Greetings, and welcome to the Kaiser Aluminum Corporation First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce our host, Kim Orlando with Addo Investor Relations. Please, ma'am, you may begin.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's first quarter 2023 earnings conference call. If you have not seen a copy of our earnings press release, please visit the Investor Relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me on the call today are President and Chief Executive Officer, Keith Harvey; Executive Vice President and Chief Financial Officer, Neal West; and Vice President and Chief Accounting Officer, Jennifer Huey. Before we begin, I'd like to refer you to the first three slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors that could cause results to differ materially from the forward-looking statements, please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2022. The company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP financial measures are not provided because certain items required for such reconciliations are outside of our control and/or cannot be reasonably predicted or provided without unreasonable efforts. Any reference to EBITDA and our discussion today means adjusted EBITDA, which excludes non-run rate items for which we have provided reconciliations in the appendix. At the conclusion of the company's presentation, we will open the call for questions. I would now like to turn the call over to Keith Harvey. Keith?

Thanks, Kim, and thank you all for joining us for a review of our first quarter 2023 results. Turning to Slide 6. Our focus on execution, coupled with continued traction on pricing and favorable demand trends in certain of our markets drove better-than-expected first quarter results despite ongoing macroeconomic and specific business challenges. Our first quarter adjusted EBITDA increased 57% over the fourth quarter of 2022 to approximately $47 million, primarily reflecting continued strength in pricing, the mix of products sold across our portfolio of businesses, and our strong focus on reducing costs across our platform. Our EBITDA margin improved 430 basis points sequentially over the fourth quarter of 2022 despite higher planned major maintenance expenses and continued higher commodity and input costs in the quarter. As a reminder, in an effort to minimize the impact of 2022 supply disruptions on our packaging customers, we purchased higher-cost metal units in the second half of last year. These purchases, along with reduced sales in the second half of 2022 led to a higher-than-anticipated metal inventory imbalance at the end of the year. We expect this inventory imbalance and the resulting higher cost associated with those purchases to normalize over the next several quarters. The demand environment for the first quarter was mixed, but overall met or exceeded our expectations. Aerospace demand continued to improve with both shipments and conversion revenue surpassing our expectations. With generally good multiyear pricing in place for most of these products, first quarter results reflected an exceptionally robust mix of products and customers served with strong accompanying pricing, which resulted in higher conversion revenue than anticipated. In many of our facilities, we were able to flex available capacity to satisfy strengthening aerospace demand as general engineering demand softened, which led to positive results for not only Kaiser but also for our valued customers. We remain well-positioned to service these customers moving forward. In packaging, destocking with beverage customers continued as consumer purchasing trends continue to adjust to the post-COVID environment with higher costs being passed on to the consumer. However, shipments met our expectations and conversion revenue was better than expected due to improved pricing and a better mix of products sold in the quarter. In general engineering, we continue to see a slowdown in semiconductor plate and other general engineering long products as distributor inventories continue to rebalance to match current demand. Prices were better than expected as our commercial teams continue to do an excellent job properly pricing the value of our market-preferred KaiserSelect products, where our quality and customer satisfaction focus continue to earn a premium in the marketplace. And finally, automotive demand modestly improved as the industry continued to recover from its semiconductor and other supply chain challenges. Shipments and conversion revenue in this market also came in significantly better than expectations as improved pricing on existing and new programs was evident in the quarter. I'd now like to turn to a brief update on Warrick following the details we outlined on our February call to position this business for success. We have implemented a number of initiatives to normalize our operations at the Warrick rolling mill, now that it has begun to stabilize and continues to recover from many of the challenges we faced last year. For example, we are making solid progress in our contract renegotiations with our packaging customers to improve the timing of contained metal and alloy price adjustments to facilitate the pass-through of higher commodity and input costs. We believe these necessary measures will help mitigate the quarterly impact of higher material and other inflationary costs on our business moving forward and discussions remain ongoing. Additionally, our roll coat capacity expansion project, which is expected to convert roughly 25% of our current output to higher-margin coated products, remains on track. However, we are experiencing higher inflationary costs on the project due mainly to continued rising steel prices and other construction-related costs. Our target to be fully operational by mid to late 2024 remains intact. We remain optimistic on the long-term outlook for our packaging business given our niche market focus on coated packaging products, the significant investments we are making in the business, and the continued secular shift to aluminum as the substrate of choice in the North American beverage and food industry. As we look ahead, we believe our refined strategy, coupled with our strong customer relationships and multiyear contracts, will support margin improvement and continued long-term growth. In summary, we had a better-than-expected start to the year following a highly challenging 2022. I'd like to thank our team for their continued commitment and dedication to strong operational execution and working safely. Our operations are stabilizing, and both underlying demand and pricing have been holding up well. While broader macroeconomic uncertainty stemming from ongoing inflationary pressures, supply chain inconsistencies, and the threat of a slowing economy remain, the secular growth trends expected in our markets give us confidence that we are well-positioned to benefit longer term. We look forward to continuing to yield positive results from focused execution against our strategic plan to reinvigorate profitable growth in 2023. I'll now turn the call over to Neal for more detail on the quarter.

