Hello, everyone. And welcome to ATI's Fourth Quarter 2024 Earnings Call. My name is Beckey, and I will be your operator today. I'll now hand you over to your host, Dave Weston, Vice President of Investor Relations, to begin. Please go ahead.

Thank you. Good morning, and welcome to ATI's fourth quarter 2024 earnings call. Participating in today's call to share key points from our fourth 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. Q4 was a great quarter for ATI. We ended the year on a high note that gives us momentum going into 2025. Let me share the financial headlines first. In the fourth quarter, revenue was up 12% sequentially to $1.2 billion. Adjusted EBITDA was $210 million above our guided range of $181 million to $191 million. On a full year basis, revenue was nearly $4.4 billion, our highest since 2012, up 5%, even with the challenges we and the industry encountered this year. Adjusted EBITDA was $729 million, and EBITDA margins were almost 17%, with both segments contributing strong performance. Free cash flow for 2024 was $248 million, up more than 50% over last year. Our topline growth and expanding margins led to double-digit percentage increases to adjusted EBITDA. These results demonstrate that our transformational strategy is on track. We're confident in our performance, and 2025 is on pace to be even better. As a result, we're forecasting our 2025 adjusted EBITDA will build each successive quarter during the year with our full year outlook above $800 million. Don will get into these details in a moment. Three key areas drive our confidence in ATI's future. Number one, 2025 demand remains robust. You're likely hearing it in our customers' earnings call. With Boeing bouncing back, ramping with the 737 MAX on track. Airbus remains steady with opportunities for upside as they push their ramp rates. We're seeing stability as anxiety comes out of the supply chain. Demand for ATI materials comes from every segment of the aerospace industry. Our products are on every commercial platform flying today. In Q4, we shipped more than Q3, yet our backlog remains steady. It didn't drop. Backlog isn't a pure indicator of the full demand picture. Remember, through long-term agreements, our customers reserve their capacity based on anticipated upcoming needs. These orders are continuing to flow and are growing. Our full year 2024 airframe revenue was up 4.5% year-over-year. Jet engine revenue was up 9%. Our isothermal forgings are a key driver of this growth. In 2024, the team was able to increase ISO pushes by 32%. In the fourth quarter, they achieved their highest quarterly total output ever. In addition to OEM build rates, MRO and the DTF engine overhaul program are also driving heavy engine demand. We are continuing to ramp our support of this program with sales in 2024, almost triple 2023 sales, and anticipate to increase another 50% in 2025. Our defense business continues to grow as well. Full year revenues were up 22% to $490 million. When the United States and our allies need reliable, high-performance, advanced materials, we're honored they turn to ATI. The continued growth of our defense business demonstrates both demand for our products and confidence in our ability to deliver. Combined aerospace and defense exceeded 65% of fourth quarter revenue. For the full year, they represent more than 62%, delivering strong performance in growing markets. In addition to our core A&D markets, you've heard us talk about Aero-Like. This is where the differentiated ATI materials come into play. In the electronics and specialty energy markets, continued demand for high-performance chips and the resurgence of nuclear energy put our hafnium, niobium, and zirconium alloys in high demand. Generally, long-term demand for these products is predicted to exceed current supply. It's interesting to note that our combined electronics and specialty energy sales in the fourth quarter were nearly equal to our defense sales, which I just mentioned were up significantly. And remember, we call these markets Aero-Like because of the growth and margins they typically deliver. That brings me to my second key driver of confidence. Operationally, ATI is where we need to be. We are on track, not just having recovered from the challenges of Q3, but being stronger from them. The continued investments we are making in equipment reliability and AI technology are allowing us to predict potential issues and proactively correct them before they occur. Our productivity improvements give us the opportunity to participate in transactional business where we want to be valued most. One of the most rewarding parts of leading our team is getting calls when they hit a new record. I received a lot of those calls this quarter, announcing things like record levels of premium quality heat smelted, milestones in powder billet, best flow times all over the system, and newly qualified operations as we gain share. With our team operating as one ATI, each business' best can raise the next operation to its new best. I appreciate all they're doing and I'm honored to celebrate their successes. Let's get to my third and final key driver of confidence. I am optimistic about the future based on growth activity we're already seeing. Today's guidance for 2025 is in line with Boeing's projections, and as an early in the value stream supplier, we will be one of the first to see increased pull as they strive to meet ramping build rates. For 2026, Boeing publicly stated that the 787 builds will increase from five to seven, another sign of increasing stability. The 777X is entering back into service, something we've all been looking forward to. We are beginning to see signs of this increasing demand for titanium and currently anticipate seeing an uptick in the back half of 2025. In July, we announced $4 billion in new sales commitments, much of which were tied to our differentiated nickel products. Those commitments added new scope and long-term agreements that both build and extend our core. We believe that growing demand has tremendous upside. You have likely heard of the emerging DOD budget inputs evolving around the philosophy of peace through strength. With additional funding targeted to potentially increase defense spending by as much as $200 billion or $100 billion per year for fiscal years ‘25 and ‘26, if they move forward, it is expected that a portion of this increase would benefit production programs where ATI provides materials for naval, air, and ground vehicles, supporting our expectations for growth in defense. Lastly, our team gives me great confidence. With each goal met, they strive to set the bar higher, often surprising themselves with what they can achieve. When faced with an opportunity or a challenge, our mindset is what would have to be true for us to succeed? From that starting point, the ideas start flowing, making each day better than the last. Now, Don will share details about our 2024 results and the outlook for 2025.

