• Revenue (Q4 2024): $1.2 billion, up 12% sequentially.
• Full Year Revenue (2024): Nearly $4.4 billion, up 5% year-over-year.
• Adjusted EBITDA (Q4 2024): $210 million, above the guided range of $181 million to $191 million.
• Adjusted EBITDA (Full Year 2024): $729 million.
• EBITDA Margins (2024): Almost 17%.
• Free Cash Flow (2024): $248 million, up more than 50% over last year.
• Defense Revenue (2024): Up 22% to $490 million.
• Aerospace and Defense Revenue (Q4 2024): Exceeded 65% of total revenue.
• Jet Engine Revenue (2024): Up 9% year-over-year.
• Capital Investment (2024): $239 million.
• Share Repurchases (2024): $260 million, representing 105% of 2024 free cash flow.
• Net Debt Ratio (Q4 2024): Improved from 2.2 to 1.6 times.
• 2025 Adjusted EBITDA Guidance: $800 million to $840 million.
• 2025 Free Cash Flow Guidance: $240 million to $360 million.

• Warning! GuruFocus has detected 3 Warning Sign with ATI.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ATI Inc (NYSE:ATI) reported a 12% sequential increase in revenue for Q4 2024, reaching $1.2 billion.
• Adjusted EBITDA for Q4 was $210 million, surpassing the guided range of $181 million to $191 million.
• Free cash flow for 2024 was $248 million, marking a more than 50% increase over the previous year.
• The aerospace and defense segments contributed over 65% of Q4 revenue, indicating strong performance in these growing markets.
• ATI Inc (NYSE:ATI) announced $4 billion in new sales commitments, primarily tied to differentiated nickel products, indicating strong future demand.

Negative Points

• Q4 revenue mix was weaker than anticipated due to short-term shifts in customer requirements.
• HPMC segment margins declined by 230 basis points sequentially due to charges related to customer negotiations and adjustments to incentive compensation.
• The company faced operational challenges in Q3, including issues with nickel-zinc melt and hurricane impacts, affecting production and shipments.
• There is potential risk from tariffs on materials sourced from Canada and China, which could impact costs and supply chain dynamics.
• The guidance for 2025 assumes no work stoppages, but ongoing union contract negotiations could pose a risk if not resolved amicably.

Q & A Highlights

Q: Can you discuss the progression of EBITDA throughout 2025, given the guidance for Q1? A: Don Newman, Executive Vice President and CFO, explained that Q1 reflects seasonal factors and non-repeating items. He expects Q2 EBITDA to be in the low $200 million range, with Q3 and Q4 seeing recovery, reaching $210 million to $220 million-plus, driven by improvements in various areas.

Q: How are potential tariffs with Canada affecting ATI, especially regarding nickel supply? A: Kimberly Fields, President and CEO, stated that ATI is well-positioned with diversified nickel sources, with less than 25% coming from Canada. They have mechanisms in place to pass through any cost increases due to tariffs.

Q: What are the expectations for growth in the engine segment, particularly in HPMC, and how will it affect margins? A: Fields noted that engine growth is expected to continue, driven by materials and forgings, especially in MRO. Newman added that HPMC margins are expected to increase from 20%-21% in Q1 to over 23% by year-end, with a long-term target of over 25%.

Q: Can you provide context around customer concessions and whether they indicate pricing pressure? A: Newman clarified that these are not concessions but part of ongoing contract negotiations. The adjustments are intended to improve ATI's long-term position, and such charges are not expected to recur.

Q: How are union contract negotiations progressing, and is there a risk of work stoppage? A: Fields reported that negotiations are constructive and ongoing, with no anticipated work stoppage. The aim is to reach an agreement that rewards employees while maintaining competitiveness.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.