ATI(ATI) - 2025 Q2 - Quarterly Results

Executive Summary & Guidance ATI Inc. reported strong Q2 2025 results driven by aerospace & defense, and raised its full-year 2025 adjusted earnings and cash flow guidance Second Quarter 2025 Highlights ATI Inc. reported strong second quarter 2025 results, driven by continued year-over-year sales growth in aerospace & defense. Key financial metrics like net income, EPS, and Adjusted EBITDA showed double-digit increases compared to the prior year Second Quarter 2025 Key Financial Highlights (YoY Growth) | Metric | Q2 2025 Value | YoY Change | Source | | :-------------------------------- | :------------ | :--------- | :----- | | Sales | $1.14 billion | +4% | chunk_num: [6] | | Net income attributable to ATI | $101 million | +23% | chunk_num: [6] | | Earnings per share | $0.70 | +21% (from $0.58) | chunk_num: [6] | | Adjusted net income attributable to ATI | $106 million | +24% | chunk_num: [6] | | Adjusted earnings per share | $0.74 | +23% (from $0.60) | chunk_num: [6] | | Adjusted EBITDA | $208 million | +14% | chunk_num: [6] | | Adjusted EBITDA as % of sales | 18.2% | +1.5 pts (from 16.7%) | chunk_num: [6] | | Aerospace and defense sales | $762 million | 67% of Q2 2025 sales | chunk_num: [2] | Full Year 2025 Guidance ATI Inc. provided guidance for the third quarter and updated its full-year 2025 outlook, raising the mid-point for adjusted earnings and cash flow Q3 and Full Year 2025 Guidance (millions) | Metric | Q3 2025 Guidance | Full Year 2025 Guidance | | :------------------------ | :----------------- | :---------------------- | | Adjusted EBITDA | $200M - $210M | $810M - $840M | | Adjusted Earnings Per Share | $0.69 - $0.75 | $2.90 - $3.07 | | Adjusted Free Cash Flow | | $270M - $350M | | Capital expenditures | | $260M - $280M | Detailed Second Quarter 2025 Financial Results ATI Inc. reported strong Q2 2025 financial performance with double-digit growth, driven by robust aerospace and defense demand and disciplined capital allocation GAAP and Non-GAAP Financial Performance ATI Inc. reported second quarter 2025 sales of $1.14 billion and net income attributable to ATI of $100.7 million, or $0.70 per share. Adjusted results exclude pre-tax charges of $7.4 million for special items Q2 2025 Financial Performance (Sequential & YoY Comparison) | ($ in millions except per share amounts) | Q2 2025 | Q1 2025 | Sequential Change | Q2 2024 | Y-O-Y Change | | :--------------------------------------- | :------ | :------ | :---------------- | :------ | :----------- | | Sales | $1,140.4 | $1,144.4 | — % | $1,095.3 | 4 % | | Net income attributable to ATI | $100.7 | $97.0 | 4 % | $81.9 | 23 % | | Earnings per share | $0.70 | $0.67 | 4 % | $0.58 | 21 % | | Adjusted net income attributable to ATI* | $106.4 | $104.4 | 2 % | $86.0 | 24 % | | Adjusted earnings per share* | $0.74 | $0.72 | 3 % | $0.60 | 23 % | | ATI adjusted EBITDA* | $207.7 | $194.6 | 7 % | $182.6 | 14 % | - Second quarter 2025 adjusted results exclude pre-tax charges of $7.4 million for special items, with an after-tax impact of $5.7 million, or $0.04 per share[8] CEO Commentary Kimberly A. Fields, President and CEO, highlighted strong and sustained demand in aerospace and defense markets, driving double-digit growth. She also emphasized disciplined capital allocation, including significant share repurchases - Strong, sustained demand in ATI's aerospace and defense end markets drove double-digit growth in net income, EPS, and adjusted EBITDA year-over-year[10] - Demand from A&D customers is increasing, with expectations for ramping production and deliveries through 2025 and into 2026, supported by recent long-term contract extensions[10] - ATI repurchased $250 million of its stock in Q2 2025, bringing total 2025 repurchases to $320 million, with $270 million remaining in board authorization for opportunistic deployment[11] Operating Results by Segment HPMC segment sales grew significantly due to commercial jet engines, while AA&S sales saw a sequential decline but remained flat year-over-year High Performance Materials & Components (HPMC) HPMC segment sales increased 4% sequentially and 8% year-over-year, primarily driven by a 26% increase in commercial jet engine sales. Segment EBITDA and margins also improved due to higher sales volume and favorable pricing HPMC Segment Performance | ($ millions) | Q2 2025 | Q1 2025 | Q2 2024 | | :----------- | :------ | :------ | :------ | | Sales | $608.8 | $584.1 | $562.0 | | Segment EBITDA* | $144.0 | $131.0 | $113.8 | | % of Sales | 23.7 % | 22.4 % | 20.2 % | - HPMC's Q2 2025 sales increased by $24.7 million (4%) sequentially and 8% year-over-year, primarily due to a 26% increase in commercial jet engine sales[14] - Aerospace & defense sales represented 92% of total HPMC sales in Q2 2025. The year-over-year sales growth was negatively impacted by a $30.0 million disposition of non-core European operations[14] - Sequential increase in HPMC segment EBITDA margins was primarily due to higher sales volume and favorable pricing of nickel-based and specialty alloys, benefiting from $4.4 million in employee retention credits[14] Advanced Alloys & Solutions (AA&S) AA&S segment sales decreased 5% sequentially but were relatively flat year-over-year. The sequential decline was mainly due to lower sales in conventional energy and defense, partially offset by growth in specialty energy and electronics. Segment EBITDA and margins decreased sequentially due to lower sales volume AA&S Segment Performance | ($ millions) | Q2 2025 | Q1 2025 | Q2 2024 | | :----------- | :------ | :------ | :------ | | Sales | $531.6 | $560.3 | $533.3 | | Segment EBITDA* | $76.7 | $83.4 | $87.5 | | % of Sales | 14.4 % | 14.9 % | 16.4 % | - AA&S's Q2 2025 sales decreased by $28.7 million (5%) sequentially, primarily due to lower sales of conventional energy and defense products, partially offset by higher sales in specialty energy and electronics[15] - Aerospace & defense sales constituted 38% of total AA&S sales in Q2 2025. Sales were relatively flat year-over-year, decreasing less than 1%[15] - The sequential decrease in AA&S segment EBITDA margins was primarily due to lower sales volume. Q2 2025 margin benefited from $2.6 million in employee retention credits[15] Corporate Items and Cash The company incurred restructuring charges, managed corporate expenses, reported a 22.0% effective tax rate, and executed significant share repurchases Restructuring and Other Charges The company incurred various pre-tax restructuring and other charges across Q2 2025, Q1 2025, and Q2 2024, primarily related to start-up costs, transaction costs, and losses on asset sales, partially offset by reductions in severance reserves - Q2 2025: $8.7 million in pre-tax charges, including $7.1 million for start-up/transaction costs and $1.6 million for losses on customer accounts receivable sales, offset by $1.3 million in severance reserve reductions[19] - Q1 2025: $5.6 million in pre-tax charges, including $4.0 million for start-up/transaction costs and $1.6 million for losses on customer accounts receivable sales[19] - Q2 2024: $5.4 million in pre-tax charges, including $5.5 million for inventory write-downs related to European restructuring and $1.8 million for start-up costs, offset by $1.9 million in severance reserve reductions[19] Corporate Expenses and Other Income/Expense Corporate expenses decreased sequentially and year-over-year due to insurance claims and lower incentive compensation. Closed operations and other income/expense shifted from an expense in Q1 2025 to income in Q2 2025, benefiting from foreign exchange gains and a bankruptcy settlement - Corporate expenses in Q2 2025 were $15.4 million, down from $17.4 million in Q1 2025 (due to insurance claims benefit) and $19.4 million in Q2 2024 (due to lower incentive compensation costs)[19] - Closed operations and other income/expense was an income of $2.4 million in Q2 2025, compared to an expense of $2.4 million in Q1 2025. Q2 2025 benefited from $1.8 million in foreign exchange gains and a $1.1 million favorable bankruptcy settlement[19] Income Tax Provision The income tax provision for Q2 2025 was $29.3 million, resulting in an effective tax rate of 22.0%, which was higher than Q1 2025 due to discrete tax benefits in the prior quarter - Q2 2025 income tax provision: $29.3 million, effective tax rate of 22.0%[19] - Q1 2025 income tax provision included $5.1 million of discrete tax benefits primarily related to equity compensation and uncertain tax positions[19] Cash Flow and Capital Allocation Cash provided by operating activities was $162 million in Q2 2025. The company continued its capital allocation strategy with $72 million in capital expenditures and significant share repurchases - Cash provided by operating activities: $162 million for Q2 2025 and $69 million year-to-date 2025[19] - Capital expenditures for Q2 2025: $72 million[19] - Managed working capital as a percent of annualized sales: 36.5% at the end of Q2 2025, a slight increase from 