HAYN - Earnings call transcript Q3 2022 | Haynes International Inc

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Operator

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Haynes International, Inc., Third Quarter Fiscal 2022 Financial Results. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. I would now like to turn the call over to your host, Controller and Chief Accounting Officer David Van Bibber. ahead. go Please

David Van Bibber

much are very International us With Financial today. Dan Thank Shor, for President today Officer. Chief and Mike Vice Haynes and me Maudlin, you President joining CEO and of

Act would I intended forward-looking Section Reform forward-looking XXXX. Act Litigation and regarding conference of within started, get meaning This and of we like read the the cautionary expressions statements. that a statements similar contains believe, and to and of words of XXE anticipate, forward-looking to Securities call the statements. identify XXXX note brief are Exchange The Securities Before Private plan are

the year and we to With believe provide no and such by such particular, filings in no publicly with suggested are Commission, these we any plans, otherwise. Although or for update new assurances company reasonable, as result the me will discussed expectations are intentions of plans, detail risks our statements Many are expectations information, or in or September a be company's the uncertainties, forward-looking regarding forward-looking obligation risks turn of XXXX. ended to the events future undertakes to a revise achieved. let in over statements The XX-K Form and whether XX, can statements, that, such Securities subject or intentions of call and Exchange fiscal Mike. number

Michael Shor

Thank you, morning, Good Dave. everyone.

months. and both quarter. the our third highlights six approximately the overall, in We as make million entry third The $XX over progress continue for month, excellent to quarter past averaged order are a follows:

million $XXX and our best dollars million one entered. aerospace quarter with for ever of Third both entry was pounds and GBPX.X order

million an XX.X%. we quarter million, QX XX consecutive $XXX.X margin of level was now and sequentially. quarter sixth up consecutive a Our GBPXX.X with million. impressive and pounds months for record backlog dollars increase Revenue XX.X% the ended at Gross increased for the and of both revenues at is $XXX.X

adjusted above our that of meaning EBITDA are we or million, And was Our income third in revenues finally, which XX% EBITDA quarter. net $XX.X million at $XXX rate. a was $XX.X our million run was

our for quarter value all that years. on our advantage noted and like the and experiencing on believe excellent I of competitive is specifically would to and high-quality, the sales business are more to Haynes-based the components application in on and believe building differentiated possible high-value also significant our for that niche we has everyone of our focus we with our operations customers significantly, feel over while of alloy we previously efforts our each My not our that innovative based past, all been that have even the business. improvement, fundamental sincere is build improved in As team's through and key are core I've seen business, momentum third business. performance that enhance focus the provide development, improvement thanks further competencies of of We to technical we sustainable services. to striving our in improvement yield continue our our results these our service, in our we few the next with a products our and result note generating company is company acknowledging in and relentless is

million, previously, XX% entered as the are almost continues as noted sequentially for quarter, third up was and year-on-year. aerospace noted by Now strengthen far as as $XXX.X follows: to The we quarter. market QX highlights XX.X% million this as in orders $XXX Aerospace revenue additional just details

the of of the emerge quarter. to reaching pandemic shipments increase in sales QX from Our continue third impact XX.X% as we the

and Our sequentially year-on-year. aerospace XX.X% XX.X% sales increased

shipped pounds single-aisle average we prior the predominantly now The fiscal XX% from XXXX. achieved XX% seeing average. we are Difficulty] were [Technical revenues high strength at for aerospace our have from growth. point is of year In We the in ‘XX

plane expect larger growth We further in builds is improve the future.

aerospace be will next levels months. record the shipping We continue over levels at on believe six order to based three entry to monthly that sales current our

reported This quarter, growth the extend involved strong demand travel enthusiasm feel this Farnborough the will I for airline just all beyond you this could at clearly the experiencing. is industry industry the believe that generally and summer. and was for Airshow,

the recession, and as we COVID I are that that worries emerging industry aerospace heard had of many far As say recession the already strong. during

order business. and believe strength projects in to that the seeing base CPI, are our I at book, Looking CPI our we special both be case. In

year-on-year. Our sales and X.X% sequentially XX.X% increased

nothing We continue to relatively in access to see within oil which to up Higher be affordable natural more were revenues and CPI, we encouraging to will QX, States. than spending sequential as demand in strong United help timing our In after supplies pent-up both demand. growth is gas saw This order seem continue and due XX.X% QX, sequentially. in in to this IGT CapEx very a down the X.X% business prices also drive segment, year-on-year. drop shipments plentiful

our continue on over remain are to natural As out grow, last to gas-powered while XX% the of to renewables projected XXXX. noted turbines U.S. power call, industrial gas production

of for use OEMs, and XXX. to ongoing a gas proprietary continue presence very ever-increasing HAYNES in parts including We have strong our hot alloy major path the

in the revenue, as into other shipment increase sequential and increases desulfurization due gas significant flue-gas in to far we markets. As oil markets, saw and

