ATI - Earnings call transcript Q3 2024

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Operator

Hello, everyone, and welcome to ATI's Third Quarter 2024 Earnings Call. My name is Lydia, and I will be your operator today. [Operator Instructions] I'll now hand you over to Dave Weston, Vice President, Investor Relations, to begin. Please go ahead.

David Weston

Thank you. to Quarter welcome Earnings and morning, ATI's XXXX Third Call. Good at is being discussion atimaterials.com. webcast Today's online Participating in and to results, Newman, today's call Vice are third from Executive Kim quarter our Fields, and President President CEO; Don share and CFO. key points

prepared color our like would at our and open and and the details I attention call. Those can to accompanies outlook found website presentation on atimaterials.com. that questions. remarks, prepared this your on also slides to remarks, starting line Before the draw supplemental our provide our be additional After results we'll for

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

Now the I'll to Kim. turn over call

Kimberly Fields

Thanks, Dave. Good morning, everyone.

is our even to Let by motivated and me navigate start customers, providing product quality our chain support by as highest we supply the market team our consistently mission turbulence. saying

As you results earnings mixed our ATI. the represents quarter release, third saw in for

I the are positive there While financial guidance. to and highlights by accomplishments achieved, the shortfall our team are and disappointed

to was today's Our better. On can we how We and we quarter challenges are for. encountered strive do and we responding what through this I'll will we walk call, not the them. performance

approximately third QX million, quarter, the EBITDA was our of adjusted from For our approximately up $XXX EBITDA million. $XXX

operational was related expectations remaining and our the for ongoing our range adjusted account of guided coming chain below $XXX to challenge. million $X.XX per below $X.XX share. year supply uncertainties to the range We've full it our However, of to quarter earnings $X.XX guided was $XXX headwinds million. one XXXX share Adjusted for per and to

continuing ranges quarter, opportunities will fourth you that to pursue guidance today. exceed anticipate We to growth sequential the through and walk Don the we for are

our the transparent be changes business like in been year look what has could through of will the and what incorporated guidance. in end into We conditions these

focus momentum total of several growth expectations, short showing quarter key did spots our in bright areas. include While fell the

In margin, to exceeded that basis see our we mid-XXs improvement closer moving or saw met margins EBITDA as continues in this EBITDA was expectations. expectations of the near as over HPMC, our our A&D XXX range A&D our approximately for segment build sequential margin the mix consistent XX%, of segment in points with this adjusted Segment work AA&S, core EBITDA to In achievable segment. we term segment. in

business. consolidated EBITDA improve continue as price points operating by mix take increased basis and our XXX to Our margins and costs out we of

strategy that both and to future. backlog Our achievements These A&D we underscore than value creation XX%, segments. as stable mix remains the remains and to business new fundamentals our underlying of the greater across continue for expand book our margin drive working are

this quarter's of our did why So fall short guidance. results

Let's set foundation. the

to Our like They operational our efficiency chain and high variables ranges for operating demand cover performance guidance contemplate are expectations customer performance. nonoperating and and well on as as based intended low-end supply items.

split This materialized risks of quarter, performance limiting the notably, and customer challenges. realized. to issues operational risks These exceeded much in market this late options evenly and our demand Most volatility offset were the between quarter, had we volatility that of the were anticipated. operational impact what changes

customer on the the witnessed first. demand touch Let's aerospace commercial We've demand ramp. bumpiness of all

began the high, for when and industry OEMs quite ramping demand backlogs remain slowly September more These on both XX. stoppage work aircraft aircraft Boeing's are While commercial worsened than delays expected.

pushing quickly, orders year-end their out around While deliveries and production reacted schedules others XXXX ahead of orders in targets. stoppage, shipments, inventory canceling they supply orders. managing chain the orders began or some placing planned work their customers in not Boeing into maintain transactional and Even

as our as commercial shortfall. one emerging our key materials extended business This the in serve adjustments we airframe for Looking growth disruption. have our LTA chain worked to quarter impact of well, drivers results, which and over years. transactional our on closely engine rapidly last limit X the historically supply has contracts, momentum at the been maintain Comparatively, customers believe contributor enhancing of these demand for to top a jet significant

from ongoing are continued demand deliveries MRO rate engine products. build drove our activity delayed for reductions, new While

demand specific less be predictable. However, out Demand overhaul. priorities can immediately reordered as operational parts MRO disruptions caused specific complete and an on for engine variations pushed parts not excess customers to platforms needed

demand available and accelerating the over were of for supply with and reflecting While chain impacted operations pivoting less increased pronounced dynamics. and September, to ship. in rapidly our smaller changeovers us ultimately X what lot was airframe, customer weeks actually shipments led last to This sizes engine decrease

underlying can significantly we cause in for That's what changes program. our requirement bottlenecks These areas in create customer we Beyond and bottlenecks testing our program rates. engine increase production levels as operations. inspection our impacted our shipment and demand, changes experienced key

rapid We increase bottlenecks. reduce outcomes efforts, the These in and with time. to are production working to customer with the along support improvements part for will investments implement testing testing decrease to triple capacity and testing our

