Thank you for waiting. My name is Ian, and I will be your conference operator today. I would like to welcome everyone to the Carpenter Technology Q4 FY '25 Earnings Conference Call. I will now hand the call over to John Huyette, VP of 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 30, 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 Thene, President and Chief Executive Officer; and Tim Lain, 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 10-K for the year ended June 30, 2024, and Forms 10-Q for the quarters ended September 30, 2024, December 31, 2024, and March 31, 2025, and the exhibits attached to those filings. Please note that in the following discussion, unless otherwise noted, when management discusses 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 4 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-injury workplace, driven by a sharp focus, consistent action and continuous improvement. Let's turn to Slide 5 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 30.5% in the quarter, compared to 25.2% a year ago and 29.1% 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 a 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 disciplined working capital management, we generated $201.3 million in adjusted free cash flow 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 6 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 end-use markets. Starting with the Aerospace and Defense end-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 end-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 remains 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 submarket in the quarter, which I will touch on momentarily. And our defense submarket 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 purchase 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 end-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 is significant growth potential. Shifting to the Energy end-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 submarket 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.

Thanks, Tony. Good morning, everyone. I'll start on the income statement summary. Starting at the top, sales excluding surcharge decreased 2% year-over-year on 14% lower volumes. Sequentially, sales were up 4% on 5% higher volume. The improving productivity, product mix and pricing are evident in our gross profit, which increased to $213.9 million in the current quarter, up 12% from the same quarter last year. SG&A expenses were $62.5 million in the fourth quarter, essentially flat sequentially and down slightly from the same quarter last year. Adjusted operating income was $151.4 million in the current quarter, which is 21% higher than the $125.2 million in our fourth quarter of fiscal year 2024 and up 10% from our recent third quarter. As Tony mentioned earlier, this represents another record quarterly operating income results, breaking the previous record which was just set last quarter. Moving on to our effective tax rate, which was 19.7% in the current quarter. This quarter's effective tax rate was lower than our anticipated rate due to certain discrete tax benefits recorded in the current quarter associated with equity awards. The full fiscal year 2025 effective tax rate was similar to the current quarter. Again, the reason the effective tax rate is lower than the normalized rate is primarily due to discrete tax benefits from the impact of equity awards vesting and stock option exercises during the year. For fiscal year 2026, we expect the effective tax rate to be more in line with our normalized rate of 21% to 23%. Finally, the earnings per diluted share was $2.21 for the quarter. The quarterly results cap off a historic fiscal year 2025. The Carpenter Technology team delivered on our promise of higher profitability driven by actions across the operations to increase productivity, manage the product mix to optimize for profit, and realize the benefits of pricing actions that we continue to pursue and capture. Now turning to more detail on each of the segments, starting with our SAO segment results. Net sales, excluding surcharge for the fourth quarter were $548 million. Sequentially, sales were up 6% on 5% higher volume driven