Thanks, Kim. Let me provide some additional insights into the quarter, which was well ahead of our expectations from a revenue and profit standpoint. Cash flow was in line with what we had anticipated. I will also touch on some full year highlights before talking through our 2025 outlook. Let's start by highlighting key results for the quarter and comparing against our guidance. Revenue approached $1.2 billion in Q4, up $122 million or 12% sequentially. That's up 10% year-over-year. Q4 revenue was higher than we expected, as customer demand improved from Q3. Mix was a bit weaker than we anticipated, due to short-term shifts in customer requirements. Our adjusted EBITDA for Q4 was approximately $210 million, above our guided range of $181 million to $191 million. It's important to clarify that our adjusted results include approximately $18 million of non-operational favorability, from the sale of oil and gas rights, and clarification of tax credit rules by the IRS in Q4. Some of those tax benefits relate to activities that predate the quarter. If we were to exclude those items, as they were not embedded in our guidance, the underlying adjusted EBITDA would have been in the range of $192 million. That's still above the high end of our guided range. We achieved this positive performance despite several offsetting unfavorable impacts noted in our earnings release. Through meaningful growth in sales and an increasing mix of A&D content, our results reflect improved performance and the ongoing execution of our long-term strategy. Full year 2024 revenue was nearly $4.4 billion, our highest revenue since 2012. For the full year, revenue grew roughly 5% over 2023. Excluding metal impacts, full year 2024 revenue grew nearly 9% over 2023 levels. We delivered almost 17% adjusted EBITDA margins across the business for the year. At 17.9% this quarter, margins are approaching the targets we've set for the coming year. In HPMC, fourth quarter margins declined 230 basis points sequentially to 20%. This was driven by more than $6 million in charges to address ongoing customer and commercial negotiations as well as adjustments to incentive compensation tied to ATI's improved performance. In AA&S, our fourth quarter margins increased 150 basis points sequentially. Those margins exceeded 16% as the mix and strength of A&D and Aero-Like volumes continue to increase. This increase includes $10 million of favorable benefits from clarification from the IRS on the Advanced Manufacturing Production Credit. Excluding this benefit, margins for AA&S would have been in line with our expectations and Q3 performance. As we anticipated, our fourth quarter was a very strong quarter for cash, delivering approximately $400 million in free cash flow, while full year free cash flow is within the range of our guidance, underlying performance is lower than we originally expected in 2024. It's been supplemented by proceeds from several divestitures that were not originally contained in our plan or guidance. Knowing that, we are encouraged by the reductions we made this quarter in managed working capital, reducing sequentially from 40% to 31%. We looked to build on our improvements in free cash flow this year to deliver a more consistent and predictable cash generating business in 2025 and beyond. In the area of capital investment, our total spend for the year was $239 million, including $17 million of capital that was funded by customers through direct investment and capacity. That funding was included in cash flow operations, as required. Our net debt ratio improved sequentially from 2.2x to 1.6x this quarter, with further reductions likely to come with profitable growth. We continued returning cash to shareholders this quarter with $70 million of share repurchases. We deployed $260 million in 2024 to repurchase shares, representing 105% of 2024 free cash flow. We start 2025 with our existing authorization at $590 million. This quarter represents a strong conclusion of 2024 and helps shape our expectations for 2025. With that, let's turn to our 2025 guidance. As we have said consistently over the past several months, we expect the first half of the year to reflect modest recovery as the commercial aero supply chain rebounds and subsequently grows. Taking that into account, along with seasonality we know exists in our business, we are setting our adjusted EBITDA guidance range for Q1 at $170 million to $180 million. That equates to an adjusted earnings per share range of $0.55 to $0.61. For the full year, we have narrowed our range within the previous target for 2025. That aligns with how we have seen this market recovery and the delays in the aero ramp unfolding over the last half of 2024. We are setting the full year 2025 range for adjusted EBITDA at $800 million to $840 million, with a corresponding range of EPS at $2.80 to $3 per share. As you would expect, we will work all year to pursue opportunities to eliminate risks and build on this guidance. Even though we don't provide direct guidance for revenue and margins on an ongoing basis, our previous targets remain unchanged for 2025. Turning to free cash flow, we are setting the full year range at $240 million to $360 million. This range contemplates how much more we believe we can improve managed working capital timing and efficiency within this time of growth. We are assuming between $260 million and $280 million in capital investment this year, a portion of which may be funded by customers. We are investing a portion of the proceeds from our 2024 divestitures to support profitable growth, reliability, and debottlenecking. $150 million in debt comes due in Q4, which we plan to repay with balance sheet cash. We believe we can continue to reduce share count throughout the year with a disciplined and balanced approach to share repurchases. Note the guidance I'm sharing today is based on the assumptions that actions of the new U.S. administration will not materially change the current business environment and that we are not impacted by any work stoppages. To summarize, the path we outlined last quarter, underpinned by the strategy and financial targets we have pursued for several years, continues to guide our course for the year. Despite the dynamics the A&D industry encountered in 2024, we see significant opportunity ahead. We are working every day to fulfill that commitment to our customers and shareholders. With that, I will turn the call back over to Kim.

