USAP - Earnings call transcript Q1 2024 | Universal Stainless & Alloy Products Inc

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Operator

Good day, and thank you for standing by. Welcome to the Universal Stainless & Alloy Products Inc.

First Quarter 2024 Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, June Filingeri, please go ahead.

June Filingeri

Thank you, Brittany. morning. Good Filingeri to I call the June to would and Comm-Partners you welcome Universal of is also and like webcast. This Stainless conference

XXXX and With Chief here reported Chief Chris President Executive are to and Arminas, the Financial and and first We Vice Steven John President Vice discuss Zimmer, President this Counsel; from us quarter morning. Officer; management General are Officer. company's results DiTommaso,

made of at procedures. formal call the to Under let Reform After in over management these your management review Securities Litigation Brittany that to again Securities has Also the will fully I we statements, Act Before which instruct statements. Commission. I are would filings turn in call, note questions. company's Private and and risks remarks, remind release me management, this take the Exchange that will today's press you quickly morning's please make more related XXXX, in forward-looking the you with described the will on time. of procedures like to

With would to over call the begin. Chris, now ready Chris the Zimmer. I turn to we like are complete, formalities to

Christopher M. Zimmer

increased headwinds as in to the XX%, per rose base Thank thank fourth up, joining reaching compared I'm momentum reached a million Operating gross million stabilize. diluted XX.X%, you our margin to XX even $X.XX improvement and quarters the momentum commodity everyone, as share income we increase prices $X.X morning, in gross nearly us. $X.XX the and years, the evident earnings XX% ramp dissipate you, fifth raw in further first quarter. with material margin with XX%. This quarter to it, continue is continued the $X.X of coming net quarter, in million report expect and gross raw for our quarter, would consecutive the margin, Without which Good prices or pleased in material most June. first $X.X our our and to have continue in topped the misalignment. highest income sales

Our first record of fourth sales highest second in exceeded million sales $XX.X the $XX.X of quarter our million. by only history, our quarter were

We expect million sales upon market balance supported continued unabated. at of by It's on based the the demand, strength the entry. the achieve of year record which year-end aerospace million for increased $XXX which our quarterly $XXX from continues to strong order also to backlog,

First quarter the premium quarter. totaled in record sales the of shy million, fourth $XX.X just level

the represented well of debt the first VIM, for forge. a to quarter alloy broader a and sales another ordering quarter. main transformational which to capacity to It's includes to for the which growth. application, furnace Jackson. product and and for company first XX-ton invest continue customer we in sales are has aerospace XX% focus that base underscore premium and premium yielded quarter our on our Our strategy mainly nearly in aerospace of performance of our total alloys our be alloys, XX% has to the drivers been the represented support of important continue new as while furnace North a approvals, capabilities to richer was our That and premium for mix box in increased a efficiencies also second $X.X earnings adds by as power. Total million, reduced Both

to in capital to controls We utilize plan more optimizing continue Additionally, invest with to our investing facilities further while debt operating in upgrades performance. digital on our we further capability process XXXX. are of reducing in equipment

quarter than higher first the Our and total strongest the production XX% quarter was fourth since XXXX our XXXX. in first quarter of the of

reliability delivered to to our production process, throughout ramp. process and the capital seeing targeted are plants levels improvements enabling benefits of have We manufacturing projects our modernization that our

stability the We support to improve. our to of workforce underway additional modernization as growth projects continues have our

our Aerospace, with starting markets, end largest. our to Turning

First $XX.X first the million quarter compared million XXXX. of $XX.X quarter the totaled quarter $XX fourth sales in million in to and

low of Boeing the said, despite remains XXX. build rates robust and at slower production the As resulting demand MAX from aerospace I current production the issues XXX

