CRS - Earnings call transcript Q1 2019 | Carpenter Technology Corporation

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Operator

Good day and welcome to the Carpenter Technology Corporation First Quarter Fiscal Year 2019 Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference call over to Mr. Relations. Investor Edwards, Brad Mr. is floor yours, the sir. Edwards,

Brad Edwards

Chief sales results the materially statements differ over XX, operator. earnings conference could you, XX, ended note, movement. This being Chief factors for including Good from slides. Carpenter's recent actual you for that with be quarter you Financial XXXX, today can morning, are, Carpenter's Vice the filing. company's attached SEC President cause and XX-K year note forward-looking Executive a the Form most to management also and filings, on that found earnings to XXXX. call President exhibits Statements may during broadcast Please June time based Tony presentation also is forward-looking now Officer. by and the welcome unless those on those report over the and to current is or When surcharge. Tony. otherwise call sales Internet call management and delay the Please September along excludes made presentation by discuss that everyone Speakers on expectations. ended Risk reference in Thank statements Lain, income Officer; that will the call listening revenue, to discussion, slide for in phone, of on operating and on operating I margins, referring following based turn noted, that first the Tim the when this that experience Thene, are excluding to are surcharge.

Tony R. Thene

to everyone Brad on morning the Thank you, today. and good call

our safety of on an X. with slide begin update Let's performance

XXXX, fiscal from quarter was TCRI year X.X of or for Rate fiscal in X.X Incident full Case the Total XXXX. the first up year Our

a the quarter. to make business zero in only with has toward PEP one first Our recordable injury injury progress exceptional workplace continued

that and of to-date the However, elimination on get an have results step and regain to are prevented. plans to this me been increase and us engagement unacceptable of business injury The every as using hazard execute took to back opportunity safety are focus performance. must SAO our work. with clear a standardize action level could back employees terms on safety uninterrupted in we develop to the and track. It's teams our And

and I've in not safety again say workplace. it stated As a until the core be past we zero value I'll a we with will of today, achieve performance our satisfied injury

Now to X and first turn let's review slide the quarter.

reflect strategy, share results quarter first the market patterns our end-use demand across gains. Our of strong our further execution solutions-focused markets and ongoing

the fiscal In first of earnings, XXXX. since was best year quarter it terms

fall that last a planned annual expectations In However, we were I in that preventive did bit now. will call. earnings address we segment, completed our SAO short outage. the of our maintenance quarter's communicated

for ensure at equipment the running all quarterly high necessary operate maintenance the experiencing, With outage rates that we vital certain are operations sufficiently. The accounted it to we the market our the required is is that our the of demand utilization had from continues to at was extension to that at perform tasks we guidance. preventative majority maximum equipment The extended production ensure critical to and take centers completed outage capability. of deviation robust its offline

expected Amega our a results. impact lingering result In than as PEP were the our Dynamet, operational lower businesses. addition, than expected. short fire mainly of the inconsistency and the recovery fastener expectations higher originally West demand on certain input In of and we prices our drove At segment, in were Dynamet

took the U.S. with growth at by encouraged and in West, signs early are outside the quarter's the activity Amega mostly this For Basin while and our remain The still supported demand. all especially were our timing XXXX. perform best preventative robust the capabilities going to below earnings Amega generating tool summary, due arrangements. as West the We markets continued of preserve West, results for end-use forward, we of the QX rental year since shutdowns our solid, both by to levels customers necessary fundamentals our expectations, fiscal well, certain Permian and activity Amega operations customer Dynamet encouraged In the by and maintenance remain to

manufacturing this builds For customer our Athens Technology, industry; continued to are direct balance on sheet leading strong there in earnings strength; to quarter's our LPW returns points Carpenter's to call, four leading increased of shareholders. which market qualifications; on emphasize: acquisition position significant urgency additive our and

the Let during our me the healthy conditions in in into remained detail sales get quarter. five speak briefly year-over-year and more later each then our markets strong growth generated across each and markets Demand now end-use presentation. of one about we

XX% In sequentially. year, to addition, X% continue last grow, to and up backlogs compared up

This benefit remain the quarter sequential levels, at increased market, diverse record end-use industry sales consecutive aerospace near activity engine quarter participation. marks ninth to growth. to and backlog down year, of last specifically of by driven the defense and sub-market Drilling the our compared XX%

