Earnings call transcript Q1 2023

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Operator

Good morning and welcome to the Haynes International First Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, David Van Bibber, Controller and Chief Accounting Officer. David, the floor is yours.

David Van Bibber

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

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

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

Michael L. Shor

and of continue continues we like has fiscal team has of XXXX, Haynes our us. take periods, deal also that XXXX, we what for best improved but would a fiscal here current yet this and the The resulted our point from is the forward. our expect three on based I about to great emphasis team come point to talk actions of the accomplished believe to serve markets to of is yes, Thank our that work you this everyone. we team My QX that to Good Dave. significantly performance. improvement fiscal XXXX morning quarter time in over

revenues next forecast earnings continue to over in sustained the growth We and three years.

to period, my fundamental and our sustainable in fiscal resulted of looking the and the comments First, quarter. quarter-on-quarter XXXX XXXX year-on-year impact improvement journey has last significant I improvements our fiscal time our reviewed changes business. to at in

accountability Our focus, resulted our reduction has and point. dedication, proven for in results team’s in a breakeven XX%

We been reduction even the a maintaining accomplish for advantages key gross our rates. value pricing our in resulting over gross to of is margin based stretch average above goal XX% have over the growth of provided, on variable gains reducing has by able around by our resulted efforts positive this and and now Achieving consistently by market by employees been cost, market to segment and breakeven that result XX% enhancing the share in world. The when accomplishing margins steady fluctuations. material every state moved quickly from impacts has of the approximately removing each expected XX% XXXX both quarter a an raw negative competitive

fiscal to transition I I'd safety. start quarter recently as with our XXXX, of first to Next, about like completed talk

and safety our and improvement all through communication, overarching continues and daily be communicate in leadership, continues ongoing process Safety needed interaction the our principle. team where need our entire Our of relentlessly core change. for to to facilities and

higher higher income first compared headwinds million both The of of XXXX in to our of of prices drop nickel fiscal were in the revenue, million. overcome unfavorable for XX% related a and XX% As When $X.X net gross cobalt far results first the the were income. gross we financial the of in and of negative as XX.X% to to in in our leading an to adjusted when impact quarter $X.X quarter higher impact a fiscal results and remove quarter, calculates estimated net able be raw achieved material headwind XXXX to from material XX% estimated our margin we raw first our XX.X%. adjusted margin EBITDA, QX

and applications Our application continually new an seven in into testing. data amount our important clear codes the follows; requires our alloys for Such been One production Mechanical major our syngas for us. takeaways developed technology standards. of was from HR-XXX has petrochemical and by new ammonia, and development, open Haynes pressure continued quarter doors industry, alloy in for ASME promote gas. This and code high of to to are temperature, is developing the applications. teams need and to high a research be Engineers hurdle help considerable to or for HR-XXX the alloy our at for are new will methanol, in alloy. often proprietary included use approved number to American hydrogen, of Society especially processing team liquefied first, as case Haynes related The natural industrial alloys alloy the of code case inclusion a Recently,

routes alloy, other intermediate which several combination temperature of our applications, cases turbine considered proprietary heat results processing new alternate optimize which ductility. alloys recent requiring enables developing key be by A in our including strength the alloy a is XXX a new a components for application. applications of alternative new invention new treatment XXX patented for developing HAYNES treatment are for high to is and and ductility. significant approach This to particular to to improvement example heat properties Another -- in a

in continue. our our of Second takeaways variable efforts for on cost initiatives list reduction quarter, our the

to to bottom yield to line improvement our results We products. on changes related variable costs and projects improve significant process key continue see

to we our Next, to we the opportunities are value find continue to customers. that price providing for

quality related we and high allow and serve. and service mill service the owned advantages our outstanding technical typically continue our to market in differentiate to customer company quantities, development, to small center segments providing in application relatively combination, competitive us ourselves products alloy Our and

we many We face. have calendar based are XXXX contracts all issues margin favorable had fiscal our that, to inflationary we positive now anticipating XXXX across and on year updates a impact despite

the in price, resulting increased selling As aisle with XX.X% driven performance, in far as aerospace increase aerospace recovery. XX.X% average the prior single a to increase is our increase compared by volume market a revenue aerospace This primarily XX.X% year. along

see driven by to more advanced the more the using We need consumer both solid continue alloys. engines demand and fuel demand aerospace efficient for in market