increase our to capacity expands. output expect as We testing

ATI. Boeing underlying What These planes resolved the supply and consistent market long-term turbulence for is commercial demand work fundamentals growth demand stoppage and is clear current aero will support The to for the continue likely remains for new strong. chain signals. until realigns the

which the increase, ready of build the in Over next supply believe next X we rate XXXX. come modest the for quarters, chain anticipate we will half as back growth the

the have of growth, record significant to Since is record room during half pushed we've for operational XX%. little leave missteps. quarter. production achieve to approximately challenges related grown our this highs. These other our production The pandemic, To levels the miss sales

to unexpected in the the quarter and flow. Disruptions bottlenecks With when that bottlenecks stable can inefficiencies. be of most did they example occur that QX. they this. operations are overcome. last few and in said, level, surging efficient Especially difficult emerging weeks with When highlights as One capacity outages occur, product create

nickel performance As shop. a HPMC push long-standing our discovered was flaw in we levels, design melt

part that and damage metal allowed operational causing the quarter, flow an Last molten escape to equipment outage.

began our going once and part restore were forward. melt targets they the recovery operations material. the But This on bottlenecks QX Hurricane to fully executing own overcome. issue to they to needed Today, to delays growth. anticipated identify achieving plan ability QX, related aggregated immediately operation is well as risk to action transitory offset the in our the eliminating as transportation difficult impacts took the Helene quarter. not significant, reengineered deliver as our emerge the the this to Each issue, restricted was to team Our its were due to surging they we but effectively

we experienced in serves serves our an the as space In primarily the failure the that installed. This in due segment, furnace by pump proprietary we to operation caused industry. of vacuum anneal water Oregon outage a recently asset new step a final a AA&S

will as is team While quarter. parallel a fourth our rapidly to into the in restoration sales is headwind continue to underway, protect mitigate the working assets qualify and impacts. This customers other

Let me been has emphasize, progress made.

quarterly margins Our throughout expanding demonstrate continuing right exceeded increasing the and on showcases and sales bottlenecks capacity, $X pricing. mix reducing XXXX areas, improvement our our and improving for finishing melt strategy path. key is momentum billion ninth consecutive that the quarter, This in

to continue production reliability our We in invest and of footprint. debottlenecking

we safely, reliably. our on Our business the entire team is most vital operate efficiently and priorities focused as

they is improve is production clear, that me for ahead we're quarter, materials we confidence doing ATI The maintenance this What to The is with strategy the and encouraging The in gives and ATI. the momentum. our directly will need. Already continue productivity future are U.S. is That will progress. and specialty strong. protect performance continues, need changed? that see for market aircraft leveling depend we building believe aligned the allied performance our critical differentiated and hasn't energy, work for electronics, our fundamentals troops medical, increase, customers to on growth

We defense for in market didn't on are for The and us growth day. than are will ever, resolve. reenergize focused single to straight XXXX. and this end the our confident user and a turbulence challenges products we expect every operational line Aero will ramp them our delivering be need we more current

I it will to over Don turn for that, his comments. With

Donald Newman

Thanks, the the incurred quarter performance. and of ended. emerged Sales this growth volume quarter of Kim. as impacts is foundation the Many our

anticipated ago. As flow lower earnings a we sales, cash result, than months and X were

this of customer driven impact requirement timing and was As by roughly Kim demand highlighted, half changes.

for up sales, is This not half We million the and of reduced as was impact other guided EBITDA Total and quarter sales on with sequentially ranges earnings approximately sales rates. to it due the gas adjusted of that this XXXX. adjusted challenges. reasonable from such to view estimate for $X.X our oil in the per do shortfall sale share, were $XX even million. and timing and X% brought earnings X% our is a our gain on benefits below The of incentive guide inclusion but down operational QX compensation

volume deliver the increases. this fair say that I performed to to we continue trend as think anticipate is materials I that did quarter. well it on we

We return the expect growth quarter. to fourth in

EBITDA $XXX realized approximately efficiencies Looking million We midpoint. XXX specifically partially for from sales, were guidance the QX. are $XXX million, midpoint basis at the to consolidated up future. our delivered offset of this believe adjusted reduced us was adjusted the impact XX.X% points sales. We margins $X of of allowed EBITDA, sustainable This below performance million. of Net

perspective, is announced sequentially approach estimated The margins at XX.X%. XX%. we XX.X% our XXX XXXX, of remains margin A&S quarter. the sequential A&D expectations. From that in margins year-over-year, We point content a increased previously with basis and XX% would HPMC segment EBITDA in decrease posted and half second at this closing consistent

by quarter year-over-year with in for sales was sales X%, While this impacts XX%. were the sequentially AA&S up explained. volume even segment the we've A&D content X%, declined

basis up mix those markets. overall basis XX% expansion up enduring QX in ATI, those for totaled our consolidated The markets revenue margin of up from year-over-year. with A&D and and in X% points quarter over sales revenues by this aero-like XXX is end an markets underscored QX of points XXX

million, working to $XX in turn and This liquidations third in inventory expenditures. Let's usage million free use in Operating free in the and cash when cash cash million Year-to-date, flow flow by cash was last for position our Reduced year-to-date netted offset $XX our delayed at of than this cash $XX resulted capital manage resulted time cash million $XX sales that million quarter. a year. usage flow is is $XXX better flow. capital.