The year-over-year first end-use marks seventh quarter consecutive of growth and our in quarter defense market. aerospace the sales

spot the end-use to market, sales medical where bright year. were has consistent last Another compared been up XX%

have this is due customer relationships. industry earnings solutions, had significant in growth Carpenter is outpacing in growth titanium market leading for to as well facility. the projections Athens our as for success A expanding our growth robust Our demand enabler we our

their noticeable a qualification concerning engine experienced specific increase in we of customer engagement products. quarter, This

additional airframe given Our customers rates. the increasing build times capacity, recognize and and projected engine lead urgency the to qualify

continue and The the morning, global are are teams to capabilities. solutions. and management LPW acquisition our lifecycle for of we we and during existing Carpenter powder metal of powder keeps including and manufacturing software and additive build manufacturing of forefront at adds of supplier managing Our developer group visits recyclability information each acquisition out the actively OEMs to platform. to exchange an innovative with an onsite improving solution with additive impressive assets of engaged announced quality process, a qualifications. of solutions toward LPW completing XD manufacturing, printing the powder and contacts hardware-based customer industry, leading large acquisition hosting the technical additive Technology, powder their This to This

important solid returns gives flexibility the our long-term dividend sheet the our the to we our XX%, as cash for future and us as generate balance position, increased our to growth. solid first regular invest during quarterly to end, Lastly, a quarter, sustainable by in our that which well confidence shareholders. increased direct financial To provide our to reflects ability

avionics with slide Let's the demand year-over-year aerospace engine update. end-use distribution sales. X, basis, in I'll were defense, driven continued move higher to as well XX% and on strong begin up the submarket, sales where primarily by and market a and as

to the aerospace continues up XX% quarter of given defense market on robust demand the strong we sub-market, and achieved increase, another XX% it up growth new platform last compared sub-markets. backlog remains In ramp. year, as Year-over-year, and backlog was year-over-year with a sales our we engine each total experienced to in basis, Our sequentially. XX%

also sub-market fulfill our and remains and were as We rates OEM sales The down limited industry engine times. for both to expedited continue year-over-year current demand fastener inconsistent orders lead partners, given patterns. build sequentially with visibility

including are position our we solutions XXX. used In and predict, hard believe outlook in the the demand supported backlog to the platforms, sub-market, aircraft AXXX levels the on we experience by market the major XX,XXX our While confident near-term over and our offerings the of given demand structural are for continue to diverse is long-term fastener healthy

increased defense our both in program sales and sequentially demand. Finally, specific year-over-year to sub-market due

count gas Now, the sales American higher North moving activity sales in the West. remains and low and at to activity further healthy power and by the market the our and oil customers generation due opportunities, relatively energy X,XXX at levels rig sub-market, Amega our power demand levels. The range has sub-market Basin, to and overall year-over-year in sub-markets, gas and order oil where remain Permian were energy XX% rental total see largely and of replacement rigs In higher we baselines. horizontal stabilized and and drilling directional particularly generation up at

our the into this first transportation attractive diversifying the of rebound year-over-year year. such heavy been over matures. Sales adjacencies up market the additional streams. truck those up off-road, duty have into rail making we quarter X% solid market and were as onto XX% last revenue Now, the to sales marine and where as sub-markets heavy compared expanding progress market, in were market, In

our in stages, push remains growth early have we areas. believe in I'm and these far so into the While additional these sub-markets progress pleased selective with opportunities our

last titanium Moving the for to onto medical Dynamet. market, were XX% year up compared demand due stronger solutions at sales to our

in years. strategic incremental over more In rising has emphasis X% area several our including market, well last balance capacity portfolio leading worked to our relationships, both Today, including the and basis consumer industrial are the and solutions end-use base sales and the we sporting Our year-over-year on customer solutions, a for to Carpenter meet with traditional material medical as operating increased market hard demand. implementing We've while manufacturing. advanced semiconductors, up were model diligently goods. commitment as customer sub-markets, processing direct in to to of recognized OEM been unlock certain this due to of our portfolio additive revenues an

turn review. it financial Now, I'll to over the Tim for

Timothy Lain

slide Thank income morning, statement I'll X, start you, the on everyone. summary. Tony. Good

