CRS - Earnings call transcript Q4 2024 | Carpenter Technology Corporation

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Operator

Good day, and welcome to the Carpenter Technology Fiscal Fourth Quarter and Full Year 2024 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Huyette, Vice President of Investor Relations. Please go ahead.

John Huyette

Thank you, operator. welcome Fiscal Carpenter June XXXX and Call Earnings XX, everyone, the for Fourth morning, to Technology the Conference XXXX. . Good Quarter ended along is presentation call also broadcast the This being slides. Internet over with

delay Thene, Financial you Senior listening Vice Tim the you a Speakers For those Officer. Chief in are Executive by movement. Tony of slide today Lain, Chief and may President phone, experience and time President call and on Officer;

on forward-looking based expectations. the Statements to Carpenter that be management are SEC that made March those filings. June cause Risk found XXXX, recent during the September presentation including the XX, could to are by factors earnings report differ Forms XX, this forward-looking materially statements for exhibits in December current actual attached results most quarters XX-K from year Technology's XX, XXXX, these can XX, XXXX, ended filings, and ended and and on XX-Q company's Form XXXX, for the

following based unless and noted, to surcharge. operating surcharge. Please now excluding note that margins, or discussion, call will excludes excluding to the special otherwise over income, discusses turn adjusted that I is when that the When operating reference referring sales, revenue, sales on the Tony. items in management

Tony Thene

good on Slide I will X Thank morning begin to you, performance. the John, on our of with and everyone call safety today. a review

case was X.X. total rate incident our XXXX, year fiscal For

companies, metal at X.X as it injury Carpenter safest of manufacturing not a a Although rate rank we Technology. would is the rate accept X

X injury workplace. goal Our to be a is

to and invest believe is XXXX, . fiscal X enter to we and achieve injury continue goal. possible, year we will As that to our work tirelessly continue goal we

over performance. XXXX, our our continues X record, double overview quarter perspective, generated of Carpenter quarter quarter third year is then guidance $XXX increase and beating year exceed fourth in by fiscal expectations. in quarter turn for record this our our it XX%. growth we income, ago. to a operating To the profitable put fourth Slide XX% sequential Now previous on the In Technology million fourth most adjusted let's approximately a of to an quarter

$XXX.X continued a quarter of productivity, the fourth the in provided SAO during flow optimization product strong of The income is result delivering quarter performance. operating quarter's and pricing call above mix Further, adjusted above third exceeded free million we improvement well performance quarter. segment the million actions. $XXX.X we generated cash sequential expectations, on last outlook in XX% The and

step-up the annual of performance, SAO operating $XXX.X adjusted previous with meaningful the XX.X% this Technology. With adjusted earnings operating pre-COVID of XXXX for this record income a best and Notably, achieved quarter in year finished margin fiscal Carpenter and is from in XX%. we are exceptional XX.X% million and approximately

look our market a a productivity and volumes product improving particularly of at centers. work across increased sequentially realized X saw XX%, Let's take turn at mix key dynamics. of facilities, quarter fiscal to on and result Notably, the Slide the sales the closer increase fourth segment sequential in SAO In XXXX, quarter increased XX% pricing. shipments higher sales of and fourth year higher

well to in quarter. markets, that capacity recall allocating efforts we fourth remain focused we again above our end-use our of to levels may performance. demand customers the value continue With and able solutions to were half for them exceed then for these a as across it supply productivity as premium anticipated where accelerate our material You driver most. second previously on identified We seen performance third efforts these quarter our

up XX% XX% sequentially In and year-over-year. end-use the fourth Aerospace largest up quarter, sales market, to were our and Defense,

market. deeper bit Let into dive the a aerospace me

desire First, by as passenger and operators airline traffic, measured for airline robust, demand remains miles it's note to important new that industry planes.

fuel and by in meet reported dynamics Boeing fleets additional than more build roughly ever for over backlog travel driving provide airline people Again, X are the aging demand. to is and and fundamental More planes they airplanes airplane the now operators history want for years demand. efficiency Airbus The or of XX,XXX the with to needed newest capacity generation to airline realize to of miles. replace commercial

noise supply some the is goals. there Today, attainment chain of in news rate about build regular production timing about the and

broad like that managing Let think current me Technology we the outlook. supplier the Boeing supply adjustments. talk about a and chain as aerospace means supply through the This is of the wide-body. key Airbus includes platforms. rest rate and Carpenter are and chain narrow-body OEM. our with what We, about exposure aerospace to into and all MRO build