requirements, use capital in contributed timing melt XX% QX. However, of as our and capital year-to-date meet we sales accelerations expenditures sales customer increased in working from of with to along the Delays managed produce cash. of to to and to XX.X% continue

strategy invest and debt as capital our execute capital we to deployment for continue shareholders. return reduce growth, to balanced our We

proactively authorized cash of quarter, date. up redeemed future their outstanding expense in balance to share by a $XXX based almost Directors, on In ahead our notes, reduced parallel, interest XXXX nearly and repurchases. We Board future anticipated million debt in million. our retired generation This million strong and year sheet of our maturity $X $XXX we convertible approximately

authorization will first begin we fully early reducing to quarter, count. our This to estimate extended the this by authorization be value used significant this shareholders. of $XX that delivering share We XXXX, million

to expect about operational let's Now QX and growth talk our results. fourth build upon efficiencies expected guidance earnings to XXXX. With we our continued in close quarter the out

Our estimate the for per quarter. is from for EBITDA million $X.XX of which adjusted $XXX to equates $X.XX million, share to range an to earnings $XXX ranged

opportunities monitor Overall to performance industry in We believe the of range vacuum business there fourth key we are and Boeing capacity stoppage restore to that how the will the a driver. the AA&S. we a also responds be neo work quarter exceed as in

range full per much nonoperational million, $XXX opportunities The in year tracking fourth potential have range share $X.XX. as but our $XXX earnings for EBITDA $X.XX an increase quarter as that QX by a guidance. also of are and $XX included $XX million, adjusted to that million to million not our to equates range EBITDA We of to could

This for previous million of of represents million of $XX $XX with shortfall a midpoint adjusted expectations our QX. $XX million the reduction in to QX adjusted and EBITDA

by to the sales While flow. our due considers million the we It accounts targeted be $XX expect This strong for performance. risks timing $XX our and timing. guidance and of to reduction free million investments lowered reliability high improve generation a to $XX end in inventory also accelerating CapEx low This asset we end $XX flow in still range earnings includes cash cash have increase million near-term and in fourth million. quarter, of

cycle. deploy original ranges to $XXX capital the Free a is working our XX% a to from managed for capital, This strong above value rates. includes million less. year-end to little divesting is or look This efficiently low reflects we gas or be generation, with continually no in guidance such year to of target $XXX in operational managed quarter QX as that create We range. oil That XX% and opportunity for working capital. assets cash now expect reduction expected a cash flow end meaningful our cash consistent million. with

In to noncore and likely our of plan. improved of reliability, the much element as growth as capital existing we investment fourth quarter, anticipate support monetizing proceeds We'll an debottlenecking $XX as million redeploy assets.

As with impacts provide practice, the fourth we one and mean exit left this year-end XXXX with formal react we least more of question. earnings. rate past our are to for at XXXX the What until XXXX, to timing quarter guidance reduced XXXX Consistent we is we important will report not targets. to

initial now. offer assume the of insights that some XXXX chains. particularly adjusting supply me half performance, is to will Let reasonable first the It year reflect in

earlier Our suggests original offset views $XXX year, at largely Supply sales year. targets million. last that be million which are issued range and to the this adjusted $XXX expected the was of impact commitments within EBITDA announced chain time will we new this we of the between headwinds

and how quickly aerospace Boeing work resolved this within is by the range ramp market performance affected recovers. stoppage will the be Our

we Despite XXXX revised sustained and by on suggested we and ATI billion still EBITDA heading XXXX, half the the XXXX, last above near-term for adjusted $X.X track XXXX. more and support billion to second into in about As sales above production $X reduced $X aircraft billion remain year. believe specific range build demand be rates for a pressure to we be on confident. is

For are term, our operational on XXXX and deliver opportunities near fourth of guidance. to taking customers, focused full the supporting advantage our full quarter we year

will to turn back I Kim. note, call that On the over

Kimberly Fields

us has short critical unexpected for goals own quarter Don. and you our This quarter. left to was this with our been our and operation, Thanks, on commitments unique of ATI. most Uncertainties customers our obstacles a

across markets success, are expectations now forward. future products industry. taking going to and the are every and lead gives our me strong action on enterprise We in deliver those the quarter our What our end confidence

customers our point, on on shareholders. all, growth expansion. is team and delivering delivering most margin is value and focused of strategy our Our And for

line let's that, for With open questions. your the

Operator

Safran [Operator Research Instructions] first Our question with Seaport from today Richard Partners. comes

Richard Safran

wanted just bit to the more a to about the So how comments wanted recover these I about made I follow from unplanned you you just outages. on XXXX. And on about up ask you

issues, your resumes? of there you and efforts of in risk do For a time short assuming and the restoration repair strike in the AA&S, bump revenue results? these is ends for -- 'XX, a both expect a And 'XX is period production the impact recoverable, reasonably

Donald Newman

Thanks, Rich.

