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ATI INC (ATI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered double‑digit year‑over‑year growth: revenue $1.14B (+10% YoY), adjusted EBITDA $194.6M (+29% YoY), adjusted EPS $0.72 (+50% YoY), with aerospace & defense (A&D) at 66% of sales ($754M). Sequentially, sales and profitability declined versus Q4 due to mix and timing effects .
  • Results broadly beat S&P Global consensus: revenue by ~$64.9M (6.0%), adjusted EBITDA by ~$11.5M (6.4%), and adjusted EPS by ~$0.13 (22%) as demand in commercial jet engines and defense offset industrial softness; management cited stronger pricing and mix in HPMC as drivers . Consensus values from S&P Global.*
  • Guidance: Q2 adjusted EBITDA $195–$205M and adjusted EPS $0.67–$0.73; full‑year 2025 adjusted EBITDA reaffirmed at $800–$840M, and full‑year EPS raised to $2.87–$3.09 supported by accelerated buybacks (~$250M in Q2) .
  • Strategic catalysts: multi‑year Airbus titanium agreement (more than doubles ATI’s prior Airbus support), GICS reclassification to Aerospace & Defense, and Pageland titanium sheet facility online—supporting airframe ramp and A&D mix expansion .

What Went Well and What Went Wrong

What Went Well

  • Commercial jet engine momentum: Q1 jet engine revenue $421.4M (+35% YoY) and 37% of total, with sole‑source positions across proprietary alloys and long‑dated LTAs; “we are the sole source supplier for 5 of the 7 alloys found in the hot section” .
  • Margin execution in HPMC: segment EBITDA margin rose to 22.4% (up 240 bps sequentially; +400 bps YoY) on favorable pricing/mix and improved reliability; pricing increases in nickel and titanium (~6–7% YoY) underpin durability .
  • Contract wins and capacity: Airbus titanium plate/sheet/billet agreement (approaches $1B over 5 years) and Pageland titanium sheet facility online, reinforcing supply assurance and ATI’s A&D leadership .

What Went Wrong

  • Sequential step‑down vs Q4: sales $1.144B (‑2% q/q), adjusted EPS $0.72 (‑9% q/q), adjusted EBITDA $194.6M (‑7% q/q), reflecting mix and timing shifts and the absence of Q4’s non‑operational tailwinds .
  • Industrial softness and tariff uncertainty: management flagged “wait‑and‑see” behavior in industrial markets, risk‑adjusted into FY guide; AA&S margins down sequentially to 14.9% on unfavorable mix .
  • Cash use and working capital build: operating cash flow used $(92.5)M with managed working capital rising to 35.9% of annualized sales due to seasonal inventory builds and shipment timing .

Financial Results

Consolidated Results vs Prior Periods

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Billions)$1.043 $1.173 $1.144
Net Income Attributable to ATI ($USD Millions)$66.1 $137.1 $97.0
GAAP Diluted EPS ($USD)$0.46 $0.94 $0.67
Adjusted Net Income ($USD Millions)$68.4 $114.6 $104.4
Adjusted EPS ($USD)$0.48 $0.79 $0.72
Adjusted EBITDA ($USD Millions)$151.0 $209.8 $194.6
Adjusted EBITDA Margin (%)14.5% 17.9% 17.0%

Segment Breakdown

SegmentSales ($USD Millions)EBITDA ($USD Millions)EBITDA Margin (%)Period
HPMC$584.1 $131.0 22.4% Q1 2025
AA&S$560.3 $83.4 14.9% Q1 2025
HPMC$634.2 $126.8 20.0% Q4 2024
AA&S$538.5 $88.0 16.3% Q4 2024

Market Revenue Mix (Selected)

MarketQ1 2024 ($M, %)Q4 2024 ($M, %)Q1 2025 ($M, %)
Jet Engines – Commercial$311.2, 30% $427.9, 36% $421.4, 37%
Airframes – Commercial$190.1, 18% $191.2, 16% $205.8, 18%
Defense$114.4, 11% $148.4, 13% $127.2, 11%
Total A&D$615.7, 59% $767.5, 65% $754.4, 66%
Conventional Energy$102.5, 10% $60.8, 5% $121.8, 11%

KPIs and Cash

KPIQ1 2024Q4 2024Q1 2025
Managed Working Capital (% of annualized sales)—30.9% 35.9%
Cash from Operations ($USD Millions)$(98.8) $380.9 $(92.5)
Capital Expenditures ($USD Millions)$65.8 $47.0 $53.3
Share Repurchases ($USD Millions)$150.0 (FY-to-date earlier period) $70.0 $70.0 (avg price $59.25)

Results vs S&P Global Consensus (Q1 2025)

MetricConsensusActualSurprise
Revenue ($USD Billions)$1.080*$1.144 +$0.065B (+6.0%)
Adjusted EBITDA ($USD Millions)$180.2*$194.6 +$14.4M (+8.0%)
Adjusted EPS ($USD)$0.592*$0.72 +$0.13 (+22%)

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAQ1 2025$170M–$180M —N/A (actual delivered $194.6M)
Adjusted EPSQ1 2025$0.55–$0.61 —N/A (actual $0.72)
Adjusted EBITDAQ2 2025—$195M–$205M New intra‑year detail (in‑line with Q1 level)
Adjusted EPSQ2 2025—$0.67–$0.73 New intra‑year detail
Adjusted EBITDAFY 2025$800M–$840M $800M–$840M Maintained
Adjusted EPSFY 2025$2.80–$3.00 $2.87–$3.09 Raised
Adjusted Free Cash FlowFY 2025$240M–$360M $240M–$360M Maintained
Capital ExpendituresFY 2025$260M–$280M $260M–$280M Maintained
Share Repurchases (assumption)Q2 2025—~$250M in Q2 Added assumption to guidance framing