Often, they are information to issues make. may communicated they broadly about externally, is even our facing talking us to are before changes need and customers

example, lagged, For MRO demand elevated. have remains builds as new

customers in As near prioritize a a result, may portfolio of different products term. the

backlog orders, a like We large other both in defense, of also medical. have aerospace energy and and markets

our into adjust to schedules meet customer us evolving gives visibility of future customers. supply the broad exposure the Our needs and production our demands to chain flexibility

when we'll backlog to of increases something orders adjust customers, despite for, in are substantial Changes to needed. are when wanted pull to still rate, and build we in ongoing to, Further, we which us rates needed. our if gives near-term by our earlier of, have continue clearly production and aware portions the react and opportunity

fourth times, fourth, our points XX the three, still assumptions ongoing build rate the order maintain intake beyond for on And in significantly near-term high we orders of discuss record are bring next increases I aerospace due lead build together, higher the navigate due even had will quarter; shortly. supply One, any our adjustments from months, we you to To markets we months, as the to two, demand over modest earnings And are with capabilities, X looking chain able across outlook, next to limit XX see important to increasing horizon. and comments. currently it products remains are away take changes; despite efforts we my broad should rate levels. there in at our to all reach backlog

most future that others are industry confident given current ongoing be in build and increases the rate demand. there will and the extraordinary We increasing

defense market. the Moving to

elevated request orders emergency military levels to world support to ongoing to continue due customers Our events. activity

We support. to will our the essential given orders these nature prioritize continue of

medical our market, and we XX% year-over-year. quarter sales sequentially another end-use X% record with saw up In

market materials the to focused demand on continue our their see backlogs. customers much key view and are specialty demand as Our procedure strategic securing robust strong on given environment customers based Like needed Aerospace, supply a area. medical strong

sensitivities products driven new on engagement adoption others. the of customer in less alloy addition, robotics, of high, by innovation and use remains invasive among surgeries increasing In

see in result, we a opportunities high-growth continue As to medical the industry.

of markets to continue nearly and business X/X Defense in and are our end-use overall and Aerospace our together, Taken grow share. Medical

other end-use our high our Across remains premium for is and markets, customer positive. demand engagement solutions

power a drove and to For anticipate the a generation, example, XX% strong operating expand energy increase term. market. we line Bottom are in strong are sales that for continue sequential market, long we we seeing in is end-use the in which demand and that

Now I will turn the it summary. over for to financial Tim

Timothy Lain

Good Tony. Slide everyone. statement income start I'll the summary. on X, Thanks, morning,

products. surcharge As sequentially focus increasing volume. at X broke most sales shift ago, this that for exceeded the volumes mix by capacity we related quarter's The the profitable in his ongoing XX% with quarters improving combined XX% remarks, Tony . Starting our continue primarily and already covered net growth signaled product excluding higher top, results any on sales as profits. records our was to in our in to increased driven our quarterly productivity on previous expectations we

increase quarter. is profit, The recent expenses our up variable fourth line fourth is roughly in were from in productivity higher The item. to in gross costs, XX% timing special evident quarter up the primarily $X SG&A to mix improving expenses. of sequentially. totaled quarter, $XXX.X corporate third $XX.X recent product which compensation the and our million which million when SG&A excluding the certain accruals and the sequentially $XX.X in the increased due current million million Note the includes quarter,

than adjusted our in the $XXX.X we upcoming year and the first expectations of to year recent $XXX.X As the we current ahead we is million. costs corporate income of normalized fiscal $XX Operating XXXX, ahead quarter more in of quarter. quarter expect million third $XX $XX run to approximately XXXX of to look XX% set million million operating of million to fiscal return which rate a higher income was quarter the or last

build expand margin margins, operating and XX.X% adjusted total momentum continue of operating company delivering quarter. We in to the current

the option our year certain as changes as on tax exercises. excluding rate. the special Moving with effective tax net When with to taken associated in the associated tax stock slightly well was benefits quarter the lower benefits benefits our the for associated XX%, which prior quarter to with expectations due in items, current the effective rate positions, is than

$X.XX was with per additive the in exclude For per to for segment streamline we tax fiscal adjusted rate of look continue effective and The XX%. Adjusted quarter. range impairment impact to our opportunities asset year in share PEP XXXX, XX% pretax earnings associated charges operations. as the share expect to to we be restructuring at the results the business of earnings the

restructuring. The quarter strong improving solid special environment. adjusted earnings our the the by in of summary, execution a tax manufacturing additive results associated demonstrates In items benefit share with include a for demand the also profitability, per U.S. $X.XX driven

X higher million, the for and quarter our volume. results. XX% XX% fourth to turning Slide sequentially segment $XXX.X Now surcharge on sales SAO excluding were up Net

markets, product mix the actions, in defense aerospace drove pricing the In medical favorable end-use earlier. up and in as Tony reviewed to addition and step volume, we and primarily realized

Moving expectations income results. which recent history operating SAO. a reported our to of in $XXX.X new fourth the in and our quarter, represents outpaced SAO record operating million significant of

from productivity, has quarter million, sequential to and period. last income the for context, operating increased in million margin, current adjusted XX% As operating the XX% product The improvement. a operating on by shown slide And XX.X% same the income $XX.X year, the mix basis, are improvement in pricing in $XX.X increased which on a SAO increased evident a improvement.