by increases in our key end-use markets of Aerospace and Defense, Medical, and Energy. With adjusted operating margin of 30.5%, a meaningful milestone, SAO reported operating income of $167 million in the fourth quarter. The continued increase in sales, profitability, and margin expansion is a result of what we have highlighted over the last several quarters. Specifically, the SAO team's ability to increase productivity at key work centers to drive an improving mix while realizing higher selling prices. These areas are as relevant as ever as we actively manage our production schedules to adjust to changing customer priorities and seek to increase our overall output. Looking ahead to our upcoming first quarter of fiscal year 2026, we anticipate SAO will generate operating income in the range of $162 million to $165 million, which accounts for the planned maintenance activities to be executed in our upcoming first quarter. Now turning to Slide 10 and our PEP segment results. Net sales, excluding surcharge in the fourth quarter of fiscal year 2025 were $97.1 million, down 5% from the same quarter a year ago, and flat sequentially. In the current quarter, PEP reported operating income of $11.7 million compared with $10.6 million in the same quarter a year ago and $10.9 million in the third quarter of fiscal year 2025. The improving profitability is a result of solid results in our titanium business. As we've talked about in the past, our titanium business, Dynamet, is the driver for this segment. Our titanium solutions are an important element of our Medical end-use market portfolio. In addition to Dynamet, the additive business continues to drive higher sales, resulting in improved profitability. With that in mind, we currently anticipate that the PEP segment will deliver operating income in the range of $11 million to $12 million in the upcoming first quarter of fiscal year 2026. Now turning to the next slide to talk about our cash generation and capital allocation priorities. In the current quarter, we generated $258 million of cash from operating activities, and we spent $58 million on capital expenditures, resulting in $201.3 million of adjusted free cash flow. For the full fiscal year, we generated $287.5 million in free cash flow. The cash generation results were driven by improving profitability and our disciplined approach to working capital management. The cash generation is the engine driving our capital allocation priorities. At the beginning of fiscal year 2025, we announced the authorization of a $400 million stock repurchase program. To date, we have purchased $101.9 million under the program. The share repurchases complement our long-standing quarterly dividend and taken together reflect our commitment to return cash to our shareholders. In addition, we are committed to investing in our future growth. We announced the $400 million brownfield capacity expansion back in February, which is now underway. During fiscal year 2025, we spent $26 million of capital expenditures related to this project over and above the base CapEx, which resulted in $154.3 million of reported capital expenditures for fiscal year 2025. As we look ahead to fiscal year 2026, we expect to spend $300 million to $315 million on capital expenditures. This includes an estimated $175 million to $185 million related to the brownfield expansion project. We ended the quarter and the fiscal year with $664.4 million in total liquidity, including $315.5 million of cash. Our leverage ratio remains at historic lows. In fact, at June 30, 2025, our net debt-to-EBITDA ratio is 0.5x and we have no near-term debt maturities. Our free cash flow outlook is strong. We expect to generate adjusted free cash flow of $240 million to $280 million in fiscal year 2026. For clarity, this is net of our anticipated capital expenditures of $175 million to $185 million related to our brownfield capacity expansion project. Before I turn the call back to Tony, I wanted to highlight that as we have done in the past, we have included a slide in the appendix of this presentation that includes selected guidance to help model our anticipated fiscal year 2026 results. With that, I will turn the call back to Tony.