Thank you, Keith, and good morning, everyone. I'll begin on Slide 8 with an overview of our conversion revenue. Conversion revenue for the first quarter of 2023 was $369 million, an increase of $16 million or 4% compared to the prior year period. Looking at each of our end markets in detail, Aero high-strength conversion revenue totaled $122 million in the first quarter 2023, reflecting a 39% improvement on a 28% increase in shipments over the prior year quarter and a 19% improvement on a 6% increase in shipments over the fourth quarter of 2022. The improvement in conversion revenue over both periods reflects higher pricing, along with growth in shipments driven by the strengthening demand for commercial aerospace applications. Packaging conversion revenue was $133 million in the first quarter, down 8% year-over-year due to a 12% reduction in shipments, resulting predominantly from destocking in the beverage can markets offset by improved pricing per pound. On a sequential basis, first quarter conversion revenue was down 1% and relatively flat shipments over the fourth quarter of 2022. General engineering products conversion revenue for the first quarter was $80 million, down 17% year-over-year due to a 35% reduction in shipments, offset by higher pricing to offset inflationary costs. Sequentially, first quarter 2023 conversion revenue was down 13% on 15% lower shipments. As expected, lower shipments over both periods were predominantly due to destocking at service centers for our extruded rod and bar products, in addition to softer demand from plate due to the impacts of the semiconductor chip export restrictions. Automotive conversion revenue was $31 million, up 43% over the first quarter of 2022, driven by a 19% increase in shipments. First quarter 2023 conversion revenue improved 24% on a 10% improvement in shipments over the fourth quarter of 2022. The improvement in conversion revenue over both periods was driven by higher shipments as well as improved pricing. Additional details on conversion revenue and shipments by end market applications can be found in the appendix of this presentation. Turning to Slide 9. Reported operating income for the first quarter of 2023 was $19 million. After adjusting for corporate restructuring costs and other non-run rate items of $1 million, adjusting operating income was $20 million, down 18% year-over-year. Our effective tax rate for the first quarter of 2023 was 24% compared to 29% in the prior year period. For the full year 2023 and over the long term, we continue to expect our effective tax rate before discrete items to be in the low to mid-20% range under current tax regulations. In addition, we anticipate that our cash taxes will remain in the low to mid-single digits until we consume our federal NOLs, which as of year-end 2022 were $161 million. Reported net income for the first quarter of 2023 was $16 million or $0.99 per diluted share compared to a net income of $8 million or $0.51 per diluted share in the prior year quarter. After adjusting for the $1 million non-run rate items previously mentioned and other pretax income of $14 million related to a legacy land sale, adjusted net income for the first quarter of 2023 was $7 million or $0.42 per adjusted diluted share compared to adjusted net income of $9 million or $0.53 per adjusted diluted share in the prior year quarter. Now turning to Slide 10. Adjusted EBITDA for the first quarter of 2023 was $47 million, up approximately $17 million from the fourth quarter of 2022 and down approximately $6 million from the prior year quarter. As Keith highlighted, the sequential increase was driven by our ongoing efforts to offset higher inflationary costs through pricing actions, cost reductions, and efficiency improvement projects. Adjusted EBITDA as a percentage of conversion revenue was 12.7% in the first quarter of 2023, which surpassed our expectations by improving extracts only 430 basis points from the fourth quarter of 2022. The outperformance reflected the improved cost recovery from pricing actions taken during the prior year as well as moderating input costs. On a year-over-year basis, adjusted EBITDA was impacted by $7 million of increased, planned major maintenance activity associated with furnace rebuilds partially offset by lower freight costs. In addition, our margin performance continues to be hindered by higher metal input costs associated with ongoing inventory imbalance along with the time lag for passing through certain other commodity and production costs within our packaging operations. Now turning to a discussion on our balance sheet and cash flow. On March 31, 2023, total cash of approximately $32 million and more than $514 million of borrowing availability in our revolving credit facility provided total liquidity of approximately $546 million. There were $39 million of outstanding borrowings under the revolving credit facility as of March 31 as we continue to invest in growth capital projects, most notably the roll coat capacity improvement project in packaging as well as to meet our working capital requirements. Notwithstanding our use of cash in the quarter, we believe our total liquidity position remains strong. As a reminder, our senior notes interest costs are fixed at $48 million annually, and we have no debt maturing until 2028. In regards to our capital allocation strategy, we remain focused on supporting Kaiser's growth in 2023 while continuing to make returns to our stockholders through quarterly cash dividends. On April 12, we announced that our board of directors declared a quarterly dividend of $0.77 per common share, reinforcing the confidence our board and management have in our long-term strategy for profitable growth and increasing stockholder value. For the full year 2023, we anticipate our capital expenditures to be in the range of $170 million to $190 million. And now I'll turn the call back over to Keith to discuss our outlook.