35.9% at the end of Q1 2025[19] - Share repurchases in Q2 2025: $250 million (approximately 3.2 million shares at an average price of $76.79). Remaining authorization: $270 million[19] Company Information & Forward-Looking Statements ATI Inc. announced its Q2 2025 conference call, provided a forward-looking statements disclaimer, and reiterated its role as a global high-performance materials producer Conference Call Information ATI Inc. will host a conference call on July 31, 2025, to discuss the financial results, with broadcast and presentation slides available on its website - A conference call with investors and analysts will be held on Thursday, July 31, 2025, at 8:30 a.m. ET, accessible via ATImaterials.com[17] Forward-Looking Statements Disclaimer The news release contains forward-looking statements subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from expectations. The company assumes no duty to update these statements - Forward-looking statements are based on management's current expectations and involve known and unknown risks, uncertainties, and other factors that could cause actual performance to differ materially[18][20] - Risk factors include material adverse changes in economic/industry conditions, market changes, inability to achieve anticipated benefits from strategic investments, raw material price/availability volatility, pension plan asset declines, labor disputes, equipment outages, and business disruptions from extraordinary events[20] Company Overview ATI Inc. is a global producer of high-performance materials and solutions, primarily serving aerospace & defense, electronics, medical, and specialty energy markets, leveraging materials science and innovation to solve complex challenges - ATI (NYSE: ATI) is a global producer of high-performance materials and solutions for aerospace & defense, electronics, medical, and specialty energy markets[21] - The company focuses on solving difficult challenges through materials science, partnering with customers to deliver materials that enable high-performance products[21] GAAP Financial Statements This section presents ATI's unaudited GAAP financial statements, including statements of operations, balance sheets, cash flows, and detailed revenue by market Consolidated Statements of Operations The unaudited consolidated statements of operations show ATI's financial performance for the fiscal quarters and year-to-date periods, detailing revenue, costs, and net income Consolidated Statements of Operations (Selected Data) ($ in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :---------------------------------- | :------ | :------ | :------ | :------- | :------- | | Sales | $1,140.4 | $1,144.4 | $1,095.3 | $2,284.8 | $2,138.2 | | Gross profit | $242.5 | $235.8 | $227.4 | $478.3 | $424.8 | | Operating income | $161.0 | $146.9 | $142.6 | $307.9 | $257.8 | | Net income attributable to ATI | $100.7 | $97.0 | $81.9 | $197.7 | $148.0 | | Diluted net income attributable to ATI per common share | $0.70 | $0.67 | $0.58 | $1.38 | $1.04 | Selected Financial Data This section provides a breakdown of sales and EBITDA by segment, along with the percentage of total ATI sales by product type, offering insights into business segment performance and product mix Segment Sales and EBITDA ($ in millions) | Segment | Q2 2025 Sales | Q2 2025 EBITDA | Q2 2025 EBITDA % of Sales | | :-------------------------------- | :------------ | :------------- | :------------------------ | | High Performance Materials & Components | $608.8 | $144.0 | 23.7 % | | Advanced Alloys & Solutions | $531.6 | $76.7 | 14.4 % | | Total external sales | $1,140.4 | | | Percentage of Total ATI Sales by Product Type (Q2 2025) | Product Type | Q2 2025 % of Sales | | :-------------------------------- | :----------------- | | Nickel-based alloys and specialty alloys | 48 % | | Precision forgings, castings and components | 21 % | | Titanium and titanium-based alloys | 17 % | | Zirconium and related alloys | 9 % | | Precision rolled strip products | 5 % | Condensed Consolidated Balance Sheets The unaudited condensed consolidated balance sheets present the company's financial position at the end of Q2 2025 and fiscal year 2024, showing changes in assets, liabilities, and equity Condensed Consolidated Balance Sheets (Selected Data) ($ in millions) | Metric | June 29, 2025 | December 29, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total Current Assets | $2,702.5 | $2,945.0 | | Total Assets | $5,021.0 | $5,230.6 | | Total Current