Thanks, Tim. The completion of fiscal year 2025 marked a meaningful milestone in the growth of Carpenter Technology. Just over 2 years ago, at our Investor Day in May 2023, we communicated a 4-year goal to reach $460 million to $500 million in operating income, which was double our pre-COVID high. We exceeded that original target in just 2 years. For fiscal year 2025, we generated $525.4 million in adjusted operating income, a 48% increase over fiscal year 2024. Our previous record year is nearly 4 times our fiscal year 2023. And we delivered those record profits at a time when the aerospace supply chain slowed, the medical industry went through a destocking and geopolitical issues continued. It is a testament to our focus on execution backed by a strong market position, broad solution portfolio, and unique capabilities that we were able to deliver such a strong year. In addition, with the record earnings and disciplined working capital management, we generated $287.5 million in adjusted free cash flow in fiscal year 2025. That is net of our investment in the brownfield expansion project as detailed in our recent investor update event, which will be an accelerant to our growth trajectory starting in fiscal year 2028. And we continue to return cash to shareholders. Over the course of the fiscal year, we executed $101.9 million in share repurchases in addition to $40 million in dividends. Altogether, the results speak for themselves, demonstrating powerful momentum. This is also evident as our market cap increased to over $13 billion, delivering meaningful total shareholder return. But as we communicated in our recent investor update event, we believe this is far from our peak. The same dynamics that drove our success in fiscal year 2025 are only strengthening as we look ahead over the next several years. With that, let's turn to our fiscal year 2026 outlook. Let's start with the near term. For the first quarter of fiscal year 2026, we are projecting between $148 million and $152 million in operating income. This is approximately 26% to 30% higher than last year's first fiscal quarter, which was then a record best first fiscal quarter and roughly in line with our just completed record fourth quarter. This represents a strong start to fiscal year 2026. For those of you who have been following our story, you know our preventive maintenance program is critical to keeping our assets healthy as we look to grow over the long term. We continue to operate in an increasingly strong demand environment, and asset availability is key to our continued success. Already in the first quarter of fiscal year 2026, we have completed several preventive maintenance projects and have additional activities planned for the remainder of the quarter. It is a strong testament to our earnings creation momentum that we are able to project record first quarter earnings even while completing strategic preventive maintenance projects. Moving on to how we are thinking about the full fiscal year 2026. At our recent investor update event in February, we set a target of $765 million to $800 million in adjusted operating income for fiscal year 2027. This represents a nearly 25% two-year CAGR over our record fiscal year 2025 operating income, and we believe it is the highest growth trajectory of our peers in the industry over that period of time. Our growth will continue to be driven by increasing sales and expanding margins from improving productivity, product mix, and pricing actions. It is important to note that we expect operating income to be materially higher in the second half of fiscal year 2026 versus the first half. This is driven by available operating days more heavily weighted towards the second half of our fiscal year due to planned maintenance activities and holidays, as well as the anticipated aerospace supply chain ramp continuation that will drive further earnings growth tailwinds in the second half of fiscal year 2026. With that said, we project fiscal year 2026 to be a meaningful step on the path towards fiscal year 2027 operating income goal. Specifically, we expect $660 million to $700 million in adjusted operating income in fiscal year 2026. This range represents a 26% to 33% increase over our record fiscal year 2025 earnings. And as I stated earlier, we believe this is our highest earnings growth trajectory among our industry peers. In addition, we are projecting approximately $240 million to $280 million in adjusted free cash flow during fiscal year 2026, net of brownfield capital expenditures, another meaningful step up in our cash flow performance. Finally, what is now our fiscal year 2027 target will not be the peak of our earnings growth as the same dynamics that are driving our current performance are expected to only get stronger in the future. Let's turn to the next slide, as I believe this point deserves a bit more detail. As I detailed earlier on the market slide, the Aerospace and Defense, Medical, and Energy markets had strong growth outlook for years to come. To be successful, both to meet the volume output demand as well as the performance challenges, these markets will rely on our diverse portfolio of products and world-class capabilities. We manufacture highly specialized products designed to meet customer and application-specific technical needs. And in many cases, we are the only company in the world able to make the material. As we look to the future in the aerospace market, significantly more planes will need to be built, and practically all will have Carpenter Technology content on them as we saw some of the most difficult technological challenges across