represent results year. a strong our quarter first to start Our fiscal

surcharge. lower $XXX this volume. XX% our maintenance quarter preceding operating million surcharge in across were first In to quarter the planned by fourth sales the results Historically, in of due years. preventative work key annual sales fact, a excluding Tony quarter's the facilities. marked our centers to basis or first on on first mentioned, at five as quarter Net strongest timing quarter income the sequential relative $XXX X% decreased excluding Sales decline our shutdowns million

see our higher as first across up our our demand to of sales strategy. were end-use a business, signs volumes. ago, year of the on solutions-focused continue on From increased we in markets We XX% quarter X% execute including strength most

in expenses The is due attributable with million. SG&A by our In not in of certain in by areas. growth and increased of to in targeted reduction Year-over-year growth million costs year-over-year addition, to did sequential notably that most $X.X million and sequentially timing repeat XX%. $XX backlog to QX. SG&A defense to key continues investments backlog expenses $X.X declined mostly of QX aerospace mostly XX% the grow,

and be income. note, the related to reporting presentation. an year conform operating standard, excluding simply made EID have one referred to been same income the we now numbers are and the as given of will administrative As Prior previously to current the and recent recast operating operating to period adoption pension the current income accounting

a As in was operating X.X% of quarter. income sales, the percent

on in quarter Operating year declined basis quarter first expected volume. XX XX.X% as fiscal sequential XXXX. points of the declined to lower margin basis to due Our as compared to margin compared a the fourth

fire will in was business more Dynamet our negatively margin at efforts we a operating our addition, detail In moment. which also in recovery by impacted ongoing discuss

which XX.X%, and quarter. associated certain was Our quarter compensation, exercises equity the discrete in tax stock-based reflects awards benefits for effective vesting tax rate the first with current

We of continue rate for to expect XX% balance range XXXX. the to be fiscal year our to XX% effective in tax of the

$XX.X million quarter income XX%. or First $X.XX Year-over-year, net per was EPS share. grew

review as million end, across cash free during period. capital result we cash as demand $XX relatively our that flat sequential $XX $XX million free cash quarter inventory of fiscal and negative current the we Now, with strongest of higher the fiscal declines performance a year turning of consistent half patterns of and by the our as improving X offset second Capital higher the cash generally a in XXXX build by quarter We mainly our year-over-year expenditures volumes compared each experiencing to the earnings the in the aligned in half To fourth million first were working year support basis, first to of flow. quarter was increased slide with markets to we year higher first are operations in levels XXXX. historical in flow current year. increasing sales is fourth the our a end-use generally in was fiscal On of the capital, in increased and was cash fiscal flow from backlog. quarter year. million. with the $XX inventory inventory This the Free expenditures quarter quarter free positive flow

the continue We full capital year be to expenditures million. expect for $XXX to about

of strength availability September of the $XX As commitment projects the of also as CapEx magnetics. our the levels as of we dividend last million liquidity, million is $XXX have the signal historical direct business, talked to another in and with reflects rates in confidence including relative soft quarterly in growth delivering the well to additive under cash The reflect we facility. about manufacturing flow our cash increase investments and Free $XXX returns XX, our in the impact had million dividend. of to shareholders. our our quarter, associated quarter we increase cash elevated total of strategic our At credit

no contributions to position our is in We Our growth XXXX. remain long-term solid debt financial strengthening growth. fiscal supported well-positioned and pension major required year maturities until by areas sustainable foundation investing for or targeted continue

annual Now improving on Net the income mix. million, the the the defense impact a seasonal first medical, by The in preventative on last production turning was The to Again, million, continuing patterns decline $XX.X higher sequential across $XX input the reflects reduced operating aerospace year-over-year quarter segment. reflects driven elements. and first of to up XX.X% volume. X% XX% On shipment certain basis, SAO down lower sales fiscal year SAO excluding fourth combined and our or $XX $X to which increase X% of $XX decline was slide quarter XX down $XXX an last product fourth on year's in and excluding on most and current XX.X% operating sequential basis demand million year-over-year. the with our markets, surcharge during million surcharge reflects a compared our shipment million planned maintenance sales in sequential higher quarter. update margin volumes XX.X% on quarter. the of or XX% and quarter increased were compared million volume. shipment an end-use was in income prices Operating strong and

strong end-use backlog to are and our across continuing drive demand ahead, remain growth. Looking markets we

continue relationships and opportunities. customer to on will expand capitalize We we market are emerging confident

currently best of quarter SAO income the to QX operating will the in represent number that sequentially operating six XX% which estimate increase production Given we days income in performance QX, available for second would to up from QX, years.