Liabilities | $1,072.6 | $1,208.5 | | Total Liabilities | $3,163.0 | $3,275.4 | | Total ATI stockholders' equity | $1,743.4 | $1,850.4 | | Cash and cash equivalents | $319.6 | $721.2 | | Accounts receivable, net | $787.9 | $709.2 | | Inventories, net | $1,412.6 | $1,353.0 | Condensed Consolidated Statements of Cash Flows The unaudited condensed consolidated statements of cash flows detail the sources and uses of cash from operating, investing, and financing activities for the year-to-date periods Condensed Consolidated Statements of Cash Flows (YTD) ($ in millions) | Activity | YTD June 29, 2025 | YTD June 30, 2024 | | :-------------------------------- | :---------------- | :---------------- | | Net income | $204.5 | $154.0 | | Cash used in operating activities | $69.0 | $2.3 | | Cash used in investing activities | $(119.2) | $(117.1) | | Cash used in financing activities | $(365.8) | $(193.9) | | Decrease in cash and cash equivalents | $(401.6) | $(318.3) | | Cash and cash equivalents at end of period | $319.6 | $425.6 | Revenue by Market This table provides a detailed breakdown of ATI's revenue across various end markets, highlighting the significant contribution of Aerospace & Defense and changes in other core and industrial markets Revenue by Market (Q2 2025 vs. Q2 2024) ($ in millions) | Market | Q2 2025 Revenue | Q2 2025 % of Total | Q2 2024 Revenue | Q2 2024 % of Total | | :-------------------- | :-------------- | :----------------- | :-------------- | :----------------- | | Commercial Jet Engines | $447.8 | 39 % | $352.8 | 32 % | | Commercial Airframes | $195.2 | 17 % | $210.8 | 19 % | | Defense | $118.8 | 11 % | $120.3 | 11 % | | Total Aerospace & Defense | $761.8 | 67 % | $683.9 | 62 % | | Specialty Energy | $63.5 | 6 % | $76.6 | 7 % | | Electronics | $43.7 | 4 % | $40.8 | 4 % | | Medical | $38.9 | 3 % | $61.7 | 6 % | | Other Core Markets | $146.1 | 13 % | $179.1 | 17 % | | Conventional Energy | $92.9 | 8 % | $66.1 | 6 % | | Automotive | $64.8 | 6 % | $70.8 | 7 % | | Construction/Mining | $33.3 | 3 % | $44.2 | 4 % | | Other Industrial | $41.5 | 3 % | $51.2 | 4 % | | Total | $1,140.4 | 100 % | $1,095.3 | 100 % | Computation of Basic and Diluted Earnings Per Share This section details the calculation of basic and diluted earnings per share attributable to ATI, including the net income numerator and weighted average shares outstanding denominator, adjusted for dilutive securities Basic and Diluted EPS Computation (Q2 2025) ($ in millions except per share amounts) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------------------------------- | :------ | :------ | :------ | | Numerator for Basic net income per common share - Net income attributable to ATI | $100.7 | $97.0 | $81.9 | | Numerator for Diluted net income per common share - Net income attributable to ATI after assumed conversions | $100.7 | $97.0 | $84.1 | | Denominator for Basic net income per common share - Weighted average shares outstanding | 139.8 | 141.7 | 124.4 | | Denominator for Diluted net income per common share - Adjusted weighted average shares and assumed conversions | 143.1 | 144.2 | 146.3 | | Basic net income attributable to ATI per common share | $0.72 | $0.68 | $0.66 | | Diluted net income attributable to ATI per common share | $0.70 | $0.67 | $0.58 | Non-GAAP Financial Measures & Reconciliations This section defines and reconciles ATI's non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, Adjusted Free Cash Flow, and Managed Working Capital Non-GAAP Definitions and Rationale ATI Inc. utilizes several non-GAAP financial measures, such as Adjusted net income, Adjusted EPS, Adjusted EBITDA, Segment EBITDA, Adjusted free cash flow, and Managed working capital, to provide investors with supplemental information on core operating performance by excluding special, non-recurring items - Non-GAAP measures are used to assess operating performance consistently by removing the impact of special items not directly reflective of core operations[29] - Special items are defined as significant non-recurring or non-operational charges/credits, restructuring charges, gains/losses from asset/business sales, strike costs, impairments, debt extinguishment, and pension adjustments[29] - Management believes these measures provide meaningful supplemental information, allow investors to view performance using management's metrics, and offer additional period-to-period consistent information[31] Adjusted Net Income Attributable to ATI This section reconciles GAAP Net income