Now moving great it’s margin, to gross story. a

increase gross million, the year-on-year. margin $X.X points improvement improvements points the XXX sequentially $XX.X Dan see the up was that discuss improving team's but margin raw X,XXX differentiated the This and supply basis the continue of drivers at in previous focus material showing high-value was and of of helped, to the XXX points. increasing products our our absorption shows were and performance tailwind estimated We with fixed costs. the power driver our basis actions. leverage not from for achieving quarters Net by main better The gross we which and volume our basis cost variable services, material and without improvement. of raw tailwind, significant was Even main shortly, margin the year-on-year with margin are income million, will

for Our quarter X.X, X.X a third third level. least that’s quarter the was book-to-bill at of the based revenue on book-to-bill consecutive

For IGT X.X CPI was X.X. the quarter was X.X, third and aerospace was

inventory, in Now $XX backlog. increased well of and prices inventory which growth both inventory being the cobalt, in customer moving million the obviously orders work of by process our is over currently to combination to increased driven our nickel significant increase as by is in applied quarter million the inventory. as The of in $XX

our been experiencing. order we've company and support continue Our to of customers must unprecedented the level entry

period. in which million our with our shipments catch be to produce same fact time grew million It's during is this projected the a will a simply the from ship compared begin past million and that we XX% averaged over over $XX important $XX to very as $XXX order order to per note in to past over to $XXX the and bottom six line. cash months, month good out important growth million It's we for month quarter. entry, to up in due have that is to backlog backlog the the inventory shipments also thing Our point entry

the these is of develop end-users future understanding needs development aerospace, anticipated always a the power emerging number continues future markets. alloys such serve. on and numerous markets been from in-depth business in development Haynes our the and different chemical as industries programs an a and leader of related developing high be underway. of and Haynes of markets, with and to for quarter, generation, material needs material has of we has inventing alloy working highlights OEMs knowledge additional to processing Some Based alloy application of currently the that to our performance Haynes

IGT aerospace IGT current development generation and the gas turbines. possible of and next generation of hydrogen the the nuclear and of alloys power CPI evaluation alloys next both turbines Some generation include generation. new and emerging power of The for examples aerospace for the for technologies of for next alloys testing and

In and HAYNES this point for I being HYBRID-BCX expansion specified a XXX HR-XXX engine resistant technologies has include been are at alloy of aerospace alloys commercialized. for oxidation alloy, corrosion-resistant for stages a Haynes already highly emerging the several various thermal that addition, coefficient applications. development alloy this of market; that XXX turbine new CPI should low application. applications; These HAYNES HAYNES a beyond alloy, HASTELLOY alloy, industrial alloy alloy into out a phase gas

considered HAYNES Next engine alloy for an metal dusting a the and resistant application. a for with strength being petrochemical and alloy aerospace HR-XXX of HAYNES-XXX finally which alloy, an in advanced of testing continues already applications; is alloy, combination oxidation resistance, unique stages and

our As development times core I've said application excuse and before competencies me alloy -- are for our company. many

company. on development true what for work a and our differentiator commercialization Our build strength has to current and been continue

implementation safety daily the on efforts team's our to impressed Haynes. all presses of continue be with change, at performance leadership, improvement related I on, and focused continued of our to Moving safety, with communication goal

In monitoring a COVID-related addition, education entire with all of with we and to the good are recent uptick employees. communication do our currently absences, very COVID-related illnesses and continues team our job in

Next, we environmental related an as far safety very as now in and manager sustainability and have in ESG, a place work our science. background to strong ESG with

noted goals. specific earnings costs in start-up based corporate that projects, to our corporate with years continue team's additional facility core and We and of my and data call possible relentless on growth along our metrics. Wrapping in ESG on next set business capital collecting and last the comments, X over future business disclosures on the performance on to variable three on megawatt ongoing work the evaluating our value to anticipated project our also improvements the as three continued our additional focus reduce add fiscal is markets. We up new responsible on solar related sustainability required and

to continue We following. the project

growth approximately ‘XX. Our XX% driven compound exceeding fiscal a this aerospace to from begin pension by year growing over ‘XX, by time And our annual estimated growth to a is this see finally, to aerospace point, rate XX% year Gross projected over At financial comfortably be results. revenues in annual XX% on margins Positive Dan details of fiscal ‘XX. for additional period. plan two rate funded within projecting over to to hand We fiscal to we for are ‘XX cash operating are compound years. mid-fiscal XX%. flow this I'll remain projected fully is