the slide increased X%. $X value by PEP excluding medical year-over-year. and continued a Now West. net and or quarter high of in at our On million to PEP down review demand or quarter $X $X.X the was $XXX,XXX first sales to sales growth fourth Amega market driven X% solutions a year-over-year $X PEP sequentially for and segment were titanium in up our $XXX surcharge down million, compared income turning XX increased million surcharge million, the results, million basis, Operating excluding

of of As business and continues facilities earlier with income the calendar its business well Operating our damaged be PEP quarter this sub-optimal our of Tony were from and expected our completed facility production the Amega continues West mentioned underway the to a results headwinds several Dynamet one To by at below year. current units. to in impacted flow the is months. deal earlier, over short-term be path. is as fire reiterate, Dynamet expectations Reconstruction result a next to

than the certain the deal continues this with lower expectations. which inconsistencies in arrangements. were demand of due to our expectations relative quarter tool results In timing to fastener impact Amega negatively our At West, addition, of patterns, rental the quarter's Dynamet to results current

income, sequentially we XXXX, up year over call fiscal of our will by quarter of improve currently that, excluding XX%. second acquisition, expect recent impacts I LPW the With back Tony. turn the to to at any Looking to PEP's operating

Tony R. Thene

Thanks, Tim.

have several expanding years, Over capabilities the part CalRAM, acquiring evolving And manufacturing we rapidly to strengthened our Puris. capabilities. capabilities forefront this the and which are production space on design then, in positioned platform we last by fiscal product additive at changing acquired We manufacturing disruptive our and of the technology. titanium additive past extensive ensure year, our powder producer powder brought and focused

Center in and an capabilities will last addition, which investment Emerging in we announced Athens, our enhance scale. year, In our fiscal Alabama, Technology technical

operators expertise feedstock XX from positions design production additive customers. through manufacturing component who also technology. and specifically an engineers, and with this technicians, specialize have (XX:XX:XX) Carpenter partner over Having technical in We irreplaceable as scientists, mobilized our

the are oilfield During our customers a this our the service a as metals steadily strengthens this tightly we are with to additive marketplace Technology process. talked through of one printed our like tool develop need critical offer quality position one platform, achieved from acquisition product U.S. leading powder unique other last to about lifecycle customers linking in of opportunities Technology by design engaging collaborations applications the with a solutions. in metal instruments, and XD call, powder string. on increasing, collaboration drill is I and manufacturing powder of Carpenter addition Overall, providers the with growing defense the a addresses collects step implants space. real to process of enabling our major end-to-end of number reuse. design, powders. due printing component, from phase in-hole value digital LPW systems, Technology LPW as And the management of the now LPW the which advanced innovative additive in is proposition satellite state-of-the-art assurance enhance time the oil meaningful and and and drilling technology jet additive manufacturing and multiple of and material medical such surgical throughout to commercial platforms. Additive solutions down-hole physical structurals, data presenting today, manufacturing This cycles took forward platform starting we market gas manufacturing manufacturing through in maturation controlled additive optimization development the to additive powder the build and another traceability by sensors engine our acquisition and manufacturing The for hardware,

points part quality. help an beyond oxygen integrity, example, variations and levels thresholds happen. compromised can the solutions performance lead since resolve LPW subpar can they certain or As can moisture failed before problems at software and accurately different to measure identify

tools to significant achieving assist analyze minimizing facing product LPW's aimed about issues of increase data savings LPW cost the major probability digital industries, today the solution. repeat We're across excited challenge including enabling industry many development relationships rapid established LPW achieving integrated XD improving grade at to platform aerospace, leading powders. and in part is in powder transportation printing Carpenter's process. to metal more track powder cost easy and has alloy a energy. reuse. making additive major as From emerging with accelerates degradation earlier of is enhancement These Another manufacturing lifecycle the integrity. the overall and the manufacturing and manufacturing part standpoint, medical, it the customer position end-to-end collection and approach powders, an and additive in of acquisition uses lifecycle LPW's innovation, by can management success leadership it

slide we are growth comments. our Let's and investing areas. making closing in growth very In XX progress executing strategically targeted broadening potential in by continued term at my level, commercial closing, turn relationships a high strengthening and our customer long to strategy our