many areas of the aircraft. Our specialized materials are found on all engine platforms in a wide range of components, including rings and discs, combustors, gearing systems, bearings, and fuel nozzles. Beyond the robust outlook for current generation engines, we continue to engage with OEMs to discuss future generation engine designs and how our solutions can address the challenges they are facing. In structural applications, our materials are found in high-performance parts such as landing gear and wing components. Given the stress these components must withstand, they require high strength, wear, and corrosion resistance performance. In avionics, we enable more powerful and efficient electric motors and generators, critical on aircraft where weight and space are at a premium. Our soft magnetic material found in the rotor and stator of an electric motor is critical to realizing those performance requirements. And our broad range of specialized alloys, including titanium, are found in fasteners across the entire plane, including the fuselage and the engine. As you can see, we are not overexposed to one particular platform, but instead participate across multiple platforms and OEMs for new builds and MRO. Our relevance to the aerospace OEM and the overall aerospace supply chain is significant and highly valued by our customers. Shifting to Medical, where our vision of partnering with our customers to solve their challenges has come to life. In working with medical OEMs, we are inventing new advanced solutions that improve patient outcomes. For example, in orthopedics, we have invented low-nickel alloys for use in medical implants. This material virtually eliminates the impact of nickel sensitivities which can cause complications for a portion of the medical patient population. Finally, in power generation, as I detailed in the market overview, there is significant demand for industrial gas turbines with rising energy demand from the technology sector. Carpenter Technology supports the IGT supply chain with multiple material solutions that are similar to materials used in commercial jet engines. These are just a few examples of where some of our most advanced solutions address key application challenges for our customers today and will continue to do so into the future. We believe our capabilities are unmatched and virtually impossible to replicate over the course of the next several decades. So when we talk about 2028 and beyond, it is undeniable that we will continue to be an irreplaceable force in helping our customers solve their most critical challenges. With this strong market outlook and our unique strategic position, we continue to seek opportunities to accelerate our long-term earnings growth potential. This mindset drove the recently announced brownfield expansion. The $400 million project will add high-purity primary and secondary melt capacity that will feed existing downstream finishing assets. We are in a demand environment where industry capacity for our specialized materials is well short of demand. This enables us to invest in a brownfield expansion without materially changing the industry's fundamental supply-demand imbalance. We believe Carpenter Technology is best positioned to successfully complete such a project, given our capabilities and unique collection of assets. Now let's turn to the final slide to summarize this great story. We just completed a historic fiscal year 2025. For fiscal year 2025, we generated $525.4 million in adjusted operating income, a 48% increase over fiscal year 2024, our previous record year, and nearly 4 times our fiscal year 2023, exceeding the original 4-year target in just 2 years. We generated $287.5 million in adjusted free cash flow over the course of the year, net of brownfield capacity expansion expenditures. We continue to build operating momentum with increased productivity, improved mix, and higher realized prices. In the current quarter, we expanded SAO adjusted operating margins to 30.5%, up from 25.2% from the previous year fourth quarter. And we executed $101.9 million in stock repurchases in fiscal year 2025 against the $400 million authorization, returning cash to shareholders. At our February 2025 investor update, we announced a fiscal year 2027 operating income target of $765 million to $800 million. And today, we provided more insight as we guided to a strong fiscal year 2026, projecting $660 million to $700 million in operating income. As I stated earlier, this range would represent a 26% to 33% increase over our record fiscal year 2025 earnings and as we believe the highest earnings growth trajectory among our industry peers. Importantly, we believe fiscal year 2027 isn't the earnings peak. We are just getting started. As we look out over the long term, Carpenter Technology is well positioned to continue to drive meaningful shareholder value. We are operating in a strong demand environment across our end-use markets with the long-term outlook even stronger than today. Given our unique assets, capabilities, and solutions, we are well positioned to realize this high-value demand. We are actively investing to accelerate that growth with additional strategic brownfield melting capacity, and we are balancing opportunities to invest in future growth with our desire to return cash to shareholders through our repurchase and dividend programs. In closing, we remain focused on supporting our customer needs, operational execution, and living our values as we drive to exceptional near-term and long-term performance. Thank you for your attention. And now I will turn the call back to the operator.