Thanks Don. As I shared, we are optimistic about the future. We're bullish on demand and our markets. Operationally, we're stable and improving. We're seeing our long-term strategy deliver. Yes, there are risks ahead, both known and unknown. Let me take a minute to address the dynamic macroeconomics we're all experiencing, including tariffs and trade actions. The steps we've taken to mitigate risk give me confidence that we're well-positioned for any environment. We're predominantly a U.S.-based manufacturer, and in recent years, we've taken deliberate action to diversify our supply sources. We have purposely expanded pass-through mechanisms in our contracts. We are nimble and experienced in responding to uncertainty. As we overcome each challenge, we know our success will make our business better and strengthens our ability to perform, now and in the future. And with that, let's open the line for your questions.

Our first question is from David Strauss from Barclays.

Good morning. Thanks, everyone. Hey, so you gave the guidance for Q1 EBITDA. Can you just talk about the progression through the rest of your outlook? It looks like we're going to need, you're going to need a pretty steep recovery in the second half to get to your guidance range.

Sure. I'd be happy to kind of walk you through that. You're right. When you look at our Q1, it reflects some seasonal moments from the Q4 performance down to Q1. It also reflects the removal of some of the non-repeating items around asset sales and whatnot. But as you look at the pattern for 2025 by quarter, what I would say is one place you could start, I think the consensus figures that are out there, the market expectations, show a reasonably good pattern of how to think about the progression through the quarters. So midpoint on our guide for Q1 in the mid-170s, what I would expect is that with that seasonality behind us, as you get to Q2, you would be experiencing something closer to the low 200s. And then in the second half of the year, we would expect to see the recovery in a number of areas, which will create some lift in the second half versus the first half. So I would expect that you'll see EBITDA kind of in the $210 million to $220 million plus range for Q3 and Q4. That would give you an idea of the kind of pace and pattern to think about.

Great. That's helpful. And Kim, you touched on it briefly, but the potential of tariffs with Canada, specifically for you guys, I think you purchased a lot of your nickel from Canada. So maybe if you could just touch on that and then the mechanism that you have in place in your contracts to potentially recover if we do see tariffs on nickel in Canada. Thanks.

Sure, David. As I mentioned, a portion of our nickel comes from Canada, but it's much less than 50%. In fact, it's probably closer to 25%. And a lot of that is going for additional processing into Norway and other countries in Europe. But we've got multiple sources, three or four or five, which does allow us a little bit of flexibility as we think about the changing and evolving situation. The pass-through mechanisms, I'd say, were in place nickel obviously based on an LME price. We had surcharges and premiums that were already in place before the pandemic. But as we came out and we saw rapid inflation, we took that opportunity to really enforce those mechanisms to ensure that we get close alignment. Our intention is to pass through any increases in cost that we're seeing in our raw materials. So we feel like we're in a good place for that today. And we'll continue to monitor and be flexible based on the changing dynamics.