first number that robust highlights. all benefited our us in serve across our And will up strong while preventative backlog continue on and Our demand and included X% end-use of year last is to from market markets. outage solutions maintenance of critical to results a growth. year-over-year growth strong market, and a sequentially. generated were compared important growth, year-over-year trends a approach to capitalized delivering successful quarter a We completing allow We earnings continued revenue further we XX% driving

in industry qualified this for growth upcycle. major facility capacity will Our the major during aerospace fully offer when significant Alabama, and remains a Athens, driver incremental

comes urgency qualify markets and that earlier, opportunities their as noted As accelerating new also as major Carpenter. we enhanced well that and customer our significant offers industries change for is We and of growth customers are know industry evolve The technologies, our I future to seeing aircraft components. needs. with dialog with increasing

as disruptive Carpenter years to the additive make manufacturing. spent our strategic continue we and of impacting complete the needed transformation That years customers the remain This provider. investments our have change a end-use market. includes several transforming solutions must ahead in We forefront the at last into

a platform of offers we the leading reuse a powder processing during materials development management addition production that capabilities, the improve a lifecycle manages part that XD With and have powder solution, and solution design to metallurgical optimization, recyclability. printing and platform powder expertise, technology-based process powder LPW's and built and

units are portfolio, and soft high magnetic Our to future growth capacity. investing the for strong in we future leader the market power auxiliary build we our drivers also growth aerospace, and value given increase Today, include potential capabilities significantly rates. our current see where and cycle aerospace are projected

in and soft attractive We growth for also electric our future electronics solutions opportunities vehicle magnetics consumer applications. see

by of that a is ahead. SAO multiple in Our investing evidenced a demand as to presented the quarterly sustainable a as growth the cash shareholders, the X% high project position solutions our With with mentioned positive market to continued solid in In delivering years be and next for just maintain earnings basis gives future weakness. for in environment, much regular important Carpenter up We on progress, basis our have a as projected our and all focused growth returns to we strategy by in working no long direct much We the future. we and performance as XX% summary, XX% term quarter, sheet next drivers have increase to that solid of year-over-year a year-over-year the the as on see PEP dividend. providing outlook increase quarter. increased us continue we earnings have balance to indications flexibility business

especially In orders markets expedited are as lead times become the continue for increase aerospace to and common. and backlogs more fact, strengthening,

the is operating facility continue field additive opportunities make activity model the future. your investments significant last has committed Our market in back to future new delivered and the the and to only to quarter. operator areas we over coming as And growth magnetics I'll about long-term it exciting Thank strategic for to this has soft your team The capacity attention. results, increased but and excited manufacturing. and such continue turn Carpenter questions. Carpenter implement, journey as near significantly the can to Athens qualification The be into is and we meaningful you

Operator

Thank you, sir.

begin session. now question-and-answer will the We

we will Khanna Cowen come ahead. question and from go Please first of Gautam have The Company.

Jeff Molinari

and is for taking Tim, for on Gautam. this Jeff good question Thanks here. Hey, my Molinari Tony morning,

Tony R. Thene

morning, Jeff. Good

Timothy Lain

morning. Good

Jeff Molinari

morning. Good

have kind else being if an you planned or know I with is of that are other issue this, could yeah, So just we're mix anything season at that issues Well, a bunch maintenance sequential there there's talked dealing drop? any wondering normally EBIT amplified inefficiencies about the SAO. the

Tony R. Thene

and was due that extend a Well, across we mix was this was in have high we markets, some Jeff, protect earnings right now this sure to utilizations, of hurtful running the you was our to we issue, have this equipment simply we're to outage, Carpenter to that protect end-use it's decision just to the was that. up outage, where the down a issue, that and customers run, take the up, this backlog up long not demand easy are equipment and get caught this primarily going for our long run, demand long is areas all at our make for to not that so quarterly is very decisions cycle, in business term, make to that not do

took little shutdown. actually was time what us guidance it gave impacted last we needed. the and versus $X our preventive quarter. between had we maintenance guidance was difference the performed that, the We as keep that as we in So And But million. mind

up fact to our backlogs compared So, markets are see quarter and year-over-year. are we it's amount a being small rather next and the stronger increasing significantly that getting

I the that's point. real think

Jeff Molinari

completed. sense. definitely else get kind that's there to things maintenance want We want of wanted you don't was make to sure at you make play. Now understand We and helpful those have, you just nothing it makes sure to