Volumes into industry processing the X%. decreased chemical slightly

IGT and XX.X% a by revenue selling markets in to gas However, price CPI increase prior were a increase CPI XX.X% the in in X.X%. up industrial increase increased selling compared price, volumes prior resulting a increased Continuing, with year. turbine revenue average other IGT revenue X.X% by compared to the XX.X% the along year. increased resulting Other XX.X% revenue average XX.X%

all forward. markets are We going continue of our to remain bullish we in on the demand seeing

takeaways XXXX, backlog and far a the is of quarter from $XXX our as with first of at Continuing backlog million. now as record book-to-bill, company our

was slightly at from revenue at and in by with X.X with industrial for ratios the calculated other X.X part Our markets quarter, turbines book-to-bill mixed at gas backlogs and aerospace CPI book-to-bill ratio X.X, our declined X.X. dollars our Both initiatives. driven management

I'll In inventory. record have process cover we work Next, to levels, and deployed higher revenue. in to response investment our inventory cash backlog top drive our line to

yield return million. Given the our particular growth year. solid a end prices, increases the raw was the second-half of will We material this $XX this believe which on revolver, with investment in same at in our occurred of the a of temporary the time at draw business this quarter required as the in

being supply audits ESG to include partners, disclosures facility our this we of ESG one alloy end program social chain sustainability recent carbon and continue ESG, finally solar support development second communities, customer make application supplier support two Haynes initiation reduction programs the ongoing significant market employees rooftop by Louisiana. and to And progress. manager, our array as related programs, our to highlights in our planned The and Arcadia, a now on of solar project, at our our and

and continue opportunities our improvement Haynes. current Now Based on next improved with what's performance. financial performance growth our to transitioning year-on-year we anticipate for actions, ongoing and excellent

far margins as removing calculated, are headwinds QX was improving adjusted percent the as XX.X%. cobalt raw when gross and margin material related nickel Specifically,

This to benefit that incrementally high is neutral differentiated the ongoing services expect assuming for increased inflationary of to balance the work face. of and because our products fiscal and on with XXXX of our along costs providing raw improve pressures despite on customers. materials volumes We we value the

revenue we aerospace despite record year chain the within and builds. the issues slow set a our XXXX, market industry ramp expect aisle twin in fiscal supply to Next, of up

levels fiscal purchases our order We're year as performance, XXXX current year levels line mid higher full higher our XX% supports bookings operating of revenue XX% current into order and more as raw positive our cash material and shipments anticipated As for year-on-year entry to entry. to our far with and in also turned for flow projecting are book-to-bill turn growth rate beginning both earnings.

$XX.X XX, ago. the for funded as Finally, pension, with million on $XXX.X near net December just plan XX% million we of a compared of months XX liability currently are to pension the U.S. XXXX

pleased of to market be We with stability volatile percentage even conditions. continue in our the funding

In capital continue keep the funding plan. the we pension considerations funding addition, our we of allocation and to will pursue XXX% as

hand our for Dan and now over I'll first this quarter. to comments Okay, on additional perspectives

Daniel W. Maudlin

to revenue major Mike. in our you, solid with had year's of moderate QX. start in drop and Thank revenue growth a year-on-year We new under had the up end just We compared three strong markets XX.X% X%. a revenue last to fiscal sequential year

this their holiday and lower drop sequential QX schedules, managing has many end been than QX outages, Historically, to However, is calendar larger typically due X% sequentially sheets. year cases. planned in balance maintenance generally customers

to cycle. our cost the flow the the consistent X.X and Net commodity This a nickel and estimated was of raw of expected. nickel price each of developed mechanism goods This impact by $X.XX, revenues price higher including was guidance sales. EPS we though is net company of how and and related and from achieved exposure revenue the changes is the million nickel with cobalt different to impact of price on and of across even from to of cost cobalt an which fluctuations flow the cost measure provided. company commodity gross flow material margin incorporates derived headwind income model sold, scrap timing was type the cobalt than the The how pricing through

a model headwind of the difference of driven created $X.X assumption primarily million Our at by calculated by the of price beginning our to headwind in was drop quarter the million. $X.X compared cobalt. The the

million $X.X exclude in XX.X% This this year's the this QX of non-GAAP compares and estimated which last gross headwind measure. contained in methodology gross material and on effect XX.X% raw X tailwinds impact, margin describes for Schedule release If would we margins headwinds PR the to last the QX at the to look and press analysis XX.X% of XX.X%. sequentially in same calculate our of compares excluding XX.X%. of of to FYXX margin and gross this quarter our impact

but quarter, course of depend on actually next We are that over move volume this at accomplished shipped. the of this to period. expecting material headwind was pounds prices This neutralize over time a where level raw will margin gross X,XXX,XXX lower

efforts result an We even QX in ongoing leverage point This a million, This provided described breakeven lower has prior below calls net to our financial material solid enable income lower as successful to by is heavy us a expected quarterly our grow. XX%. have with profitability £X raw plus headwind. be volumes the now benefit at volumes breakeven to