Our next question is from Seth Seifman from JPMorgan.

Thanks very much and good morning. I wonder if you could maybe take apart a little bit more the expectations for growth, especially on the engine side in HPMC this year in terms of A, the programs that will be driving it, and then B, kind of where the products that will be driving it more, whether it's more on the specialty alloy side, the forging side, and titanium, and kind of how the execution is going in those areas, and I guess what I'm getting at is kind of also how we can think about the margin progression in HPMC and when we can get back on a track of kind of ascending margins in that business.

Sure. So let me take a start at it and then I'll let Don add some color here at the end. You mentioned titanium and you mentioned engine. So I'm going to start broadly here and we can narrow it down to make sure that I get your question completely answered. So as we think about engine growth, I believe is where you started, we saw about 9% growth in 2024 over 2023. And I'd say we are anticipating similar growth as we go into 2025. We're seeing that in both materials as well as forgings. I'd say MRO is driving quite a bit of activity. We're seeing a lot of that, especially in our forge products business, where the hot section of the engine, we're making those discs; they've got the highest backlog that we've had, I think ever, over a year of lead time for parts. A lot of that growth is coming, as I said, from MRO, the shop visits, the lifing upgrades that are being made across all of the different OEMs, as well as the work that Pratt is doing. We're partnering with them to continue to ramp up our production to support their accelerated shop visit program. I think I mentioned in the prepared remarks, our revenue is up 3x in 2024, just for the GTF program. And we hit run rate, full run rate in Q4 of that ramp increase on parts for them. We expect to see full year 2025 with a 50% increase. All of this is being supported broadly by the ISO capacity increase. We upgraded our fourth ISO press that's online. We had 32% of ISO output in 2024. As I said, we're hitting full run rates on that press and overall, and so we're going to see continued growth for all of 2025. We've been focusing on downstream bottlenecks around ultrasonic testing which is an industry constraint kind of across the board but with our minimal capital investment as well as investing in qualified technicians and training, we've increased that over 50% and so really reducing cycle time increasing throughput in the shop there. Overall, engine demand remains strong, we continue to see it across the board especially from MRO. I think I'd say I'm hearing kind of 40%, 50%, 60% of their order demands are being driven by MRO today. Now, you mentioned titanium. Just briefly, there is titanium that's included with that. We do have our new EB2 melter that's coming online in Washington. We are commissioning today, waiting on final permit approvals because we do have customer commitments for that asset. So we're anxious to get going and start qualifying that asset. Titanium, I think a little bit as looking at the airframe market, and as that starts to ramp, I think Airbus is very stable and we're anticipating that going into 2025. You heard from Boeing; their growth with the 737 is on track and we anticipate that will continue to ramp as we get into the back half of the year. I think the one area I'm keeping an eye on is wide bodies. I think both air framers have talked about ramping in 2026 and increasing the build rates. We're starting to see some of that activity and we'd look to see that order activity come in during the back half of the year. So pretty strong demand on engines. Airframe, I'd say, is a little more muted, flat to slightly up in the first half of the year for sure, and then as they gain momentum going into the back half and as the wide bodies start to hopefully ramp, we'll see that additional order rate come in. And Don, I don't know, if you want to share anything with margins.

I would be happy to do that. So, as Kim said, really strong broad-based demand around jet engine, which is helping to drive our growth. And you can see the impact of that on our margin profiles. So for the way to think about our margin profile for HPMC for 2025, I would expect that, and I think I mentioned this, Q1, that we would see the margins in the kind of 20% to 21% range. Then you're going to see those ramp up to north of 23% as the year progresses. What's driving that increase in margin? It's all the dynamics we've talked about in the past. We're seeing this broad-based demand. We have a position with all of the major jet engine OEMs. So, we get tailwinds around the MRO. We get tailwinds around the builds as the wide-body build rates ramp. That's something that we're going to meaningfully participate in. That means that our volumes are increasing, but also increasing is our absorption. Then we get favorable mixed impact. We've talked in the past about expectations that the HPMC margins should be north of 25%. We clearly believe that's true. I don't expect that we're going to get there in 2025, but as we get into 2026 and head toward 2027, that is absolutely one of the objectives, and we believe we've got the underlying reasons that will drive us to that level.