comes to early quarter that When into late that, for And industry First we we disruption, about, and we track. continue XXXX. of us related year that stoppage what thoughts one, and touch the to, back stoppage we it's be the [indiscernible] but this XXXX, QX, number the work expect demand end I When the the on asked example, driver titanium our for to all, either will titanium resolved will get not experienced that quite the be is a know outage around or that. of on to and just expect in would in it anticipated comes in headwind that you when with a to XXXX. we it demand, work think Boeing experience would the not demand this will will have key about through create that

our terms XXXX of and in In that revenue are targets but nice -- that, it we saw what I to not assumption. ability we as in believe recover would to the increasing QX, would QX be missed under anticipate

Richard Safran

Okay. And here. just quick

what between you're agree want bit engine that in what's a airframers to Pratt more airframers. from saying GE know and relative you're and trying a could you engine the manufacturers. airframe that's think the go we're into I are the if to going maybe roles the I now the on to your embedded what dependent and manufacturers just and in from getting outlook differences Boeing bit get different Airbus about

Kimberly Fields

everyone end I'm this I that and to is quarter. to to give Rich. going color Don with by engine jump numbers Boeing clarity. can hopefully help an -- here, continuing is is of this Sure, more get give standpoint, that assume any the I'll and settled stoppage -- sometime you some everyone wants From work if sorry, in you

engine supply they're So demand from they've an chain. that sure also that making the protecting stated they're standpoint,

aligning seeing August frame steady there of up other exactly with not we're of well. was orders. end did So the or kind that of big time some seeing lining call We're that the say, I'd mid-quarter, weren't happened the with that build drop-offs, some what Airbus rates down as

resolved rate. that are in have Don to GTF. also of end in MRO, the shipments first that's individual is quarter, driving grow half with we end working to this we're to their quarter, as steady. been early let September. towards be Pratt So something done to to said, dispute, continuing the engines we've They're this And and the we We continuing me that where jet of shipments, then increase quarter. run continuing addressing next targeting the just shop continue buy. of say, forward, saw earlier that and in XX% are labor in next positions XX% towards gain each of And the support clear, milestone the There we're our aligning it's a the some, engine where into visits. to going September year year. all gets to They're strong double sales in that Xx the going with across increase design hit I'd upgrades assuming going quarter, going challenges, OEMs. meaningful a in But did but be the back we're seeing

maybe engines, continuing. support a the to -- demand the that growth as that that's the to expecting support little continue the and both continued LEAP to that be to pull bit their going Xa strong on as of up and all support shifting we're lines of and So well growth MRO for

Operator

comes question next with Andre from Our BTIG. Madrid

Andre Madrid

if demand. markets? the look differential to margin the you between guess those you mentioned near I offset pressure end MRO extensively broadly, broad maybe pretty is that this strokes of Do And the you impact we X about term, enough into could airframe. though think just the talk on

Kimberly Fields

at look public engine running we MRO. their most it, what As shared much we've the in seen comments, they're higher of have OEMs

the to of is XX% OEMs So demand XX of the anywhere shared one from their coming from even MRO standpoint. current

make track. continuing So over, say is is stoppage about that to keep at rates, either Boeing we they're They impeding stable as thinking want demand how that of work the point once the support where them that's Airbus to to Boeing look make not the growth continuing some up would buy and on continuing. that level at build I To sure the supply and build back they chain on their to levels. they're side. they're they're have protecting shared, can sure or

have stoppage we say, a So to I I today, different revisit look may forward, work would they're pretty assuring going that have around assumption to have to path. if this think, along the that continue us that. But them there be, they're

but do into say from engines you share I'd to far the very that's positive but OEMs, to little multiple is machine to harder products also it something? than business It airframe, big airframe, a through X go multiple bit standpoint. error distribution. more accretive There's shops. margins, go margin and position goes define they're Yes, Don, as As to a that. our channels goes want that on both through our

Donald Newman

Yes.

would in profile unpack engine the mind, if as -- revenues you -- our I Jet it to it airframe is aerospace revenue don't you a was add be XX% and what period. of that, see about so I'll is Xx our is you revenue, about what you XX% think our what And given If XX% defense. are of think about is,

us happened in sustained tailwind We with to jet QX, engine slowdown of would be a So like a would positive or side. end fully offset while, that airframe, be expect through we significant and would see a at overcome don't the the yes, probably we'll would as we one-for-one in offset it airframe say headwinds QX. a has an airframe

it. news that we dampen do effect the have of But the good is certainly offsets

expect that offset is will for good we Another time. to us and defense sustained have for of has area of defense we period continue a be area a been growth

Now our that represents you if about more that to the it's half and airframe, XX% of than airframe. revenues compare our

it those set of So the that's us, offset we revenues, will not again, that like drivers to quarter. and quarter fully saw a around help bucket it's separate headwinds a this and of necessarily seeing effect business good of very demand anticipate for offset airframe but next

Andre Madrid

there. driven. case, more side more. color the obviously if airframe you was in it about the And on could like you more I on was more the demand extensively pushed But how defense but it mean, shipments just to I to appreciate talked that's titanium out due throw guys being clarify, the operationally mean sorry operational missed I I seems could if signal if it this, shifting. challenges? explain side, I if was X

