ATI at Bernstein Conference: Strategic Focus on Aerospace & Defense

On Thursday, 29 May 2025, ATI Materials (NYSE:ATI) presented its strategic initiatives at the Bernstein 41st Annual Strategic Decisions Conference 2025. The discussion highlighted ATI’s significant transformation and strategic focus on aerospace and defense, which now represents 65% of its revenue. While the company is thriving in these sectors, challenges remain in maintaining growth momentum and managing market shifts.

Key Takeaways

• ATI’s aerospace and defense sector accounts for 65% of revenue, with energy, medical, and electronics contributing to 80%.
• The company exceeded its Q1 EBITDA target by $20 million and is on track for its 2027 goals.
• A new five-year, $1 billion contract with Airbus was signed, reflecting strong industry partnerships.
• Nickel melt capacity will increase by 8-10% next year, enhancing production capabilities.
• ATI is benefiting from a shift away from Russian titanium sources, securing long-term contracts.

Financial Results

• First Quarter Performance:

- EBITDA exceeded the midpoint by $20 million.

- HPMC margin reached 22.4%, with expectations to hit 24% this year.

- Jet engine sales grew by 35% in Q1.

• Full Year Guidance:

- Anticipating 15% to 20% top-line growth.

- On track for 2027 targets: 19-21% margin and $1 billion EBITDA.

• Revenue Breakdown:

- Aerospace and defense contribute 65% of revenue.

- Jet engines account for 37% of revenues.

• Share Repurchase:

- Accelerated program, utilizing half of the outstanding authorization in Q1.

Operational Updates

• Capacity Expansion:

- Nickel melt capacity is set to increase by 8-10% next year.

- Zirconium and hafnium production rose by 25% over recent years.

• Technology and Innovation:

- Developed a patent-pending nickel melting process to eliminate defects.

- Introduced a new nickel alloy with improved lifespan.

• Contractual Agreements:

- A new $1 billion contract with Airbus.

- Finalized a six-year labor agreement with USW.

Future Outlook

• Defense Growth: Anticipating mid to upper single-digit growth.
• Aftermarket/MRO: Expected to remain 30-50% of revenues through the next decade.
• Airframe Business: Aligning with Airbus and Boeing production rates.
• Investments: Focus on investments with a 30% payback threshold.
• Revenue Target: Aiming for 65% aerospace and defense revenue share.

Q&A Highlights

• GTF Program: Collaboration with RTX may double ATI’s involvement over the next decade.
• Long-Term Agreements: Provide stability and facilitate quick response to market changes.
• VSMPO Impact: ATI is gaining market share due to the shift away from Russian titanium suppliers.
• Energy Market: Focus on land-based gas turbines, commercial nuclear, and fusion energy.

For a detailed understanding of ATI’s strategic direction, refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Okay. Good morning. I’m Doug Hornet, Bernstein’s global aerospace and defense analyst. I’m really happy to have with us today Kim Fields, the president and CEO of ATI Materials. Think a very interesting company that fits into the commercial aerospace world quite well.

We’re gonna just go straight to a fireside chat unless you have any anything you wanna say

Kim Fields, President and CEO, ATI Materials: before we Sure. No. Well, thanks, Doug, for having me, and thanks everybody for joining here and online. I just wanted to give a little background on ATI. If you don’t know us, we produce advanced materials and components at scale for critical applications across a range of markets, including aerospace and defense.

Our portfolio spans titanium, nickel, zirconium, hafnium, and I’m happy to announce vanadium now as well. We’ve melted our first vanadium billet yesterday for a fusion customer. And we also deliver that in isothermal forge parts, plate, sheet, and billet and rod. We’ve been transforming a bit since I joined the company in 2019. We’ve exited our low margin businesses and commodity businesses.

We’ve invested in forgings and advanced materials. We’ve doubled down on in innovation to position ourselves in aerospace and defense as well as advanced energy, as I just mentioned. And today, that’s about 65% of our revenue is A and D. When you add in these other markets, energy, medical, and electronics, it’s about 80% of our revenue.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Well well, great. So, Kim, you’ve been CEO for roughly one year now. You know, as you look at that year, know, how how have you looked at the opportunities for ATI and what some of the challenges might be?