under the profit operating time. historical the the year current achieved segment put $XX performance quarter quarterly of prior in adjusted year the with XXXX, quarter's fourth that just highest of margin in a To to fiscal corresponding was SAO the XX.X% perspective, XXXX million fiscal at

with over the record previous This XX% quarter's results are margins. than higher considerably higher

results we on only believe increases path the the reported, future Although are just we profitability. impressive towards in milestones have highlight we they our

the product the on actions executing to maintain actively to With market remains mix products. capacity to continue strong profitable focused for to manage team and increase further our conditions, levels consistent maximize production the most SAO backdrop and of

have before, maintaining we importance preventative availability managing of we includes environment, the the term. current to long the ensure This schedules our actively maintenance for in assets. said recognize heightened of assets As the the

upcoming would first million SAO record for a to segment's Looking will $XXX quarter first performance. represent the generate of XXXX, of which fiscal income range operating in to year our the we ahead $XXX anticipate million, quarter

and the in year revenue from and Now turning XX in income growth quarter, and markets operations. million results. strong is which, million, sequentially. $XXX.X the quarter X% of Net to our $XX.X were sales, XXXX. fiscal surcharge profitability like primarily year driven across market the quarter key up business. demand the Slide million of Dynamet of In operating Sequential segment production fourth fiscal to in titanium up third reported PEP by increase excluding end-use sales is current seeing $X.X rates working further our SAO PEP XXXX was

with mind, fiscal in roughly year in quarter operating in we of million. $XX.X upcoming fiscal line first or that XXXX that year PEP quarter the segment currently the will XXXX With the deliver of anticipate income fourth

from generated cash million $XXX.X to we turning current our adjusted third activities of million review compared operating free the to a Slide $XX.X recent in and quarter. flow. Now quarter, cash XX of In

we half meet last to activity increased outlined the efforts in-process for the continue our strong as our of quarter, on As operations. while increasing ramp focused to we demand XXXX, fiscal production we across rates, year environment manufacturing first inventory

And in increased the quarter, by as drove flow also centers sales with by cash inventory operations. planned, was key improvement flow from productivity the higher we in increased $XX activity levels. million through facilities. The work reduced at our driven management profitability by improving inventory the inventory significant reduction and The fourth material of combined driven focus,

of fiscal under details finished in XXXX $XXX reported For XXXX. year With flow million those $XXX.X adjusted the capital year mind, the in million $XX.X spent quarter in million of expenditures. we at on and we current free capital cash fourth quarter, fiscal just expenditures

are balance satisfied flow we the not fiscal $XXX with year yielding full improving the the cash cash of of and we disciplined $XXX year the working ended For on a profitability but see free management adjusted XXXX million and opportunities. Clearly, million and sheet. results, further capital generated are

Our for near-term solid position balance comfortable no debt positions and sheet leverage with maturities future. us the ratios well

year on those help back appendix fiscal certain slide call with included modeling. the Tony, guidance call highlight in to to of turn with wanted presentation, to I selected the I Before that for this XXXX we the a have

the turn that, Tony. With to I'll call back

Tony Thene

Tim. Thanks,

Now let's fiscal turn XXXX outlook. to year the

our we May context, For X-year double fiscal little at our to ago, laid goal year expected over from Day our represented fiscal income in income a operating XXXX, a year operating XX% that out year a a XXXX Investor year path performance. of by XXXX XXXX, CAGR fiscal

we such actions. estimate. acknowledged growth driven and front-end We improved a mix earnings further it product fiscal on with a have clarified we XXXX, productivity, the that be impressive our growth, Even conservative with focus would loaded. initiatives pricing growth was Through year accelerated by multiple earnings optimization

year ahead goal after fiscal pulling our least another in Investor expectations record are our earnings full and Day, our our our exceeding after we year performance Recognizing accelerating X with goal quarter another fiscal a year. in than into XXXX, less quarter, XXXX year pulled original now last at year we presentation,

million We of $XXX At that's record a high of are income XX% over for year to our operating projecting fiscal year million the approximately performance. $XXX XXXX XXXX. the increase end fiscal range,

$XXX $XXX approximately up represents in fiscal flow performance. marks to cash XX% conversion million rate XXXX, million adjusted we flow and are projecting which addition, step cash during In free another our in year approximately

more Now XXXX term quarter fiscal our outlook. the year near to shifting first and

As communicated last starting we the anticipate strong. I quarter, year

pricing. productivity, accounts we is first and our offset of impact achieve quarter, improving XX% year well For million the target. it million higher realized fiscal a was record the preventive This income. operating fiscal XXXX best full which year in then first than mix projecting up fiscal first and target higher year's between last maintenance, $XXX quarter, $XXX and fiscal approximately sets quarter by of to XXXX, are This for accelerated

following XX% several months, consistently the you For CAGR, those last span performance of our over the just we XX expectations, quarters seen accelerating the we in in become has impressive of that targets have don't sight year XX% now, that bank approximately income year as I X XXXX. been operating XX% appreciate that you and have CAGR hope in you've with confidence year story, to that the achieving. have exceeded fiscal don't of line we in a now goal By communicate goal X X-year and

achieving team satisfied is with that the said, Technology With Carpenter not just targets.

