ATI Announces Second Quarter 2023 Results

Strong performance in Aerospace & Defense propels sequential and year over year growth

• Q2 2023 sales of $1.05 billion up 1% over Q1 2023 and 9% higher than Q2 2022
• Q2 2023 net income attributable to ATI of $76.0 million, or $0.52 per share
• Aerospace and defense represent 58% of Q2 2023 sales, up from 56% of Q1 2023 sales and up from 46% of Q2 2022 sales
• Non-GAAP information
  • Q2 2023 adjusted net income attributable to ATI of $86.2 million, and adjusted EPS of $0.59 per share
  • Q2 2023 ATI adjusted EBITDA was $149.8 million, or 14.3% of sales

DALLAS, Aug. 2, 2023 /PRNewswire/ -- ATI Inc. (NYSE: ATI) reported second quarter 2023 results, with sales of $1.05 billion and net income attributable to ATI of $76.0 million, or $0.52 per share.

Adjusted earnings per share* for Q2 2023 was $0.59, and ATI adjusted EBITDA* was $149.8 million, or 14.3% of sales. Q2 2023 adjusted results exclude pre-tax amounts of $4.5 million in start-up related costs, $2.7 million of severance-related restructuring charges, $2.8 million primarily for asset write-offs related to the closure of our Robinson, PA operation and $0.6 million related to the loss on the sale of our Northbrook, IL operation. Adjusted earnings per share* for Q1 2023 was $0.49, and ATI adjusted EBITDA* was $132.7 million, or 12.8% of sales. Adjusted results for Q1 2023 exclude a pre-tax amount of $1.2 million for start-up related costs incurred as part of restarting a titanium melt facility in Albany, OR. Q2 2022 adjusted results exclude a $115.9 million loss on the sale of our Sheffield, U.K. business.

"ATI's growth as an aerospace and defense leader continues," said Robert S. Wetherbee, Board Chair and CEO. "As demand accelerates, the percentage of our revenue attributed to aerospace and defense reached 58%, up from 46% in the second quarter of 2022. We are making rapid progress toward our aerospace and defense sales goal of 65%," he said.

"Strong execution and operational performance drove further margin expansion in the second quarter, with our High Performance Materials and Components segment delivering 20.5% EBITDA margins, up from 17.0% in the prior quarter," said Wetherbee. "Overall, consolidated margins were up 150 basis points. This reflects improving operating leverage from higher production volumes and incredible work by the entire ATI team."

Operating Results by Segment

• HPMC's second quarter 2023 sales increased $56 million, or 12%, compared to the first quarter 2023, primarily driven by growth in the commercial jet engine market. Overall aerospace and defense sales were 83% of total HPMC sales in the second quarter 2023. Second quarter 2023 sales improved 33% compared to the second quarter 2022, with total aerospace and defense related sales increasing 38% compared to the prior year period.
• HPMC segment EBITDA was $108.1 million, or 20.5% of sales. The incremental margins continue to be driven by increased volumes on higher margin next-generation commercial aerospace platforms.
• Results in the second quarter 2022 included $5.6 million of benefits from the Aviation Manufacturing Jobs Protection program.

• AA&S second quarter 2023 sales decreased by $48 million, or 9% compared to the first quarter, 2023, primarily due to recessionary softness in general industrial end markets and lingering COVID impacts associated with our Asian precision rolled strip business. Sales of commercial aerospace products increased by nearly 50% compared to the prior year period.
• AA&S segment EBITDA was $63.2 million, or 12.2% of sales. Reduced deliveries of nickel based alloys and precision rolled strip products in the second quarter 2023 were partially offset by increases in titanium plate deliveries. Second quarter 2022 results included a $9.9 million benefit from the settlement of Section 232 claims as well as lower retirement benefit costs when compared to the second quarter 2023.