I the facility. past, your the delivery And said would months. one several that on are as you if requirements. meeting you're repairs, you this like the know to completed you still behind say you? in status you you cost on say question Can in Just of Would mind. said, associated update issues, kind – with you are next expect recovery the largely the don't the be us Dynamet of you other on the

Timothy Lain

question. out That's just roof finish we for still and asking. building. ago, about inside the months quickly, a have there to that moving several it was so there is XX building Jeff. go of Thanks good new under now I The now, Okay, days to

with alternative our customers. more tight customers. to are We flow our It's paths been which costly of supply using many are

many they very mouth. think them to say worked needed. has we've when would honest, to hand I'll material cases, I with get been that well But in them it they

we'll clock those early the make So we the when hopefully couple to – next work get have the of could we they need what think by around that here months, over sure and building complete. continue to spring, customers

Jeff Molinari

Okay. Thank you.

Tony R. Thene

you. Thank

Operator

Seaport next we of will come from have question Global. The Josh Sullivan

Josh Ward Sullivan

Hey, good morning.

Tony R. Thene

Good morning, Josh.

Timothy Lain

morning, Good Josh.

Josh Ward Sullivan

cadence here how half. of earnings results bump about cadence for given we year the first half expect the outlook, or the in we the the in through now? the Should year, Just as this second historical the for just the a we thinking think essentially are at about historical similar point

Timothy Lain

Yeah, Josh.

I think that's a fair assessment.

days look over production versus second to of the number first QX need And the not Given is half in second there's produce. period, QX, a half, to generally you what stronger enough we time produce historical if at the than us. for

Josh Ward Sullivan

find just did given maintenance, something something road? preventative Okay. extended the or you the guess, expect you extra you utilization down rates, high you which did the didn't just the outage, you I benefit you on And then, said may, do

Tony R. Thene

no to sure make that appropriately. we find And that we is we to didn't Yeah, that were yeah, items were anything had everything it everything done we done make some exactly we wanted – wanted just to want major there didn't be. that issues. the But sure there we just should way expect,

a Some a manpower frankly quite areas standpoint, took longer. from little standpoint, a we than expected part took longer from

on centers So, that had bottom for impact work some week significant market, a line. sell extend in. everything if a when a can all you you in you you even make, the has where In

Josh Ward Sullivan

guess, just given... So we I expect I similar special type think mean, you year, was do would a event next outages this or

Tony R. Thene

at that decades an just and of outage I've probably here take when done customers, annual your off. for long that's especially been in customers Well, European time because for usually, timeframe, little the Carpenter as we've August a as do some and

a looking suggest and taking rolling different to outage, bit. us that going would the on hit schedule we better out for as forward, where points one see always do of we're opposed I to throughout smooth and a ways think I year more this that large you could

Josh Ward Sullivan

Athens on production just one maybe do see certain above Is the Athens? at the this utilization then XX% in AXXX you there And go Athens, a point? on XXX or rate elbow where at contributions we where

Tony R. Thene

definition sure me Are your understand make of you Let elbow. I saying when...

Josh Ward Sullivan

just So see utilization, just And when in? there do we are really it, mean, we as you tie it is mean, rate think defined you can above happening? Athens that on at we a XX% you I you Athens? get do kicks when – can looking the to, OEM when when maybe, side I how that

Tony R. Thene

a I think to it's it rate. tie specific difficult to

what going just look rough math need to supply do engine manufacturers and do you're material that to If supply, raw going the some over at Athens the supply, engine year more based demand. to nickel on Xx, to the of all the sometimes just next you are

So next the understands discussions And uptick I the happens the as continues governed in large months, said, in and XX next is to months the intensified. us, these only the those as six chain, still rate. who or works we last going need, in ramp whether manufacturers had be significant a by supply managing qualification quarter very, engine have a that the very are with

to The tell don't going going not their shortcuts take get the we quality we can closer week, and Now But with qualification customers closer. so, on to we're not take and that. any side. any and that said, on methods, shortcuts every rightly I expect you are

Josh Ward Sullivan

get back Thank queue. I'll you. the in Okay.

Timothy Lain

welcome. You're

Operator

ahead. go KeyBanc have Markets. Phil Please we with Next Capital Gibbs

Philip N. Gibbs

morning, Hey, Tony and how you? Tim, good are

Tony R. Thene

morning. Good

Timothy Lain

Hi, Phil.

