Ati Inc. · NYSE:ATI
Ati — Investor Day (November 2023)
52 slides from Ati's investor day presentation, Nov 29, 2023
Slide 1: Proven to perform anywhere. ATI Investor Update
Proven to perform anywhere. ATI Investor Update November 29, 2023 ©2023 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: Meeting Logistics
Meeting Logistics 9:00 – 10:45 AM Main Presentation 10:45 – 11:00 AM Break 11:00 – 12:00 PM In-person Q&A Broadcast live to webcast attendees in listen-only mode 12:00 – 2:00 PM ATI team available for discussion Lunch served Slides will be posted on ATImaterials.com at conclusion of presentation. 3
Slide 4: Proven to perform anywhere.
Se ATI Proven to perform anywhere.
Slide 5: $5B+ revenue and $1B+ EBITDA by 2027
By 2027 $5B+ $1B+ Revenue EBITDA
Slide 6: Strategy, priorities and markets
Strategy, Executing Delivering priorities and the strategy financial markets operationally performance Bob Wetherbee Kim Fields Don Newman Board Chair and President and EVP and Chief Executive Officer Chief Operating Chief Financial Officer Officer 6
Slide 7: Strategic Priorities
Our strategy is delivering Vision Mission 5-year Strategic Priorities Solving Deliver long-term Grow the core the World’s shareholder value by Sharpen operational Challenges Transforming to be an aerospace and defense advantage through leader Materials Position for the future Securing tech
Slide 8: Aerospace and Defense: Strong fundamentals
Aerospace and Defense: Strong fundamentals Growth significantly outpaces GDP Materials science is critical to end-product performance Differentiated solutions earn strong margins 8
Slide 9: Aerospace as a growing market
Aerospace as a growing market Key growth drivers • Build rates • Increased demand for engine spares • Share gains Percentage of ATI sales from aerospace and defense 61% >65% 41% 49% 2021 2022 Q3-23 Target 9
Slide 10: Strong commercial aero demand gives us confidence
Strong commercial aero demand gives us confidence Narrowbody Forecast Widebody Forecast 3500 140 900 35 130 800 3000 Monthly Airframes Produced Monthly Airframes Produced 30 700 Annual Engines Produced Annual Engines Produced 120 2500 120 600 110 25 2000 500 100 1500 400 24 90 20 300 1000 80 200 15
Slide 11: Perform end-to-end across entire jet engine supply chain
Perform end-to-end across entire jet engine supply chain Produce most complex rotating parts for hottest environment • Our premium materials meet jet engine thermal management needs: faster, farther, longer, more efficient • Isothermal forging capabilities best in the world • ATI nickel powder alloy
Slide 12: “Next-Gen” is now: current engines use latest materials
“Next-Gen” is now: current engines use latest materials Current-Gen engines in service As MRO demand increases, ATI delivers • Of all new engine builds, ~90% are “current-gen” • With travel demand exceeding ability to replace fleet, • Current-gen drives new build part demand; with airlines are runni
Slide 13: Today’s world needs performance and security
Today’s world needs performance and security Fly Float Roll Spending up 20% (2024-2028) 4 aircraft carrier builds underway; Spending up 20% (2024-2028) on continued ramp of F35 USS Kennedy delivers in 2025 for ground vehicles CH-53K program ramping from Virginia class submarine builds M10 Bookers gr
Slide 14: “Aero-like” markets growing at outsized pace
“Aero-like” markets growing at outsized pace High growth: High barriers to Leverages ATI’s High value: significantly better entry: uniquely “Big 5:” A&D materials margins to than GDP complex science expertise match demand Medical Electronics Specialty Energy Titanium and niobium alloys Hafnium alloy
Slide 15: Solving our customers’ most difficult challenges
Solving our customers’ most difficult challenges Honored to partner with leading OEMs in aerospace, defense and beyond 15
Slide 16: Proven to perform anywhere.
