Ati Inc. · NYSE:ATI
Ati — Investor Day (February 2022)
66 slides from Ati's investor day presentation, Feb 17, 2022
Slide 1: Proven to perform anywhere. Investor Day
Proven to perform anywhere. Investor Day February 17, 2022 © 2022 ATI. All rights reserved. 1
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements. Actual results may differ materially from results anticipated in the forward-looking statements due to various known and unknown risks, many of which we are unable to predict or control. These and additional risk facto
Slide 3: Logistics
Logistics Virtual Meeting • Slides will be posted in the Investor section on ATI’s website after the event • Live Q & A session at conclusion of presentations • Submit questions at any time using the Q&A box at the bottom right of your window • Questions will be asked anonymously by a moderator 3
Slide 4: Agenda
Agenda Welcome Scott Minder | VP, Treasurer and Investor Relations Strategy Bob Wetherbee | Board Chair, President & CEO Markets & Growth Kevin Kramer | SVP, CCMO Operations Kim Fields | EVP & COO Financials Don Newman | EVP & CFO Closing Bob Wetherbee | Board Chair, President & CEO Q&A 4
Slide 5: Video
ATl Video
Slide 6: Proven to perform anywhere.
Proven to perform anywhere. 6
Slide 7: Experienced team leads strategy, execution
Experienced team leads strategy, execution Bob Wetherbee Kim Fields Don Newman Kevin Kramer Scott Minder Board Chair, Executive Vice Executive Vice Senior Vice Vice President, President & Chief President, President, President, Treasurer & Executive Officer Chief Operating Chief Financial Chief Comme
Slide 8: ATI is well-positioned for growth and delivering results
ATI is well-positioned for growth and delivering results Today’s Key Messages Clear strategy propels Significant profitable Durable competitive Cash generation and aerospace & defense growth in high-value advantage built on capital allocation fuel leadership markets unique capabilities shareholder r
Slide 9: Now transformed, accelerating for growth
Now transformed, accelerating for growth Transformed Accelerating • Defined the strategy • Focusing the strategy • Streamlined portfolio, world-class • Eliminating low margin products capabilities • Right-sized cost structures • Locked in cost structure benefits • Aligned the team • Disciplined inve
Slide 10: ATI Today: Leaner, more profitable, poised for growth
ATI Today: Leaner, more profitable, poised for growth Strategic Focus 2021 Results / 2022 Guidance • Focused global aerospace and defense markets $0.13 $0.85 - $1.05 • Leveraging capabilities to grow in diversified applications • Innovating to create sustainable shareholder value Adj. EPS1 • Deeply
Slide 11: ATI's unique capabilities underpin our success
ATI’s unique capabilities underpin our success Products Processes People Partnerships World-class Unique process Committed team of Deep customer materials science technologies materials science partnerships from capabilities; with proven and engineering R&D to final proprietary alloy execution at ex
Slide 12: Gaining velocity in high-value markets
Gaining velocity in high-value markets Transformation Accelerating 2022 & Beyond • Defined the strategy • Focusing the • Purpose-built portfolio focused on strategy aerospace and defense markets • Streamlined portfolio, • Eliminating low • Significant growth potential in world-class capabilities mar
Slide 13: Guided by a clear purpose
Guided by a clear purpose Mission Vision Solving the Delivering long-term shareholder value by: world’s challenges • Expanding aerospace and defense leadership through • Securing technology leadership in strategic materials science nickel and titanium applications • Earning the first call through st
Slide 14: Growth-oriented, highly profitable and sustainable
Growth-oriented, highly profitable and sustainable Our Strategic Priorities Grow The Core Driving Competitive Position ATI for Advantage the Future • Accelerating key • Materials science expertise • Purpose-built portfolio end-markets • Differentiate via digital • Strong balance sheet • Flawless exe
Slide 15: Markets and Growth
Markets and Growth Kevin Kramer Senior Vice President, Chief Commercial & Marketing Officer 15
Slide 16: Strong markets, driven by customer partnerships
Strong markets, driven by customer partnerships Key messages you’ll hear today Growing Positions in Great Markets High-Value Differentiated Markets Customer Needs • Commercial aerospace • Innovative solutions that solve critical challenges • Defense & space • Trusted suppliers with a high • Critical
Slide 17: Serving attractive markets with high barriers to entry
