ATI(US:ATI)2023-08-02 20:09Financial Data and Key Metrics Changes - ATI reported adjusted earnings per share of $0.59, at the top end of guidance, reflecting a 9% year-over-year revenue increase to $1.05 billion [15][7] - Adjusted EBITDA margin increased to 14.3%, a 150 basis point sequential improvement, with overall adjusted EBITDA rising by 13% from the previous quarter [10][15] - The order backlog grew over 20% year-to-date, reaching $3.5 billion at the end of June [4][9] Business Line Data and Key Metrics Changes - Aerospace and Defense (A&D) sales increased by 5% quarter-over-quarter and 39% year-over-year, now accounting for 58% of total revenue, up from 46% a year ago [3][4][9] - High Performance Materials & Components (HPMC) segment sales grew 12% quarter-over-quarter and 33% year-over-year, with EBITDA margins increasing by 350 basis points to 20.5% [5][10] - Advanced Alloys and Solutions (AA&S) segment experienced a sequential sales decline due to softness in general industrial markets [11][15] Market Data and Key Metrics Changes - The Asian Precision Rolled Strip business is stabilizing but not yet recovering, with continued late deliveries impacting performance [7][11] - Demand for materials in military applications remains strong, particularly for brown vehicles, rotorcraft, and naval applications [3][4] Company Strategy and Development Direction - The company is focused on increasing its A&D content to 65% or higher of total business, projecting it will exceed 60% by year-end [9][10] - ATI is investing in expanding titanium melt capacity, with a 35% increase projected by the end of 2024 [20][21] - The strategic transformation aims to reduce volatility in quarterly results and stabilize performance [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of markets and sustained demand, with a strong backlog and operational improvements expected to drive future growth [18][22] - The company anticipates continued robust A&D demand and operational improvements will contribute to a strong finish in Q4 2023 [16][17] Other Important Information - The company generated $68 million in cash from operations in Q2, ending the quarter with total liquidity of approximately $770 million [14] - A $75 million share repurchase program is expected to be completed by the end of the year [14] Q&A Session Summary Question: Expansion on $1.2 billion in new contracts - Management confirmed that the new contracts should be accretive, with an expected incremental EBITDA of $40 million to $50 million from these commitments [26] Question: Titanium trends and share gains - Management noted aggressive share gains in titanium, with lead times extending into 2024 and pricing reflecting a seller's market [30][31] Question: HPMC margin performance - The strong margin in HPMC was attributed to volume and price/mix, with improvements in throughput and operational efficiencies [35][36] Question: Non-A&D demand headwinds in AA&S - Management expects a slight decline in Q3 for AA&S, stabilizing in Q4 before recovering in Q1 2024 [38][41] Question: Nickel pass-through and pension impact - Management indicated that higher nickel prices have been a headwind but do not expect this to continue into 2025 [44][47] Question: Future opportunities in titanium - Management believes there are still opportunities for share gains in titanium, particularly as the wide-body market recovers [51][52]