Kim Fields, President and CEO, ATI Materials: As you mentioned, ATI is a really unique company. Over the last year, we’ve continued some of the portfolio transformation, continue to focus in aerospace and defense. I was really excited that we were recognized last quarter with the GICS code change to A and D, which really just outlines the accomplishments of us growing our share in that space. Over the last year, we’ve really been focused on investing for growth so we can support this aerospace ramp. Defense is ramping, electronics, energy.

There’s tons of growth opportunities. And in a lot of the markets, we are one of only two players that provide these materials. So huge amounts of demand for really unique materials and products. And and so how do we get those investments in the ground and up and producing as quickly as possible?

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: You know, you know, jet engines is a key growth market for you. It’s about 37% of revenues. Sales were up 35% in q one. I mean, I think your guide is for 15 to 20% top line growth this year. Can you describe where you play in that engine space and how you’re differentiated from other participants in that market?

Kim Fields, President and CEO, ATI Materials: Sure. So we shared a little bit on the last earnings call. We put a slide together to make it a little clearer. We operate in the rotating parts of the engine, predominantly in the hottest section. And so we’re making the discs.

We’re making the materials. There is seven proprietary alloys that go into that hottest section because they’re really trying to drive that temperature up to get more efficiency and more lifing out of those parts. Of those seven materials, we are the sole supplier for five of those, And many of those, we codeveloped with in conjunction with the customers. And they’re using them not just in this generation of engine, but also the next generation as well as they’re continuing to drive efficiency. So pretty unique position, difficult to replicate, and, you know, we’re continuing to drive our technology advantage forward there.

We’re investing. You know, some discrete investments we’ve talked about, others that we have not shared. You know, we have more nickel melt capacity coming online next year, about 8% to 10% increase in capacity, along with the work we’re doing around debottlenecking and productivity that’s allowing us to continue to participate not just in the jet engine but also other transactional incremental business. I’m also really excited to share that we’ve developed and have a patent pending on a brand new nickel melting process that will eliminate defects, in particular freckles, which have been very problematic and challenge for the industry. There’s been a lot of work done by the industry and the regulators and our customers to put in detection and inspection procedures, and now we have a process that will virtually eliminate those from occurring at all.

So very excited. Hope to be able to talk more about that as we get towards the end of the year here and that patent progresses. But really, really great stuff to get us, again, keep that position and keep control and and help support the the jet engine guys at increasing their lifing issues. That’s really what those freckles turn into a lifing or a part limiting issue. And and being able to put in a process to control that will allow them to keep those parts flying for longer.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Now now the LEAP’s a very important engine for you, and it has been for some time. But the GTF now, I I know you’re doing more and more work related to that. Can you compare your content on these new generation engines, LEAP and the GTF, and how that’s gone relative to their predecessors, CFM 56, v 2,500.

Kim Fields, President and CEO, ATI Materials: Sure. Sure. So if you think about the this generation, those engines you just mentioned, again, with the hotter core trying to run more efficiently and longer, have more of those powder alloys, more of those proprietary alloys I just talked about. So as I think about you know, we think about the MRO opportunity of this generation versus the last, you can kinda think in the range of about 2x of the content because it’s using more of those powder alloys. It’s using more of those proprietary rotten cast alloys.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: And and, you know, you said the aftermarket’s about 40 to 50% of your jet engine revenues. And, you know, right now, we’re seeing a very high level of MRO activity on these new generation engines. How does that affect your business?

Kim Fields, President and CEO, ATI Materials: So we we’re seeing a huge effect. You know, the first area we see it is in our ISO forging business. I think I mentioned on the earnings call, our lead times are out to 2027. We are seeing about 50%. Some of it is due to the GTF and and the opportunity that we’ve had there to partner really closely.

I know we’ve had a lot a lot of questions around our long term agreements or LTAs that we have in place. And, really, those become the foundation for us to work seamlessly with these customers so when an issue or an opportunity comes up or in the room. And in that case, with the GTF, we came together, and the leadership at RTX said, hey. We’re gonna treat ATI like we’re all one company, and we’re gonna look at these assets holistically and work really transparently with no hidden information or proprietary information. We were able to ramp very quickly to help support that program.

So those are the kinds of opportunities, and we’re seeing those, you know, not just from the GTF, but also, you know, any of the upgrade packages. So we’re seeing MRO continue to drive demand, and we’re expecting that to continue through the decade as more and more of these engines are coming in for shop visits.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: You know, the the GTF, you know, CLIA has had some real challenges with in powder metal parts and discs and. So it sounds like you’re playing an important role in helping them on those on those components. But, you know, this is something that we would expect. You know, they’re gonna work through this once you get to the other side. Do you look at the work you’re doing there?