expectations to results. our target mix on respect execution and XXXX productivity, the just are Our as fiscal pricing. exceeding team believe our communicated, is there year in to focused areas demonstrated to we in With opportunities outperform like assumptions, related

to our Further, of dynamics the The be slide. get what the XXXX are is year target our expected as are will current now same future, driving into on detailed not our I market earnings fiscal that only earlier stronger performance growth. the peak

next that is this our capital slide the let's of believe the journey. in growth to to continue allocation. our turn to to approach We only beginning With earnings review mind,

balance growth positioned clearly to incumbent a we place solid outlook is a a earnings have the and We possible. outlook we sure and are make sheet, base recent capital asset consistently approach have to take our in balanced as us are and operations as to earnings running upon allocation. today, it to our strong accelerated strong invest With with efficiently and well

million end, that assets to productivity. won't we'll year expenditures, opportunities which We with debottlenecking each depreciation. about roughly risk our line of and spend at capital we continue To identify to that expect to annual put is improves unnecessary in any in continue $XXX

already growth value high-growth aerospace must by undertake say, $XXX enabling medical capabilities that enhancing the strong million, defense projects given any growth and our returns. end-use or improvements. will we projects attractive like current we projections, Needless either be incremental with markets to throughput high are target Beyond evaluating and

is intention our addition, capital In to shareholders. return to our

to long including million through current going approximately We expect $XX COVID dividend, level, supported have it the which the a and years annually is forward. at maintain

market present. program authorized dilution. capitalize Further, will today Directors be a to has We this deploy share up announced million. repurchase of $XXX opportunities we of to The program to the primary also may may Carpenter Board on Technologies it use offset that

comments, note or million free year million $XXX capital that are during payments. Earlier my to cash flow XXXX. expenditures $XXX is stated important in above does not that the fiscal projecting dividend million $XXX adjusted to any share include in approximately I It we stated repurchases

demonstrated, aim As our we good have we to stewards be of capital.

As a result, drive to term. over we the believe continue shareholder we will strong returns long

historic quarterly We comments. will exceeding expectations we again, of year of let's adjusted completed quarter record. I Now fiscal and result a operating fourth the new turn million closing flow. cash my million XXXX. generated adjusted free delivered slide it next setting We income a for $XXX.X to of $XXX.X say

We improved increased build prices. mix and continue productivity, operating to momentum realized with higher

to quarter, most million completed operating the operating from We record $XXX.X SAO and in with previous the expanded XX.X% adjusted adjusted year margins on profitable we up XX.X% in income.

demand We strong are with to are across demand. even positioned and than unique realize today, outlook we environment long-term a assets the well these given operating capabilities, in markets and stronger our the high-value

just mind, X again, year pulling in XXXX fiscal years to we in earnings our fiscal that our With outlook year target XXXX. pulled forward

free For income fiscal income to to $XXX year we $XXX $XXX of in year strong cash $XXX first XXXX. in million with and adjusted in the million start million the year million to operating projecting expect million quarter in fiscal operating XXXX, million $XXX we fiscal flow, to $XXX and are

share addition, to In supporting repurchase program returns. $XXX announced million, further a up we shareholder our

just we execution We our our near-term exceptional in getting remain and performance. focused as are operational living our customer started we long-term values, journey. on to growth believe and drive supporting we earnings Finally, needs,

your Thank you for attention.

to I call will the now the operator. turn back

Operator

from Gautam Khanna with comes question first [Operator Instructions] The Cowen. TD

Gautam Khanna

ask I couple wanted questions. a of results. to Great

in any you all seeing wondering increase prepared in engine XX about of of to Just to requests? times assembly a lot and your guys remarks, are product I'm your kind that order lower been of in XXX final rates terms book, the concern respect airframe your you seeing rates. the assembly deferral are lead maybe final conveyed perturbation how just actually times. you lead has with First, given and

Tony Thene

Yes, you're I hope doing well.

As order up remarks, a quarter. strong were sequentially in I fourth year-over-year. very and said prepared We the the we in actually intake had overall,

have So true mind but that also not Carpenter market use total say as come Technology, keep be lead in. holds that end Also in I well. for aerospace times our can would that

said I not quarter, last think still, I weeks, bit. a if little there extended XX-plus they're

X/X is if is this that's of closely important customer early. XX we're tied a at what some thing when the is about in remarks of adjustments we COVID, able different you it customers, referenced, adjustments. those of said the that I that they specific Xx But that you there mean, ask prior order time, our in are could is and and product that because as navigate a that asking any want that Now customers have an situation, for estimation might book be very to be to for my type I was to they

to kind that don't to as customers this take anybody an of to we give the or and us can give coming cancel with, more have opportunity have also to we production color a slots. So that wants want pull I bit we anybody to far that up in. saying opportunity you they and little as work maybe

again, There's anybody always to to that's " to in is us I XXX, to push this noise some very "Hey, saying, strong interested around enough you've us we take going of put Gautam. out but supply because production, saying, we in type people have takeaway. be the long chain. not have if aerospace we're think to there. OEM know, opportunity use up -- going they're to the In the fact, been So There's they free have connection a calling

into There's visibility airplane. breadth very those because feel multiple go of the of the here different have, -- manage different thousands our build our of and confident we of in piece making specific of changes types, but rate we near term. And any that materials can we an because for that,

that that believe those are over after news or that inside I powerful that everybody going the coming piece to that us, talk of good including the is to significantly months. rates build increase industry The the

consideration increased pulling of all So that consideration, we've our year. forward a all of still into into earnings it that and outlook significantly, taken

this. increase puts that think can Carpenter in out I that earnings that helps willing so extra through with says, So outlook. to much that so the I color. unique spot Technology a we're move our hope all we

