Carpenter(CRS) - 2025 Q4 - Annual Results

Financial Performance Overview Carpenter Technology achieved record operating income and free cash flow in Q4 and full FY2025, driven by strong segment performance and a robust financial position Fourth Quarter Fiscal Year 2025 Performance Carpenter Technology reported a record-breaking fourth quarter for fiscal year 2025, achieving its highest-ever quarterly operating income of $151.4 million, a 21% increase year-over-year. The company also generated a record $201.3 million in adjusted free cash flow, driven by strong performance in the Specialty Alloys Operations (SAO) segment and improvements in working capital Fourth Quarter Fiscal Year 2025 Key Financial Metrics ($ in millions) | Financial Metric | Q4 FY2025 | Change (YoY) | Change (QoQ) | | :--- | :--- | :--- | :--- | | Adjusted Operating Income | $151.4 million | +21% | +10% | | Earnings Per Diluted Share | $2.21 | - | - | | Adjusted Free Cash Flow | $201.3 million | - | - | | Net Sales (ex-surcharge) | $623.7 million | -2% | +4% | - The Specialty Alloys Operations (SAO) segment was a key driver of performance, with operating income reaching $167.0 million, up 19% year-over-year. The segment's adjusted operating margin expanded significantly to 30.5%, compared to 29.1% in the previous quarter and 25.2% a year ago[3][6] - The company executed $24.1 million in share repurchases during the quarter[3] Full Fiscal Year 2025 Performance Fiscal year 2025 was the most profitable year in the company's history, with adjusted operating income reaching $525.4 million, a 48% increase compared to fiscal year 2024. The company generated $287.5 million in adjusted free cash flow for the full year and returned cash to shareholders through $101.9 million in stock repurchases and $40.3 million in dividends Full Fiscal Year 2025 Key Financial Metrics ($ in millions) | Financial Metric | Fiscal Year 2025 | Change (YoY) | | :--- | :--- | :--- | | Adjusted Operating Income | $525.4 million | +48% | | Adjusted Free Cash Flow | $287.5 million | +61% | | Adjusted EPS | $7.48 | +58% | | Net Sales | $2,877.1 million | +4% | - The Aerospace and Defense end-market grew to represent over 60% of the company's revenue during the fiscal year[7] - The company executed $101.9 million of stock repurchases against its $400.0 million program and paid $40.3 million in annual dividends[7] Financial Position and Capital Allocation The company maintained a strong financial position, ending the fiscal year with $664.4 million in total liquidity, comprising $315.5 million in cash and $348.9 million in available credit. Under its $400.0 million share repurchase program, $298.1 million remains available for future purchases as of June 30, 2025 - Total liquidity stood at $664.4 million at the end of Q4 FY2025, consisting of $315.5 million cash and $348.9 million available under the credit facility[14] - During Q4 FY2025, the company repurchased 100,000 shares for $24.1 million. For the full fiscal year, repurchases totaled $101.9 million. As of June 30, 2025, $298.1 million remains authorized for future repurchases[7][13] Business Outlook and Management Commentary The company projects strong operating income and free cash flow growth for FY2026 and FY2027, driven by market demand and strategic investments Fiscal Year 2026 Outlook Carpenter Technology provided a strong outlook for fiscal year 2026, projecting operating income to be in the range of $660 million to $700 million, which represents a 26% to 33% increase over the record results of fiscal year 2025. The company also anticipates generating $240 million to $280 million in adjusted free cash flow Fiscal Year 2026 Guidance | FY2026 Guidance | Range | | :--- | :--- | | Operating Income | $660M - $700M | | Adjusted Free Cash Flow | $240M - $280M | - For the first quarter of fiscal year 2026, the company anticipates operating income to be between $148 million and $152 million[7] Long-Term Outlook (Fiscal Year 2027 and Beyond) The company reaffirmed its fiscal year 2027 target for adjusted operating income of $765 million to $800 million, implying a nearly 25% compound annual growth rate from its fiscal year 2025 results. Management sees continued growth beyond 2027, supported by strong demand in key markets like Aerospace, Defense, Medical, and Power Generation, and strategic investments such as a recently announced