Is this sort of a surge and you’ll come down on the other end, or do you see this as a long term situation for ATI that will lead to growth there and and elsewhere?

Kim Fields, President and CEO, ATI Materials: Sure. Yeah. So as we’re talking to them, you know, in the past, we’ve done a small percent of their forgings. They do a lot of that in house.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Yeah.

Kim Fields, President and CEO, ATI Materials: We’re the only other supplier that they partner with for this. And as we’ve talked to them, as they work through this particular issue and they shared their projections, they see an increase of shop visits and MRO needs as they’re going into the future. So they don’t see that coming down. In fact, that they’re talking to us about doubling that or maybe even more in the in the next ten years. So we do see considerable growth even after this one issue is is behind them.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: So when you look forward in general, do you do you expect this the aftermarket and what’s your sense on the aftermarket in terms of of the percentage it will occupy in your business? At the same time, we’re seeing ramp ups. We we just heard, you know, Kelly talk about, you know, Boeing plants and how they’re looking at production. You know, how how do you sort of see this mix evolving over time?

Kim Fields, President and CEO, ATI Materials: Yeah. I mean, both of them are great for us. Obviously, the material goes in. It either goes into a new engine. It goes into a shop visit.

I’m excited about Boeing and and their recent successes at ramping. We shared, you know, a new contract we just signed with Airbus that, you know, for five years, one billion dollars brings us into parity. Both of those are great for our business. A lot of the airframe is gonna use the titanium assets that we’ve been investing in over the last couple years. And on the engine side, it’s gonna be using those proprietary nickels, those powder alloys, some of those very, very difficult or, in some cases, sole source supply positions that we’ve got for the next decade or two.

As we think about MRO, we’re anticipating that it’s continue to to rise and stay in this range of thirty, forty, 50 percent through the rest of this decade into the next decade.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Now so so when you look at this, this suggests your volumes are they’re growing rapidly right now. The volumes continue to grow. That should give you operating leverage. There should be also some attractive mix shifts as you have more and more on these new engines. So how does that set up for margin expansion opportunities in HPMC?

Kim Fields, President and CEO, ATI Materials: Yeah. Well, you know, in the first quarter, we’re at 22.4% from a margin standpoint. So we’re already starting to see some of those advantages that are coming through, the equipment reliability, the productivity, the debottlenecking. We’re starting to see that capacity come online, and we’re taking some more transactional business, which I think we’ll be able to continue to operate in underserved markets like, you know, Aero one hundred and and other alloys. From a a mix standpoint, we are as each of these contracts come open, we have an opportunity to renegotiate at market pricing that then locks that in for the next decade or two decades in some cases.

So I do think that, you know, it’s still a seller’s market for materials. You know, somebody said it’s a material world. It’s definitely still a material world. I don’t anticipate that changing anytime in this decade as, you know, demand continues to rise. I mean, I just heard Kelly talking about that that huge order they just got over in The Middle East.

You know, we just see demand continuing to come in. And for us, you know, we’re talking mainly aerospace here, but we’re seeing similar kind of strong demand in defense. Energy is another great market that’s continuing to grow. The executive orders this week around nuclear, We’re one of only two suppliers that supplies zirconium and hafnium for the nuclear market in The US in The for commercial applications. So we’re seeing demand kind of across the board in all these markets.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Yeah. And and I wanted, yeah, to jump over to defense because can you kind of take us through what some of the key programs are for you in the defense arena and and how it how that plays across? I know it it applies to both your segments.

Kim Fields, President and CEO, ATI Materials: Sure. Sure. It does. Yeah. The a and a the AANF segment is the nuclear naval program, and so, you know, we’re providing materials for that.

Obviously, with a lot of the discussion around focusing in the Indo Pacific, that plays very well to those strengths. And and we anticipate, least with some of the bills that have been discussed, that increased spending will continue to bring some some growth and some demand there. We also in A and S, we have the the tank, the armor for for the tank programs. Even you know, there’s still very strong FMS sales for the Abrams and other tank programs that we provide material into. But we also have relationships with the Europeans who are gonna be reinvesting in their defense.

