

line your mid with months me high six guide are So for are margins XXXX much looks to in it alloy XXX EBITDA ex like here the teens. advanced and we pretty to Section later

sense bit I'm February gains a if thinking just obsolete. kind to I'm now. share get at make least wondering your of guide of trying how you're it a about So

Don Newman

what demand really what key to asking, the invasion of we're were for that perspective. somewhat the believe events And Then the number has some core Yes, in of February, world, top-line markets. very end And many XXXX and agree Ukraine get business that, Investor for created shared To Russian performing conference, market at some our healthy rates including in dynamics the a our of that the happened aggressive I I had with a you, and we appreciate you're well. we point after with for of we guidance. broad-based the opportunity seeing margin in really, obviously in the Conference, impacted and is expansion. us. And across growth

that core VSMPO think asking example, today the it exists with XXX% what would to the since I world that in related Day you're Investor is are up new I And our incremental So that our question, your XXXX in share done have come the as gains, are our the Investor we Day numbers say that information low. targets. is for shared

we see reinforce markets and end seeing seeing we're tailwinds that would I are upside geopolitical not It related impactful. certainly aerospace. would in to And So the Rich the that that invasion, also includes key beyond that are energy. we're other the medical there happen I opportunities saw say stuff with the just Russian although it's

a the we'll high-end in is certainly and our our have us think see it's fantastic at certainly our February position the that goal targets capabilities we this and us to of in unfolds. seeing, I put We broad-based and for out we're our news and to opportunity good we're time conference, strategy demand, so So that think laid good performance be our of look tailwinds sustainable excited targets a then And those that. do also that's to us we for these for great all business to us. as beat have

Operator

Our Phil from of Gibbs KeyBanc. next question is

ahead. now line Please go open. Your is

Phil Gibbs

a lot on good gave was and very your MRO. you it engine quarter, of business texture terms heavy in of Last jet

MRO. looks have to quarter like, while I given picked baseliner had you just the of it have for yet, don't quarter, think would strength this the have first your up oh, or opinion the we numbers in

texture the in explain engine So jet the second of maybe that, quarter? business the

Bob Wetherbee

Phil. Sure, Yes.

right. themes, you're both on right I think

good, quite probably quite narrow-body been transitioning XXX sustained, air be to business the wide-body I in a they not lot repair new the then delivered, you as demand. one-on-one, probably some of into So only might engine team before the demand, positive of actually of, our MRO over sustained imagine and the get but show the spent and with at kind last has looks spares uptick bills through, days, has middle-term time the -- cycle customers, and this think

we've increase to an is a historically the on business gets next XX% seen sustained based engine of closer the we've it of I going today would And said, couple feedback, So, our be on say the based spares. XX%. -- years really trend, for side. think that's to we

So more XX on days. we've over the that gotten last clarity

you, Now, you we're the staggering, charts OE on from some the a of right. base, are but I percentages the starting tell low I'll demand, again, showed

get on the we're well-positioned alloys, increases So when to as the a because products we programs, look as of make going chain and in pretty to short But sure a in advance, see next-generation well-positioned you the stays day-to-day to we're sync, increase we're demand months we're that, I our on our hot to we're with percent long at medium pretty those stay our XX think is term. all in shipping will sync, spares the next the which well. XX lot supply OE major here challenge programs, for

helps. hopefully So that

Phil Gibbs

Yes.

really if months less, you what's spares So surprising has terms of all six to me it sounds maybe that three in been anything, strength. to the the like side to its

Bob Wetherbee

booking. but today, the I indications it into a three to in don't buy strong. started the definitely say to incremental orders us of want we four quarter the got We from of last, first anything, lot that months. in, have -- XXXX we're been QX forging middle since produced would yes, of just, It's That come mean, the

they of the I in some And -- the because customers we've being think those they've wide-body work. team want in repair a be overhaul products on engine or spare of good to want our it engine for make they're it's the so on conscious very it to is we supportive got side, and sector because side,

than I that seeing blip. is a So of just more trend we're think sustained initial now what an

Phil Gibbs

Okay. Well, on follow-up And that's the one then $X.XX. guidance. encouraging. is more Don, just third Mid-point, quarter

You just the $X.XX. labor but did is moving in aerospace. have moving recovery do the away, sustained away, Clearly, tariff credits you

got fair that's you've say AA&S? by sequential a that offset it's pickup and So that decline to in stability equally HPMC, a in in

Don Newman

a in don't for I I decline would know AA&S. look

as is HPMC. S -- very, said, segment seeing performing we're think I the is like we're Clearly demand. well, AA& broad-based very I

good as unfold balance I for the to think going both things you're of So year. the guys on sides, see especially

