ATI Inc.

Hello, everyone, and welcome to the ATI second quarter 2024 results conference call. My name is Seb, and I'll be the operator for your call today. If you would like to ask a question during the Q&A session, you can do so by pressing star 1 on your telephone keypad. And if you would like to withdraw your question, please press star 2. I will now hand the floor over to David Weston, Vice President of Investor Relations, to begin the call. Please go ahead.

Thank you. Good morning and welcome to ATI's second quarter 2024 earnings call. Today's discussion is being webcast online at atimaterials.com. Participating in today's call to share key points from our second quarter results are Kim Fields, President and CEO, and Don Newman, Executive Vice President and CFO. Before starting our prepared remarks, I would like to draw your attention to the supplemental presentation that accompanies this call. Those slides provide additional color and details on our results and outlook and can also be found on our website at atimaterials.com. After our prepared remarks, we'll open the line for questions. As a reminder, all forward-looking statements are subject to various assumptions and caveats. These are noted in the earnings release and in the accompanying presentation. Now, I'll turn the call over to Kim.

Thanks, Dave. Good morning, everyone. Let's dive in. ATI's second quarter results represents another strong quarter of execution and performance. What excites me the most? Here are three key highlights. First, revenue growth. Quarterly sales reached their highest level in nearly a decade. Nearly $1.1 billion reflecting 10% sequential increase in our strategic A&D and Arrow-like revenue categories. Second, strategic mix expansion. A&D sales made up 62% of our revenues this quarter, putting us on track toward our A&D mixed target of 65 plus percent. In total, 79% of our revenues comes from A&D and arrow-like markets, markets where our differentiation is most valued. And third, strong financial results. Adjusted EPS hit 60 cents at the high end of our guidance. And adjusted EBITDA came in at $183 million, exceeding the upper end of our guidance range. So what is driving these results? Let me break it down to three main points. First, it's about surging demand. At the Farnborough Air Show, the high demand for our products was clear. Interest has broadened beyond titanium to nickel, looking for commitments for the rest of this decade and into the 2030s. Customers are offering premiums for any available near-term slot that opens up. We're currently in discussions with multiple customers about investing their capital for added capacity. And why are they investing? To guarantee supplies available when they need it and secure their preferred position in line. They're increasingly facing the wide body ramp while still supporting historic levels of shop business and spare parts demand. In late July, we announced new sales commitments surpassing $4 billion. primarily for high-value nickel products for jet engines. These commitments not only support our 2025 and 2027 financial targets, but also add approximately $100 million per year in incremental annual revenue. Some of these commitments extend as far as 2040, reflecting our customers' long-term confidence in sustained jet engine demand and ATI as the supplier to help them succeed. Second, as one ATI team, We are executing and delivering. Our strategy is clearly paying off. In the second quarter, ATI's largest end market jet engines grew 13% sequentially to over $350 million driven by specialty nickel. As the industry reaffirmed in its most recent quarterly reporting cycle, more growth will follow as the OEMs resolve their challenges and plan production increases through 2024 and beyond. TITANIUM REVENUE FOR AIRFRAME INCREASED 11% SEQUENTIALLY THIS QUARTER TO MORE THAN $210 MILLION. THAT'S ANOTHER ALL-TIME HIGH FOR ATI AND A 28% INCREASE OVER LAST YEAR. OUR EXPANDED TITANIUM MELT CAPACITY IS A KEY FACTOR IN THIS SUCCESS. DEFENSE SALES ROSE 5% SEQUENTIALLY, LED BY INCREASED DEMAND FOR EXOTIC ALLOYS AND CONTINUED STRONG DEMAND FOR TITANIUM ARMOR PLATES USED IN MILITARY GROUND VEHICLES. And here I'd like to take a second to recognize the specialty role products team for the tremendous work they've done to earn that position. Their hard work is paying off. Specialty energy was up 37% versus the prior quarter. We see building demand for nuclear and gas turbines for increased electricity consumption. We expect sustained global demand in this end market for the foreseeable future. And third, we're well positioned for the future and more confident upside as possible. We are optimizing our operations to deep bottleneck flow paths, reduce costs, and drive productivity across our system from melt to ship. Our focus on increasing specialty nickel melt demonstrates the strength of our integrated one ATI approach. Since last year, we have significantly increased nickel throughput by improving turnaround times, optimizing melt blends, and implementing standard works. Materials flowing faster and we expect to see the benefits of these actions towards the end of the year. It's great to see the experts from across the business units collaborating to optimize production output. These results represents a lot of hard work and the team takes great pride in being able to work together to serve our customers needs. Great job team. We are seeing the impacts of this optimizing in both segments. In AA&S, we achieved over 16% adjusted EBITDA margins in the second quarter. reflecting the success of the specially rolled product transformation. In HPMC, revenues grew 6% sequentially on level shipment volumes. What's that telling me? We're effectively capturing the impact of tougher product mix and equally important price. Overall, we are well positioned now and for the future. And with that, I'll hand it over to Don.