And and so you’ve got Rimetal and and BAE and General Dynamics UK. So we’ve got lots of opportunities there on the titanium plate side as well. The HPMC side, as we’ve been talking about, is the jet engines and and the things that are going on with the f 35 and the f 18. We’re already seeing inquiries for material for the f 47 that’s just been announced. Many of the forgers and producers have started to reach out to partner with us, to work with us, to get materials onto that platform.

So kind of across both groups and and all three branches of the military, we see demand coming from different parts, either US or foreign.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Well, in 2024, you had you had double digit growth in defense in both your segments. Now, I mean, that’s pretty good. I mean, that’s that’s better than most defense businesses are performing. What should we be expecting there going forward?

Kim Fields, President and CEO, ATI Materials: I think we’ve been talking about kind of mid to upper single digits as we go forward for defense. We do see strong growth. The programs that we participate in are established and mature programs, and they’re getting funding and and getting support. So we anticipate to see continued growth there both on those current programs as well as things like hypersonics and and drones. We make material for that.

One of the materials, c one zero three, that we make for the commercial space industry, which, again, is another really growing area for us as well. So, you know, we’re expecting strong growth, obviously, off smaller numbers than our aerospace and defense business, but Yeah. We expect to continue to see strong growth there.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: And and how important is aftermarket there? I would expect on the engine side, that would also be a very important piece of this.

Kim Fields, President and CEO, ATI Materials: On the engine side, for sure. On some of the others, it’s more for the original builds. You know? But we’re seeing and and I can’t talk about all the new developments, but we’re doing a lot of new materials development where we’re looking at materials and and maybe not just one material, but a system of materials that increase protection for the occupants, increase the strength to weight ratios to get better fuel efficiency. We’re working on some materials, you know, for for some hypersonics applications.

We’ve opened up our new classified additive facility down in Florida that’s doing some interesting things. So there is a lot of opportunities for continued growth for the original build more than MRO, but the engines for sure. There’s a lot of MRO for engines.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: And and and so I wanna I wanna switch over to your airframework. Now, you know, traditionally, you’ve done a lot of work with Boeing, but I know you’ve got new new agreements with Airbus. Can you talk about, like, first, the kinds of products that you’re focused on on the airframe side, and then maybe help us understand a little bit about what you’re gonna be dealing with Airbus.

Kim Fields, President and CEO, ATI Materials: Sure. Sure. So, yeah, I’d say you know, so just going back for a minute, 2019, we were only a Boeing supplier. We didn’t have any business with Airbus. In fact, most of the time back then, we were a Boeing and GE supplier.

Through the last five years, we’ve really diversified that on both airframe and the the jet engine side, and we talked a little bit about that. And, really, you know, 2019 was the first contract we had with Airbus, very small percentage. We were just getting started with them. COVID hit. We weren’t really supplying anything.

And then Russia invaded Ukraine, and they called and said, look. How do we wrap rapidly ramp? And we really wanna get your material. And so we went through kind of a very concentrated qualification process. In the last contract, it was mainly plate that we were providing to them.

It went into cut pieces for for parts on the on the airframe, landing gear, other things like that. This contract, as I mentioned, brings us into parity with where we’ve been with Boeing. It’s not just plate. It’s also long products that go into forging, as I said, for landing gear and other things, but also pack roll sheet, which is a brand new product that we’ve just offered. And they contract for about half of that facility now.

So we have kind of a wide range of materials that we’re gonna supply to them. And, again, we’re really excited about that relationship. Sorry. Yeah.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: So one one of the things maybe you can help me understand a little more. When Russia invaded Ukraine, you basically very quickly had shut down in terms of all titanium products coming out of Russia into US companies. Although the European companies continued to source in one way or another, some from Russia, go to Airbus to Safran. I mean, is that does some of the share that you’ve gained represent, you know, sort of the eventual shift out of that Russian supply of titanium products?

Kim Fields, President and CEO, ATI Materials: In general, yes. I’d say a big portion of it is people shifting away from VSNPO and what they were buying there, but not completely. You know, we’re continuing to see, even just recently as a couple weeks ago, where some of our competitors maybe aren’t performing to the level that they need to be and customers calling and saying, hey. We have you at 80% share. We wanna take you to a % because we can’t get the materials we need and the time frame we need.