Serving attractive markets with high barriers to entry Increasing performance requirements create need for advanced materials and components • Fuel efficiency • Thermal management • Weight reduction Aerospace Defense • Asset durability • Extreme operating environments • Greenhouse gas emission Speci
Slide 18: Aerospace market requires innovative solutions
Aerospace market requires innovative solutions Airline Needs ATI-Delivered Solutions • Fuel-efficient aircraft • Thermal Management: • Increased flight range Advanced materials and powder metallurgy enable • Reduced engine noise engines to burn > 10% hotter • Lightweighting: Customer Needs Titanium
Slide 19: Sustainability helps power NextGen aircraft
Sustainability helps power NextGen aircraft Advanced, sustainable materials NextGen aircraft enable enable efficiencies savings and help the planet NextGen aircraft deliver savings > $9B+ (vs. legacy aircraft): Annual fuel savings • LEAP jet engines: 15% less fuel, 15% reduced CO2 • B787: 20% lighte
Slide 20: Engine demand returns to 2019 levels by 2023
Engine demand returns to 2019 levels by 2023 Jet Engine Annual Forecast Recovery Ahead Return to 2019 total production rates in 2023 5,000 Rapid narrowbody growth offsets • Driven by air traffic recovery/growth and slower widebody recovery fleet retirements 4,000 Production composition differs in 20
Slide 21: NextGen growth fueled by advanced materials
NextGen growth fueled by advanced materials Robust Recovery NextGen vs. Legacy Engines NextGen engines: +115% expected growth • Ramp underway 5,000 +115% NextGen through 2025 • Trough hit in 2021 4,000 3,000 NextGen engine programs • General Electric: LEAP, GE9X, GEnx 2,000 • Pratt & Whitney: GTF (1
Slide 22: Video in replay
* Video in replay ATl
Slide 23: Strong demand aligned with ATI's strengths
Strong demand aligned with ATI’s strengths Key Markets Fly Float Roll • Military jet engine • Nuclear-powered submarines • Tanks • Military airframe • Nuclear-powered aircraft carriers • Armored vehicles • Helicopter/VTOL • Conventional surface vessels • Other ground combat vehicles • Hypersonics &
Slide 24: Mission-critical products require innovative solutions
Mission-critical products require innovative solutions Military Needs • Fuel-efficient aircraft • Hypersonic and space flight • Efficient naval vessels • Increased protection • Perform in extreme environments Customer Needs ATI-Delivered Solutions • Hotter-burning jet engines • Advanced materials en
Slide 25: Video in replay
re Video in replay ATl
Slide 26: ATI is well-positioned in growing high-value markets
ATI is well-positioned in growing high-value markets Key Takeaways Grow The Core Driving Competitive Position ATI for Advantage the Future • Core markets in recovery • Critical applications leverage • Increased sustainability aerospace expertise requirements drive demand • Transitioning to phase of
Slide 27: Operations
Operations Kim Fields Executive Vice President, Chief Operating Officer 27
Slide 28: Competitive advantages drive profitable growth
Competitive advantages drive profitable growth Key messages you’ll hear today Transformed business focused on execution Competitive Advantage Operationally Excellent Margin Expansion • World-class materials • Streamlined footprint • Lean cost structures sciences capabilities with increasing revenue
Slide 29: Focused operating priorities drive execution
Focused operating priorities drive execution Taking costs out… Driving and keeping them out efficiency gains Implementing a Extending our disciplined capital best-in-class investment process leadership team 29
Slide 30: Core competencies create a wide competitive moat
Core competencies create a wide competitive moat Built on advanced materials science and unique process technologies World-class process Next technologies generation Defect-free • Durable, multi-faceted moat metallic melting powders • Not easily replicated • Provides significant Diverse Products Mar
Slide 31: Defect-free melt delivers extraordinary quality
Defect-free melt delivers extraordinary quality Advanced, sustainably focused technologies Customer Benefits • Meets the most extreme quality requirements • Extends lives of customers’ products • Reduces customer lifecycle costs ATI Benefits • Marketplace differentiator • First-run quality: - Reduce
Slide 32: Integrated process delivers unmatched quality
Integrated process delivers unmatched quality Jet engine disks: melt powder forged components Customer Benefits • World-class product quality and reliability • Lower total cost solution • Alloy development capability for next generation jet engines ATI Benefits • Metallurgy expertise improves produc