Our first question comes from Gautam Khanna with TD Cowen.

Thanks for the great explanation and good results. Tony and Tim, I was wondering, could you just talk a little bit about lead times if they've evolved at all in jet engine, fasteners and any other markets you think are important indicators? And then broadly, if you could speak to your expectations of pricing through the cycle over the next couple of years? You may have heard ATI announced a little bit of capacity today or I guess they alluded to it a quarter ago. Just do you think there's any impact to the strong pricing power that you guys have had? Do you think that will endure?

Yes. Thanks for your question, Gautam. I'll start with the second one. We said publicly in the past that as we go forward that we see pricing actions continuing to be a tailwind. That's still the case for us. That hasn't changed. The supply-demand gap as you look forward is so large. You remember, we made a very concerted effort to talk specifically about that when we announced our brownfield that said that it would not impact that overall supply/demand. As you see others put in smaller investments, that's not going to have a big impact on the overall supply and demand. In fact, it's helpful. It helps the entire industry build at a higher rate than we are right now. So I think those are complementary investments. And I think they are welcomed in the industry. So I don't see any issue with that going forward. The activity we just had in Paris with some of the contracts would substantiate that, that we don't see any change to our position when it comes to pricing actions. That's number one. Number two, the first part of your question at lead times, they remain extended. We use jet engines as the proxy for overall lead times, and they remain extended. And I would assume that they'll stay that way. I think going forward, quite frankly, Gautam, you're going to see even more tightness than you see now, right? Because you've got Boeing making good progress right now. That's a major positive. But you still have a subsection of the overall supply chain that was tied very tightly to Boeing and maybe specifically the 737. So in their mind, they're probably saying we're holding more inventory than what we'd like. But I think over the next couple of quarters, Gautam, you're going to see that turn dramatically. And any of that inventory will be used very, very quickly. On the other hand, you have customers that are broader in their offerings, I mean by more outlets than the 737. We see them pulling pretty aggressively on us right now. So I think you had a very good point right now where you see Boeing producing well, very consistent. And over the next couple of quarters, I believe it's going to continue to get tighter. So lead times are going to stay extended. Hopefully, that helps answer your question.

Our next question comes from the line of Scott Deuschle with Deutsche Bank.

Tony, did you approach this initial 2026 EBIT guide with a similar level of conservatism as you initially approached the 2025 guide with?

That's a good question, Scott. At a high level, we evaluate our internal data carefully. When we provide a target, we ensure that achieving it is realistic and that we are not overcommitting. The target does not incorporate actions we cannot reliably execute. Achieving that target will require significant effort, which I know you understand. The market conditions are more clearly defined now compared to May 2023, given the many changes since then. We take these targets very seriously as we know people depend on them, and we are confident that we can meet them.

And Tony, are you getting orders today that support a reacceleration in Aerospace and Defense volumes within the next few quarters? Or maybe just having conversations to that effect that give you confidence and an acceleration of volumes in that specific end market?

Yes, Scott, let me elaborate. The defense sector is quite aggressive. In aerospace, there are essentially two subgroups to consider, specifically regarding nickel billet, not titanium, aside from my titanium fasteners. The dynamics between nickel and titanium differ significantly. Focusing on nickel in aerospace, one subgroup is linked closely to Boeing and the 737. Not too long ago, they were building inventory in anticipation of ramping up production, but faced challenges related to Boeing. They may now hold more inventory than desired and are seeking greater confidence moving forward. We have collaborated with these customers without pushing materials on them, which we believe is not the right approach. Recently, discussions reflected a positive outlook based on Boeing's announcements about production rates and expectations for the upcoming quarters. If that continues, I believe you will see them place orders again quite rapidly, potentially urgently within two quarters. The other subgroup also has connections to the 737 but has more diversification in their operations. Recently, they have shown more aggressive engagement, as evidenced by our sequentially higher bookings compared to last quarter, which increased by 17% to 18%. This improvement indicates a positive trend. While there is a demand for more consistent deliveries from Boeing, I feel they are indeed meeting those expectations. Looking ahead to the next few quarters, I anticipate that this subgroup will return to stronger ordering patterns.

That's really helpful. And Tim, sorry if I missed this, but how much were power generation revenues up this quarter year-over-year?

We didn't say that on the call, Scott, but they were up significantly. Remember, Power Gen is in our energy business and it's Power Gen and oil and gas that makeup energy, but Power Gen was up significantly both year-over-year and sequentially.

Our next question comes from the line of Joshua Ward Sullivan with Benchmark.

On the defense growth, you noted the urgent requests continue to come in. Clearly, geopolitical operationally, tempos pretty high globally. But is there a way you can frame the urgent request from defense versus the more regular way? And then what is that urgent versus regular order flow look like over kind of the medium-term cycle in your opinion?