Operator

Seifman Seth from is question of JPMorgan. next Our

Please is line go Your ahead. open. now

Seth Seifman

Hey, thanks morning. and much, good very

to and but key sourcing labor aerospace heard sector defense four seems on, themes of labor you risks supply has given ramp that the the up that the to of kind sourcing that? it this in remain front particularly, of increasingly across the of, in well. So ask two, kind labor about next can wanted quarters? and aerospace, you over sure the deliver been in in How you're around, And we've of; have just pool the about on the, and for both energy, you chain, guys one about on activity growth expect as what, having three, positioned make you, quarter

Bob Wetherbee

Seth, great morning. Yes, and good

that done a with hubs job. you Wisconsin ever recruiting, four so than hiring and really I the we've starts in have team's deployed think or we've And Pennsylvania, this right. done a the it operate, Oregon. Carolina, differently to at recruiting look the make qualified, This is Wisconsin, when most North and we sure before North is market, focus team, a ramp Carolina, great in major our broad, so five in candidly and of aggressive recruiting we

balance or that onboarding, we're about week. look of ahead, been at adding ramp of think so it's a about challenging yes, To year. In that I it's a QX, every go but XX% a about It's XX% weekly positions. we probably thousand got more to talked So pace fill we the we given ahead scorecard to at.

at we're this pace during did than at the aggressively. point. chain. supply confident in things It's that We recruiting different pandemic couple helping us some others feel we are a the So when of

each operations keep of to is open. our strategy Our

doing of a had moving a to degradation and add And getting jobs. and was skilled more trained technical, people people around, matter more the onboard their without it skilled back we that people maybe we good really to able employees during they'd as less be we're So jobs in get productivity. pandemic and quickly

it's recruiting key, get is thing can a that's think you quickly hiring really one been up but them speed. to and I how

has Aviation to allowed Jobs us that like, of could. the done there try to far, have been think our things say balance Protection least much as so otherwise. on the helpful. but talent through feel keep of And I some good. technical as we to pace we we're probably we pulling we every So was the to the we're lever, strategy year. The we wouldn't But do what need aggressively It keeping with do

Seth Seifman

it there not to part because as would good ourselves, as we sure things and to sustainable as we about quarter. XXXX, that sought the you the other there Great, upside great. of materially XXXX, That's XXX all at for that coming make on $XXX rest very this a just like in that, that's -- run to guidance here There's that level there's really emphasized that not our ahead little check you the this expectations order something level just bit lead the second for on we in rating the of close based helpful. of a and that follow-up And should would of maybe business be potential out in AA&S, there, get tariff in head don't And the year, mentioned, EPS to is then doesn't are, maybe question one-timer level. just forward XXXX, down to million growth kind term. in a a seem near in of are think XXXX, going in but that to of reimbursement? remain on think Richard's sustainable in anything earnings going you is the that year than earlier, that in the off But

Bob Wetherbee

Yes.

So a in to mind. couple of keep things

well. both performing businesses, First, are really segments the underlying

for year you it? taking the vacations impact the It's half well. QX, in expect year, There's pullback and heavy of of about think in the into QX transitioning Western as has think of you a example, that's seasonal Europe, of as the outages you to for some in also is QX segments you how production Well normal. the U.S. do would As broader their what second that's can extended the about into go in us. that Europe both kind into first should with, from see seasonal half vacation period, which to

in keep for future. amount out roughly would thing the the out that modest won't that be pull think to program that recoveries, terms good million And mind, in wouldn't obviously was the to repeat. on HPMC $XX pointed these us you you repeating guide XXX we side, I had QX benefits that employment then in of in expect a $X I million. another

of one note. that's set I would that So things

metal is affected prices. our Another is that how mind keep business thing to by in

lot metal Now like in the of volatility the reduced have to volatility first And prices by although, half we of a seen business impacted nickel. significantly movements price the -- we're like commodity related around still are we've year we our it. nickel, in

been have nickel where we've seeing prices so some. And recently moderated

you would metal And would some pricing a things create soften expect prices those come it surcharges coming affects sort, commodity of for as that down. sequential a so of headwind that as and And those AA&S prices bit result that may down.

as the we Good on bit? would continue Does business And see you lot to a we and in easy do to a everybody multiple consider. it's full help finish the our things want unfolds, that in for the but is by of guidance year performance to have see you standpoint markets. not as we'll for are XXXX tailwind that an So thing is, on those understand. that second that math the can you from end news quite Arrow underlying expect strong point group, full-year. the in this quantifiable that things specific

Operator

question next Cowen. is Khanna from of Gautam Our

Please line ahead. open. is now Your go

Gautam Khanna

did -- have seeing specifically, Safran urgency curious, I and the do the -- next the morning. the titanium? you those of reduce of had that guess move Are the just the gain taking of source sanctions, years situations? anything titanium of with share a off like away I opportunity. if to that couple from follow-up customers which to Russia two pace EU a prospective on good was any or that curious share do to I were negotiations I expect quick over on does I'm VSMPO you are based Airbus