Slide 33: Video in replay
re Video in replay ATl
Slide 34: Leading in exotic alloys for critical markets
Leading in exotic alloys for critical markets High-purity hafnium specialty products Customer Benefits • High-purity material enables: - Faster, more efficient electronic devices and chips powering 5G and Internet of Things - Higher velocity manufacturing processes • Increased supply to satisfy grow
Slide 35: Video in replay
re Video in replay ATl
Slide 36: Best-in-class assets, streamlined flowpaths
Best-in-class assets, streamlined flowpaths High-value flat materials, efficiently produced Customer Benefits ATI Benefits • Faster order response times • Expanded product portfolio • Competitive pricing, superior product quality • Increased manufacturing flexibility • Broader product catalog • Lean
Slide 37: Video in replay
re Video in replay ATl
Slide 38: Powerful portfolio performing with precision
Powerful portfolio performing with precision 38
Slide 39: Transforming the supply chain to generate cash
Transforming the supply chain to generate cash Laser focus on inventory efficiency Inventory Efficiency Drivers Benefits • Rationalized footprint streamlines • Less material in transit product flows system-wide • Strategic supplier partnerships • Increased consignment materials; consistent payment t
Slide 40: Operational improvements drive sustainability success
Operational improvements drive sustainability success Carbon footprint Focused on GHG reduction reductions • Modernizing footprint: Since 2018 Increasing process controls • Advancing melting technology: >70% increasing scrap intensity Recycled materials used in production • Improving energy efficien
Slide 41: Long-term growth driven by strong fundamentals
Long-term growth driven by strong fundamentals High Performance Materials & Components Advanced Alloys & Solutions 2025 Targets 2025 Targets Revenues ~$2B Revenues ~$2B EBITDA EBITDA Margins Low-to-mid 20s% Margins Mid-to-high teens% Growth Fundamentals Growth Fundamentals • Narrowbody engine growth
Slide 42: Executing the strategy operationally
Executing the strategy operationally Grow The Core Driving Competitive Position ATI for Advantage the Future • Leverage competitive • Prioritize sustainability for • Drive inventory efficiency; advantages for above-market growth and environmental generate cash for growth growth rates stewardship • E
Slide 43: Financials
Financials Don Newman Executive Vice President, Chief Financial Officer 43
Slide 44: Growth and Disciplined capital allocation drive value
Growth and Disciplined capital allocation drive value Key messages you’ll hear today Positioned to create shareholder value Generate Cash Deploy Cash Create Shareholder Value • Key market revenue growth • Fuel profitable organic • Accretive capital allocation growth • Focus on price and profitabilit
Slide 45: Consistent revenue growth across markets
Consistent revenue growth across markets Revenues Revenue Growth Drivers $4.5 • Commercial Aerospace • Narrowbody recovery 9%-11% • Widebody recovery $3.5 CAGR • Defense market growth • Price optimization $2.5 • New products and applications $1.5 Billion 2019 2020 2021 2025 Target Note: historical p
Slide 46: Significant margin expansion on higher revenues
Significant margin expansion on higher revenues EBITDA Margins Margin Expansion Drivers 21.0% • Product mix improvement • Commercial aerospace recovery 14.0% 18%-20% • NextGen jet engine materials • High-value flat products • Lean cost structures 7.0% • Price and productivity above inflation 0.0% 20
Slide 47: Efficiency magnifies cash generation as revenues expand
Efficiency magnifies cash generation as revenues expand Managed Working Capital Efficiency Drivers Every 100 b.p. improvement 40% adds $30M -$40M of cash 38% • Footprint optimization 30% < 30% • Strategic supplier partnerships • Value chain analysis • Improves inventory turns • Reduces buffer stocks
Slide 48: Targeting free cash flow conversion of 90%
* Targeting free cash flow conversion of 90% Pulling on multiple cash generation levers Business Margin Inventory Financial Growth Expansion Efficiency Discipline • Strong market • Streamlined • Optimized material • Reduced pension growth cost structures flow paths contributions • Market share • Enh
Slide 49: Deployable cash grows, fuels TSR expansion
Deployable cash grows, fuels TSR expansion 2018 - 2021 2022 - 2025 Deployable Cash Deployable Maintain Cash Required Maintain Pension No Required Pension Contributions 49
Slide 50: Capital allocation pivots to growth, shareholder return