Gautam Khanna

or curious Yes, guys if throughput you broader step answer. give just us And you the it's some content enhancements you've are you've be of examples productivity you higher to where you're on to alleviated. could with key of driving gains. the going back obviously on throughout a context great and as give some had fiscal 'XX. us throughput Any Maybe Maybe helpful. follow-up, be driving I'm the because -- are you that's lot would obviously can bottlenecks a where a some that furnaces

Tony Thene

you And Gautam, years great. I been talking right? and for about now, several Well, it's this have a

a primary I always getting doable. on are, that's SAO in XX%. excited our just think Gautam, That's XX%, the XX%, about mean on zeroing And always COVID, we're before -- I we And sites and it's indicator. you significant. very are leading had margins to what

right? them, that to of they've amount uplifting obviously fantastic. believe this I they done importantly, across mean not been has the center of shop say that have big as immense safely us. your the mean the more I behind entire it's driving melting output, you front have is work mill And to specifically just floor, from process do step on top productivity on been. and for able doable. drivers our the will an I and If we be that's side, the XX%, has back not workers we've But high question that it I quality pride next that, a of level the into to on and the where they're what's total linked. with to the is -- is you primary doing the done every they're And has output talk the process, that biggest the end work take what answer out because been

Operator

comes from Sullivan Benchmark. question Josh with Next

Joshua Sullivan

here. quarter great Congratulations,

at inventory, kind should forward little are level you're more with loaded. Or models? channels operating what you're the looking of what metrics a about you think bit -- the that at are we Just as going comfortable these maybe

Tony Thene

it's obviously, a with big And cash it driver, FY now look over free increases way of Well, flow. we the in volume significant at 'XX.

in goal keep flat, inventory or is use. to Our on significant improvement a relatively you'll days inventory have means hand which turnover, whatever metric you

enough Now you quarter-to-quarter. around been from know fluctuate you've long going to that that's

not to But going do that to that's our going inventory to the is we stay that's high as over as to next every for goal. level, -- at FY stay area goal product to it's much So a overall And our get in our that can flat our to we customers. FY But flat 'XX be what's 'XX. we're FY target, make sure versus going quarter. is best -- 'XX,

Joshua Sullivan

Is a comment on that there. And the then runway . is defense this there how defense on immediate side? will prioritizing continue need orders, a longer-term dynamic there Or the short-term just much is on

Tony Thene

last proud with longer standpoint, or with I year, we several them is their has will very what our closely working on going think I quarters And they it have. any much we're that do our from help with schedule our a term, see, we're yes, stay events, to goals. next-generation discussions the Department questions the we . to strong. term, to into always in, can last environment but we as we're near over pull has revalue that, Defense been do current will continue Short Defense to support Department you can not the say amplified of of to there's products, with as readiness the of that that. strong. them over term, do both. as Certainly, We're current world and alloys with this I type only think happy that world

Operator

from with Bank. Next Deuschle question comes Deutsche Scott

Scott Deuschle

it throughout typically grow EBIT we Tony, does? like sequentially should to expect XXXX,

Tony Thene

Scott, good level, out. a is sold And high that is a a question. right yes, effectively in is and It's answer but we're at the we're now, there that dynamic

we So ship. can everything we produce

seasonality So has offset idea demand. of elevated this this been by more

is difference to why real and operate. that's between only the important understand quarters really planned days have maintenance, it's you So doing. And what number the to of we're

The guided As to to the primary maintenance we've we a slightly outages in why took fourth fact for some isn't takes that, first our planned almost mill bit quarter, through. down It that take be flow to That's and No maintenance. market. in do first our to the assets see is preventive must quarter. you with nothing weaker, red has a we quarter quarter that the planned why must getting XXX% little due but protect down it's quarter, flags. market that it or fourth the just about getting from it's and stronger, we

or whatever your Scott, related XXX% be hope earnings answered to but a is, take It will your it's could quarter, question. that we in the EBITDA down that So I metric that maintenance. our or future there planned could, how slightly. be

Scott Deuschle

is Tony, in all the current then years exercising can pricing been deteriorated still the really you've pricing holding Or Yes. No, that's great. characterize And recently? environment? X at that in power Has well? last you the