attributable to ATI to Adjusted Net income attributable to ATI by adjusting for the tax-effected impact of special items, providing a clearer view of core profitability Reconciliation of Net Income to Adjusted Net Income Attributable to ATI ($ in millions except per share amounts) | Metric | Q2 2025 | Q2 2025 EPS | Q1 2025 | Q1 2025 EPS | Q2 2024 | Q2 2024 EPS | | :------------------------------------ | :------ | :---------- | :------ | :---------- | :------ | :---------- | | Net income attributable to ATI | $100.7 | $0.70 | $97.0 | $0.67 | $81.9 | $0.58 | | Adjustments for special items, pre-tax | $7.4 | $0.05 | $9.3 | $0.06 | $5.4 | $0.03 | | Income tax on adjustments for special items | $(1.7) | $(0.01) | $(1.9) | $(0.01) | $(1.3) | $(0.01) | | Adjusted Net income attributable to ATI | $106.4 | $0.74 | $104.4 | $0.72 | $86.0 | $0.60 | Adjusted EBITDA This section provides a reconciliation of Net income to EBITDA and Adjusted EBITDA, excluding interest, taxes, depreciation, amortization, and special items to reflect operational profitability Reconciliation of Net Income to Adjusted EBITDA ($ in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | Net income attributable to ATI | $100.7 | $97.0 | $81.9 | | Net income attributable to noncontrolling interests | $3.3 | $3.5 | $3.7 | | Net income | $104.0 | $100.5 | $85.6 | | (+) Depreciation and amortization | $41.6 | $40.8 | $37.9 | | (+) Interest expense | $25.4 | $23.0 | $28.4 | | (+) Income tax provision | $29.3 | $21.0 | $25.3 | | EBITDA | $200.3 | $185.3 | $177.2 | | Adjustments for special items, pre-tax | $7.4 | $9.3 | $5.4 | | Adjusted EBITDA | $207.7 | $194.6 | $182.6 | - Q2 2025 special items include $7.1 million for start-up/transaction costs and $1.6 million for losses on customer accounts receivable sales, partially offset by $1.3 million in severance reserve reductions[33] - Q1 2025 special items include $4.0 million for start-up/transaction costs, $1.6 million for losses on accounts receivable sales, and a $3.7 million loss on the sale of non-core European operations[33][34] Adjusted Free Cash Flow Adjusted free cash flow is a non-GAAP measure used to assess the cash flow generation of operations, defined as cash from operating and investing activities, excluding cash contributions to the U.S. qualified defined benefit pension plan - Adjusted free cash flow is defined as total cash provided by (used in) operating and investing activities, adjusted to exclude cash contributions to the U.S. qualified defined benefit pension plan[36] Reconciliation of Cash Provided by Operating Activities to Adjusted Free Cash Flow ($ in millions) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :---------------------------------------------------------------- | :------ | :------ | :------- | :------- | | Cash provided by operating activities | $161.5 | $101.1 | $69.0 | $2.3 | | Add back: Cash contributions to U.S. qualified defined benefit pension plan | — | — | — | — | | Cash provided by operating activities excluding pension contributions | $161.5 | $101.1 | $69.0 | $2.3 | | Cash used in investing activities | $(68.6) | $(53.3) | $(119.2) | $(117.1) | | Adjusted Free Cash Flow | $92.9 | $47.8 | $(50.2) | $(114.8) | Managed Working Capital Managed working capital is a non-GAAP measure focusing on assets and liabilities attributable to core operations, used to evaluate asset intensity and effectiveness in deploying cash. It is presented as a percentage of annualized sales - Managed working capital is defined as gross accounts receivable, short-term contract assets, and gross inventories (excluding reserves), less accounts payable and short-term contract liabilities[39] Managed Working Capital Calculation ($ in millions) | Metric | June 29, 2025 | March 30, 2025 | December 29, 2024 | | :-------------------------------- | :-------------- | :------------- | :---------------- | | Accounts receivable | $787.9 | $827.0 | $709.2 | | Short-term contract assets | $86.4 | $85.9 | $75.6 | | Inventory | $1,412.6 | $1,396.9 | $1,353.0 | | Accounts payable | $(532.3) | $(563.2) | $(609.1) | | Short-term contract liabilities | $(171.7) | $(187.1) | $(169.4) | | Subtotal | $1,582.9 | $1,559.5 | $1,359.3 | | Allowance for doubtful accounts | $3.4 | $11.6 | $15.0 | | Inventory reserves | $80.3 | $74.2 | $68.5 | | Managed working capital | $1,666.6 | $1,645.3 | $1,451.3 | | Annualized prior 3 months sales | $4,561.4 | $4,577.7 | $4,690.5 | | Managed working capital as a % of annualized sales | 36.5 % | 35.9 % | 30.9 % |