brownfield expansion to increase melt capacity - The company remains on track for its fiscal year 2027 target of $765 million to $800 million in operating income[7][8] - Long-term growth is expected to be driven by strong market demand, increasing productivity, optimizing product mix, pricing actions, and investments in capacity like the new brownfield expansion[7][8] Segment and Market Performance The SAO segment delivered exceptional performance, driving overall growth, with Aerospace and Defense as a key revenue contributor for the fiscal year Specialty Alloys Operations (SAO) The SAO segment, the company's largest, delivered an exceptional fourth quarter with operating income of $167.0 million, up from $140.9 million in the prior year. For the full fiscal year 2025, SAO's operating income surged to $588.6 million. A key highlight was the expansion of the adjusted operating margin (excluding surcharge) to 30.5% in Q4 and 28.6% for the full year, reflecting improved pricing and product mix SAO Segment Performance ($ in millions) | SAO Performance ($ in millions) | Q4 FY2025 | Q4 FY2024 | FY 2025 | FY 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $674.1 | $715.8 | $2,563.6 | $2,443.8 | | Operating Income | $167.0 | $140.9 | $588.6 | $408.5 | | Adj. Operating Margin (ex-surcharge) | 30.5% | 25.2% | 28.6% | 21.8% | Performance Engineered Products (PEP) The PEP segment, which includes titanium, additive manufacturing, and distribution businesses, reported operating income of $11.7 million for the fourth quarter, a modest increase from $10.6 million year-over-year. For the full fiscal year 2025, operating income was $37.0 million, slightly up from $36.0 million in the prior year. The adjusted operating margin for the year was 9.9% PEP Segment Performance ($ in millions) | PEP Performance ($ in millions) | Q4 FY2025 | Q4 FY2024 | FY 2025 | FY 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $104.6 | $111.2 | $405.4 | $411.0 | | Operating Income | $11.7 | $10.6 | $37.0 | $36.0 | | Adj. Operating Margin (ex-surcharge) | 12.0% | 10.4% | 9.9% | 9.5% | Performance by End-Use Market For fiscal year 2025, the Aerospace and Defense market was the primary growth driver, with sales (excluding surcharge) increasing by 20% to $1.44 billion. The Energy market also saw a 16% increase in sales. This growth was partially offset by declines in the Medical, Transportation, and Industrial and Consumer markets Net Sales by End-Use Market (Ex-Surcharge, $ in millions) | Net Sales by End-Use Market (ex-surcharge, $ in millions) | FY 2025 | FY 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Aerospace and Defense | $1,440.7 | $1,199.2 | +20.1% | | Medical | $296.1 | $315.4 | -6.1% | | Energy | $151.3 | $130.4 | +16.0% | | Transportation | $86.4 | $108.9 | -20.7% | | Industrial and Consumer | $288.1 | $319.4 | -9.8% | | Distribution | $83.5 | $94.4 | -11.5% | | Total | $2,346.1 | $2,167.7 | +8.2% | Consolidated Financial Statements (Preliminary & Unaudited) Preliminary unaudited financial statements show significant FY2025 growth in net income and operating cash flow, alongside a strengthened balance sheet Consolidated Statements of Operations For the fiscal year ended June 30, 2025, the company reported net sales of $2.88 billion and a gross profit of $768.6 million. Net income more than doubled to $376.0 million from $186.5 million in the prior year, resulting in diluted earnings per share of $7.42, up from $3.70 in fiscal year 2024 Consolidated Statements of Operations ($ in millions) | Income Statement ($ in millions) | Year Ended June 30, 2025 | Year Ended June 30, 2024 | | :--- | :--- | :--- | | Net Sales | $2,877.1 | $2,759.7 | | Gross Profit | $768.6 | $584.3 | | Operating Income | $521.8 | $323.1 | | Net Income | $376.0 | $186.5 | | Diluted EPS | $7.42 | $3.70 | Consolidated Balance Sheets As of June 30, 2025, Carpenter Technology's balance sheet showed total assets of $3.49 billion, an increase from $3.29 billion the previous year. Total liabilities decreased to $1.60 billion, while total stockholders' equity grew significantly to $1.89 billion from $1.63 billion, reflecting strong profitability and reinvested earnings Consolidated Balance Sheets ($ in millions) | Balance Sheet ($ in millions) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,764.7 | $1,591.2 | | Total Assets | $3,486.8 | $3,291.7 | | Total Current Liabilities | $483.7 | $466.3 | | Long-Term Debt | $695.4 | $694.2 | | Total Liabilities | $1,599.8 | $1,662.9 | | Total Stockholders' Equity | $1,887.0 | $1,628.8 | Consolidated Statements of Cash Flows For fiscal year 2025, the company generated $440.4 million in net cash from operating activities, a substantial increase from $274.9 million in the prior year. Cash was primarily used for capital expenditures ($154.3 million), share repurchases ($101.9 million), and dividend payments ($40.3 million). The company's cash and cash equivalents increased by $116.4 million to end the year at $315.5 million Consolidated Statements of Cash Flows ($ in millions) | Cash Flow Statement ($ in millions) | Year Ended June 30, 2025 | Year Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $440.4 | $274.9 | | Net Cash used for Investing Activities | ($152.9) | ($95.9) | | Net Cash used for Financing Activities | ($167.1) | ($23.3) | | Increase in Cash | $116.4 | $154.6 | | Cash at End of Year | $315.5 | $199.1 | Non-GAAP Financial Measures and Reconciliations Reconciliations of non-GAAP measures provide adjusted operating income, EPS, and free cash flow, offering a clearer view of underlying financial performance Reconciliation of Adjusted Operating Income and Margin The company provides adjusted operating income to exclude special items like restructuring charges. For fiscal year 2025, GAAP operating income of $521.8 million was adjusted for $3.6 million in charges to arrive at an adjusted operating income of $525.4 million. The adjusted operating margin, excluding surcharge revenue, improved to 22.4% for the year from 16.3% in FY2024 Reconciliation of Adjusted Operating Income ($ in millions) | Reconciliation ($ in millions) | Year Ended June 30, 2025 | Year Ended June 30, 2024 | | :--- | :--- | :--- | | Operating Income (GAAP) | $521.8 | $323.1 | | Special Items | $3.6 | $31.0 | | Adjusted Operating Income (Non-GAAP) | $525.4 | $354.1 | Reconciliation of Adjusted Earnings Per Share (EPS) Adjusted diluted EPS for fiscal year 2025 was $7.48, compared to a GAAP EPS of $7.42. The adjustment removes the per-share impact of restructuring charges. This represents a significant increase from the prior year's adjusted EPS of $4.74 Reconciliation of Adjusted Diluted EPS ($) | EPS Reconciliation | Year Ended June 30, 2025 | Year Ended June 30, 2024 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $7.42 | $3.70 | | Special Items Impact | $0.06 | $1.04 | | Adjusted Diluted EPS (Non-GAAP) | $7.48 | $4.74 | Reconciliation of Adjusted Free Cash Flow Adjusted free cash flow is presented as a measure of cash generation available for investments, dividends, and share repurchases. For fiscal year 2025, the company generated $287.5 million in adjusted free cash flow, calculated by subtracting capital expenditures from operating cash flow. This is a substantial increase from $179.0 million in the prior year Reconciliation of Adjusted Free Cash Flow ($ in millions) | Adjusted FCF Reconciliation ($ in millions) | Year Ended June 30, 2025 | Year Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $440.4 | $274.9 | | Purchases of property, plant, etc. | ($154.3) | ($96.6) | | Proceeds from disposals | $1.4 | $0.7 | | Adjusted Free Cash Flow (Non-GAAP) | $287.5 | $179.0 | Other Information This section provides conference call details and important disclaimers regarding forward-looking statements and associated risks Conference Call and Webcast Information Carpenter Technology scheduled a conference call and webcast for 10:00 a.m. ET on July 31, 2025, to discuss the fourth quarter and full fiscal year 2025 results. Presentation materials and a replay of the webcast are available on the company's investor relations website - A conference call to discuss financial results was scheduled for July 31, 2025, at 10:00 a.m. ET[15] Forward-Looking Statements The press release includes a standard safe harbor statement regarding forward-looking statements. It cautions investors that actual results could differ materially from projections due to a variety of risks and uncertainties, including the cyclical nature of its markets, raw material costs, geopolitical conflicts, and potential supply chain disruptions - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ. Key risks mentioned include market cyclicality, cost fluctuations, geopolitical tensions, and supply chain disruptions[18]