Philip N. Gibbs

this pressures, more input or just think you you input Tony, cost and things refractories, that (XX:XX:XX) things there that did, Are that you're on Tim and is more read made of talking quarter? about? I cost electrode in can't Is rolls I Hey, we aggressively or increase hitting looking the what comment, what and that and should like at? remember, inflation lubricants, about speaking we are staggered question the other

Tony R. Thene

Phil, did out over are a the think, as and I question, availability now with there. X think more about just you I would coverage the we've the general input past, out implemented sometimes just prices are we're are demand there, months is more it's say pressures last I sense talking asked the In of, talk the to as XX months. the electrodes, got supply surcharge the lacking. inflation about and – there of prices there scrap we we

to opportunistic months ago. maybe at what we open or maybe the hadn't which prices So on scrap we're be three market trying buying above about four spot anticipated

Philip N. Gibbs

backlog comments of XX% does Okay. effectuate obviously backlog the question very supply chain up the not getting color double-digits, in right up terms can market. strong, actually on and product that in are the is, sequentially whether anything into mean the or growth, now aerospace the And particularly But struggling to with the growth I'm year-over-year.

curve is think, I question, wrestle philosophical the up is, the so effectively everybody with the get of to some requirements? are just trying sort these forward that's with wrapped deliver so we people – Can is or so everybody rates to here? on can of trying And just move build up

Tony R. Thene

me the So, come Phil, looking let let try you're hit don't point follow-up me back a and I that question, exact with one if for.

when I – Lead that last XX% this us don't other for speaking for think increased the the times, I We was – think at meaningful. in know is the we I players and XX% least, I quarter required. industry, for backlogs to has the example are product that quarter-over-quarter. in know mentioned

You material approximately now, months. is nine engine lead have the time for

see to demand improvements out to are up that's down expedited that, over been to And builds then, of which the melting the our people customers. to units, the as real, comes a the furnaces. additional Phil, best press meet to able think That's required increase to productivity see to out of trying real that's But couple assets we've we that's is quarters, how demand our And try engine last to we I demand, lot why can as of care you'll the said of to and you doing, earlier, well these from I Athens, it about demand hit types productivity there. the real talked able that and take market. those existing that there in do be meet as I orders, it the to in is we Athens of move will have So our this – queue.

Let on you hit me know going if after. that what were

Philip N. Gibbs

missed That's have. here growth color No. sneak revenue Thanks. That's I been or have either last could one, jet just but the all helpful of did give engine it in may you if I it, is, year-over-year? and I may very terms any what have the in sequentially

Tony R. Thene

engines that last if levels now aero record quarters. probably the the we've XX%, we've Year-over-year, flat. level of jet quarters, sales thanks. maintained history been level a sequentially as was the But the and Carpenter three on three as last growth in the high remember, was basis Sure, it top as you the at as engines, far far sales

Philip N. Gibbs

Thanks so much.

Operator

Bank. Jeremy have Deutsche we Next Kliewer of

Jeremy Kliewer

Hey. Good morning.

Timothy Lain

morning. Good

Jeremy Kliewer

SAO I is that was looking on a the bit excluding or extended impacts? of increase, XX% kind that inclusive clarity little maintenance for guidance, your more

Timothy Lain

would Jeremy, in reported XX% be QX. it over here just what's

Jeremy Kliewer

Okay.

results? a flat then of over QX rate of more kind So normalized your

Timothy Lain

Correct.

Jeremy Kliewer

Assuming a... that there was

Timothy Lain

days QX we yeah. production of versus shutdown, when in QX number the Given

Jeremy Kliewer

And earnings as how anything powder that should or an of standpoint, manufacturing more capabilities going revenues this we just you Okay. stated, is to on do of to and kind is capabilities? kind a regards LPW, this long-term, for end-to-end then, or view accretion additive of

Tony R. Thene

Yeah.