Like every tough as supply continue a and pressures labor electricity to encounter we industrial such chain business, rates, delays. inflationary market,

to successful and navigate issues find or continues around offsets. our successfully team these way Our solutions

process Our improvements. cost reductions as improving pressure and/or increases inflationary goal offsetting be and productivity with yields, to such price enhancements, continues

flow, inventory, XXXX. employees and second-half efforts increase in backlog our rates fiscal by in forward in an provide production increase our optimistic strong Our the of product and especially with a to continued melt combined outlook, driven investment

to and shipping increase takes gain this traction some driving and and QX second-half earnings. As product QX, volumes meaningfully time, line sales increased flow we process top in expect

quarter. customized million on last quarter Our Operating of first research double continued million, funding $X.X of due driven and X% offset was sales a as net change quarter, to actuarial benefit percentage X/XX/XX. within of quarterly XX% cost strengthened our due this valuation XX.X%. or which year's is was $XX.X with $XX.X to The expenses sales. in year's the A our of at compared retirement recent to portion last to Non-operating of nearly income volatility market first service cost benefit million even X.X last to SG&A favorable improve leverage pension income to investment costs strategy. less at including U.S. during liability was this QX which technical change year's the was favorable SG&A million by

at net million, improvement XX/XX/XX ago. at XX.X million is not XXX Our U.S. that X/XX/XXXX a from liability significant the long at

are high moderately million statutory entry for estimates the quarters at rates. backlog XX.X%. to FY be of Current continued Our line in state effective tax federal higher, over the of for XXX.X of levels. the Backlog quarter rate signals. and the was and record first XXX.X Order up XXXX remaining with again backlog up This demand quarter, or XX.X set a and first XX from or months million, at and XXXX. quarter strong company represents XX.X% growing million, X.X% fiscal

drive that This XX/XX/XX. utilization This quarter growing increasing. facility cash from to million into revolver on the of XX our over backlog increased balance level Inventory credit our million inventory. continued the the XX% with increased of with about pounds XX the inventory at deployment at

to with revolver Looking with turn levels, more across our continuing should improved our in fiscal of and combined cash line growing positive that melt with to shipping ease free year come expected XXXX. fiscal XXXX, we profitability flow estimate utilization the mid-year the is rates in

of using the flow cash this to be the positive half year pay to expect revolver. in begin back to the We down

million provides forward. facility liquidity strong expanded moving Our credit XXX

was XXXX, first spending quarter first of to Capital last million similar quarter. in the X.X fiscal year's

We to XX full of which XX spend puts Outlook than forecasting for this orders XXXX, are and million pace QX. year's quarter a to capital fiscal XXXX. at higher remaining next spending million fiscal in the year

our for inventory fiscal earnings expect strength in to manpower backlog be we of and XXXX, quarter company revenue second of year. than the XXXX the the XXXX and with higher first put place, higher quarter and last process in quarter into of XX% Given as along the full fiscal earnings. record to than the XXXX the as be fiscal both both work year of revenue being fiscal XX% well to expects Further, second

along Demands on a the QX We will team you. solid shareholder in was optimistic our will second into the growing backlog of growth. headcount even in execution headwinds. to in the conclusion, return of management the half factors, a and fiscal than discussion reflected over provide the believe I with primary our that, in an markets Mike, cash back remain In revenues increased start provide and These year, material higher with our to investment turn solid view our year. strong as strong expected with that with production inventory value. raw forward investment now earnings increase

Michael L. Shor

open there. entire hardworking, you, up, in Thank against expertise class, to to Dan. expand ask job done. any level to our At gap questions. team the for well to our on the operator, have Wrapping of thank match up focused competitive our a for want continue others workforce best business core I competencies, innovation, advantages, would out this related to versus call performance. please and I They're being I'll this and the point, Tom,

Operator

the Ferazani Steve, And your Company. from morning is this line question coming Instructions]. Please Steve & [Operator Sidoti is go ahead. first live. from

