ATI INC Q4 FY2024 earnings call

• Q4 was a strong quarter with revenue up 12% sequentially and adjusted EBITDA above guidance. Full year revenue and adjusted EBITDA were strong despite industry challenges.
• Operationally, ATI is investing in equipment reliability and AI technology, achieving record levels in various operations. Demand remains robust in aerospace (Boeing, Airbus ramping, Airbus stable), defense is growing, and Aero-Like markets (electronics, specialty energy) are in high demand with long-term demand exceeding supply.
• Free cash flow for 2024 was $248 million, up over 50% from 2023.

In the fourth quarter, revenue was $1.2 billion, up 12% sequentially. Adjusted EBITDA was $210 million, above the guided range of $181 million to $191 million. Full year revenue was nearly $4.4 billion, the highest since 2012, up 5%. Adjusted EBITDA was $729 million, with EBITDA margins almost 17%. Combined aerospace and defense exceeded 65% of fourth quarter revenue. Defense business full year revenues were up 22% to $490 million. Electronics and specialty energy sales in the fourth quarter were nearly equal to defense sales.

• 2025 adjusted EBITDA outlook is above $800 million, with Q1 adjusted EBITDA guidance $170 million to $180 million and full-year range $800 million to $840 million.
• Full year 2025 free cash flow range is $240 million to $360 million.
• Anticipate capital investment of $260 million to $280 million in 2025, with ongoing share repurchases.

• Tariffs and trade actions, including potential impacts on nickel supply from Canada and China.
• Geopolitical risks such as dynamics with Russia and Europe tariff discussions.
• Union contract negotiations and potential work stoppages.

Q: David Strauss asked about the progression of Q1 EBITDA and tariffs on nickel from Canada.

A: Don Newman discussed Q1 EBITDA progression expecting recovery in the second half, and Kim Fields talked about nickel supply diversification and pass-through mechanisms in contracts.

Q: Seth Seifman inquired about engine growth expectations and margin progression in HPMC.

A: Kim Fields spoke about engine growth from MRO, forging, and titanium, and Don Newman discussed margin progression in HPMC expecting increase as the year progresses.

Q: Gautam Khanna asked about customer concessions and union contract status.

A: Kim Fields clarified customer discussions are not concessions but strategic, and mentioned union contract discussions are ongoing and constructive.

Q: Richard Safran asked about new long-term agreements and defense sales sustainability.

A: Kim Fields talked about new customer commitments and defense sales expecting growth with potential additional spending.

Q: Phil Gibbs asked about revenue catch up from Q3 issues and EBITDA benefits from oil and gas rights.

A: Don Newman explained revenue catch up from Q3 issues and breakdown of EBITDA benefits from oil and gas rights and IRS credits.

Q: Andre Madrid asked about impact of tariffs on zirconium supply from China and recycled material reuse.

A: Kim Fields discussed zirconium supply diversification and recycled material usage across materials.

Q: Timna Tanners asked about operational issues and tariffs on Europe.

A: Kim Fields provided update on Q3 operational issues and spoke about tariffs on Europe and response strategies.

Q: Scott Deuschle asked about CapEx and jet engine growth by type.

A: Don Newman discussed CapEx guidance and Kim Fields talked about jet engine growth with MRO being predominant and wide body growth expected.

Q: Josh Sullivan asked about Russia impact and Aero-Like lead times.

A: Kim Fields spoke about Russia's re-qualification challenges and Aero-Like lead times of 6-9 months.