Our next question is from Gautam Khanna from TD Cowen.

Yes, thanks. Good morning, guys. I was wondering if you could provide some context around the customer concessions, given we think of this pricing environment to be pretty strong for suppliers like ATI. What specifically led to those, and does that speak to any incremental pricing pressure broadly? Then I have a follow-up.

First, I wouldn't describe them as concessions. As you can imagine, Gautam. We have a robust portfolio of LTAs, and on a daily basis, we're having conversations with our customers on all sorts of terms. It's not just price; it's term, it's mix, it's many different dynamics. And it happened that this quarter, we had a charge that we took related to some of those discussions. Also keep in mind when we're dealing with our customers and addressing changes in contracts, sometimes those contracts can impact the current period, but it does not mean that you're detrimented or giving up value in the future. As a matter of fact, it's quite the contrary for us. When we talk about changing contracts and making amendments to key terms, it is always with the intent of improving our position for the long run. So the way to think about this, we won't share specifics around those conversations, but I would say, don't view this as a negative indicator for our position, our demand, the strength of demand under business or the strong negotiating position that we have with our customers. Don't look at it in that way, it would be an incorrect way to interpret it. And what I would also say is you should not expect to see a charge like this on anywhere of a recurring basis. This would be something I wouldn't expect to see again, just because of the unique circumstances that resulted in this charge. Does that help?

That's helpful context. Absolutely, yes. And just a quick follow-up, I know the guidance assumes no work stoppages. Curious if you could give us an update on how far along you are on the union contract association. Thank you.

Sure. Yes, sure. Discussions are ongoing. They began in January. They're very constructive and positive so far. So, yes, we remain confident that we're going to reach an agreement that rewards our employees as well as maintaining our competitiveness. I think they're progressing well. And we're having good dialogue on a weekly basis. They're including a large group of employees so that we're making sure that we're considering all the needs. And so, again, I'm not anticipating any work stoppage. We've not planned for once in our guidance. I'm looking forward to getting to an agreement with our employees for a fair contract for them while maintaining the competitiveness I mentioned.

Our next question is from Richard Safran from Seaport Research Partners.

Kim, Don, Dave, good morning. Kim, if I heard you right, I think you mentioned something about share gains. We're always interested in new customers, new long-term agreements. I want to know if you could discuss two related things. First, new long-term agreements with new customers, and then how you think that's going to impact capacity utilization.

Sure. In the summer, we announced $4 billion in new customer commitments. As I look at that, that was predominantly on the nickel side. Think about half of it for the rest of this decade will come through in orders and commitments. From a capacity standpoint, we're in good position to support these commitments that are coming. A lot of our conversations with our customers are really around today, are really about what is that demand going to be as we get to the back half of this decade and into 2030s. So we are starting those discussions around capacity, growth expectations, and builds. So for the rest of this decade, as I said, we're making good progress. I mentioned in the past we're on every program across the industry with each customer. I'd say our relationships with RTX have really grown, not just with Pratt, but the overall company. We're continuing, I think, to gain share, to gain relationships working on Next Generation products, and that capacity is well-aligned to support that.

Okay, thanks. On defense, there's a follow-up bit of a standout in the fourth quarter, up 38% sequentially, and you had an 11% decline in Q3. I thought that was related to titanium armor plate, but you didn't even mention that, so I thought maybe we could discuss this a bit more. I'm wondering if we're now looking at a more sustainable higher run rate for defense sales here.

Yes, I appreciate you asking about that. I do agree we did have a very good quarter for defense and I anticipate, again, depending on where the administration goes; some of that increase in the fourth quarter came from some of the volatility you're seeing in a geopolitical space where some of our partners are looking to bring in material and ramp up some of their growth rates. As you mentioned, we do have participation on the ground vehicles as well as nuclear naval applications. Both of those have been very active. I'd say the $200 billion that Congress is talking about possibly increasing defense spending in the next two fiscal years. When you look at the white paper on that, it's earmarked and targeted to go to programs over 50%, maybe 50% of that earmarked to go into programs that we participate in materials. I do think especially given the volatility we're seeing on trade and geopolitics, there is this focus around peace through strength. We're also seeing strong pull from some of our European counterparts where they're re-armor-ing as well in response to the Ukraine-Russia conflict. So yes, we did see an uptick. We're expecting to see that number go up maybe 7% as we go into 2025. So we're expecting additional growth. That's without this additional spending. If that were to come to fruition, it would be an additional tailwind for us as well.