Capital allocation pivots to growth, shareholder return Deploy capital to maximize shareholder returns, maintain financial flexibility Priorities Goals • Maintain world-class asset base • Above-market growth rate • EBITDA margin expansion • De-lever balance sheet • Financial leverage • Fund growth,
Slide 51: Clear glidepath to fully fund pension obligations
Clear glidepath to fully fund pension obligations Funded Status* Participants > 95% 35,000 84% 30,000 75% 71% 72% 25,000 > 60% 20,000 reduction 15,000 10,000 5,000 Actives 0 2018 2019 2020 2021 Goal 2013 2018 2021 *Financial reporting basis 51
Slide 52: Investment ROIC well-above cost of capital
Investment ROIC well-above cost of capital Projects driving long-term shareholder value Increased Share Efficient Technology Enhanced Capabilities and Volumes • Strong organic growth from • Efficient melting technologies • Advanced product core market expansion increase scrap material use developmen
Slide 53: Strategic alignment, disciplined process drive M&A
Strategic alignment, disciplined process drive M&A Criteria for Potential Acquisitions Strategic Criteria Financial Criteria • Aligned with core competencies – • Demonstrated, sustainable growth profile materials science focused • Strong margin profile and historical trend • In aerospace & defense m
Slide 54: Accelerating value creation across ATI
Accelerating value creation across ATI • Transformed business; lean Significant cost structures Revenue & • High-value end market Increasing Margin expansion ROIC Expansion • Growth driven by advanced materials that solve customer challenges • Fund organic growth Increasing • Increased revenues; Dis
Slide 55: Growth-oriented, highly profitable and sustainable
Growth-oriented, highly profitable and sustainable Grow The Core Driving Competitive Position ATI for Advantage the Future • Accelerating key • Materials science expertise • Purpose-built portfolio end markets • Differentiate via digital • Strong balance sheet • Flawless execution technology • Compe
Slide 56: Closing
Closing Bob Wetherbee Board Chair, President, Chief Executive Officer 56
Slide 57: Meaningful improvement across all pillars by 2025
Meaningful improvement across all pillars by 2025 2025 > 90% of < 30% of Sales GOALS 18% - 20% Adj. Net Managed Income Working of Sales ~ 9%-11% Free Cash Capital per year EBITDA Flow Margin Conversion Revenue CAGR 57
Slide 58: Accelerating to a bright future
Accelerating to a bright future Clear strategy Significant Disciplined Accretive Create propels our growth execution capital significant aerospace and opportunities across allocation shareholder defense in key markets world-class value leadership capabilities 58
Slide 59: Questions & Answers
All Questions & Answers
Slide 60: Proven to perform anywhere.
Proven to perform anywhere. 60
Slide 61: Additional Materials Appendix
• Above-market growth rate Additional Materials Appendix • EBITDA margin expansion • Financial leverage ~2x net debt : EBITDA • Fully funded pension • ROIC above cost of capital (WACC) 61
Slide 62: Non-GAAP Financial Measures
All Allegheny Technologies Incorporated and Subsidiaries Non-GAAP Financial Measures (Unaudited, dollars in millions, except per share amounts) The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP") However, mana
Slide 63: Net income per share reconciliation
All ‘Numerator for Basic net income (loss) per common share - Net income (oss) attributable to ATI Effect of dilutive securities Numerator for Diluted net income (loss) per common share - ‘Net income (loss) attributable to ATI after assumed conversions _$ ‘Denominator for Basic net income (loss) per
Slide 64: Adjusted EBITDA reconciliation
All Net income (loss) (©) Depreciation and Amortization (G) Interest Expense (¢/-) Income Tax Provision Benefit) © Strike related costs (a) (¢/-) Restructuring and other charges (credits) (b) (©) Retirement benefit settlement gain (c) (© Gain on sale of business (4) (©) Debt extinguishment charge (e
Slide 65: Non-GAAP footnotes
All (a) Third quarter 2021, second quarter 2021, and fiscal year ended December 31, 2021 results include $22.9 million, $40.3 million, $63.2 million and $63.2 million, respectively, of pre-tax strike related costs primarily consisting of overhead costs recognized in the period due to below-normal op
Slide 66: Free Cash Flow and Adjusted Revenues
All Free Cash Flow Fiscal Year Ended December 31, 2021 Cash provided by operating activities $ 16.1 Cash used in investing activities (77.6) Add back: cash contributions to U.S. qualified defined pension plans 67.5 Free Cash Flow as defined Free cash flow as defined by ATI includes the total of cash