Tony Thene

term, there, going we is I to with the that, aren't too increase long things that relevant talk want to scheme results don't see be pricing. blips in market driver in-depth here small specifics about I whole Scott, us, continues these little from big the see I you think on quarter-over-quarter. And that But from think as can our the what of which in of front right? to even it,

that. us right doesn't now. I That able to shown impact that mean we're we've offset you

going to believes I that's nobody years, X can't Now that, last the or but X case. be

just would this the up a believe. put fact, line over next year, In I steeper trend even

you demand with assume supply pricing type demand should would strong, dynamics. of the So just that because that of environment, remain

-- to And going Obviously, we're be this about I'd brings if balanced, we brings growth that want buyback but this other around I -- and it talked time, our when point of projects. like could, we intent to whole me I program demand that point. just signaled to hope are talked to that. the supply shareholders. to it fact we don't another your Scott, we the capital about before take and announced allocation I capital incremental to that's potential evidence these And return to we've

clear, I are would we we aerospace. there supply products says that no that there projects are in want pushing be is currently the close anywhere or demand come that to contemplating supply above to to it

next is impressive incremental notch those growth accelerate, that growth that next that over notch years. can can already capacity So capability, next at where projects earnings of we find incremental look the we of several that very

Those you projects, start large about. gap. would just things that talking are try not talking doable. the about that They're to close When

that would the equation. think significant, don't gap that and that's I at our on say we're not would have So we anything is do The that important plates to looking solve that.

Scott Deuschle

X a And like last reprocess houses. defects. that their for more those Or But sounds for firms pretty issue And with to loop revert yields own result that castings drive them have CRS do those falls out big here. products? now. and with what companies demand there's those at inner when as generally it yields, Tony, of question question just does issues a typically apologize forgings allows the experience for I the

Tony Thene

this, the to answer assume don't you're obviously, I mean, with say be -- with, not I Well, way. don't having knowledge. I not speaking houses, answer you this I'll right? -- I with careful XXX% who something would want want not it I'm to because Scott, So enough I'm when forging

The at like large forges the, -- to going final There's We work about, the rates level. think market the is very always with those you're to here and ability if importantly, now so talking we than obviously, have move little around, it's some similar and strong and more closely again, more be noise there. much I Carpenter the right Technology offsets some things with build that. it

and us, another in turbines about a Aerospace need it power mean, for or I But that's more example, different you've generation around across lot. the good runs news the assets. talked alloy artificial for but we all similar And heard land-based a intelligence. for

we're and Aerospace into that able alloy margins to get jump So the wants products flow to for again, that's those production even margins. another to

noise. of that just that of we to type any So tool have it's another offset near-term

I'm confident any be you noise short-term well very run sure. that I'm talk those behind, they're to, will people and

Operator

The question Instructions] BTIG. Andre with Madrid come [Operator will next from

Unknown Analyst

in obviously, guide ahead, I to got FY so So pulled 'XX looking 'XX. mean,

and with how . of mean, I a I should be looking at at expansion, think looking I out? of do mean the that kind how here about XXXX of should sorts? pace we performance mean, So on we said, we expect same beyond the plateauing now?

Tony Thene

X deed it's Yes, right? I goes mean Andre, 'XX quarter, FY now I last unpunished, pulled those X welcome good just year, as no well. we of up mean, years. X

said question beginning. my the are the in what So remarks, is, prepared right? just we going do to I FY as on this And 'XX, you think is

our update year very peak customer projection. year. 'XX us. fall not this in for on FY we a of we have fiscal and mean, product, product the practice plan by where the is 'XX We So bottoms-up market in outlook. do by giving guidance 'XX I market, the customer long-term by detailed in every updated a It's future

FY that that off. its we another from like the 'XX 'XX up run that current steps let run I'd have, that to ready kick to want book to I getting let and On FY course. 'XX. certainly But We're course. our

want don't it. to can said to of the I've give. guidance line As hit we we sight we to We lightly We that confidence have before, have want it. take that

refresh our play steps 'XX. that detailed be 'XX mistake So to going out. communicate a 'XX plan nice no make to we'll be But would work FY 'XX. 'XX and that. do get And let the process up from that and We're and up. would

Unknown Analyst

$XXX looking FY know I mean of had tack mean but be -- you previously able Appreciate through is the outlook, that the XXX without are CapEx it intact the mean though I I as would has operating mean, all kind have on could just guys If another XXXX, helpful. or levels? you is at these I to about I of 'XX. I was to increases increases I said there. having hit that pricing? the kind done it. . to be million guide CapEx to seeing going income expand beyond the going -- That remained for through

Tony Thene

you for good that. question. it's Yes, a Thank

capacity current and targets, our hit of on that We on externally All none. we any new to capabilities do capacity. those our have are coming based targets communicated assume not

a So important that's point. very, very

target we've takes earnings capabilities current and current depreciation. our is year our only capacity. you is given every So our debt to equal a which right, target that account into $XXX million . The sustaining primarily roughly capital,

need You assets. refreshing be to always your

capacity. of any current adding assets. really care taking new Those are the those aren't So

did inside can projects million, are smaller times to that that I pretty already of capabilities that that consistent. growth the assume say above productivity Now and over then would number. would will add if several And is years, $XXX really XXX-ish earnings type growth debottlenecking $XXX top I there at next that's range impressive on any is inside million. capacity improve adding be anything that, what that the of going to type would we CapEx, be of a that

current important no question to the spend an So to hit we I the because need our XXX. distinction CapEx appreciate there's that's guidance make above to that