Our next question is from Phil Gibbs from KeyBanc Capital Markets.

Yes, good morning. Hey, Kim and Don, was there any revenue catch-up in the fourth quarter from some of the third quarter issues? I remember there were some operational issues and some hurricane impacts. So was there a timing issue associated with some of the shipments perhaps going out in the fourth quarter and making up for some of the third quarter deficit?

So I'm going to take that one. The short answer is yes, we did see some of that, as you pointed out, with the operational challenges that we had in Q3. Also, there were some bottlenecks, if you recall, back in Q3, we had some material that was toward the end of the production and shipping process that was held up right at the end due to things like hurricanes. We saw a release of some of that. So yes, you would have seen some of that benefit in our Q3. It's one of the reasons I would say we overperformed a bit from a top-line standpoint. In magnitudes, think in terms of $20 million, something in that range, plus or minus. But there was another element that I would also point out because as you look at our revenue performance in Q4, it was very good, reflecting order patterns that were very positive. Part of those order patterns reflected that when the Boeing work stoppage ended and the supply chain started to become more confident, we started seeing some of our customers, more on the jet engine side, saying, hey, we want to take some of the material that's ready and was intended to ship in Q1. We'd like to see that. We want to see that in our inventory by the end of the year. We want it positioned for the impending ramp. The way to think about that was probably something in the range of $25 million to $30 million of revenue that moved from Q1 into Q4. Those are positives to the top line. We did have, if you're following it to the bottom line, we did have some less than favorable mix involved with revenue in the quarter that took some of the heat off those additional revenues as they dropped through. But still, those are the dynamics you want to think about when you see that $1.170 billion of Q4 revenue.

Thank you. And when you all talked about the $18 million benefit to EBITDA and the oil and gas rights, was that in AA&S? And I would assume that was all gain or credit and no revenue associated with it. And if that's correct, what was the earnings, the positive earnings impact from that?

So for the $18 million, it had two components. Just to make sure we're talking about the same thing. The $18 million related to the oil and gas gain was booked at the corporate level as a gain, so not as any revenue whatsoever. Then the other part of the $18 million we mentioned related to tax credits that the IRS had changed their rules relating to the recognition of those credits. They're above the line credits. That represented $10.4 million out of period. That $10.4 million was recorded in AA&S. It would have been recorded not as revenue, but as a reduction to expense.

Okay, so out of the $18 million, $10.4 million of it was this IRS credit and the remainder of the $7.6 million would have been the oil and gas gain. Is that correct?

Yes, broad strokes, yes. And the oil and gas gain, I mean, we were rounding some of the numbers, right? But the oil and gas gain for the quarter was $8 million. For the whole year, by the way, it was $11 million, which there are things to get excited about. One of the things we get excited about is the redeployment of capital, selling it, selling assets like that. Those gas rates are a great example of redeploying capital into more value-added activities. So that's just a side note.

Our next question is from Andre Madrid from BTIG.

Kim, Don, good morning. Let's see looking back on some of what you've outlined before, I think roughly three quarters of your zirconium supply comes from China. How should we think about the potential impact of tariffs there, especially just with relations with China moving forward? I mean, is this anything that we should see as a risk or are you actively seeking ways to diversify away or is that even possible?

Yes. Thank you. Yes. So not quite three quarters, but it is a mixture between a material from China and then a material that comes from a couple of other sources. So, yes. We’ve been working specially with our customers on the program at identifying other sources and we have identified some second sources, so that we could use that to offset if the material becomes difficult to receive. I think tariffs we've been paying tariffs on this material. I do think we've been working, and some of that uptick you saw in the fourth quarter was us getting into position with our customer to be prepared depending on how this volatile situation continues to evolve. And I'd say the third thing that we're doing is we have been and we're going to continue to place a physical hedge. We are bringing in material ahead of this kind of ongoing trade discussions back and forth between us and China. We're doing many things to offset that. Fundamentally it won't stop demand. It would have some impact on production. It would have some impact if we were unable to get any material. But I do think we've got other sources that will allow us to continue to get that and continue to produce. It's just going to be a matter of what is the volatility in the supply and the pricing over here the next few months and maybe going into the year.

Our next question is from Timna Tanners from Wolfe Research.