Steve Ferazani

taking wanted for the I just Thanks Dan. Morning Mike. with my Morning, headwinds. to commodity questions. start

for You this clearly guided quarter. had impact this

in given that? any the what we've this view quarter neutral more in and in you impact recently, You expected were see three shift to very remaining off, your nickel where seen expected but specifically on the be would you you slightly quarters

Michael L. Shor

than back original turn quarter we more to is yeah, through are of the in estimate we get at, get was towards is it by positive Steve had believe why time of neutralize drop But to these We that which off in huge we we these we in price quarter these to continues the caught what now. this happens but we depend quarter, headwinds. the in half year. we and were on as end the expect that second we our the current cobalt, the the then -- to which by the before of this subside way, the where estimated, Obviously elements, versus what were will

Daniel W. Maudlin

remarks with well had we X.X the and or close. a it We with with. was it where in problem That in believe and X.X well, that I at a forecasting over for headwind that's Yeah, mentioned we model and concur came that my it million, The the unexpected. actual actually quite was nickel. the that for I of million cobalt estimated of calculated that. we be was prepared pretty works kind quarter. forecasted nickel X.X that is million million to forecast we use as so side also, forecasted what calculates some and X.X a And impact It

Michael L. Shor

it's is, going happens the thing Steve, what key one making assumptions way. to and with for can will us these move nickel never And it's assuming level on price? is nickel out, guarantee only I You're based level, the

Steve Ferazani

understood. Understood,

terms last grow you saw your of that we look when about looks in would In of we it and continue processing at given some demand, that is business talked those to and backlog margin how what given lower was resource allocation, pricing, like expect chemical to you potentially backlog seeing continues out pricing and strong that we're efforts? volume of quarter particularly

Michael L. Shor

continue opportunities to continue will if higher will we to we to to determine that. Yeah, that want we lower do margin manage mix opportunities are look and at volume

look volume up it for shipments, was the talked because said were reason CPI sulfurization. very flu off, have correctly, called margin almost is very FTD we've year main volume, down high our which low X% that XX%. when gas our three we versus And something by about our and on participation down months, months was revenues is to prior three And You you these but business XX%. in

we're to the customers certainly long-term So and sure certainly choose to going there. get going are queue our that ahead that yeah, critical of and make pick we're customers

Steve Ferazani

for one just Great, me. last

cash indicate are would go you of the flow inventory, obviously But half strength positive your the In year, build continue you confident prices flow given your backlog, can half? of that grow off. second still leveled terms of you talking have continuing the as cash needs about to raw second material turning to positive orders

Michael L. Shor

raw long confident remain neutral. the half We at which materials over bookings, back the of million consistently month. as look a We as look given extremely as half strong of back us. are at this year, We for year are our XX the

now. So melting we for are that

to So are level this. trained product as to at this as get we being compared process elevated melting an the in are getting ready or are begins we shipping that are now and still what through to employees

right very So have training of bookings on year now we half manpower the the to have and we is second be we the expect place the in be and on ongoing based based the strong. that

And so, the want already we're point out to melting. what that. melting get we're yes, the shipments where currently is leveling answer for just to We we're our with

Steve Ferazani

Mike. Thanks fair. Fair, Thanks, Dan.

Michael L. Shor

Thank you.

Operator

you. Thank is coming is this from Leshock morning live. And next Michael your line question ahead. Capital Please from Markets. go Michael, KeyBanc your

Michael Leshock

morning. good guys, Hey

Michael L. Shor

Good morning, Mike.

Daniel W. Maudlin

morning. Good

Michael Leshock

wanted CAPEX, an you had the lower year. increase seeing your of I talk off you get the easing as secondly, remainder now? implies year? of guidance And and of start the Are maybe work for to done is could still it some you underway constraints quarter the some that projects was about or are to on mentioned, that the or this you throughout then have balance planned that there the

Daniel W. Maudlin

Sure.

that As constraints have the need we really in of projects. of our far what getting we the constraints, CAPEX are as the components each for

this type we at not of internal point constraint. any it's So -- longer, any

build to when and an take plan there, upgrade need. able would equipment we outages Our after we be inventory that we be these from that do down to would it,

equipment wasn't be are frank, that company, very just what We our a far for we us. in into first equipment that and get It's right we're together obviously CAPEX related in. put to intentional. getting to as things our to the getting clearly now had light in CAPEX So as components not to issues need in quarter

Michael L. Shor

And then on, go ahead.