Daniel Maudlin

point point Financially and sequential a X,XXX income sequential Thank and basis representing XX.X% you, of over improvement Net a another this last XX% period basis year. margin, impressive the the $XX.X improvement XXX Mike. increase. same with quarter gross million was

was just last we lower third at was which income breakeven, year's quarter when is Looking new point, GBPX.X which than XX% year-over-year, our net breakeven million above previously. proved

margins. Now GBPX.X the strong was this is incremental profitability with year's evident shipped, million leverage QX

few A investment efforts strong wanted continued outlook. additions shipments profitability inventory increase early has remarks. important resulting Our my a to I quarter, prepared and in driven points, in successful in to address with increasing bullish production and workforce rates this forward

then last and driver the of as our First, at our would tailwind, XX.X%. sales improvement the our material solid was to still gross was cobalt If nickel and and or higher slightly impact raw basis we favorable only basis this points. improvement narrows remove have be of material XXX raw tailwind, year's million margin very X,XXX the material improvements, to results without our profitability improvement. production price main from while XXX from points. combined was estimated $X.X raw driver well, the with main basis point been Even not cost volumes. the impact our quarter The The

with in XX.X% order ratio. increase $XX.X at $XXX.X June XX order and backlog $XXX million Backlog order end. $XXX.X sequentially at entry entry March a was the quarter aerospace levels, extremely or hitting X.X of million with we quarter book-to-bill are our Second, entry a million over an this high million ’XX, had

of revolver, this the Third, utilization the inventory. drove was deployment our item, million cash $XX.X which increased primary

price $XX this inventory nearly volume in process the in related. inventory. and in inventory Over of both increased The million related increase quarter work increase all with was

to raw In consumes the This from two-thirds with get prices. inventory initially in inventory will higher ships our increases majority component from price $XX the was material a the the material higher inventory melt cash fact pounds This higher keep The value fuel remaining of for price, but were as volume top with recouped raw which line or raw increases the sales material process surging of of raw material in in one-third from our our is of purchase increasing melt with to rates the up our invest is backlog. work our rates, decision increase our $XX million costs. inventory about million increase the market was increase inventory growth. higher

to out We with cash going facility XX% further expect the around of to balance size. our utilize estimate support forward our facility growth. at credit the to XX% will utilization that need We our credit

base the safely facility group of by about current the increasing as in with size our While base over this bank a the million. below our our potentially is borrowing or XX% we are of maximum, borrowing size credit talks facility exceeds $XXX

EBITDA press of release the statement the milestone a profit million Finally, our for million our rate. backs EBITDA hit starting flow operating exceeding We $XXX in plus with add quarter definition cash P&L, and amortization non-cash our provided amortization. volatility annual tailwind and potentially which schedule headwind. One $XX.X run nickel from from comment a now, nickel of depreciation, neutralize but we and become decline on stock additional with the could recent compensation, benefiting is are this the of a prices, of nickel tailwind six,

impact We our very will continue to raw results. material be on about the estimated transparent

successfully and supply way to navigate delays, Additionally, Haynes has encountered these issues. our business continues pressures, inflationary our market like labor around team chain but tight every a

to as P&L expense again. yields, productivity improvement. Continuing the be pressures and/or continues million was process to goal net sales, offsetting $XX.X X.X% single-digits with reductions, technical with be research quarter great improving with see the or inflationary to of price that increases in Our and such and cost SG&A third

with to from million. to this compared this full-year. decrease income and of increases, sequential even last last year's income growth was income XX% $X.X at this The a pension percentage the revenue year slower recent rate. quarter quarterly on of the $XX.X much rising to continue volatility. Non-operating last at year-to-date year's of favorable second improvement, is expense basis, is a $X.X, of expect costs million Operating expected our U.S. million ‘XX during $X compared represents quarter. million is a was growth for SG&A benefit We $XX.X as which fiscal third market which $XX.X million $X.X impressively retirement to holding million operating is funding improvement to quarter, but The

funding mentioned, proud well we're customized very how our Mike percentage. LDI strategy As of our is securing