Yes. Hey, good morning. I wanted to ask about the operational instructions. I know you identified and one of them is solidly in the rearview mirror, but there was one that was going to trickle into Q2. So can you just remind us where that stands and also any updated measures to keep ensuring that the operations are smoothly running? Thank you.

Sure. I'll take that one. Let me address that question in two parts that you asked there. One is just to give an update on the Q3 status and the challenges that we face towards the end of the quarter. And then secondly, more broadly, how we're investing in our operations to continually improve reliability and productivity. So to your first point, Q3, we did experience several challenges, many of them towards the end of the quarter that made it difficult for us to fully recover. But the team did a nice job at resolving the nickel VIM melt issues in the VIM shop. These are behind us today. The shop is operational, stable, and in fact, some of the engineered solutions I talked about last quarter that we put into place are allowing us to exceed targets and post new records. The second is the issue. As we communicated, this is targeted to be completed in Q2. It is on track, but those repairs are in progress and ongoing. The team did a nice job there as well at putting in place outside processors to help us restore flow and continue to get the material flowing until the fix is completed. So both of those are stable. We're continuing to work on the challenges and we still expect that to be back online in the second quarter. The second point around just how are we thinking about this from a broader routine maintenance standpoint. Routine maintenance happens all the time every quarter in different areas of operations. These outages are incorporated into our guidance, and the team is always working to reduce that downtime to make it more effective for preventative maintenance and more broadly. We are continuing to invest in reliability and preventative maintenance programs. This has been an ongoing priority for us and isn't a reaction to the recent issues. A big part of this is going to be the asset redeployment that we sold some assets that Don talked about a moment ago and redeploying those into growth, reliability, and debottlenecking. We're continuing to invest in technology, engineered solutions, and the use of artificial intelligence, which I talked about a little bit in my prepared remarks, to really put in sensors and automation that allow us to predict when equipment seems to be drifting when we start to see issues and then eliminate those equipment issues proactively as they occur. There's a lot of great work. I mentioned some of the records that the teams are achieving. I do think this is an ongoing focus. We've been talking about debottlenecking and reliability. I think each quarter we're continuing to improve and get momentum. Last quarter has been very stable operationally and the team's doing a nice job. You can start to see some of these results coming through.

Okay, that's great to hear. I wanted to ask a follow-up. I know we've been talking a lot about tariffs. And for all we know, this will all get resolved really quickly. But Europe has been all so many.

We can help.

So I just wanted to, yes, it's hard to predict. But with Europe, I just wanted to ask if there were tariffs on Europe and if there were retaliatory tariffs, how do you think about those? And even if you have any thoughts on the likelihood, it would be great. Thanks.

I'll take your second question. The likelihood is hard to predict. I think the likelihood is high that there will be some discussion from our President and administration of some tariffs. I think he's indicated that, right? As he's talked and I've seen statements. So will those come to fruition? Will they be implemented in what way and at what level? That's hard to predict. I do think we are in a good position similar to the tariffs that he was talking about with our near partners here with Canada and Mexico. We've dual-sourced incoming materials. We do have those pass-through mechanisms in place in those contracts as well. It was very important. We focused on passing through inflation and ensuring that we captured things like tariffs as well as building tariff language into our contract. Our legal department did a nice job at anticipating some things that could be coming on the horizon. I'm not sure that I see the industry going back to as heavy of a reliance on any one source be it VSMPO or any other one. So, I don't know if the dynamic, they may come back in, it may normalize, but I'm not seeing it go back to what it was because I think that lesson has been firmly learned by all of us here in the supply chain.

Our next question is from Scott Deuschle from Deutsche Bank.

Hey, good morning. Don as the elevated CapEx for 2025 pull forward a future CapEx versus the level we should run rate going forward.

I wouldn't run rate. Actually, I appreciate you asking the question. We've been very, very consistent in terms of what we had, what we've communicated as the expectation for capital investment. So going to $270 million this year is really a reflection of a couple of things. First of all, it's still a part of that on average $200 million a year. If you look at the appendix of the presentation deck for today's call, you're going to see we add this schedule that shows you how we calculate whether or not we're on track to that $200 million commitment for capital investment for growth and reliability and maintenance. What you'll see in that calculation is we first put out our $200 million per year target in 2022. I reiterated that in 2023. If you look at the schedule that we show, it shows that rolling average, rolling annual average for CapEx, and it is since 2022, it averages in that $184 million, I believe, $182 million, $184 million. We are absolutely within the range of the guidance that we've given. I do view the $270 million as an increase above what you would normally describe as gross CapEx. But keep in mind, we're redeploying the proceeds from asset sales that we executed in 2024. A lot of that was late 2024. We're taking that capital and putting it into higher-returning, higher-value uses through CapEx investment. It's been a part of our key strategy. It happened that the proceeds from asset sales in 2024 were higher than we typically see. But it's still part of the same strategy. We still expect the same kind of return profile, which is north of 30% on those investments. So it's all holding together. After 2025, you're going to see a similar pattern for us as we keep that commitment around spending something in the range of $200 million on average for CapEx annually.