So to your point, VSMPO didn’t go away completely. I think they’re coming in through board brokers and other sources still. But for the most part, you know, that share, we’ve been able to pick up and put into long term contracts, that allows us some stability. Some stability as we go forward and maybe VSMPO. You know, we’ll see what happens with Russia.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Yeah. But it doesn’t appear VSMPO is coming back anytime soon.

Kim Fields, President and CEO, ATI Materials: So No. Not recently based on the current tweets. But Yeah. Yeah. Like I said, I think, you know, over time at some point that, you know, we’ve always planned as we put in capacity, that at some point that they might be back in.

But, again, the positions, the qualifications that we’re getting, and the capacity we’re putting in is positioning us long term along with those long term agreements so that we’ve got some stability as we go forward. You know, the titanium capacity, we’ve got our new EB melter that’s up and and in qualification right now, just started. These assets were planned back in 2019 before, you know, COVID, before Ukraine. We were anticipating based on the build rates and what we were seeing already from the industry that there was gonna need for increased capacity. So we’re feeling pretty confident that, you know, especially given the build rates that we heard here today from, you know, from Boeing and from Airbus that there’s gonna be continued need for all the the assets that are getting put in.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: So so if we look to your to modeling your airframe business, which is really an OE business. Should we consider that to move pretty much in line with where production heads at Airbus and with and Boeing? Is that a reasonable proxy?

Kim Fields, President and CEO, ATI Materials: Yeah. I think in the long term, that’s a reasonable way to think about it. That’s how we use the the build rates as as we think about what is our capacity, what are our commitments, where do we wanna be positioned as far as transactional versus contractual, and we build our capital plans off of that. In the short term, the short term for us is kind of two years. We have really, really transparent dialogues with the airframe as well as with the engine guys around what are their plans, what are they seeing from their demand signals.

And, you know, it’s an interesting position to be in because I’m able to talk to the Boeings of the world as well as the GEs of the world and get two different perspectives to triangulate exactly what’s happening and what’s gonna be driving demand. And so that’s what we’re using to set our guidance and to share, you know, the targets that we share with the investors.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: And and can you describe what your mix is between wide body and narrow body in the in terms of their relative importance for you?

Kim Fields, President and CEO, ATI Materials: Sure. Yeah. When we think about from a a wide body to a single aisle, a wide body has about five times more titanium in it or content. Sorry. Not just not just titanium, but titanium and nickel content versus a single aisle.

And it it’s both the engine and the airframe. Obviously, those airframes are just a lot larger, so they use a lot more titanium. The engines are a lot larger as well. And so they’re the ones that are using a lot of the powder alloys and a lot of those proprietary alloys to to power and and get the temperature and thrust that they’re looking for.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Well, is it all also related to the composite structures on the seven eight seven and a three fifty?

Kim Fields, President and CEO, ATI Materials: Exactly. I mean, yeah, we’ve been supporting you since the introduction of the seven eight seven with Boeing, and that relationship’s only grown. And, you know, I think that as that continues and the use of composites, titanium’s need will continue to grow as well.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Now one of the things you’ve you’ve really stressed is the importance of long term agreements. And I think you commented some stretched to 2040. So question is, how does that work? 2040 is a long way away. There’s all kinds of things that can happen in the market, in inflation, changes in materials.

So how do you think about these very long term contracts?

Kim Fields, President and CEO, ATI Materials: Sure. Yeah. Well, two ways. One, they have to be flexible. Right?

Because you’ve gotta contemplate a lot of different scenarios. And two, you’ve gotta have a really close relationship with your customers so that when you run into scenarios that haven’t been contemplated, you’re able to open that up and renegotiate it. And so, you know, a couple things. One, our contracts you know, all our contracts have surcharges to pass through material fluctuations. They have a whole host of different inflation indexes that are built in so that we try to pass through and cover any kind of costs.

But a lot of times, especially over the last five years, when circumstances change so dramatically or demand needs, either up or down, change so dramatically, it provides us an opportunity to reopen that contract and renegotiate pricing terms and other things that are more appropriate for for that situation. So, you know, one we’ve talked a lot about is some of our titanium contracts. You know, titanium used to be firm fixed material. That’s changed since COVID. And so we’ve been putting in titanium surcharges and pass throughs into all of our contracts, and we just finalized the last one last week.