While keep Boeing Boeing's has and customer, planned in to supplier build schedule is for the chain, for supply of to on curved and allowing its Boeing stability preparation the the XXXX to in catch your all to the production Boeing's intent airplanes and rates to increase demand it master curbed message its keep plan. foot XXXX. on ensuring that has suppliers the suppliers. supply gas not up

work that in Boeing's than nearly end, approximately half the X,XXX first first XXX of ], Boeing of across planes, Their their they XX X,XXX with net the week, rate to On in planes. backlog XX below XXX half planes, second that MAX to At quarter. increase last the incredibly first call in but month is of to portfolio level of reported reported up the expected XXXX of including per XXXX. planes XXXXs. Meanwhile, XXXs XXX, in new first increases XXXX, total XXX remain the XXXX the XX and orders more [ demand ramp stood a expects in strong. on XX its quarter's will the month XXX new XXX-XXs per plan their predicated Boeing XXXX said that totaled including MAX FAA. Airbus and in orders make delivery around The remains beyond production the net also XX at production are Boeing year. of to Rate quarter to

and air AXXXs goal XXXX strong per Delta, to driving as with plan XXXX. travel Airlines, production their XX single-aisle planes is of chain their new factor about month his travel career most Other accelerating. for consumers month all with airplanes a supply While the and a XX to travel their target AXXX echoed during aircraft. has in airlines reaffirmed peak Ed outlook. One healthy delivery The quarter running constructive top same. airplanes, travel Delta's, the on demand the as season as output older is is Alaska limiting market second American slowed raising in well at conditions airlines schedules Airbus position, first month to generation surge causing and in and bullish due Bastian described XX growth of and in below reduce United, quarter flying corporate per new priority production the per the in for remaining of production them issues, rely reporting

alloys is total The I defense echo specialty for important an of just generated the aerospace demand. $XX we law us, follows supply XXXX for would the replenishing defense are On this of feedback demand strong type market fully the XX% the the environment Ukraine, demand the billion into defense into and market pull Taiwan market amid has and a it Increased currently inventories their sales. Overall, the benefits demand. aid constructive signed in spending of seen. sector, Israel increasing package long-delayed increasingly passage ever a spending sentiment to In premium that that our produce. plus is side, business, can MRO which most The March. indicates that chain mode, I've President translate market in billion the aerospace for in represents and on those defense regions. for That they fiscal from added $XXX intense customers in XX% the conflicts bill

and our also we've strongest premium demand is multiyear alloy been investment capabilities that in respond capacity. in to position result ever capital as to the company of Our a

to reporting our new Energy, generation and better which [indiscernible] remaining the oil this strategy in gas reflects we Turning a sales are and quarter, market power our and category markets. Beginning market. our combines energy

the aerospace capacity on been in quarters as recent deemphasizing industry. power gen focus we have We

In the sequentially the fact, power gen gas million X.X% sales $X.X million representing market year, total to from sales quarter. in first Oil and XX% sales. rest. contributed Energy market up million of X% up quarter energy $X.X total of and up $X first were just made of sales sales last the

report energy production we million capacity Sales temporarily of have our equipment in X.X% plan increase future capacity first inventories balance rise versus market the or $X.X Ford and market alloy production our hybrid emphasizing to first deliveries EV as digest finishing for X% record quarter its Both aerospace, gas sales as EVs and production sharp premium quarter totaled the much down we our with sequentially to Although of did were changing expand. Heavy versus quarters and in reporting shifted EV in engine sales sales. our continues continue GM demand and increased GM customers vehicles. Ford market a and to hybrids sales. sales to

million Even their in to introductions and current we However, market the new to $X.X year. General first model sales sales in last pick automakers in are offerings changeovers quarter the of tool the customer adjust million model quarter the and the totaled are second demand, half to quarter planned so, and mix steel modifying $X.X driver a fourth first our compared industrial of of of preferences. as $X.X million in timing the year. they the positive up expect model

line in as were expectations results quarter with last our First call. discussed our on

expect the from manufacturing. We semiconductor Department operation the in Texas. Samsung Commerce deal announced previously up Microchip in semiconductor CHIPS which market, in The with resume announced The for for benefiting second recently Technology support Global BAE Foundries, mainly sales growth billion Act, their The which at and manufacturing is to incentives the our Intel, to Department semiconductor aimed are U.S. in onshoring TSMC, market incentives manufacturing this systems. providing quarter. Commerce $X.X to