And a nine months ‘XX quarter with cash rate representing was earnings $XX.X Current sheet and be million. tax XX%. capital XX%. changed rate million at quarter the effective $X.XX, AR net first million June in net tax and estimates borrowed Controllable of accruals our on sequential all increasing change for would company's full-year per $XX.X an increase. over was the had this $X.X Our This XX diluted for inventory sizable on cash $XX.X the share the a million of with increasing by and $XX.X of the balance million with facility. of million million. Liquidity, $X.X $XX.X working income XX% to offset credit represents fiscal million effective payable $XX XX% by a we from accounts changing

constraints. $XX ‘XX up in expected to to spending the the nine our constraints to to $XX.X million lower million These at with on the million previously million spend available of in production was $XX.X intend end liquidity of levels primarily credit of are Our than was sales to quarter facility. Capital equipment the quarter, and slightly Outlook we're continue the planning fiscal for $XX.X impact first next ’XX, response million fiscal months in operations. record supply we our backlog. ramp due $XX.X the both estimated, not and

is financial very revenue conclusion, fiscal the see fourth exciting expect recovery. earnings above driving fiscal of the ‘XX. quarter ‘XX quarter our We it to and be from strategy third our results In of slightly to our in

this and operating of and rate million and an I ’XX. ‘XX to up Our required is growing estimated cash to of $XXX milestone to generate growth, run And shareholder to starting flow are are EBITDA investments exciting revenue, current set back expected will working our that lead strengthening annual us discussion the exceeding over gross with capital our Achieving nicely positive ‘XX enthusiasm over the for strong value. is in provides Mike around and it to margins turn increasing forward at fiscal midpoint XX.X% profitability for outlook. you. now

Michael Shor

any shown we call Dan. done, this my our you, tell will at you. Haynes yet results within come. company. thank point and make UAS excellent very me please is best one achieved open to Thank questions. proud The Teamwork At that everyone is and of employees best you To well the that by you. the co-workers Thank the story to Kelly, of part our our believe

Operator

floor now the Ferazani question open is Steve Your Sidoti from Certainly, your [Operator first & pose for Company. question. questions. Instructions] is coming with Please

live. line Your is

Steve Ferazani

for Thanks call. Good on the Good the morning, all morning, Mike. Dan. detail

Michael Shor

Hi, Steve.

Steve Ferazani

trying tailwind. even hone material the explaining out, in that the to I a on here range. XX% about, if a you margin, bit job you're on great XX% that one is we the thought I'm But raw want impact Obviously to back the in did gross if I think to

be is gross productivity the you Given that volume number? you increasing plants. little should bit level? upside get type peak more Are forward, that margin maybe a and and efficiency Are some at near we moving there thinking from

Michael Shor

but can continued Steve, neutral know, with nickel hi. to say we grow gross of we're volume if as on don't as costs. the potential also now, -- dollars gain typically at margin momentum nickel and and to range. down, plant far that Obviously, level you X.X% now, tailwinds. work so certainly therefore, expect offsets saw you in we have take a right we number price continue with revenue on potential right have on And provide we as gave we that continued work Mike, more margin percent of would to as much that coming this in guidance. the XX% drops we're out, when some the grow type you the I we we to grow, excellent continue actual to was that how we It’s obviously, results expect gross to

Daniel Maudlin

add with provide changer, increase going that Yes. as rate hoping and really and mentioned margins really continuing And volumes incremental exciting. back contribution GBPX.X continue point continue million provide were here run makes get, very profitability would to that to incremental going quarter, we've to volumes I The strength, that be continued and accomplished to increased we to to and leverage margin. breakeven game get, million just where to is this we're lower $X to quarterly able I we to and is a we're that some that's that

stuff. it's good So

Steve Ferazani

Okay.

aerospace problem level. to is get the huge a certainly about flow and in continuing would momentum in obviously great the stretch driving on just would the think given And chemical that I out demand. a positive widening orders above thinking gas continues I'm I you're to Just, know differential, which could natural as your have. But book-to-bill the cash to positive price well this the one. I and be near-term turn to expect U.S.

So before more you out how the that thinking a turn given bit cash -- before the are that about flow? revolver to it stretches maybe a positive

Michael Shor

to increasing XX%. entry revolver to and up that if continues. why about the certainly to We're We're order utilization that Yes. maybe monitoring have the banks we that's possibility mentioned I forecasting on closely our of are talking

talking with in increase that process to $XXX work XX%. of So even and our cap and that's on base million a -- inventory borrowing

revolver million, $XXX $XX million. our there to of increase go would we in million to right cap then the work $XXX on process, actually the up got so base So a borrowing to bit a say size

related great a plenty of great, bank the liquidity is our group So with basin. we with group and to in bank that great relationship have think that I a

that. they're Our and very strategy happy with

to So backlog increase. do to if talks we're continues in that

Daniel Maudlin

important of time, a that of at million said think as more scripted and we’re half that for times. this, point just booking $XX past is $XX the Steve, the And because month are I I shipping million, we lead in the only one year over really what's on about

revenues get our So as through to begin we flow. this the go which will now up, product also plant. for Obviously, cash assist

Michael Shor

Absolutely.