So now all of those have those. So, again, yes, 2040 seems like a long time or 2045, in this case, seems like a long time, but it’s what’s necessary for us to have the confidence from the customer that when they tell us we’re gonna be their sole supplier, not just, you know, for their current fleet of engines, but their next fleet and next designs, that they know that they’ve got our commitment, and we’re gonna work together transparently around not just what capacity do you need, but what are these new melting technologies? What do we need to do from inspection? How do we continue to help you with life? In one case, you know, we just we just developed the next generation powder alloy with one of them that they’re using and they’re putting into their current engine programs that give much better life, that work much at a much higher temperature, much lower cost for them.

So it becomes kind of a flexible foundation that, yes, we renegotiate and we capture and make sure we pass through any cost, but it also becomes the fabric of all of the other relationships and transactions that we do on top of that.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Well well, is it possible? And you’ve talked about things that are that are, in some cases, sole source and then other ones where you have sort of very large market share. I mean, it seems like you have some pretty unique capabilities here. If you look across the product set sort of in the aerospace and defense side, where are the places where that are competitive? And where is it where it’s less so that you can really get into these sole source positions?

Kim Fields, President and CEO, ATI Materials: Yeah. I’d say, you know, many of our products so, you know, we talked about the hot section or the well, five of the seven were the sole supplier. One of them is the OEM supplies them themselves, and the other one is one that we’re qualified on, and it’s supplied by a competitor today. On the ISO forging side, there’s only two suppliers in that process at all. And so, you know, we we kinda share and we compete for that business.

So, you know, as you think about the hot section, you think about rotating parts, they there’s very few players that can produce at scale consistently the quality needed to meet the demands of those applications. Outside of that, you get into some more, I’d say, more commodity type products, you know, maybe a seven eighteen or things that are maybe on the old the last generation. You talked about the CFM. You know? So CFM 56.

Some of those materials that are have been around for a while. Not so much on rotating parts, though. So I tell you, rotating parts, everything from where we source the raw materials to who how it’s melted to how it’s maintained has very limited competition mainly because of the stringent requirements. So when you start getting into more of the static parts, you can maybe see or the airframes.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Well, can you can you characterize sort of what fraction of your business would fall into the pretty noncompetitive that you pretty much control that market?

Kim Fields, President and CEO, ATI Materials: Probably close to 40%. Yeah. Just to put a number on it. Sorry. Probably 40% because a lot of it is jet engines.

So two thirds of our A and D is is jet engines, so it’s 20% of our business right there.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Yeah.

Kim Fields, President and CEO, ATI Materials: And then, you know, there are some other things outside of aerospace and defense that is noncompetitive. The commercial nuclear, the products we make there, again, there’s only one other player in The US, and, you know, they’re that they’re participating in that space. Hassium for c one zero three, we’re the only provider of that in The US today, which goes into space and and missiles and other things. So 40 to 45% is probably a good number.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: So so when you think about that, you know, going forward, you it gives you, you know, very strong pricing power. And but if you’re looking forward and you look at how you think about capital investments, some of these take some time to get in place. So how do you plan for that and really understand what the capacity needs are going to be, you know, five years from now, ten years from now? Because I imagine that’s pretty important giving given the capital costs of some of these new facilities you’re describing.

Kim Fields, President and CEO, ATI Materials: Yeah. So so, typically, I do we do, like, a five year capital plan. We are talking with them, all our customers around, well, what do you see as your demand? What are you seeing as your signals? MRO versus OE.

And then we start to line it up. We tend you know, for our for our capital is it takes about two to two and a half, maybe three years at the most from start to finish, from approval to having it installed and it’s up and and qualifying. So five years is about the right time frame. Longer term, I’m looking at, okay, where is the industry going? Where do we need how are we investing in new technologies like the smelting technology or new alloys like the vanadium that that we’re developing.

So in a lot of cases, you know, we’re we’re using our resources and our capital is focused on investing in those core products and and those markets where our strength and and differentiation are valued and where there’s additional investment. Or in some cases, customers would like us to invest early before they need it just in case. Right? That’s where customer capital comes in, and and there’s been a big appetite with our customer base kind of across the markets to saying, hey. It went know, somebody used the phrase, it went from just in time production to just in case production.

So people are really wanting to make sure their supply chains are robust and are firm. And I heard Kelly talk a little bit about the steps they’re taking to make sure that they’re ready for their step rate changes. And so that’s where customer capital comes in as well. And if they’d like to do something, you know, that’s earlier than what we anticipate it’s needed, then, you know, then it’s something we partner to do that as well.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Now when you go outside of of aerospace and defense, you got about 35% of your revenues in other areas, which can be energy, medical. Can you talk about what the most important parts of that group of businesses is?