XXXX, We market. especially optimistic about the is second the demand half market also AI-related remain year. during Additionally, this in the of very driving

let turn for Now the our report me financials. on to Steve call his over

Steven DiTommaso

million the totaled approximately totaled costs, $X.X the $X year. recovery our through the last QX. $X.X XX% and in quarter insurance which last first representing XXXX higher a $X.X year, was demonstrating last the fell margin of year support year. in on $XX.X record million base last expenses, expenses morning, executed costs efforts. and of $XX.X about higher about reductions timing $X.X and XX.X% and and of first margin, our was increase quarter in compared then with our cost raw pull-through in by in audit first materials everyone. quarter the headwind a first delivered XXXX, and the margin than When sales or base million quarter by misalignment was only XXXX. in in $XX quarter shipments partially margin of with improvement ago projects the driven by XX.X% XXXX. higher Gross prices, our improvement million. When SG&A general to The prices Thanks, higher the of quarter increased compared nearly quarter that improvement volume sales fourth quarter first Higher were last to XXXX. of and due our compared continue second margin higher business first compared to quarter Selling, decreased impact specific The offset QX million accounting administrative Chris. also to totaled and of million to XX.X% million during the of the and cost Sales million QX employee-related Good QX

We range expect SG&A the million per $X.X quarter move expense to between year. $X as we through million and

X interest basis quarter of and QX reduce we credits the expense the the by in rate the another tax XX.X%. during income of its Term to tax first forward. rate growth our the in expense in our basis spread $X.X an was are $X the state diluted for income of on for last SOFR the our reduction the quarters, and the quarter we income resulting on profitability opportunity the $X.X in tax performance step income and path to of and than in is on $X.X A quarter in QX XX.X%. Net estimated and debt for our tax the items significant. was effective of income said year. less at the $X.X in expense we per impact fourth due plan the was or tax bank was point higher of the effective of XXXX. XX last the about as achieved stock our lower discrete going debt XXXX QX quarters, and plan. to for month federal to above Average for annual nearly the not the demonstrates million EPS first plan. We to all This shares achieve XXX,XXX the XX drive both due in to we continue since our rate a quarter compared will coming period. $XXX,XXX about $X.XX Discrete XXXX. despite and elements rate end potential which financial call, of This represents interest effective I the quarter $X.X was few same effective majority operating and the was $X.XX meaningful our of than highest in expense compared SOFR level flat debt last calculation for statutory is interest by rate of or research execute offset of XX% Other points periods XXXX first calculation an recorded million impact last that Our our our taxes, million And increasing both quarter. quarter, our on $X rate price. quarter interest if tax in fourth was versus million which rate in increase for have the drives the in to benefit items the million resulted in development decreased tax for financial includes we income quarter quarters of X.X% debt. share. near of The period ago rate million expense diluted Total quarter. by This that XX% million better operating in our quarter

million Our last EBITDA was million $X.X first to quarter quarter. $XX.X compared

Our add-back an EBITDA compensation adjusted for was QX includes of $XX.X sales, since or highest million and XXXX. XX.X% share noncash

Our cash the million our cash million. in $XXX,XXX during capital expenditures used million noncash and other items assets. decreased net of working net generated capital $X.X And debt of invested in $XX.X We remaining $X.X fund that by income adjusted our to flow and for quarter.

hand quarter and approximately each call We to free financial expect debt the XXXX full generate expenditures year plan Chris. in $XX flow XXXX. This update. and back to I'll to the pay capital down total concludes million, each quarter cash we

Christopher M. Zimmer

Thanks, material continued we highest million gross the years first margin the quarter Steve. reaching XX as trajectory, in In achieved in XX.X% even summary, upward our a profitability its $X.X after increased $X.XX premium our share entry. drive demand near-record per our sales net order strong aerospace backlog well our reached as as alloy and misalignment. sales. continues And on income Unabated to

our base premium been on and transformational, product alloys focus expanding has earnings customer richer strategic mix giving Our increasing a our approvals, of us power.

in by to VIM plan to the same quarterly the strong in on we for start time, premium reduced another forge the generating second sales to We invest continue profitability continue furnace also With through managed on in Jackson we working At We in and North new further net capacities capital XXXX and furnace support capabilities a focus focused in quarter, $X.X our a first rest quarter. ordering alloy cash facilities reducing debt there. a box our the and while and to for the XX-ton positive capital XXXX, in are invest record flow. increasing a of our debt achieving to the the year. million

said and for we our remain foreseeable we're optimistic future. That our highly growth Operator, questions. ready concludes formal for about I today's strategy in release, the momentum As remarks.

Operator

KeyBanc Instructions] of Our [Operator will question line from first with the Leshock Michael Capital come Markets.