Yes, that's great. Thank you. And then, Kim, just on the jet engine side, are you starting to see a healthier balance of wide-body jet engine growth at this point in the cycle? Or is most of the jet engine growth you're seeing still on the narrow-body side?

As I think about it, it's been probably more active on the single aisle. We are starting to see some pulls. We've had some conversations at the end of last year. Engine OEMs are getting ready for the wide-body ramp. We have heard indications of increased order rates this year as those pulls keep coming. But I would say probably the most predominant demand signal that we are seeing today is really around MRO and the shop visits and the upgrades for lifing issues on all the programs. Again, it really shows up when you look at our Forged Products business with their lead times out over a year. It's probably the largest backlog they have had in their history. As I'm talking with the OEMs and they’re sharing, a large percentage of their demand is from MRO, 40%, 50%, 60%. They're not forecasting that to drop, certainly not this year, but in the next few years. So I would expect, like I said, I'm watching if the wide bodies start to work towards that step change.

Okay, and then just to clarify, are wide-body jet engine sales typically higher margin than narrow-body jet engine sales for similar products, or is it pretty similar? Just trying to get a sense if you do get that wide-body jet engine recovery if that's beneficial to your incremental margins in the future. Thank you.

Yes, I would say maybe not as related to wide-body versus single engine, single aisle engines, but the materials that go into those wide-body engines are very differentiated, so we would expect to see a slight uptick in margins given those materials are very difficult to make. A lot of them are powdery alloys, so you're going to see that is going to be accretive to our margin.

Our next question is from Josh Sullivan from the Benchmark Company.

Hey, good morning. Can you just expand on the comments about Russia? You just mentioned what do you see as the scenarios that the Ukrainian deal is reached? How should we think of that headline, obviously, potential titanium supply returning versus what you actually think will evolve in the titanium market? And then maybe conversely, I guess, are there any exotic minerals from Russia that might be helpful for ETA?

Yes, there's lots of chatter and talk about specifically VSMPO coming back into the markets and providing titanium parts and forgings. From our perspective, we're monitoring both relations and how the U.S. reacts and, frankly, how the European players react because they may be different at their acceptance and their rate of normalizing relations. There is the recognition that there will be a re-qualification period that's going to take some time. Even once relations have normalized and things are starting to progress, there's going to be this re-qualification that we have to work through. A lot of expertise that led these programs is no longer there, and I do think it's going to take some time for that to re-ramp and come back online and meet the high standards from a quality standpoint. So in the short term for 2025, I don't see that as a significant threat. I do think it's something to monitor as it continues to evolve and we'll see how rapidly they're able to get that expertise and re-qualify. There could be significant qualifications that need to be redone. As far as the benefit for us, yes, Russia was a large source of nickel for us in the past, and it's something that we moved away from and stopped purchasing there. That could be a positive for us. It's something that we're continuing to look at. I'd say the last thing just to mention as I think about the supply chain, I do believe all of the players have learned that lesson to ensure you de-risk and have dual sources to stay nimble in the face of uncertainty.

Got it, thank you for that. And I just think one last one in here thanks for taking it. Just on the Aero-Like markets, what do lead times look like, just given the very long cycle nature of those markets?

I believe those lead times are about six to nine months on most of those products. There's very high demand for specialty energy nuclear products, I would say that demand continues to grow, especially with energy needs, the resurgence of nuclear is coming back pretty strongly globally. From electronics and chip production, especially with the investments here in the US, lead times are very long across the market. I'm excited about the growth there. I think the team's doing a great job. We're working to get more capacity, but lead times continue to be very long.

Thank you. This concludes our Q&A session, so I'll now hand back to David for closing remarks.

Yes. Thank you very much for your time today on our fourth quarter call. Please feel free to reach out to myself and Clay on the Investor Relations team with any follow-up questions, and have a great day.

This concludes today's call. Thank you for joining. You may now disconnect your lines.