ATI Morgan Stanley's 14th Annual Laguna Conference

Sure, absolutely. Thanks, Christine. I'm Rob Rengel, IR head over here at ATI. Just real quick, and I know everybody loves the disclaimer, but we may make forward-looking statements today. Those, of course, are subject to risks and uncertainties. For a full list of those risks and uncertainties, just look at our most recent earnings slides or our most recent 10-K. That's it. Thank you. Great.

Yeah. Thanks, Christine. As I look at ATI through my tenure, it's really the transformation that we've done with the business. It started back in 2019 in the AA&S segment as we were looking at and working on SRP and that business and focusing on our aerospace and defense portion of that business, exiting Standard Stainless Sheet, which at the time was about $400 million in revenue. Really focusing our resources and investments at those differentiated products that bring the highest value to our customers. Here recently, we continued that focus around aerospace and defense and some scarce resources that we make, hafnium and zirconium. I've talked a lot about that on our calls. Those products go into everything from commercial nuclear, naval nuclear, hypersonics, space launch, and even jet engine additions for those alloys.

Taking that with the commercial discipline that we've applied across our business, we were able to capture the value that we were creating for those customers and for that business, and we've seen phenomenal results. In our second quarter alone, we were at about 22% margin in AA&S segment, 23% across the business. In the AA&S segment, if you go back a year ago, it was at 14%, so a really substantial increase. For the segment, over the last five years, we more than doubled our aerospace and defense percentage of revenue up to 44%. Again, substantial transformation that has been going on for a long time. I've been talking about it, but really started to see those financial results come through in the last quarter. The team's very proud of the progress that they've made, the focus.

Overall, from a company standpoint, we've increased our aerospace and defense percent of revenue up to 68%, 70% of our total revenue. That was down around 50% back in 2019. When you just look at how quickly that we've transformed and focused our energy, our resources, and our investments around those products that are differentiated and bring the highest value to our customers, it's phenomenal. It's been a phenomenal journey.

Yeah. As I look across the industry, and unfortunately, the time zone wasn't working with me today, I was up very early. As I was thinking about this, there is no other company in the industry that has the same combination of differentiated, unique products that ATI has. If I look at those areas where we are differentiated, one is the jet engine. We just talked a little bit about aerospace. Focusing in the jet engine, I've talked in the past on my earnings calls, there's seven proprietary alloys that go into the hot section of the jet engine. We make five of them full source providers. The sixth we split with another supplier, and the seventh is made by the OEM themselves. When you think about that, very unique characteristics and capabilities that we bring to this market. In addition to that, we have isothermal forging.

We're one of two globally that have that capability. Every disc that goes into a jet engine is made through an isothermal forge process. We have the capability. We've developed it. It's a very precise temperatures and pressures and time to make those discs. Again, very unique capabilities that our customers recognize and value. The other two, premium quality titanium. Again, goes into a jet engine, but it also goes into missiles, it goes into defense applications, and it goes into specialty energy applications. As we look across that portfolio, one of two globally that make premium quality titanium. We're in the process of qualifying our new asset that we just brought online out in Richland, Washington. The fourth is our hafnium and zirconium. We've talked a lot about that in my last earnings call. Done phenomenally well. We are one of three Western suppliers that are qualified to make that product.

The only one that doesn't have a captive commercial nuclear business, meaning they're supplying their own internal business first before they're selling it to the market. We're the only independent. When you look at that four, that combination, that's where I see customers are coming to us. They come to us to solve their hardest problems. They come to us because we have knowledge of almost the full periodic table, and we can work and say, if we add a little bit of this alloy or a little bit of this element, we can change the properties to get to the performance specifications that you're looking for. That combination, it's a phenomenal toolkit to have to bring to the industry.

When I look at our competitors, that combined with decades long of process knowhow and qualifications, we bring a ton of value to helping our customers solve not just today's problems, but the next generation developments that they're doing.

Yes. Capacity has been top of everybody's minds since COVID, as we came out. First thing we do is we start with Elevation. That is our operating model and our system, and it's the way we run our business. It really encompasses everything from procurement savings to operational improvements, as well as commercial discipline and portfolio optimization. So we've looked at our full set of assets, and you've seen probably quite a few changes over the last few quarters as we've continued to optimize at which markets, which customers, which products really leverage those specialized, differentiated capabilities we have for the highest value. So we do that and then apply incremental improvement. Continuous improvement in our facilities to get to increase the flow through the capacity-constrained bottlenecks, work on increased yields, work on improved productivity, reduce costs.

That's really the first step, where we can get more out of the assets we already have invested today. Once we get to that point, with our conversations with our customers, we look at putting in new capacity, and I've announced several new ones. A great example is the technical superalloy nickel CapEx that we are putting in. In fact, I'm very happy to say we are in commissioning for the remelt assets today, so I'm excited to see that come into operation. We'll have new primary melt coming next year. Sorry. At the end of next year, we'll be commissioning that. That was really close collaboration with our customers around what is their demand. As I talked about this year with our CapEx, about 20% of our CapEx is coming from customer-funded capital.