Michael Leshock

nothing start I impact, some inventory just assuming lower changed much there could how sense to impact larger starts Boeing longer to backlogs expectations? production and their mitigate trying wanted buffer subdued thinking have with you long and a levels if of Boeing's of the for issues production it Boeing before at those a how remain elevated XXX about to get is supply than chain wondering

Christopher M. Zimmer

Yes.

is XX was The at have them So the continue able recent information have idea it. we've that had. the lot to There's the from is a month supply X achieve that difficult up a the and support rate that that current that to correspondence an best that this about supply it level trying conference issues out this X an out to conference attended a persisted, for months way there support supplier and would that to of been that that supply have to level ago they coming were we we to for chain chain to chain catch that per achieve. opportunity

chain So caught to this be position to rate get up in is XX realize an opportunity supply to count. the Boeing for that the get to able continue and

the it continued that to the pull which believe July time through in the track standpoint, do, continue and supply the of timing month would a in not we're said if they and beyond or committed schedules. what of and they resolution XX what cancellation to per schedules late and seeing we're their June, the is what chain. word to I to with we a They any the the in keep of all right beyond go they FAA place to So a don't now has out From seeing period, get pushout on back have going industry been remain rate.

But I this strong that potential need ago. But like. they've a in place is think ] impacts. at here and right persists that the we reassess them [ if to signing that brakes that we be until the to FAA feel plan even first chain got with begin the half current reviewing be to of so at month the ultimately pull to believe end supply need the what the continuing demand going that that looks build period we point, X-month I beyond the tapping now the environment and the or with in then rate on believe point, the comfortable I their then of in July, to off year. talk the on about

Michael Leshock

the second ago, you then you Got then maybe begin in to the would X end this behind the of very had very quarter. margins misalignment. in the said think That's helpful. raw moderate by And And us had and I despite it. quarter, XQ material strong months

So anything of moving or given is this the pieces? changed some view your has still

Christopher M. Zimmer

Yes, by stand that. we still

what life. only roughly had about stability first It a think actually, past a the we're where seeing over to up little show bias. experienced if is currently weeks. is in quarter. just or near-term I But a XX% move. misalignment X starting to for a don't to bit to we'll And have months. is market still stability now going know little of upward a go what nickel in We've the the slight of few X but to in XX% that commodities that's we second I slightly that's quarter. here the

more the year, misalignment we'll wait misalignment going again, what at the So the commodities rate of right I quarter. then. half less in don't and see and the in the talk now, about we'll think And it second but we're second do have

Michael Leshock

within you be like And what And is strength. any several wondering seeing new to the impacts are about going opportunities, demand maybe for there's there years. strong aftermarket? just us of is to sounds prolonged MRO aerospace impact aftermarket think a more It way if to any

Christopher M. Zimmer

just impacted an shows and that's planes, standpoint. into in legacy their numbers. helping of the new that's MRO. where continue planes that I hard which of a They're us definitely of these operation happening, is these get and hard is or the impacting life that and to to us to know increasing of quantify It's builds yet. planes not when a rate we legacy but It's going the new is for through a Boeing. our because again, hard MRO to service. flows retire simply it's for that, build how product And side their from us for to it service plan maintenance and that having up to balance that happening fuel-efficient centers at majority us our quantify know know is is positive much forgers. But slower carriers had I But of at look metal

Michael Leshock

me, just Then clarification. lastly for a

rest year. mentioned sales profitability and had quarterly increased the you expect for record the of You

to implying understand sequential Just each that's quarter. increases sure want make I

Christopher M. Zimmer

that that continue we to sequential we initiatives leadership the the number giving right. upon and production. enable to our march plants the throughout force that to of the as targeted move year. march volume. That's then have ramping continued taking really improvement assistance modernize a the ramp have And lot continue is to predicated of labor us that, plant, we we through And to We're a to from that expect

Operator

Chris I'm Okay. I it turn no would closing this further to time. Instructions] [Operator back remarks. at to Zimmer questions like for showing now

Christopher M. Zimmer

good XXXX updating quarter on morning. rest plan Thank you We traction again progress our to strong a in forward to on of and start, expect look our we joining you got call. our second for off us day. this Have the a the increasing during growth year.

Operator

Thank your does you This the for conference. in today's conclude participation program.

now may You disconnect.

Universal Stainless & Alloy Products (USAP) 1 May 242024 Q1 Earnings call transcript