Kimberly Fields

Andre. No,

which side, bottleneck the some more ballistic frankly, we that and plate supply a On defense is that is slowing what timing it's I at there and provide. would testing, orders on armor of Aberdeen their impacting with the chain shipments in where is say the

we're Europe. the the over Army. around Tivity domestically and is rebuilding So through with ground military ], sales defense the for in both of [ working

our Don there offset us to an said, a see lot upside with opportunities And we as And from airframe opportunity. any for there standpoint is of so is that titanium. softness

Operator

comes from question with Barclays. David next Our Strauss

David Strauss

I ask guidance. the helping to us EBITDA wanted walk QX about to maybe

impacts You're worse. be calling think for chain relatively flat supply would flat would I in the EBITDA QX. sequentially

AA&S You're issue it the talking of on the is you're the sounds assumption quarter. going to this your operational goes still like on It about at side, through like -- strike Boeing sounds there. the have end least

to QX terms the QX forecast. if help walk Don, in could just, EBITDA us So you of from

Donald Newman

I Then related that a a ended in of those take gain things way million not going gas things us you don't of $XXX back guidance. million about in to To you our Sure. and of we've the almost it expect about step QX some with we things QX. the not in when minutia. QX. oil we're all, demand expected EBITDA that QX dragging titanium in shared, last to and I'm your outage process of that repair is an are sale that this think magical not a basket a quarter $X And included to about through first is, that of bulk I'll think reduction is you through way the try probably yield saw. with that to be we then and like the going that of expecting that will back solution to point, But

So those will be hurricane, we example, trucks shipping with when for us. and But there that were the to some No load things headwinds repeat. shouldn't [indiscernible] you're around, kind during that moving. some get hurricane. were in And QX of surprise it's had tough

didn't So but news is we -- good

[Audio Gap]

just We it is to last quarter. expect us. it bit to the outage some right? this is a was other Well, We quarter. be about impactful that anomalies. impactful for VAM outage, talked impact VAM don't that behind

the bad of of of QX don't -- it's $XX won't probably of So in terms we into repeat in to hit $XX total of in pluses a that revenues, back they're were good about things QX. QX. that million minuses, if you repeat go And Think rather, in those QX the million through that expect and them guy. QX guys revenue in about you -- that

good EBITDA and example. the for guys $XX And million then by nonrepeated like sale, gas I would [indiscernible] oil that the of reduce

guys bad there So what you that QX. be $X QX, in shouldn't to hey, in really of get million about is, there's

QX $X.XX is what at and $X.XX. for guide when So EBITDA, our look current you indicates that

a so looks QX, QX And a explained midpoint a be it million should of $X.XX Don flattish QX by just in like few better to kind dollars.

effect will be and full That is a already going we're have something with. X we're hey, While raised you thing vaccine. titanium of that, of the to quarter the that dealing

And do quite on be plan will you QX not guidance, our when this frank, then I at look we

[Audio Gap]

affected on how our that guidance.

and all stuff. view say the moment with going as in to thing probably the and good with would QX volatility the at that fairly that's stoppages It do. change conservative, that but prudent felt You the on like that probably can we market all be a the

So help, that's in as math that Does the well. David?

David Strauss

And up helpful. I for What the on Yes. But just know you're major set take to Yes. the side, and you're where ship That's rates? side, at the exactly your help on shipping follow-up, shipping guys sometimes level particularly of any where at. airframe hard where maybe you rates platforms, now? you've shipping know titanium kind it's been to a what as right

Kimberly Fields

David reacting. we as supply from talked coming So chain the about

it of strike has rhetoric. the subsided. mainly the they Some before as even began hearing That were

titanium we need flat answer think shipping side I a But in from shipments business, into up got do honest, titanium see the product that does spot seen we fourth side. and your come anticipate be we'll have we've stabilized the put it's back we maybe slightly the from some back I quarter, this signal some order on or as demand that to I some And Hopefully, that to book. transactional level that as think rate. said, question? missed do this or go the into we've titanium

David Strauss

think if a looking on you I the it were quarter it for at today like look mean where just X what or -- or you what you maybe was where are rates is? where what know you I QX, shipping, to Yes. example, you actually ago of relative AXXX kind of down kind to QX were or you and don't -- expecting you're to can boil where MAX I

Kimberly Fields

supply that those they I were think rates, rates I their have continued. in few, them. a those too. So adjusting chain are on the We think suppliers about if Airbus think, There build do did I their side, programs talk with

ready titanium of call that build almost impacts smoothing continuing as to I year. We next supply that, aren't from would in VSMPO into They year for are away go move any to we seeing this to them. be

pretty alignment And standpoint. that so we've got from close

the parts Those over some similar, are LEAP shifting not the I exactly the they're but the XB. to mentioned, seen have XA On as we versus side, same.