Thanks, Neal. Now I'll turn to our outlook for the second quarter of 2023. Beginning with aerospace on Slide 12, we anticipate the strong momentum we've been seeing in aero and high-strength shipments to continue into the second quarter. The recovery in commercial aerospace, in particular, has continued to ramp towards pre-pandemic levels, which we continue to believe should be attainable in 2024. Now turning to Slide 13. Build rate increases for single-aisle and wide-body jets are being planned for this year as supply chains improve, airline passenger miles continue to increase and declarations by the airframer support a stronger 2023. As such, we expect our second quarter shipments will sequentially improve by approximately 3% to 5% versus the first quarter of 2023. Conversion revenue is expected to be flat over the same period as we are not anticipating as strong of a mix of products as we experienced in the first quarter. Underlying demand for business jet, defense, and space-related sales are expected to remain strong. As mentioned previously, we remain well-positioned to support incremental aerospace and high-strength demand in the second quarter and beyond, following the investments and upgrades we continue to make in our facilities, along with our ability to pivot existing capacities to adjust with market demand. Turning to packaging on Slide 14. As mentioned earlier, our packaging operations are stabilizing following the significant supply chain challenges we experienced in 2022 at our Warrick rolling mill. Looking ahead in 2023, we expect operations to continue to normalize with some lingering impacts from higher metal costs and a continued lag in price adjustments to fully pass through certain costs with a few remaining customer contracts. Destocking in beverage products is expected to continue into the second quarter. However, we anticipate second quarter shipments and conversion revenue to improve approximately 3% to 5% compared to the first quarter of 2023. We remain bullish on the longer-term prospects for improved packaging margins guided by our niche focus and position in the market, our targeted growth investment in the new roll coat line and strong customer relationships. Now turning to general engineering on slide 15. Sales and conversion revenue for general engineering products in the second quarter are expected to be similar to the first quarter. We expect continued softening in plate due mainly to reduced demand for semiconductors and in our rod and bar products as distributors continue to reduce inventories to match lower sales. Pricing is expected to come under more pressure going forward as more domestic capacity becomes available due to slowing semiconductor demand and availability increases from imported plate suppliers. We remain confident our highly differentiated Kaiser Select products and industry-leading customer satisfaction metrics, broad product offering, and strong long-term customer relationships will continue to warrant a premium for these products. On a more positive note, the slowdown in semiconductor plate has opened capacity at our Trentwood rolling mill to accommodate rising aerospace demand, highlighting a key benefit of our unique diversification strategy. While general engineering markets have long been first movers to decline as the economy slows, there is growing support that with the reshoring of certain manufacturing industries back to North America, and the strong dislocations associated with long supply chains, domestic supply of these products is in a stronger position than in the past, and the depth of any trough in demand will be more shallow than in the past. Our differentiators mentioned previously are expected to minimize the impact of any slowdown for Kaiser. Next, I'll turn to automotive on slide 16. Demand for automotive has been modestly recovering in 2023 on higher build rates for trucks and light vehicles in North America. That being said, we expect shipments and conversion revenue to mirror our first quarter, which, as a reminder, were higher than expected when we gave our outlook in February for the first quarter. Currently, we don't expect a more meaningful recovery in automotive until at least mid to late 2023. Turning to slide 17, we believe Kaiser is well positioned to execute in the current demand environment, given our solid market position as a key supplier in diverse end markets that require products that can be technically challenging applications and multiyear contracts with key strategic partners. We remain intently focused on managing elements within our control, including pursuing cost reductions in our operations, improving manufacturing efficiencies as our operations stabilize, and continuing commercial actions to improve our margins. As such, we expect our second quarter 2023 EBITDA and margins will be flat to slightly positive compared to our first quarter results as we improve efficiencies continued to successfully pass through higher input and commodity cost and rebalance our inventories as previously discussed. Importantly, we are prepared to address economic adversity and market cyclicality, given our strong liquidity position and demonstrated ability to flex our highly variable cost structure, if needed. We remain responsible stewards of capital to take advantage of the growth opportunities ahead of us while continuing to manage debt and deliver solid returns to our shareholders. Now turning to slide 19, and a summary of today's remarks. I'm pleased with our start to the year as we continue to execute against our long-term strategy for sustainable and profitable growth. We remain confident this portfolio can deliver conversion revenue approaching $2 billion and an EBITDA margin on conversion revenue in the mid to high 20% range, the timing of which remains subject to expected investments and macroeconomic conditions. With that, I'll now open the call to any questions you may have.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from Emily Chieng with Goldman Sachs. Please go ahead.