Bob Wetherbee

issue is first Yes. urgency Gautam. Good your about I morning, think the And question.

any been We haven't chain. level aerospace referred supply certainly looking change tremendous the with certainly seen to shifts. set to for qualifications. amount And There's There's really the that of terms multi-tier. additional of multi-market markets that of a anybody the work are Don in titanium in in urgency up

supply. procurement commentary focuses on a OEMs, the lot or of where are concerned that of amount tremendous directed people but think really I the buying there's a about

they've they're that, a But deal Russian's much away risk would it's totally think make publicly, go believe play and committed managing diversification that's any said to can with never kind they what levels. very they eventual do I their of circumstance. And to from overall So supply. I sure

are this think we of I share. will will and So qualify us win most who in position some

be emergent always in I think like they'll there is uptick. uptake also demand this --

different Not industry the think it do not but we're a clearly significantly but across XXX%, to and of repositioning airframe, expect win in in only armor defense, I multiple do So is terms medical, joint haven't and itself, seeing then industrial places. kinds some share systems, venture we very engines, those in to We unity up space. those backed free and titanium from away things, long. all of lasted rotorcraft, our and on even the industrial units energy yes,

and on, benefit believe are do do shift So they I long-term going that tiers. gain will across I there's believe that a going from the lot to but there's

Gautam Khanna

That's helpful. up potential you in I demand because if any the precision of And is on the have your showing Did seen guys some the forging was quarter emergent with wondering in of -- bottlenecks right? it show you side or bookings, that competitors? up

Bob Wetherbee

late are say haven't we're that to was at -- options. customers taken regular go fully back a in yes. some mean, February, our looking yet. would I that I March. is, basis. on I to early we various question to your Yes. mean, But QX talked have There the they places I developed advantage obviously situation and qualified of Russian the answer they're say,

our answer So XXXX still lead late into be the in on probably XXXX we a it's a growing geez, late for XXXX it's your times, there's hadn't I I to I opportunity the with fully We're position right. exercised. would share in announced, some that oh XXXX question upside side, Europe going but us. it's that the bookings, while back say, -- think opportunity into wait been order yes, But

Operator

of Our Strauss is next Barclays. from David question

line ahead. open. is now Your Please go

David Strauss

to I thanks. on it Seth’s Hi, question. was follow-up Don, just think

I the the had and million view think out when you quarter. you've one-timers prices? kind What that from do recurring $XXX was the strip the you big of EBITDA number benefit in as nickel of higher Your kind

Don Newman

I mean I to easy math course chunks big talked two So about. grab is that of the the

$XX So number million of million strip to federal we types out, range. start employment the a million million you and of $XXX $XXX recoveries. had that to if kind XXX benefits $X in $X of of you was then grant million at gets about it you And

they're metal far QX, in As as I modest. would say tailwinds

out, improving the that's have normal -- wrap that I seasonality, transformation It's the is the business, really we business. for trying it's pretty margins. the you're to million If say QX That's range, And get continued really this hey, our some And head transformation recurring impacting plus think year, into in but number, SRP about the got second results. -- have to certainly top-line trying half It's million of your mix. and business. $XXX impacting QX. the would look is as It's tailwinds that AA&S it's you creating QX line And of to improving what in that $XXX we've positive a you of bottom then profound. underlying around a as I we laid segment kind the some demand. of

We benefit that expecting. we've we're half to shutdown. we because expect to comments shared from to well. some be transformation expect facility benefits other that another And in that's the mixed to have And that, got second continue we going that's the transformation, costs in add good some guys related pre-prepared around as I going the

about how go-forward color from then to that's of give best So think best the QX you about the terms I -- probably can the half. and to second the in think how

David Strauss

pretty And you've Okay. had here I build us flow mean How get the year. the receivable obviously the walk there? guide, first big free can inventory on your working capital? a you through and in half cash you of on piece moving

Don Newman

that. do to happy I'm Yes.

really our of our cash important influence as when you're there's comes key about couple So free is capital, data it a guidance. points flow -- which managed working think to about thinking to a

on XXXX. So of in capital mind, one in our around sales XX% keep target hasn't changed. working managed were hand, We at the

target get of to back and XX% to sales then upon is improve Our that.

about where as that point at we're the look quarter improvement in believe QX, made basis ended at So you XX.X% of XXX that's I at we end the position, great.