Steve Ferazani

to other anyway, no up you're is this up side catch saying? you’ll on the catch if of level, booking you what So maintain type you're going borrow, even

Michael Shor

going see time, through that to our With lead in the once time. get are we absolutely steady a we revenues lead increase

Daniel Maudlin

of profitability well. cash increasing drives course flow as the And

Steve Ferazani

problem right. the Great, have. to the have Right, issue certainly think I no time business the group call. banking it's Fantastic great And again, a for folks, would thanks here. appreciate

Michael Shor

Steve. Thanks,

Operator

Michael Your pose Please next at Leshock Markets. Capital KeyBanc is from question. question coming your

Your line is live.

Michael Leshock

good Hey, morning.

Michael Shor

Mike. Good morning,

Michael Leshock

could anything there seen I is but there I a headwind be a than ask was equal. maybe be there Sequentially, so to that third that to stayed, XQ quarter raw material First, fiscal what in But impact. potential fourth anything prices consider be expecting we've may way, obviously you're a might ask wanted else stronger negative wanted lot your quarter? on in else headwind guidance, going a to all about as

Michael Shor

business call in adding facilities as said I and in have our and do -- increase in people back now manpower what continue look this at a We in what of and talks we're to the outstanding. before about to able or able Kokomo is increase this everyone manpower seeing think, has has I inflation. step staffed handle related be Kokomo to were do Kokomo, we each on we And to been to we're been been take call pick to is able fully our that in bookings. another last we that were XXX We,

trained inflation that's man focus the is as going other work on good again this on really safely, on well. they're materials. out side, not are inflation And to we beyond an and to using we really is issue they’re trained getting feel jobs excuse. raw So then inflation, that the their forward, continue we there And

We our are we to continue on at do possible the provide order manufacture significant value that. lower where and we on to to our to in what offset to price-based cost focus increase going variable

increased volume top that. the good going oh So on we feel forward, what's about of and

Michael Leshock

seeing within helpful. Boeing that, straints, logistical mentioned? in you? particularly that Is of some your that on streams the I what manpower it you're or labor the heard particular seeing? Got biggest or are We supply it. Is can casting chain engine to what for cite anything week on ask side. you also chain? supply you But that the it wanted this And That's are

Michael Shor

have so -- but staffed, a to now three works labor, a outgoing, staffed that we would regular say not say six for that an we actively we materials. around team for we're basis, that won't incoming see definitely issue, away and months is we months be we're is not successfully our It's have the hiring right we're levels the I handful but and fully levels for out, not it transportation. the on for biggest I raw but issue. with issue every body an only deal our Trucking

So that's an very and with ongoing think job heck a are issue our I of it. people a proactive done they've

Daniel Maudlin

the expected. kind CapEx, an just delivery a And made comment issue time about equipment longer incoming I we where is that that's lead of well the as of than the

So partly equipment. that into or of that be coming may partly us the be it may freight manufacturing

Michael Leshock

on next lastly within me, pent CPI outlook And for color then over to call see just XX-months Got CPI? Do XX duration up for you that or your that special You projects the you demand can of did up for fiscal what's it. ’XX? lasting there? Thanks. for demand the provide pent any out some

Michael Shor

In mind, continue do revenue, my you're staff technical We HYBRID-BCX, grow. it's G-XX, long I've we that only as alloys as to like projects to of projects, increases growth solve talked real current saw margin strong problems. just only in our a to are XXX have you the B-X, quarter, special expect When our special in application and going out not continued talking there lot. percent but -- about and spending saw to development in see in about margin, not the because we

also we even small So like power a see and production plants. clean technologies coming energy modular CPI, supercritical from from coming and see we lot so emerging COX called

to happening So good to and continue grow. we what's about that's going feel

Michael Leshock

Thanks the Appreciate color. guys.

Michael Shor

Thanks, Mike.

Daniel Maudlin

you. Thank

Operator

[Operator the at and Instructions] I over further any would There to Mike floor Shor no back now questions turn for CEO, in President the queue closing remarks. to appear to like be this time.

Michael Shor

being of To call in our shareholders and and our part to talk interest thank our much ongoing company audience our Kelly. we for Thank improvement in journey. next you. for you you very your Thanks, again today, the quarter. We'll

Operator

today's gentlemen. and conclude ladies you, conference Thank This does call.

your may for lines time Thank disconnect day. a and wonderful You at participation. you this phone have your

Haynes International (HAYN) 29 Jul 222022 Q3 Earnings call transcript