Good morning, Keith and Neal. Thank you for taking my questions this morning. I wanted to come back to your comments around being cautiously optimistic for the full year in terms of both the EBITDA margin profile and an EBITDA generation there. Are you able to put some numbers or frames of reference around what cautiously optimistic might translate to in terms of that margin outlook? And what's the level of confidence you have in the volume pricing and cost out potential in the second half of the year?

Yeah, well, good morning, Emily, and thanks for the question. Well, as we mentioned in our comments, Emily, we're still seeing pretty positive indicators out there on our markets. And plenty of discussion out there about how the economy, whether or not we have a hard or soft landing. That's really been that coupled with the challenges we had last year has given us caution about going out beyond the second quarter. But I will tell you, we're fixated on continuing to move forward on the pricing opportunities to really negate these inflationary costs. We also mentioned late last year, and we're seeing that come to fruition that we expected 60% to 70% of those incremental costs that impacted us last year, we think they're behind us. And so it's really about a cost play for us, improving cost, passing through the cost that we have. There's a lag on the input metal cost associated with the situation we saw in the second half. So we're going to be living with those higher costs in the first few quarters of the year. But I think as you can see from comments and from the markets that are starting to move, our markets are positive. And we're well positioned here. As those markets continue to build, we think any depression that might come at us is hopefully going to be shallow. And we think we're well positioned, especially in the general engineering side to weather any storm, but perhaps better than anyone with the broad product offering that we have and these long relationships that have been in place for over 70 years. So I think we're seeing very positive trends right now. And I think we're moving to an area again, what we mentioned that we're stabilizing our businesses, and we're very focused on really performing. And that's going to be the focus for our years. So our outlook right now remains solid and positive on our outlook. As we mentioned, pricing has held up well, demand has held up well. And I think as we stabilize our business, obviously our intent is to see that margin continually move up to where we were, a minimum what we were early last year and perhaps beyond the moving back up to that 17%, 20% range. And those are targets that we have, but there's going to be a period of time to get there.