Corporate Items and Cash

• Restructuring and other credits (charges) in the second quarter 2023 include pre-tax charges of $4.5 million for start-up costs, $2.7 million of severance-related restructuring charges, and $2.8 million primarily for asset write-offs related to the closure of our Robinson, PA operation, of which $0.8 million was accelerated depreciation on fixed assets. First quarter 2023 results include a $1.2 million pre-tax charge for costs to restart our titanium operations in Albany, OR. Second quarter 2022 results include a $1.3 million pre-tax credit for restructuring charges primarily related to lowered severance-related reserves based on changes in planned operating rates and revised workforce reduction estimates.
• Corporate expenses in the second quarter 2023 were $18.1 million, compared to $17.3 million in the first quarter 2023, and $16.7 million in the prior year quarter.
• Closed operations and other expense was $3.4 million in the second quarter 2023, compared to $2.8 million in the first quarter 2023, and $5.1 million in the prior year quarter. Higher costs in the second quarter 2023, compared to the first quarter 2023, were associated with higher facility costs at closed locations.
• Second quarter 2023 results include a $3.7 million income tax provision, compared to $4.3 million in the first quarter 2023, and $3.4 million in the prior year quarter. This expense is primarily related to our Asian precision rolled strip business. ATI maintains a valuation allowance on its U.S. deferred tax assets and does not expect to pay any significant U.S. federal or state income taxes in 2023 due to net operating loss carryforwards.
• For the second quarter of 2023, cash provided by operating activities was $68.1 million, and cash used in operating activities was $217.1 million on a year-to-date basis. Inventory levels increased in the second quarter as a result of a strategic nickel purchase to ensure continuity of supply, which was funded by a $50 million draw on our asset based lending credit facility. As a result of the strategic purchase, second quarter 2023 managed working capital as a percent of sales was 39.0%. Capital expenditures for the first half of 2023 were $103.3 million.
• Cash on hand at June 30, 2023 was $267 million, and available additional liquidity under the asset-based lending (ABL) credit facility was approximately $500 million. ATI has no significant debt maturities until 2025.
• On April 28, 2023, our Board of Directors authorized the repurchase of $75 million of ATI stock.

Outlook

"Our laser focus on executing our commitments gives us the opportunity to expand for the future. We're investing in both the additional capacity our customers need, and growing our capabilities to solve their most difficult challenges," said Wetherbee. "With our restarted Albany, Oregon titanium melt shop fully operational in the third quarter, and a brownfield expansion well underway in Richland, Washington, we're well-positioned to capitalize on market opportunities," said Wetherbee. "We are confident in our ability to deliver for 2023 and beyond, executing on our long-term strategy."

ATI will conduct a conference call with investors and analysts on Wednesday, August 2, 2023, at 10:30 a.m. ET to discuss the financial results. The conference call will be broadcast, and accompanying presentation slides will be available, at ATImaterials.com. To access the broadcast, click on "Conference Call." Replay of the conference call will be available on the ATI website.

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this news release relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements, which may contain such words as "anticipates," "believes," "estimates," "expects," "would," "should," "will," "will likely result," "forecast," "outlook," "projects," and similar expressions, are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control. Our performance or achievements may differ materially from those expressed or implied in any forward-looking statements due to the following factors, among others: (a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty materials; (b) material adverse changes in the markets we serve; (c) our inability to achieve the level of cost savings, productivity improvements, synergies, growth or other benefits anticipated by management from strategic investments and the integration of acquired businesses; (d) volatility in the price and availability of the raw materials that are critical to the manufacture of our products; (e) declines in the value of our defined benefit pension plan assets or unfavorable changes in laws or regulations that govern pension plan funding; (f) labor disputes or work stoppages; (g) equipment outages and (h) business and economic disruptions associated with extraordinary events beyond our control, such as war, terrorism, international conflicts, public health issues, such as epidemics or pandemics, natural disasters and climate-related events that may arise in the future and (i) other risk factors summarized in our Annual Report on Form 10-K for the year ended December 31, 2022, and in other reports filed with the Securities and Exchange Commission. We assume no duty to update our forward-looking statements.

ATI: Proven to Perform.
ATI (NYSE: ATI) is a global producer of high performance materials and solutions for the global aerospace and defense markets, and critical applications in electronics, medical and specialty energy. We're solving the world's most difficult challenges through materials science. We partner with our customers to deliver extraordinary materials that enable their greatest achievements: their products fly higher and faster, burn hotter, dive deeper, stand stronger and last longer. Our proprietary process technologies, unique customer partnerships and commitment to innovation deliver materials and solutions for today and the evermore challenging environments of tomorrow. We are proven to perform anywhere. Learn more at ATImaterials.com.