Well, Josh, I think as you know, on the defense side, those orders are historically more uneven than aerospace because they're very program-specific. They depend on budgets being passed by Congress; they depend on a lot of different schedules. So by definition, they're more uneven, right? Now you've seen some potential clarity when it comes to the defense budget and what that will be. And we've seen those orders increase even more over the last couple of months. I would suspect going forward that defense, based on what's in the new defense budget that lines up very closely to the products that we produce or we supply, that you'll see that stay at very elevated order levels.

Regarding the upcoming maintenance events, your capacity to operate at these historic margins and continue improving is commendable. You maintain a strong stance on maintenance, which appears to be a highly effective strategy for managing the system. Can you elaborate on how this aspect serves as an advantage for your company and how it may contribute to the overall long-term margin profile?

You can't earn money if the assets aren't functioning, and that's obvious. Not everyone may see it that way, but we do. Over the past few years, we've become much more data-driven, significantly utilizing AI tools in this area to predict future outcomes. Predictive maintenance has existed for decades, but the AI tools available now allow for a deeper understanding of the types of preventive maintenance outages to address. Additionally, the significant change for us is that long-term shutdowns are no longer necessary. We now keep our outages shorter and more focused, which helps us avoid the lengthy ramp-ups that others may experience after extended shutdowns. Looking ahead to the next few quarters, we have several targeted outages scheduled throughout the entire production process, including melting, remelt, hot working, and cold finishing, to ensure optimal operation. I believe this represents a strategic advantage in how we manage our operations and preventive maintenance, and it will continue to be a key area of focus for improvement.

And then maybe just one last one. On the power generation side, are you seeing anything where they're using more of your advanced materials? I mean, is there any material change in the industrial gas side? Or is it more a replacement cycle of legacy materials for industrial gas turbines?

We operate at the high end, providing alloys that closely resemble aerospace alloys. We expect this to be our primary alloy moving forward. I want to address Scott's question about Power Generation. As Tim mentioned, it falls under our oil and gas sector, which actually saw a decline from the previous quarter. However, Power Generation experienced an over 100% year-over-year increase. This signals significant growth in that area, giving us a strategic advantage to achieve aerospace-like margins. We are well-acquainted with this product, and it integrates seamlessly into our overall production process. Although the revenue percentage from Power Generation is small, due to our dominance in aerospace, it remains strategically important and presents substantial growth potential for us in the future.

Your next question comes from the line of Bennett Moore with JPMorgan.

And congrats on a record year. How should we think about further mix gains into fiscal year '26? More specifically, if you can maintain the rate of Aerospace and Defense mix growth seen over the past 12 to 18 months, I would think this would be somewhat a function of yield improvements and leveraging latent capacity? If you could comment on that too, please?

Please follow up if I don't address your question fully. Moving forward, we primarily see ourselves as an aerospace company, which will be one of our main focuses. We anticipate that aerospace demand will significantly increase over the next few years. It's evident when you consider where OEMs are currently producing and their future production plans. Our aerospace business is expected to continue growing. Additionally, the medical market is also very strong for us, offering margins comparable to or even exceeding those in aerospace. It's important to note that our medical sales are 70% higher than they were in FY '19, before COVID. We've managed to expand in this market because we are innovators. The medical sector requires new alloys to address customer challenges, and we've successfully developed solutions like the new alloy addressing nickel sensitivity. This isn't a market where you can merely enter and exit based on capacity; it demands a steadfast commitment to innovation and problem-solving for customers. Thus, we believe this will be a continued growth driver for us. Regarding power generation, we believe we can push our sales as high as we desire due to seemingly unlimited demand and positive interactions with our customers. Together, aerospace, medical, and power generation represent over 80% of our business, with aerospace alone accounting for more than 60%. This strong mix is something we will aim to further enhance in the coming years.