Right, that's very helpful. A follow-up just around the Warrick roll coat line. Actually, I think you mentioned that there might have been some inflation potential pushing that CapEx number higher. Can you remind us what the capital outlay here was for the Warrick roll coat line? And then perhaps we can give some guidelines around what that upside risk could be if steel and labor costs do creep up?

Yeah, certainly the initial outlook for this investment was approximately $150 million. And really, we're in the process of assessing the overages and we're going to provide more clarity going forward. But we expect the rate of return on this project, even with the cost that we're assessing right now, this investment is still going to continue to exceed our cost of capital, Emily. And in spite of these higher inflationary costs and those costs associated with the construction. And a reminder, this investment, it's central to our long-term strategy to deliver the higher margins and really positioning us with a strong defensible position as we go forward in the packaging market. So we've evaluated these costs and we're trying to minimize those. And we'll be assessing and giving more clarity in upcoming calls.

Understood, thank you.

Thank you.

Sorry. Our next question comes from Josh Sullivan at Benchmark. Please go ahead.

Good morning.

Morning, Josh.

Just jumping in for another call here. So apologies. On the aerospace demand, we've had Boeing confirm that they're going to 38 per month on the 737, pulling through pretty strong on the supply chain, regardless of some other disruptions. Curious how much of the strength this quarter was from a more dynamic call, or has it been more consistent, and this is just a reflection of the overall market moving forward?

Yeah, well, thanks, Josh. Well, we've been seeing the expected rate increases coming for a while. We generally talk with the airframers and plan about a year ahead of time. So this is actually coming through fruition to what our expectations were. But I will tell you, with the strong defense space and business jet associated with this, it's actually accelerated a little faster than we expected. So that's good news. That's good news for us. We're well-positioned to handle the increased outlook. And we think that's only going to continue to accelerate as the supply chains. I think both companies have talked about that really, the holdback right now is not demand. It's the supply chain, catching up to it. And we're all looking to ramp up accordingly. But this is actually coming up on the 2020 timeframe when all the COVID issues hit. We talked about as a company, we expected to return back to 2023, 2024 back to that 2019 level, which was a record. And we're well on our way there. So I'm very pleased at what the outlook is as expected. I would say the only difference that we're seeing is the strong demand in business jet and defense, especially as it relates to Kaiser. So all of those coming together are going to really wrap this up to the expected levels that we hope it gets to in '24 and beyond.

And maybe a similar question on the automotive side. I know you're looking at more automobile recovery a little bit later. We had some plant shutdowns last year. So trying to get a feel for how much of the recent automotive strength was catch up to that relative to kind of the seller expectations for this year?

Yeah, I think the economics are it's mixed right now. I think they're prepared. I see inventories going up a little bit more. We see demand is still there. But on the other side, you see challenging for rising interest rates, the period of time to the cost of the vehicles overall is going to be very challenging for the consumer. I think you see us we're generally conservative on the approach. I say that, but our numbers for the first quarter were a lot better than we expected. Now I believe most of that is our ability to pass through cost, and to get higher prices on the products that we provide. And with the new programs that are coming in, we're getting a little better pricing on those products. So I think that more than demand really improved our numbers overall. I continue to believe that those challenges with interest rates and the consumers' ability to pay for these rates are really going to be the determiner in the second half of the year, whether or not we're going to have a muted response in '23 or we're going to have a breakout year. But we're well-positioned to do it. And as you know, it's a smaller part of our portfolio. But we're watching those numbers and so far we've had a great start to the year.

Thank you for that.

Thank you.

There being no further questions at this time, I would like to turn the floor over to Keith Harvey for closing comments. Please, sir, go ahead.

All right. Thank you, operator. Hey, thanks for being with us today. And I look forward to updating you on our second quarter 2023 results in July. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.