in whole line, been might X So these of up parts, said, and had more getting okay, they that X out. to kind we caught again, idea of of want shifted and and push have seventh sixth XA we bottlenecks which as or and material

created some that so and bottlenecks efficiencies. And

the working overall I with fairly work an to with long and done take been couple and now our certified standpoint, OEMs, that then would stop How to that work as does requalified to from QX, were Boeing the their I them get in get we're in August. anticipate anticipate takes to that rate. they back, it's it assumption bring through to But engine some get probably guidance folks that months going our And get up a We that look of in, shipment back the back stable. [indiscernible]. time that's rates and where spending XXXX,

some be reacted their with around the being very the supply came distribution stuck cash opportunities of inventory the or do I chain concern could the there with as think at aggressively the shops, flow because and end some up. But of year machine

So see I do we work, to could think that emergent that some as they that. opportunities come back from come

Operator

Phil Gibbs Next KeyBanc in Markets. with we Capital qeueu, have

Philip Gibbs

Question in general about the backlog.

direction some mentioned remarks, you have you products? you had that, after segments provide in QX? stable. specific -- of you And Kim, to guess, in And some think I had backlog then prepared could relative your in you any fairly your the terms QX? it cancellations. as Where of texture pushouts, an . But seen enterprise, I mentioned between then also was

Kimberly Fields

from backlog been you a said, that's So billion. stable $X around standpoint, as fairly

and that, again, stable. the strong, at see HPMC segment. As is to two. quarter of the AA&S in And demand the those segment, We're you X/X as looking pretty continuing steady said, across that, is I'm other about in

you As pushouts, we asked far what see as -- and think products? about that where and I do

Philip Gibbs

mentioned I Yes, some cancellations think you also you And mentioned had some pushouts. well. as had

I'm curious fell. And those so where

Kimberly Fields

titanium, the biggest as portfolio. across the the mainly those were airframe took we related look So probably to hit

planning rates still engine I their back As obviously, said, one, work to they're well. building on rate. folks, They're very steadily. getting buying to stated and getting as produce Airbus got the -- build to back we've are continuing that's and Boeing to And

pull saying, lot we titanium. for it canceling So product see product, we like okay, was don't to it that of did swapping some with A we'd titanium in. this need or

came of those or in timing a let's around is like orders. And they a of -- so there switch that said, noise was orders say the switch I'd lot and that, there lot

is a going there in distribution whole they are or -- demand A So as ahead when is those little shop, to has stay everyone in fall. mostly to the going out there were bit machine to looking buying they to at the sure cancellation went but think ramp. pushouts space. the they either -- think mainly make And continue some were they rise standpoint, buying some that demand distribution speculatively chain, from of supply the been

around you customer, landing particular share, gear. bit a One color can more I little give

level, running slowdowns, we're they of inventory that some we're well of We part think correct XXXX. make to these again, look, chain. were sure And said, supply to ahead build that what of okay, were, not this pushing the and rates I need we're with slowest the that over-inventoried. into

Philip Gibbs

your Or within you, Is your QX. just Thank is outside framework? mentioned Don, you And there's of that free framework? flow think inflows flow be related $XX free in Kim. that question to going I then cash divestiture a cash about million that clarification, for

Donald Newman

Yes, it calculation. how It's historically within. defined of part that we've is

your the around or include discrete as to sell including of sales that CapEx element include there proceed. The an So asset and from from just those asset sales you're general. if you flow, proceeds turn wouldn't your if cash assets, in free logic you cash we one is

yes. answer So short . is

Operator

from comes question Tanners Wolfe Research. with Timna next Our

Timna Tanners

outlook wanted the I to your targets back, for just XXXX those quickly lower-margin beyond? change I on for divestiture. that businesses first circle $XX million are off, assume your that doesn't and

Donald Newman

assets, XXX% margin the attached are are oil no correct. assets. which noncore sometimes Those little rights. to and gas discrete like there's they're -- You They're

top Sometimes from would be a almost always standpoint. operations. a standpoint. immaterial They from dilutive be would margin line they're noncore They

unlock gets and we improves So and the cash metrics us that to redeploy.

Kimberly Fields

the I the thing that one supply continue we that material to think assets will case these able be is to buyer. to I'd with the in add this to

and supply, the So there aligning is going invest strategic focus anticipate we benefit who going we will with this another they're get that that owner they're to of -- material while and to grow business. their that business

not opportunity us does to growth it's accretive, think said, it it Don support provide potential. . I as continue So but with an to

Timna Tanners

said talk segment you and the of the sold industrial. segments some into QX to call, the up past about to that lost on -- Okay. Got could follow I wanted things and the it. said the in on be volumes you other

it, the when update periods give about led and work were and us in then an are low MAX and Similarly, would they you've like could had volumes. ultimately back stoppages that when you taking And talked minimum in in how markets didn't if industrial -- to on margin maybe of even contact, on too of you past, kind past, the prolonged the working? goes the So like keep maybe they this But far. so lighter need they Boeing,

So there I'm itself. risk that, repeats just wondering, a that is

guess, X I So that's -- questions. that's

Kimberly Fields

Yes.