And then regarding shipments, I know you mentioned the preventive maintenance in the first quarter; earnings are expected to be more weighted in the second half. Do you think SAO volumes could trend higher this year, potentially more weighted toward the second half?

I think what we have to do, Bennett, when you talk about volumes, I think the days of looking at overall volumes are going, right? We're just too complex. It's too sophisticated. You need to look specifically at aerospace volumes, medical volumes. Those I will answer yes to some of our other markets that have traditionally been higher volume, lower profit then you're not going to see the same emphasis there. So going forward, let's talk about volumes by market, and I think we'll have a much clearer picture. And that's what we're trying to do. We're trying to drive profitability, not volume.

Our next question comes from the line of Andre Madrid with BTIG.

I wanted to ask a bit more pointedly. I don't mean to beat a dead horse here, but it kind of ties into your conversation about the two separate camps that we're seeing right now. And I guess when you look at it, if I can ask more pointedly, what are you seeing around airframe demand? And are you seeing significant destocking?

In this environment, we have achieved record quarters, and that is not affecting our ability to generate these earnings. Some customers have more inventory than they prefer, particularly those closely tied to the 737, which is not surprising and is quite common. I believe that inventory will be reduced quickly, but it does not significantly influence our overall performance and earnings potential. The fact that some customers are slightly delaying orders did not affect our quarter, and it will not alter the guidance we just provided. This situation should be clearly understood by everyone, and with Boeing's ongoing success, it will soon be behind us.

Got it. Got it. And then Medical, obviously, continued momentum there, but the story seems a bit different at one of your peers. They highlighted some inventory destocking there as well, some trade headwinds, some pricing pressure. Are you seeing any of that? I mean I know the comp is...

Yes, I think it's important to note that not everything is the same. Just because we are in the medical market doesn't mean we are competing in the same areas. We operate at the high end of the medical market, specifically in orthopedics, cardiology, and dental. If you're looking to jump in and out of the market, you may face those types of challenges. However, as a long-term player focused on solving complex problems, we do not see those issues affecting us. Our approach to the market is different from others, and we believe it’s a highly profitable and strong market for us now, with even greater potential in the future. Therefore, it is not a valid comparison to what you mentioned.

Our next question comes from the line of Phil Gibbs with KeyBanc Capital Markets.

So Tony, as I look out to the guidance for fiscal '26, is there a way to sort of tether out how much you think within that upside relative to this year is going to be pricing and mix related versus just volume leverage?

Well, I will tell you the specifics on that, Phil, but all three of those are going to be drivers for us going forward. We believe all three of those will take a next step up.

Appreciate that. And then I don't know if you mentioned it earlier, but did you provide your jet engine sales growth either sequentially or year-over-year?

Yes, I'll do that for you, sir. Aero Engines, up 5% sequentially and up 3% year-over-year. So good quarter for us there in that area.

And then lastly, Big Beautiful Bill within your fiscal '26 free cash flow guidance. Is there any cash tax benefit from accelerated depreciation within that outlook?

Tim here, and the short answer is no. We didn't factor that into the guidance we just provided. We're assessing the impacts like many companies are. You mentioned accelerated depreciation, and there's also the potential benefit from expensing R&D, which is likely to positively affect our cash taxes. We will have more information on that in Q1, but it should overall be beneficial for us and was not included in the guidance we just shared.

Our next question comes from the line of Andre Madrid with BTIG.

Sorry, I just had a follow-up as well. You mentioned completing some LTAs in Paris. I mean, are you seeing any sizable change to your LTA mix?

Sizable change? No, not a sizable change. I mean these LTAs primarily are re-upping of existing prior LTAs. So it's just the next level. There's been a couple of customers maybe that we signed new LTAs with, but the majority is the renewal of the existing LTAs.

There are no further questions at this time. I would like to hand the call back over to John Huyette for some closing remarks.

Thank you, operator, and thank you, everyone, for joining us today for our fiscal year 2025 fourth quarter conference call. Have a great rest of your day.