Carpenter Technology Corporation

TRS Q4 FY25 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I would like to hand the call over to John Hewitt, VP Investor Relations. You may begin your conference.

Thank you, operator. Good morning, everyone, and welcome to the Carpenter Technology earnings conference call for the fiscal 2025 fourth quarter ended June 30th, 2025. This call is also being broadcast over the internet along with presentation slides. For those of you listening by phone, you may experience a time delay in slide movement. Speakers on the call today are Tony Tain, President and Chief Executive Officer, and Tim Lane, Senior Vice President and Chief Financial Officer. Statements made by management during this earnings presentation that are forward-looking statements are based on current expectations. Risk factors that could cause actual results to differ materially from these forward-looking statements can be found in Carpenter Technology's most recent SEC filings, including the company's report on form 10K for the year ended June 30th, 2024, forms 10Q for the quarters ended September 30th, 2024, December 31st, 2024, and March 31st, 2025, and the exhibits attached to those filings. Please note that in the following discussion, unless otherwise noted, when management discussed the sales or revenue, that reference excludes surcharge. When referring to operating margins, that is based on adjusted operating income, excluding special items, and sales excluding surcharge. I will now turn the call over to Tony.

Thank you, John, and good morning to everyone. I will begin on slide four with a review of our safety performance. We ended fiscal year 2025 with a total case incident rate of 1.4. This is a notable 20% improvement over fiscal year 2024. Although this rate would rank as one of the safest metal manufacturing companies, it is not a rate we accept at Carpenter Technology. As we enter fiscal year 2026, we remain committed to our ultimate goal, a zero-entry workplace, driven by sharp focus, consistent action, and continuous improvement. Let's turn to slide five for an overview of our fourth quarter performance. We continued our earnings momentum with strong execution to close out the fiscal year, delivering the most profitable quarter on record. For the fourth quarter of fiscal year 2025, we generated 151 million in adjusted operating income, a 21% increase over our fourth quarter of fiscal year 2024, and a 10% increase over our recent third quarter, which was our previous record for quarterly operating income. The profitability was driven by SAO as the segment continues to expand adjusted operating margins, reaching .5% in the quarter, compared to .2% a year ago and .1% in the prior quarter. You may recall that a year ago, having achieved the 25% adjusted margin milestone in SAO, I said that we had line of sight to 30% margins. And now that we have achieved the 30% milestone, I continue to expect margins to expand further. As the major drivers of our growth, improvements in productivity, product mix optimization, and pricing actions continue to be opportunities for our business. The SAO segment reached a record 167 million of operating income, an increase of 19% year over year and 10% sequentially. In addition, with strong earnings and a disciplined working capital management, we generated 201.3 million in adjusted free cashflow during the quarter. And we continued returning cash to shareholders through our dividend and repurchase programs, purchasing 24.1 million of shares in the quarter, raising the total to 101.9 million for the fiscal year. Turning to slide six and a closer look at fourth quarter sales and market dynamics. In the fourth quarter of fiscal year 2025, sales increased sequentially across all key in-use markets. Starting with the aerospace and defense in-use market, sales increased 3% sequentially and 2% over our fourth quarter of fiscal year 2024, which at the time was our highest revenue quarter on record for the aerospace and defense in-use market. Within aerospace and defense, sales were notably up across engines, fasteners, and defense. Our engine sales were up 5% sequentially as demand for our materials remained strong. Our engine customers continue to be concerned about surety of supply as they navigate high MRO demand while looking forward to the ongoing and accelerating build rate ramp. In fact, sales to our engine customers might have been higher if not for our increased focus on the power generation sub-market in the quarter, which I will touch on momentarily. And our defense sub-market sales were up 17% sequentially as we continue to see urgent requests for material across multiple platforms. Overall, the aerospace supply chain continues to increase activity as build rates ramp and confidence grows in the OEM's ability to perform. Let me provide some comments from the recent Paris Air Show to further illustrate what we are hearing from our customers. The general theme customers talked about was the ongoing ramp in aerospace demand and how that specifically impacts their business. Some customers emphasize the need for us to provide more material faster, and we discuss ongoing efforts to increase shipments to them. Others, based on where they are positioned in the supply chain, report they are managing their inventory closely and looking for signals of step-ups in demand, which we all anticipate, particularly around Boeing build rates. We advanced and completed several long-term agreements while in Paris, in line with our expectations and supporting our ongoing growth. Many customers expressed their appreciation for how we have worked with them over the last several quarters as they needed to adjust their schedules to better match aerospace builds. Finally, customers were excited about the Brownfield capacity expansion project that we recently announced, and wanted to know what it would mean specifically for the products they purchased from us. Overall, the Paris Air Show was a positive event, and we came away with even higher confidence about the future outlook for aerospace and defense. Moving on to the medical in-use market, our sales were up 6% sequentially and down 16% compared to a record prior year fourth quarter. It's important to note that underlying demand in medical remains positive, with ongoing increases in patient procedures. While our medical sales have already grown substantially over the last several years, we continue to believe there's significant growth potential. Shifting to the energy in-use market, sales were up 27% sequentially and 22% year over year, with significant increases in sales to our power generation customers. As has been widely reported, demand for power generation continues to accelerate. Because the alloys that we produce that go into power generation applications, primarily industrial gas turbines, are similar to our aerospace materials, they command similar high margins. They also compete for time on similar assets. Therefore, we are carefully managing our production schedules to slide in the power generation demand. Looking ahead, we will continue to work closely with the power generation supply chain, from OEMs to parts manufacturers, to support their growth as this sub-market has become a valuable strategic advantage for us. Altogether, the demand outlook for carpenter technology remains very positive and should only strengthen in the coming quarters as the aerospace industry continues to ramp, the medical industry remains at high levels, and the IGT business continues to aggressively pull for more material. Now I will turn it over to Tim for the financial summary.