Operator

Next question KeyBanc with Capital Gibbs Markets. Phil comes from

Philip Gibbs

congrats the results. strong Tony, on

Tony Thene

hear to you. Good Yes. . from

Philip Gibbs

in engine sequentially . last much grew quarter, revenues that texture you your us can of terms in year-over-year? give how The or a

Tony Thene

sequentially. Yes, were Aerospace year-over-year engine XX% and up sure. XX% sales

for very strong a So quarter Aerospace.

Just at to specific aerospace engines. . be

Philip Gibbs

funding given and an as is tea it's strong now government. the of idea the the been years. Okay. how in And right to can mix for obviously, couple strong give been defense you pulled much just A&D your has percentage, stuff trying of in leaves said some And you've read us you defense last a

Tony Thene

-- and of is of maybe total defense end-use I higher defense the aerospace XX% market. the about . the think roughly

Philip Gibbs

on the can And more you've or Obviously, on the of renewed. color put me, your Have any give SAO? you've contracts then higher within long-term anything some for achieved duration the altered contracts of lastly in some you pricing resigned? that contracts of you you us clauses new pass-through

Tony Thene

and clauses, those of of there energy over types future, maybe are more that if inflation moves sure, moves. accelerator if type point, longer this to into of year, the going for the Yes, last as you some said,

of more to that those much there's in that. large those if any contract of project the in by try items get we don't some to move So burned there's

a that So that's part our of of all contracts forward. true that is going

what are question, second now than your for to part . were shorter COVID. the of would On they that contracts I a say duration prior

Philip Gibbs

that. do? And the hiring you appreciate training me, you're more side like feel you the point? need that capability? that lastly or . to you further on Is of you the extent more more then at I front for feel that on labor. Or pretty on do to How hiring unlock there debottleneck equation all equipped this

Tony Thene

Yes.

it real it We couple the want that of nowhere areas always improvement standpoint, made, a there's near for a to for there have year areas we've a that. add that's or ago, maybe with increase But mean people we're there. some quarters years couple extent a the going quite for room From passed I to that of some time. want when training us. We've X was but with staffing that very staffing. and XX people, X newer yes, happy replacing you're that continue are to was XX, progress we we issue a ago with

of very those. equipment, As these operator pieces run are a skilled know, takes to very it you complex

got the the You just So making. we're and you operators job, put right? experience, with that . to can't are into our pleased buy progress time the

Operator

Cowen. Gautam question Khanna next Our is . a TD with follow-up from

Gautam Khanna

Curious, from once, what and will, the more downstream an supplier on your you Thanks a because heard level. what GE there to impressions like Tony, question, just sites, the get products follow-up. sell to it's castings and And sloppy that refer troubled low curious, buy-to-fly was I forgings of might term now? of kind buy-to-fly the if are their to And that's just case, presume now. now? to worse any do you've the earlier about your to negative talk than years back be just opinion opportunity for X that a or anticipated But you houses. starts you're view if than like maybe Pretty I'm have couple can much particularly longer right right of is implications -- ratio is as they the the yields having a better therefore, you

Tony Thene

just mean, To of be that we with -- hasn't commercial XXX% that to into demand up something said, that you have I could much so with be sell come so "Hey, because have great of the not I mean of some that. the and insights discussions honest, it there more some us. greater dominates team need side that's our I much that"

that gets which a see driver, that means So future major not as there's in a the we hole when better. don't

mean, too, in seen is and myself see very move have we're those. demand that them where the that does commercial we're mitigate gap And we're because I just And mean, that, from, for I well we're you our able over how and here, And to impact between specialty unique able team. point don't of -- that know, the And supply summarize, be position not I And our I right, you're "hey, wide. everybody as now, high all much. " a to you? here's right discussion -- coming a for between I get Gautam, changing materials is where pretty looking a

Gautam Khanna

some it if quarter than discernible. for almost guess be them more Yes. through you would like of I it expedite are yield . to that having whatever asking as move And be are asking would customers a I for to challenges you just wonder expected what shipments or ask you how those or

Tony Thene

things to on. the And be many say could we It things. There's be expedite types there driver? going a It's could like of get of getting right? I the requests hard we're this. what across mean bunch -- those other was board,

very that desire data if really pulling point a point, a deep, orders well, want, because on I'm important you expedite I you business their real. And " entity XXX. they're singular it, XX% is up X this making hear their "Hey, And which the of back customers say, and yes, you to the of and it this get heard say, dig but that from which it's of we about So forward Gautam, X really of is pick is things can earlier, move to and the but we talked that's

make across to people take of that. that's the many going and in advantage then industry, small other adjustments move they're course, though, whole Of to

guidance that's me, Gautam, that's guidance in another the noise. this And us of we think strong So over took were just all years. with for all year, earnings that's our into why I -- just right? We that's to pulled several -- our we . why that outlook We able, -- we're extremely consideration. next