Daniel W. Maudlin

mention some going to of projects. was the I

of an where reliability it around of I goes some as and the equipment $X There's sizable spending example, mentioned, for think alleviating a bottlenecks some A&K we're of we've process. amount million. line, the the through CAPEX of

we're going upgrading that to So as be line well.

yeah… So,

Michael L. Shor

We're in We've a tube you our or solar got field solar what going facility. on facility. is recently we've on list work now completed right to the Just process the was give in of our what got field wire beginning at now.

Haynes cutting control work for systems, jet water incremental upgrade center. Wire cutting, in service security jet grinders. water purposes LaPorte some Cleaning. We've have done completed our We've our manufacturing for of our We some

the equipment budget. other on is high. control We And and the $X.X grinders. are that's of A&K course and of for mill of big called system waiting that of between brain come critical we've what's the Mike piece putting gauge about that's four equipment our the truly process in. and the upgrade then just got final our the We're at coming Most touches automatic finishing. the the the some in to line, four And, million in in operation,

a So really forward. area, beyond tow everything our us moving just equipment cold of flat that, cranes, keep little motors, for some to finish,

Michael Leshock

Got at a swing on that's then smaller ask market, a it. That's the ASP wanted given to you, the can for really know of market meaningful markets, I rest double helpful. but your nearly have it And to other I earnings.

maintain So last I wanted couple what levels? over has the maybe that that around and pricing to quarters of any current could been are driver there these the are ask sustainable trends there

Michael L. Shor

But I other So things our alloys new almost some is oil the oil the continue in other the we alloys to sulfurization in number material XX%. cases our one us was in gas of new code us what about new gas helped of market. and and much. so markets, And alloys. up getting some into was is with and of going But gas that year-on-year one, helped our thing our down and metal, the flu script drive talked

and pull from yeah, we on saw a we that's through end So in engineering getting products. business, in and review we're what end with our as the key gas. what driving our it past application But this to. these the our users and quarter is driving you team to And to continue users creating basis where oil know, we're to going monthly look, we're a

Daniel W. Maudlin

this look XX, that it more quarter, ago, you so high. markets, you'll to Yeah, know, which like to XX. certainly, selling quarter a still was we Compare year XX, other between was was Last and the XX $XX.XX quite at average in fantastic. price

volatility different lot of alloys. here lot a see a you in different cause there's a lot applications, of So of

flu mentioned, Mike out to gas as it big difference. a get sulfurization of the to side So a of really little makes management mixed

As certainly out ends these XXX,XXX was we far mover, earnings in applications, big keep alloys for love pounds the as being yes quarter, of X.X. I it the into a higher but mean, mind

So it's and pie part of gas still turbines, a smaller say, than the aerospace, CPI. industrial

Michael Leshock

lastly And headcount then maybe the is if side the update the of right and hiring where the Thanks. front on it And much or training is you're left environment, more labor now? that's constraint on on hiring biggest to it things how you is could give an there at go?

Michael L. Shor

Sure. It we're brought XXX staffed. over the nearly Kokomo, in depends on a people. We've location. fully In

XX we Monday next hired brought in. being being and are fact, In have another that

That's we are. Kokomo great perspective very through making operation loosen. and what right on let now. making from sure from It's in we that in frankly good So a where a them And their we're largest with we feel going operation are progress quality perspective, our before fully just quite safety people trained that.

feel production about fully the So side being staffed. on good

I are key long-term think trades trait in related sure having world Kokomo. stability that pursuing, to everyone the issues is the in also we some in have in and aggressively making our Kokomo, we

making Indiana basis, being they Kokomo. sure access forecast and our it's the tube little major our a talent. there than a other job to in wire of monthly Little difficult ones have LaPorte but tougher our Now hit to our They've facilities, more on facility. done a their that facility, it's in been that facility, great distribution being

Michael Leshock

Thanks guys.

Michael L. Shor

Thank you.

Operator

I'd to [Operator in no to questions you. now there the Instructions]. time. And management. Thank further like this back queue turn over at are floor

Michael L. Shor

in and really our on Thank look part forward for to We today. Thank ongoing your next quarter. our journey. you and the We again ongoing of appreciate interest to call shareholders being talking you. audience improvement you our Haynes to

Operator

this conclude you. gentlemen, conference does today's call. Ladies Thank and

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

Haynes International (HAYN) 3 Feb 232023 Q1 Earnings call transcript