we As to in by to going going to capital neighborhood. the is to in the be today levels to quite expect year. get XX% our reduction We're where be are significant you time forward, there. we clearly But a from measuring a indicates think get we end going what going where to we're the XXXX, it end at of of the the We're not about to lot be target. closer

at why happen? how's to we So first capital you think our we're that about to want standpoint. working Well, are where from going

add add that When strategic to transpiring, us short-term in was what tied expect that of For we this some and de-risked the inventory Russian is, we that stock, made elevated that business. thing, that fiscal inventory. by the we'll invasion strategic strategic to that decision of and with was news our Good Ukraine. safety happening was inventory a the did the inventory in end we on through year, burn one

manufacturing of her for and of for Think need, an COO flow is -- has need, about our have get certain target. reasons lack like inventory and footprint in does things it. order moderated the the do some. doing our what in Then been to prices. efforts commodity facilities positions. that to of for what good some higher Fields, business, SRP around So the of we XX% after a one us. to The number commodity in around talked the that. of that we've transformation to Kim are nickel, think how have I into that would need part great we be team consolidated prices work guide about inventory the that reduced Then fact, important because going why in all our elevated Well, or and the are structural is short-term We've certainly the example. inventory the

is you expect is second in the of is the this should year all half So what transpiring.

a The business then, tied That in year. very largely pattern cash the should You a well. our I half in of of the of managed generation to second the as in is, capital. flow don't it's fourth thing our be will working usually and free XXXX on in managed majority our see say we place working business cash And quarter. typically work -- on the significant in generate last capital would to forget, release of the our

does help that you? So

Operator

Berenberg. question is Paretosh next Our from Misra of

go ahead. Your line is now open. Please

Paretosh Misra

us of any Thank you. Facility, how your sort sense what trending? rates are and sales utilization if service are of And these seeing? Hot-Rolling At you conversion Processing could give you

Bob Wetherbee

Paretosh. good morning, Hey,

generator or depends positive the So turned the to kind this is very and a we're minus probably to so on so in settling be conversion out depends range. business XX% month, but cash I part for with Bob. so, It in the week, pleased the far at it's we're the of good. would actually us, plus and It's and positive earnings being say HRPF. a normal it on of process a

Paretosh Misra

any so items, And things? of of or to QX then versus corporate maybe hear. you major good in a cost expecting any And are in the follow-up that's changes those any depreciation, QX corporate

Don Newman

those expecting not categories. we're significant is, that cost changes answer no, -- short any So in

Operator

question next is Our Company. Sullivan Benchmark of from Josh The

ahead. is open. Your line go now Please

Josh Sullivan

ground made you previous or defense a some titanium Washington years to. like in presence, the incremental your on of what Just grow had an ago You vehicles, exposure could effort couple versus know, you've cycles? that look opportunities programs to

than Just wondering more historically? if what meaningful be this could ground cycle, vehicle

Bob Wetherbee

yes, simple is, to this answer cycle The more we expect meaningful. be

we of strength for was industry vehicles to light-weighting military trend it that is past. I potential in the different what an as plays contemplated our see and a think, actually conflict

sure the Abrams, for see, announcement armor. and AJAX, the the on, talked been the we space a programs That's acronyms guess, is big past about for, titanium and Firepowers in also saw what we're armor there's Protected MPF MPF opportunity clear. the titanium make We've I the stands prices. in and are the, to strong very that So some of titanium of our recently, Mobile opportunity

and bigger the ago. The other probably [ph] submarines to thing six certainly anticipated what programs Not last is both have related that's ACUS opportunity and developed over we than carriers nuclear six but, necessarily months broadened, naval we've in countries months to that the ground see fairly the to side, of been asked NATO are compared to titanium you the lot basically upside a we response that, significant do due and where in. the themselves vehicles, geopolitical investing

Josh Sullivan

And what M&A are your point. this thoughts on strategic at

here. shifting to a far this some as seen maybe even done new point? you at as What job do opportunity into grow need some an You've a markets great see or portfolio

Don Newman

to when for. Don. types it talked This be in what specific don't looking is of about came this we what want February terms going I that is be of Conference is, capabilities say to in we'll would would What we the consistent and get say of Investor our too to M&A. But I is

We we A&D and capabilities prioritizing prioritizing that will are are competitive advantages. really increase unique our

on that, with that businesses economic from a standpoint, so businesses, focused us. that needle is margin means moved an it And differentiated for have standpoint, from

pick assume we're were are Yes. surprised so well generally. extremely discerning and very it we're something why? A&D you be terms interested in so being of on considering to will disciplined will And and have up, in focus it won't And we an we what if But opportunities? be that

Operator

have no We further questions.

for I'll back their the closing remarks. So to hand team

Scott Minder

call. us our to all This joining for -- QX again for Thanks all today. earnings concludes XXXX

Operator

call. joining. This for you concludes today's Thank

now may You disconnect your line.

ATI (ATI) 4 Aug 222022 Q2 Earnings call transcript