Gautam Khanna

about am possible I curious for -- appreciate to holding that, so it. at I X obviously, then and you is XX% but I'm say last I did longer pricing follow-up. expectations And not term that. hear your you

that out they X again next X reset price renewed with going were net a shorter renewal beyond high. be base ballpark the the presumably, still as going to duration be I . But mean, inflation the As years, contracts out your is great aren't just get are and move or for in as as up a come you've given not you to that Is to have renew. XXXX? like case we -- do price going you you you're as of look still when part thinking

Tony Thene

our pricing that. And for don't that may Yes. see advantageous for an that's I I leave But I'll believe continue think I or right? forward. want that. will we exceed what us that to to Because do careful want going market imbalance market supply on we may demand to I I be have to side, products, solve that don't where we that's that going that that's signal appropriate. forward, the anything going is to at to the say going the to make right? not going is it going . don't anything here.

Gautam Khanna

. you year-over-year? was in sequential it, what fastener And Okay. have said the may but

Tony Thene

Yes. I did not.

So Fastener X% sequentially. and bringing thanks that . up year-over-year sales up. XX% for

Operator

comes a Deuschle Next with follow-up. Bank with Scott Deutsche from question

Scott Deuschle

to making meaningful investment were to to to how made boat Do you you X be take it another X reasonable rock in that a a duration? the any a investments just capacity. to expand sense in big theoretically, for to Carpenter But Tony, industry for that point have supply/demand. way? Is participant online make years, want it for would like come meaningful framework a capacity the long that on if

Tony Thene

Yes.

you step going still it's really, important to gap X right? I a The to pretty think XX That's rock years. not I it's think is that say, back right? to small. boat, the if happened, take as And

to design take going ease to around build several increase where There's can was even do to so we're us if it it's qualification requirements. years then capabilities XX for your It's several going It's going new design. nobody There's months let's XX and piece second equipment, question, X to pick to look to big there, speak. that years, I not that. ways someone we'll I years Like build capacity. to years. and going specialized going take equipment. said, can your ways bang to qualify. plant, been a to to like we The that's It's the to at original look at some XXX then we very mean, the out years take . And number several back to

to that. So runway get a yes, very to to it's get long

you'd be someone about you it be about you'd when done someone And is that before. else, talk there has -- talking never

to that's facilities types knowledge run these the required massive. So is of

couple years. not just a So in that learn how It's do of doable. do and don't that you just to

Scott Deuschle

Do it. now issue think tougher even you powder had? Pratt that requirements the qualification Got contamination are those given metal

Tony Thene

failures as of they not example the for doubt that no just in you to stand. it's so, more "I'm capacity qualifications more That I and go that that. this out than but much There's past put had, right? other It's eliminate that over want as be industry of that mean type it stringent gave, and examples " because tougher, are this we other rightly and just going more are to not any people say, more makes possible. safe to difficult you've

or than there's X difficult So process doubt is the X more that . no qualification it was ago. years

Scott Deuschle

than this you've on cash looks Got started a in think balance this it. sheet confidence exiting year. to rather it it get that Tony, the outlook? so and Is like to fair given high do then on really pretty the ability got sooner of might later, good And you like buyback the amount it sounds

Tony Thene

good right, it place, be a at what to we're I think of Well, about balance just want that forward. or and the very levels to I market. right? a going be the don't out a about a year place it's all sitting think I But would now, I the of it's believe when million us a time on shareholder, for cash forecast we'd we're execution signal with coming in good be nice in Scott, sheet, good

look just a we've a cash that a going program flow. earnings we're says I've forward. to that years that's to growth. to big use be cash the got look next see very said meaningful and out to put repurchase of that's not We We've a going flip -- demand things There's at growth CapEx be Because several environment. incremental can our strong the we going over out demand, great supply going great free that and from and just got us.

So on. -- is and know but focused spot we're but it day, now, we have we in every a earn what team good right that's to -- our

Scott Deuschle

Tim, question you. X And for Fantastic.

EBIT closer to Should guiding to can free anything breakeven, out? the there? typical we seasonal allow cash Or maybe worth for Just on quarter first free flow be even first outflow flow the strength positive. you're to quarter cash expect calling a

Timothy Lain

working inventory to cash That specifically you Yes, as driver going free is fluctuate Scott. the capital, seasonally Like is Tony said, biggest for mentioned. flow inventory. our

inventory our year flat. . we can relatively the for make goal as -- to is to going we're best and for decisions. that manage So But good overall the keep

Operator

concludes . session. over to turn for question-and-answer closing Huyette John the like remarks. conference would This to any our I back

John Huyette

today thank great call. Have a and operator, for everyone, you, you, day. conference your our . for Thank us of joining rest

Operator

now today's has for conference The concluded. presentation. attending you Thank

disconnect. may You now

Carpenter Technology (CRS) 25 Jul 242024 Q4 Earnings call transcript