Proven to perform anywhere. 16
Slide 17: Our path to the future
Our path to the future By 2027: >$5B in revenue (+$1B) │ Grow EBITDA to >$1B Grow the Sharpen Position Core Operational ATI for the Advantage Future 17
Slide 18: ATI’s unique capabilities underpin our success
ATI’s unique capabilities underpin our success Fully integrated supply chain gives us a competitive advantage Materials Science Expertise │ Advanced Process Technologies Market Most diverse Global leader Widest Market Premium Best World’s best Preferred leader: portfolio of in reactive titanium lead
Slide 19: All made possible by our team of proven performers
All made possible by our team of proven performers 19
Slide 20: Our path to the future: Grow the Core
Our path to the future By 2027: >$5B in revenue (+$1B) │ Grow EBITDA to >$1B Sharpen Position ATI for Grow the Core Operational Advantage the Future • Reposition titanium capabilities to meet high demand growth in high-value market • Disciplined capital • Focused mix management: product, markets, cu
Slide 21: Meeting unparalleled demand for titanium
Meeting unparalleled demand for titanium Expanding capacity and capability: • Operational efficiency • Restart • Expansion Significantly increasing Titanium melt capacity +80% Increase 2022 Current 2025 21
Slide 22: ATI Operating Model: sustaining performance
ATI Operating Model: sustaining performance 22
Slide 23: From standard stainless to A&D powerhouse
From standard stainless to A&D powerhouse Specialty Rolled Products transformation Working systemically: • Highest quality melt • Most powerful rolling mill • Best-in-class finishing capabilities at lowest cycle times • Flexible assets: able to roll and finish titanium, nickel, specialty steel 35% 3
Slide 24: From by-product to core: Hafnium takes off
From by-product to core: Hafnium takes off 80/20 analysis led us to: • Continue mature zirconium oxide business • Expand production of hafnium: only producer in world at highest purity • C103 (hafnium + niobium): key alloy for $400B commercial space market 50% increase in hafnium output +50% Increas
Slide 25: Our path to the future: Sharpen Operational Advantage
Our path to the future By 2027: >$5B in revenue (+$1B) │ Grow EBITDA to >$1B Grow the Position ATI for Core Sharpen Operational the Future Advantage • Accelerate inventory velocity to generate cash • Increase productivity and yields, at highest quality while increasing revenue • Streamline value cha
Slide 26: LEAN drives operational efficiency, inventory velocity
LEAN drives operational efficiency, inventory velocity Aligning demand and capacity with operational flow Value Stream Create Target Flow Pounds Establish Pull Days 26
Slide 27: Debottlenecking to unlock operational efficiencies
Debottlenecking to unlock operational efficiencies Working systemically • Faster operational flow • Increase inventory velocity • Reduce Working Capital • Solving as One ATI 27
Slide 28: Our path to the future: Position ATI for the Future
Our path to the future By 2027: >$5B in revenue (+$1B) │ Grow EBITDA to >$1B Grow the Sharpen Core Operational Advantage Position ATI for the Future • Expand and strengthen long-term customer partnerships • Develop materials that solve customer challenges: new alloys and products • Expand capacity a
Slide 29: Integrating additive expertise, from powder to parts
Integrating additive expertise, from powder to parts • Building on ~10 years of expertise: metal additive manufacturing for aerospace • Secure facility: defense, aerospace, space • Fully integrated: Design, production, post processing, inspection • Multi-material: titanium, nickel, aluminum, special
Slide 30: ATI Titan 23TM: Manufacturable high-performance Ti AM parts
ATI Titan 23TM: Manufacturable high-performance Ti AM parts • Superior performance in additive manufacturing (AM) applications vs. common alloy Ti64 • Higher strength (+20%) while maintaining ductility • Reduced distortion of printed parts • Wide processing range • Able to print “unbuildable” Ti64 p
Slide 31: ATI-produced Nitinol key to growing medical market
ATI-produced Nitinol key to growing medical market • Nitinol (NiTi) used in life-saving and life-extending medical stents and devices: cardiovascular, orthopedic, tissue engineering • $40B device market projected to grow rapidly: 13%+ CAGR over next 5+ years. • Nitinol’s super-elastic and shape-memo
Slide 32: Our path to the future
Our path to the future By 2027: >$5B in revenue (+$1B) │ Grow EBITDA to >$1B Grow the Sharpen Position Core Operational ATI for the Advantage Future 32
Slide 33: Well-positioned to create shareholder value
Well-positioned to create shareholder value Key takeaways from today’s financial discussion Focused strategy, effective execution, discipline to drive TSR Generate Cash Deploy Cash Create Shareholder Value • Markets and capabilities with • Fuel profitable organic • Accretive capital allocation robus
Slide 34: Revenue growth driven by demand and critical capacity
Revenue growth driven by demand and critical capacity Revenue CAGR at target midpoints ($ billions) ’21–’25 = 13% $5.2–$5.4 ’21–’27 = 11% $4.5–$4.6 Original Growth drivers $4.1 2022 • Commercial aero growth Target $2.8 • Defense (“fly-float-roll”) demand • Commercial space growth • Medical, electron
Slide 35: Profitability reflects growth and improving mix