with I'll industrial question. the start So

in So housing. we or not heavy are automotive

that we very markets really have impactful. are that that aren't those So

a have business. small of We part our

inventory Those related are of still segment. as to results strategic there's as order shared I think sailing. our see timing, medical core the look catch down. you'll energy past, Don say very mainly elective that like medical segments, really that I shortage heard to to demand electrical the in We're seeing and up. I'd strong a took across in to Aero specialty the starting are a other demand. realignment really our AA&S XX%, not XX% as surgeries specialty in step in due well I with underlying electrical

things some market. think I those that choppiness in of a are little medical creating

our the sell strong during we any those demand. still as very again, when are But other those And our On -- renegotiated contracts, into saying, like we were aerospace contracts most seeing to an pandemic. of so see us products markets contract, those opportunity are give you're aero-like openings. Boeing those

min/maxes. And sheer now so a currently we are them, position with with at

before. shared As I've

these the starts because is ramp our it an demand quickly, of can side contract to that to have they support to demand it continue us to transactional their total is. what contracts give customers. exceed contemplate when to sure opportunity MAXs their does All what we X participate make as also capacity But on then starts

this, we're about we they've as here setbacks out thinking series So of unfortunately, the had are a working coming pandemic. closely just Boeing, of with

they to the to But kind full, not that. to MAX of past from so up say, a build to crashes, full talk towards rate build rate been I'd to were move And the they that work FDA had with starting since rate frankly. XX standpoint power

growth, now. of customer if lot portfolio, this you the a shared our in look our base a So very we at past, diverse we have

So of the we're of and meaningful supporting the engine programs in both a all way. airframes

And to rest to needs build some planes but but planes. get demands the the industry get air. they're engines those continues anticipate to there in to we keep and the is new and rate, have Boeing of the robust, meet so going very for to issues, new unfortunately, before airlines their the trying And

how the about we're first through and the gets markets we're the least we [indiscernible] see quarter rate. that managing, this that's end of thinking . into half So that that's Boeing at and as those how to year year -- August dynamics next back first of Don

Donald Newman

Yes. from We've And that And I coming industrial thing of about returned would. this just talked And in hasn't think about would X and well standpoint did to sales equipment the Timna. that this as quarter, industrial food like that we down year. areas back particular see part of expected some materials you it asked some anticipation I One construction sequentially. And demand. back as in for, we add, I industrial go be Kamet mining kind the our like at you echo automotive, saw as to, throughout would it said, we where -- to look demand an question quarter-over-quarter that of think of looking and you was provide. the we things were things headwinds were industrial sales the

industrial to expect I are a sales say, back think we're a anticipating But QX. not roaring from our sales generally We level. going guidance, QX year, this XXXX, a out So in would normalized sales -- be, look those would come as disappointed we're that not level. we when certainly about to you us sales anticipating group more that would that's

Operator

Seifman next The Seth with JPMorgan. question comes from

Seth Seifman

you of able market wide-body push about certification which more really XXXX trajectory think wanted have some quite being other demand of ask affecting that production. same in the the terms the on that XXX, that seeing side, that's you're I because seeing more issues. some stoppage of over deliver to there and being Boeing the there guys And due of side you and in couple feed to the challenges to growth think of is you're tied aircraft just the way. how out the they've And expected had on unevenness the generally not But on as if delays the airframe -- end next in the to years? then subject to work wondering the there of also,

Kimberly Fields

Seth. Yes,

So that's an interesting question.

the it, you portfolio. we're on As a at said, looking going like in there's lot Boeing

growth So the XXX, see your to on point, we do opportunities.

those planes we're So statistic aisle. talking moving They're XXXX, shared Xx is we looking And bright that as spot this a before are the single about the use making They planes. at titanium as wide-body the with Boeing. forward.

demand with from next forecast said their coming increased for us So we seeing are for Boeing and already upped that aircraft, they've year.

ramped And grow that as seeing and those through seeing they anticipate get growth. planes up, to continue we that . So production that XXXX.

service. that yes, claim XXX, into heavy have was entry that titanium a very That the disappointing on the pushed load. On out does

issue that the as still some they're that early challenges look So related we'll anticipate we a as But through. engineer substantially to built they that we our that any and got that, design see that But or going I that XXXX. working ramp. production as and in didn't design or believe estimates the not really on That's say, that that with working there's furloughs into to was they've even material on line us. other we we XXXX improvement in would have forecast into time go I hopefully

Seth Seifman

significant periods is mentioned a in opportunity to follow-up, And when margin stable. Okay. then the production as you just more maybe Great. being drive

in to to maybe running half persisting into be that with so line year. of provide early drive Does so prepared the be now ramp challenges and the also for efficiency through part always not they're of hard now maybe the first operations And of demand? some the to rising next with really these some that next opportunity kind of

Donald Newman

you delivery of that up The you're down targets. is picked it answer in So But toward -- margins mean and our it's that on insightful we're doesn't right, great that. short Seth, very of I'll it's take that one. the terms slowing absolutely

me the let So answer take part that of first.