Kim Fields, President and CEO, ATI Materials: Sure. Yeah. So of that 35%, fifteen would be in what we call aero like primarily because it utilizes equipment and strengths that we already have and that we’ve invested for aerospace and defense, really challenging environments like space and the human body and nuclear reactors. So as I think about those markets, the one area that we are focused on is energy. I think there’s a tremendous, obviously, amount of growth from data centers and needs here in The U.

S. We have contracts with OEMs for land based gas turbines, and we’re continuing to support that. And I think there’s a huge amount of growth right here in the near term for that. But I think in the medium term, as we’ve talked about, you know, with these executive orders, nuclear, commercial nuclear, and MNRs are gonna take a much higher position. The zirconium and hafnium that we produce out in AA and S in the segment there is is gonna be is participates and is gonna be an important part of that.

And then longer term is gonna be some of these really unique alloys around fusion. You know? We’ve got two fusion companies that are building reactors right now. One of them, I think, is in Virginia is gonna go in. And so that’s what these vanadium and other alloys are are gonna be used for as a consumable, if you can believe it, in these reactors.

So, again, could be huge upside in the long term. So energy is one that I think has, like I said, is a near, medium, and and longer term opportunity for us to continue to grow. It’s it’s a small part of our portfolio today. It’s five or 6%. But I do think that’ll continue to grow, and it uses all the same strengths and capabilities that we have that we need to use for aerospace and defense.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Well, I mean, on the industrial gas turbine side, I mean, are you engaged now in discussions with some of the big players like a Vernova or Siemens?

Kim Fields, President and CEO, ATI Materials: Yeah. Yeah. And and we’ve got relationships and contracts with them. There is one that we’re talking to that is even looking at moving to a powdered alloy so that they can get more efficiency and run their their turbines hotter. So there is opportunity for development for proprietary alloys very similarly to what we have in the jet engine space.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: So first quarter, you had you had a really strong first quarter. Can you give us a little more insight in how you see this year unfolding q two and the rest of the year?

Kim Fields, President and CEO, ATI Materials: Sure. Yeah. The first quarter started out really strong. We were $20,000,000 above our midpoint from an EBITDA standpoint. We were able to finalize our labor agreement with USW for six years for A and S, which is was just fantastic foundation for for their aerospace customers from from that business.

So as we look forward, you know, second quarter, we are on track and are doing well throughout the quarter. And so I’m anticipating continued good performance. We’ll evaluate the rest of the year and what we want to do as far as full year guidance as we get to the middle of the year after the second quarter. Trade and tariff policy continues to move around. We are seeing some rebounding of some of those other markets we haven’t talked about.

So things are starting to normalize a little bit, but I won’t go out on a limb to say that we’re kind of already there and it’s stable across the board yet.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: I mean, how much is the tariff impact for you?

Kim Fields, President and CEO, ATI Materials: From a cost standpoint, very little.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Yeah.

Kim Fields, President and CEO, ATI Materials: Yeah. I mean, I think we said $50,000,000, and we’re really well protected with pass throughs. And we’re working with our customers. I mean, there’s, you know, there’s a lot of collaboration around duty drawback and and other things that we can do to to collect that and protect their our customers as well. But on the demand side, we’re not seeing any impact from an aerospace or a defense side whatsoever.

In fact, you know, I think, like I said, what’s happening in Europe and and the rearming in in Europe is gonna actually be a benefit to us is some of those smaller industrial markets and that are more transactional, and they’ve actually rebounded and and are firming up. So I do think that you know, our business is focused on OEMs and focused on people that are using our material and building things. And so, ultimately, at the end of the day, people continue to need this material to build their products to serve their customers. And so we aren’t seeing any long term impacts or or any changes. Just wanna get through the second quarter continue to perform well.

And like I said, then we’ll reevaluate. But but, yeah, we had a first great first quarter.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: And and I know you’ve got targets out there for 2027. Can you describe those and how you see them today?

Kim Fields, President and CEO, ATI Materials: Yeah. So we are we’re well on track to to meet those targets as we go forward. I think it’s a margin of kind of 19 to 21%, a billion dollars of EBITDA. We’ve already hit the 65% aerospace and defense. So, you know, things are continuing to go well from that standpoint.