manufacturing the that these them over earnings So, two, positive. seen in of or very all have side, the Jeremy, additive this of stage, year this in are last on acquisitions early not majority the development. We're you

you're potentially market, I at what for is aren't exceptionally And Carpenter we the where but that's time two so that want going we're And in to Now, boat. EBITDA than for in today. significantly to believe get companies manufacturing be this miss is an with and earlier, I some a instruments, are customers components, development has our work leap gas basis, applications day-to-day direct it of like business? material, that mentioned because specific jet they taking line a engine in these systems, these cetera. traditional et interested now, As manufacturing, with drilling company, additive some the additive in alloy structural is you losers, to medical What's play priced in on because now. to now, from now why oil years we're you if interested it and and the look in it we to important higher going satellite, it,

now listen, transition We a parts. being can design to ability develop (XX:XX:XX) provider, powder we So manufacturing powder. say, additive solutions a easily AM, have don't for supplier, just from now, very the we make that we and wrought

powder make design, as excitement an have do it, the to and years, skills with piece and I part. powder We one of supplier, has through other grow, honest actually has no primary management, with we we to go entirely to there's fact, design, final that will, the I with do raw to now is lifecycle side and of over some calls announcement LPW, couple part of production, recyclability. where would made been morning say a a from the processing critical you absolute from LPW which be far we've can be new that that what materials this ability And set our it now to continues digital added have of the the as bring player in you, we've to this as the customers the manufacturing field. next Carpenter think puzzle the in in additive and post

Jeremy Kliewer

luck. Okay. Thank good and you

Timothy Lain

you. Thank

Operator

Cowen from of a the have Gautam Khanna of question and location we follow-up Next Company.

Jeff Molinari

question This Hi, for had aerospace on is the I yes, Jeff market. fastener up. a the thanks follow again.

on Thank kind kind Can and seeing in with some business not up patterns, answer you're You you're mentioned having whether you demand from demand visibility. that? dealing also, or (XX:XX:XX) that and you. picking And spot just expand inconsistencies trouble with of of were you specifically others?

Tony R. Thene

– and in going this a a forward, as I've time, fasteners I industry think has been be as well. it sub-market is been habitually it it I've around as will long and been Jeff, for been aerospace inconsistent long has

to going some overpurchasing time time is The the I there demand. there. is be think are at short, that signal and out stocking for a the trigger impact of says you're potentially going time. to Carpenter aerospace going fasteners supplier thing destocking. we broadest Every an Every to see it's acquisition, to there's critical that we're going it's

We have very we will quarter And the supply, nickel we're margin a nice to supply, all be inconsistent to touch to it have our fact I we have from going us. think that just titanium accept quarter. It's business our customers. for

Jeff Molinari

or And you the you both kind titanium same characterize and nickel characteristics? of would the would segregate them

Tony R. Thene

very would are they say I totality, are there similar. but in differences,

Jeff Molinari

helpful. That's Thanks. Okay.

Operator

follow-up will have we Sullivan Global. question will next of be Seaport a and also from The be this Josh

Josh Ward Sullivan

Yeah.

Just how point? and powder is powder at how with your big other Just this LRW this (sic) is at big point vertical operations? additive your [LPW] (XX:XX:XX) the business CalRAM

Timothy Lain

Josh. It's a good question,

we're what million I'd and roughly think, – able on out, depending say to I it's it's volumes get line. the top $XXX year business

Josh Ward Sullivan

(XX:XX:XX). [LPW] (sic) LRW on then And

Sorry, go ahead.

Tony R. Thene

Josh. ahead, go you No,

Josh Ward Sullivan

on point, what at software entirely it going [LPW] I is was you (sic) would... this software it is or say just of LRW (XX:XX:XX) percentage

Tony R. Thene

No it's not.

entirely they IP. an one powder, So They software heavy on about solutions not are I into also the they developed atomizer order. but talked LPW, mean, company, have have place, second a they very with optimize I earlier, in one it's that

where they if been LPW, the in past. subset, as of produce they in have well then fact, become optimize a powder, So they – customer fully the providers. sell service even to integrated Carpenter the different as has they powder and

Josh Ward Sullivan

Okay. you. Thank

Operator

Well, at further showing we're questions. this time, no

I Brad Mr. to would now the for Sir? any We ahead to Edwards conclude will session. remarks. conference question-and-answer and go over like back turn closing call the

Brad Edwards

call. everyone earnings for first next us our Michael. day. you with call. today all quarter again look on conference And of a thanks, forward Have joining great you, Thank our We on speaking to

Operator

for you, have the this great for time today. thank the and we And team of you management everyone. At may sir, today's also you. rest we to also time, again, Thank presentation. Again, disconnect. care thank attending all day, Take and your a you

Carpenter Technology (CRS) 24 Oct 182019 Q1 Earnings call transcript