Profitability reflects growth and improving mix Adjusted EBITDA1 CAGR at target midpoints ($ billions) ’21–’25 = 31% $1.0–$1.2 ’21–’27 = 24% $0.8–$0.9 Adjusted EBITDA margin % ’19 actual = 10.7% Q3 ’23 actual = 14.4% $0.6 ’25 target = 18%–20% ’27 target = 19%–21% $0.3 Performance drivers • Revenue g
Slide 36: Both segments delivering growth and profit expansion
Both segments delivering growth and profit expansion High Performance Materials & Components Advanced Alloys & Solutions ($ billions) 2025 2027 ($ billions) 2025 2027 Revenues >$2.3 >$2.6 Revenues >$2.2 >$2.6 EBITDA1 Margins Low-to- Mid-20s % EBITDA1 Margins Mid-to-upper Upper- mid-20s % teens % tee
Slide 37: 2024: Robust A&D growth with margin expansion
2024: Robust A&D growth with margin expansion Revenue 2024 Quarterly • Robust growth in A&D / aero-like markets Revenue Trajectory1 • Oregon Ti melt facility restart run rate achieved in 2H • Industrial sales recovery in 2H EBITDA and EBITDA margins • Margin expansion YOY driven by mix improvement,
Slide 38: Maintaining free cash flow conversion >90% in 2025
Maintaining free cash flow conversion1 >90% in 2025 Business Margin Inventory Financial Growth Expansion Efficiency Discipline • Strong end market • Streamlined • Optimized material • Reduced pension growth cost structures flow paths contributions • Market share • Enhanced • Low-value • Lower intere
Slide 39: As revenues expand, working capital efficiency magnifies cash generation
As revenues expand, working capital efficiency magnifies cash generation 1 Managed Working Capital Transitory increase includes inventory Every 100 basis point improvement in position for adds $40M to $50M of cash ramping demand and higher production capacity 41% 40% 38% 30% <30% Efficiency Drivers
Slide 40: Best days of value creation are ahead
Best days of value creation are ahead Growing “deployable” cash – cash from operations after maintenance capex, interest, and pension contributions – will drive total shareholder return Prior 4-yrs Next 4-yrs Drivers (2020 – 2023) (2024 – 2027) • Growing profits • MWC efficiency Deployable • Capex d
Slide 41: Deploy capital to maximize shareholder returns, maintain financial flexibility
Deploy capital to maximize shareholder returns, maintain financial flexibility Deliberate and balanced capital deployment strategy Priorities Goals • Above-market growth rate 1. Fund growth and acquire differentiated capabilities to • EBITDA margin expansion extend competitive advantages • Financial
Slide 42: Investing to grow and extend competitive advantages
Investing to grow and extend competitive advantages Capital Expenditures • Robust list of organic investment • Growth investment priorities: titanium melt, advanced forging capabilities, and secure additive manufacturing • Average annual capex of $200 million through 2027, including growth and maint
Slide 43: De-levering: De-risk capital structure, improve cash flow
De-levering: De-risk capital structure, improve cash flow Pension Pension Participants (in 000’s) • October annuitization largely completes “glidepath”: 33 Transferred gross pension liabilities of ~$1.4 billion to 3rd party Down 93% • Actions reduce expense >$45 million from pre-annuitization run-ra
Slide 44: Returning capital to shareholders remains a high priority
Returning capital to shareholders remains a high priority Share repurchases Share Repurchases ($ millions) • Over past two years, share repurchases total $225 million • Completed current $75 million program with $30 million of stock $150 $140 purchases in early November • Announcing today a new $150
Slide 45: Growth-oriented, highly profitable and sustainable
Growth-oriented, highly profitable and sustainable By 2027: >$5B in revenue (+$1B) │ Grow EBITDA to >$1B Grow the Sharpen Position Core Operational ATI for the Advantage Future 45
Slide 46: Best days of value creation are ahead of us
Best days of value creation are ahead of us Strategy is delivering: leading in A&D. Confirmed by our customers… and our results. We’re early in the growth cycles – Up to 20% revenue growth, 2025-2027 – Well-positioned for the upside. We’ve raised our expectations. – Significant increase in 202
Slide 47: Proven to perform anywhere.
Se ATI Proven to perform anywhere.
Slide 48: Appendix
Appendix 48
Slide 49: End-Market Trends (4Q23 – 2027)
End-Market Trends (4Q23 – 2027) Q4 2023 2024 2025 2027 Aero – Jet Engine Aero – Air Frame Defense “Aero-Like” (1) Industrials Asian precision rolled strip 1”Aero-Like” includes electronics, medical and specialty energy 49
Slide 50: GAAP measures to non-GAAP (Adjusted EBITDA)
GAAP measures to non-GAAP (Adjusted EBITDA) ATI Inc. and Subsidiaries Non-GAAP Financial Measures (Unaudited, dollars in millions, except per share amounts) The Company The Companyreports reportsitsits financial results financial in accordance results with with in accordance accounting principles ac
Slide 51: GAAP measures to non-GAAP (Adjusted EBITDA)
GAAP measures to non-GAAP (Adjusted EBITDA) Latest Twelve Months Fiscal Year Ended Fiscal Year Ended Ended September 30, 2023 December 31, 2021 December 31, 2019 Net income (loss) attributable to ATI $ 298.7 $ (38.2) $ 252.5 Net income attributable to noncontrolling interests 13.4 22.0 12.5 Net inco
Slide 52: GAAP measures to non-GAAP (Free Cash Flow and Managed Working Capital)
GAAP measures to non-GAAP (Free Cash Flow and Managed Working Capital) Free Cash Flow Free cash flow as defined by ATI includes the total of cash provided by (used in) operating activities and investing activities as presented on the consolidated statements of cash flows, adjusted to exclude cash co