We’re well on track to that. Like I said, as we get into the back half of the year, as we get to the end of the year, we’ll reevaluate, you know, when’s the right time to to update and if we need to make any changes to that guidance.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Any any things that you see as risk to the upside or downside on that?

Kim Fields, President and CEO, ATI Materials: Not not very many. I’ll be honest. Demand is is really strong. It’s it’s a good market. It’s a good time to be in aerospace and defense.

I’d say our operations are are operating really well. The debottlenecking and productivity is improving. As you saw, you know, I mentioned the the margins for HPMC. I was just under 22 and a half. We see margins, you know, going to to 24% this year, and, you know, and and the target there is 30% in HPMC.

So the equipment reliability, the productivity is is going really well, and we’re seeing a lot of benefits already from the investments that we’ve made.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: And then in terms of cash deployment, I think in on the q one call, you said that you’re looking to accelerate share repurchases. Can you talk about how you’re thinking about cash deployment in general beyond beyond q three?

Kim Fields, President and CEO, ATI Materials: Yeah. Sure. We kind of we kind of approach it, you know, in three ways. You know? One is investment, organic investment for growth.

And as we’ve been talking about here this morning, there’s a lot of opportunities. And so we’re being very selective, making sure those investments meet at least a 30% threshold. In some cases, there’s this melts investment I talked to you about, it’ll be pay paid back in one year. So it’s a very, very quick payback on some of these investments. Second is debt and and, you know, retiring debt.

We’re targeting kind of between one and two times leverage. We were at one point I just think I’m one one point nine, just under two at the end of the first quarter. So we’re pretty much there. So I’m not really seeing that we’re gonna be doing a ton more work there, but there’s a few things coming into maturity. And then the last is the return capital to shareholders, and we’re prioritizing doing that through share repurchase.

And as you mentioned, the first quarter, we accelerated it. We took about half of our outstanding authorization. We’re gonna continue to evaluate that, you know, and taking a look at where are the stock prices. Do we think it’s fairly valued? How much upside do we see?

And then make a decision on do we wanna continue to accelerate that as we go forward.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: And when you look at investment CapEx, what are your priorities? What are you thinking about here? And and I’d say that this year. But, you know, as you look at the next, say, three years or so, what what would you be focused on?

Kim Fields, President and CEO, ATI Materials: Yeah. So we’re we’re kinda we’re we’re finalizing a lot of our titanium. We’ve talked a lot about titanium. It’s only about 20% of our business. But we’ve been making some discrete investments on the nickel side of our business.

And so we are evaluating from a jet engine all those proprietary alloys, both from a powder as well as a cast and rot process investments. I mentioned, you know, we have some new capacity coming on next year. We do see some additional opportunities there. And then we’ve made a few discrete investments on our zirconium and hafnium production. We’ve improved increased that about 25% over the last couple years.

There could be some more opportunities, especially given with commercial nuclear, maybe taking off the defense in the Indo Pacific. I think I saw I know you you you challenged me. I think I saw another Virginia class in there. We’ll see if it comes to fruition or not. But, you know, if they do start to increase, you know, the build rate on either the subs or on the carriers, that could be a huge amount of material pull as well.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Yeah. A lot of people would be happy if they can do that. So, anyway, let’s let’s wrap up. As you look at the next twelve months, you know, where are you gonna be focusing your time?

Kim Fields, President and CEO, ATI Materials: Really two things. Execution on all this capital that we’ve put in place, getting it qualified, getting it up and running so we can support the ramp for aerospace, defense, energy. Second is investment. As we just talked about, where do we continue to invest not just for capacity but also for capabilities? I mentioned that new melting process.

It’s gonna change the way we melt nickel products today. And so we’re gonna be continuing to drive that investment around technologies, drive that investment in partnering with customers on new materials and new processes so that as the OEMs continue to develop engines that run hotter more efficiently, we’ve got the materials ready that’ll allow them to be able to deliver that.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Well, great. Well, Kim, thank you very much for joining us. It’s been really good.

Kim Fields, President and CEO, ATI Materials: Alright. Well, I appreciate it. Sorry about the cough. We got a little bit of a cold coming back from Europe, but I appreciate the time. And I appreciate everybody’s time here.

Thank you.

Doug Hornet, Bernstein’s global aerospace and defense analyst, Bernstein: Thank you.

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