Earnings Call Themes & Trends

TopicQ3 2024 (10/29)Q4 2024 (2/4)Q1 2025 (5/1)Trend
Aerospace ramp & supply chainWork stoppage and Hurricane Helene delayed shipments; ramp uncertainty Recovery underway; strong Q4; backlog steady; MRO ramp, ISO pushes +32% in 2024 Sustained strength; commercial engines +35% YoY; A&D 66% mix; contracts extended Improving demand, stronger execution
Tariffs/macro mitigationNot a major focus in Q3 releaseContract pass‑throughs, diversified sourcing; mitigations described ~$50M gross tariff exposure mitigated by offsets (duty drawback, exemptions, surcharges); minimal EPS impact expected Risk acknowledged, well‑mitigated
Pricing/mix dynamicsAA&S margins down on lower titanium/exotic deliveries AA&S margins +150 bps sequential, aided by credits; HPMC 20% margin HPMC margin 22.4%; nickel/titanium pricing +6–7% YoY Favorable pricing/mix supports margins
Capacity/capex focusInvesting; ISO upgrades; reliability initiatives FY25 capex $260–$280M; rolling average ~$184–$200M per year Nickel melt debottlenecking; Pageland titanium sheet online; customer‑funded capex expected Capacity aligned to A&D growth
Customer contractsNew LTAs, $4B commitments (nickel) discussed Continued negotiation; share gains with RTX/Pratt Airbus multi‑year agreement; sole‑source alloys into 2030s/2040s Contracted visibility increasing

Management Commentary

  • “ATI’s strong start to 2025…robust demand and growing contractual support. Aerospace and defense accounting for two‑thirds of our revenue this quarter…” – Kimberly A. Fields, President & CEO .
  • “Adjusted EBITDA at $195M was $20M higher than the midpoint of our Q1 guidance… Strong operational performance in both segments and robust customer demand drove results.” – Don Newman, CFO .
  • On tariffs: “These represent approximately $50 million in annual cost exposure prior to offsets… we anticipate minimal impact on our full year earnings, allowing us to reaffirm our current guidance.” – Fields .
  • On jet engines: “We are the sole source supplier for 5 of the 7 alloys found in the hot section… under long‑term contracts… well into the 2030s and even 2040s.” – Fields .
  • On capital deployment: “We expect to buy back as much as $250 million in shares [in Q2]… how can we not?” – Newman .

Q&A Highlights

  • Pricing strength in HPMC: Nickel/titanium prices up ~6–7% YoY; LTAs secure multi‑year benefit; supports margin durability .
  • Tariff offsets: diversified sourcing, productivity, duty drawback, defense exemptions, and contract surcharges; core A&D demand intact with no cancellations/pushouts reported .
  • Jet engine growth and capacity: FY25 jet engine sales expected +15–20% YoY; H2 margin targets HPMC >24%, AA&S 15–16% as A&D mix expands; capex disciplined, with customer co‑funding .
  • Airframe/widebody outlook: ATI signed a 5‑year Airbus agreement approaching $1B, doubling participation; titanium capacity ramp (Oregon, Pageland SC) aligned to OEM pull .
  • Industrial end‑markets: Guide embeds softer industrial demand risk; AA&S still targets mid‑teens margins (15–16%) in 2H .

Estimates Context

  • Q1 2025 beat vs S&P Global consensus: Revenue $1.144B vs $1.080B*, adjusted EBITDA $194.6M vs $180.2M*, adjusted EPS $0.72 vs $0.592*. Strength came from commercial engines and defense, with HPMC pricing/mix and reliability gains .
  • Q2 2025 guidance vs consensus: Company guides adjusted EBITDA $195–$205M and adjusted EPS $0.67–$0.73; consensus EBITDA ~$204.9M* and EPS ~$0.713* suggest guidance is broadly aligned at mid‑point. Revenue is not explicitly guided; consensus ~$1.156B* .
    *Values retrieved from S&P Global.

Key Takeaways for Investors

  • A&D mix and contracted sole‑source positions are expanding, anchoring margin trajectory (HPMC margin 22.4% in Q1; target >24% in H2) as jet engine demand accelerates and MRO stays elevated .
  • Near‑term tariff risks are actively mitigated; contracts and offsets should protect earnings—maintained FY25 adjusted EBITDA guide and raised EPS guide underscore confidence .
  • Sequential softness is largely mix/timing and the absence of Q4’s non‑operational credits; Q2 guidance implies stability with margin expansion skewed to H2 as A&D ramps .
  • Airbus agreement and Pageland/other capacity investments strengthen airframe positioning into the widebody ramp; watch qualification progress and customer funded capex signals .
  • Cash conversion should improve across the year (Q1 seasonal build), with FY25 adjusted FCF $240–$360M reaffirmed; accelerated buybacks (~$250M in Q2) provide EPS tailwind and potential share‑count leverage .
  • Monitor AA&S industrial exposure; guidance already embeds caution, but segment margins remain resilient mid‑teens with aero‑like and medical/electronics support .
  • Trading lens: Q1 print beat across headline metrics; catalysts include contract wins, guidance maintenance/raise, and A&D backlog strength—stock likely sensitive to any tariff/newsflow shifts and OEM production updates .