XX.X% this you consolidated when we basis. our delivered a look quarter, on at margins So

in If and you oil strip you're out gas the I think right sales, XX%. the low

we the So talked range, it's XX% EBITDA what bring the last we in some lighter guide a a expect margins debt inefficiencies around those the had reduction be our of much would anticipated last that with surprise not and being kinds little production threshold. lower still of when things. to absorption in above bit in We QX but than quarter,

we still, wanted to business a there's from the opportunity. also But where is But significant going margin standpoint. a

that. We have to of to about if range this any in very line is to the XX% XX% of very, I But good our ramp. get there sort XXXX. feel pause sight in

things that efficiencies not advantage and that our full take part yields full we'll or might available. actions all that the plan of our be improve resources and course, of to those and of accelerating Of take might good advantage by are

Operator

. Bank. question Deuschle next comes with from our Scott And Deutsche

Scott Deuschle

well? engine on engines alloys Or as Tim, primarily products on pushouts yes. primarily the were demand are changes any like customer -- demand Kim, on changes side, on there products? side, the forged nickel demand the in on

Kimberly Fields

out their then The to changes on in They quarter-to-quarter was this realigning of both the would would even build people earlier rates based pushing HPMC not and of were, businesses, where year. small, at. build rates are and updating they I say, demand realigning, I pushing hit say, Airbus the cancellations were quarter, and this Boeing's were

a is I -- continuing So of we say, hit the that a products unique we're did products goes right? lot will material supports situation, to the them, I and GTF SM. and both forged the There between with it it of would ramp produce, is say majority them. did split So of hit and work probably the OEMs.

no impact that was program. there So from

Scott Deuschle

Okay. over the And cushion disruption, outages weather-related like years leave like XXXX you've experienced and then, for several operational challenges Don, and does things or the for XXXX last guidance demand meaningful challenges?

Donald Newman

in that drill about 'XX, it But me bit, get think okay? table. let little does. Generally, you the off a Yes. let's So when

scenarios scenarios, the guidance. it range and Our a XXXX, our of those yes, includes number of drive

And been thoughtful so look XXXX. that. at Then we believe let's we've in pretty

we you XXXX, and an to that, original XXXX. think And about talked of of in that we million as guide million. as $XXX we gave guidance gave about So $XXX November

about guide, is As range. we expect be that good still that that about I is and our the we original going feel talked felt margin what range about by -- said revenue we it's good range. to and driven really . profile

growing So XXXX. And and of signals growth seeing growth as part we we in early even the we we're expecting regardless the underlying think into first Boeing the half modest XXXX, chain, in like in these jet of the some positive will of probably significant though work that and our the about the with second supply will those stoppage still those headwinds there, are that's certainly accelerated about. strong are headwinds and carry driven in Aero markets of defense talked will be engine that and end by the and pains half

anticipate And be the range. so and original well will that we within business do

Air probably the the we're at good deliver business there of range. I $XXX, this a $XXX being this Now effect incremental not would think, business. about to positive full commitments $XXX add is we obviously, to headwinds, pretty But of in we EBITDA the of that to the million. XXXX, indicator believe we midpoint how see where $XX able area million feel these is, sales Farmborough an about some Show. had $XX That announced additional million original is with That going to

answer your Does that help question?

Scott Deuschle

just the asset and Don, clarify, the to sales guide And prior well? were Yes. as cash flow free

Donald Newman

somewhere. Yes,

sales. these there's -- asset are So discrete

that a You what sale asset never our through quite there's to could if through regular identify know a really we -- in go get. kind redeploy there we of process. do going on We you're and capital do any portfolio basis

given expect given million would say we quarter expected $XX that normal at the million And $XX spend because an Same CapEx each consideration there of into as $XXX don't in but -- wouldn't it's asset we to about We a as it. the this capital year. do have take for kind put putting We that their have on I take we've in on we'll side, CapEx. here. much, been some element it. to for the us we calculation a -- somebody of is like spending about they're on for of to spend, cash us we course would process. into high it We that paying don't think average, guide behalf, generated our customer-funded going in doing through part So million give of that. hey, things is idea calculation for

but sales, funding that about for think that getting not proceeds the shareholders we helpful a deserve. source As tuck cash net in as program, offset returns huge CapEx typically, from in typically dollars, asset we'll our our

Operator

This you. our session. Thank concludes Q&A

So Weston. to I'll Dave pass back over you

David Weston

you. Thank

As to team for to invite our time any Kim their it I'll remarks. some we move that, thank closing out everyone pass Investor for I'd close everyone with call, and like our to other questions. With over to Relations reach to

Kimberly Fields

Thanks, Dave.

defense just strong, and for me all only do. where the fundamentals differentiated before are products in we well let to some margin make a with cases, in that So we're us expansion. the materials world aero in reiterate up you there quarter-over-quarter the seeing growth is One, positioned are few able only ATI those we questions. the companies markets and are and thank and The here. wrap

them relationships customer need it. are they Our because getting we day for stronger when growing are and every delivering

producing are solutions design tomorrow's challenges. on they new can We for developing products, and highest are and the that, rely we quality

for the appreciate joining again, call. time, So and thanks, the everyone,

Operator

call Thank joining. our concludes you today. for This

You may now disconnect your lines.

ATI (ATI) 29 Oct 242024 Q3 Earnings call transcript