DPC Holdings PLC 2026 Q2 Earnings Call

Good morning and welcome to DPC Holdings second quarter 2026 results conference call. I'm Lucy Sharma, responsible for investor relations, and I'm joined by Mike Quinn, Chief Executive Officer, and David Egan, Chief Financial Officer. Mike and David will run through a short presentation outlining our results, strategic updates, and outlook. We will then open the call for questions. Before I hand over, I'd like to note that today's discussion will include forward-looking statements regarding our future performance, plans, and expectations. Information about factors that could cause actual results to differ materially from these statements can be found in today's presentation, our earnings release, and our SEC filings. During the presentation, we refer to certain non-GAAP financial measures with reconciliations to the most comparable GAAP measures available in the earnings release issued today, as well as in the appendix to the presentation.

Unless otherwise indicated, all performance comparisons are on a year-over-year basis, and all numbers will be in U.S. dollars. With that, I'd like to hand the call over to Mike on slide 3.

Great. Thanks, Lucy, and good morning, everyone. Welcome to DPC Holdings second quarter 2026 earnings call. I'm delighted to be reporting our first set of results as a listed company and to welcome many new shareholders alongside our existing ones who are as excited as we are for the growth opportunities and potential to generate significant further value. The listing was a major achievement in Doncasters' history, but our priorities remain the same, and as our second quarter results show, we're continuing to deliver record profitable growth. Let's move on to the operational and strategic highlights of the second quarter ended June 28, 2026, on slide 4. We have delivered record revenue and adjusted EBITDA. Revenue grew 34% year-on-year to $269 million. Engine Products increased 39%, growing 49% in Europe and 29% in North America. Adjusted EBITDA grew 33% to $48 million.

Revenue and adjusted EBITDA in the quarter were ahead of expectations. Adjusted EBITDA margin was 17.8% in the quarter, broadly in line with last year, but well ahead from quarter 1. As you can see, we are flagging a 60 basis point dilution to the adjusted EBITDA margin due to metal inflation in the quarter. Metal elements as traded commodities see price fluctuations, so our commercial contracts are structured for metal pass-through protection. This is a normal practice for us, and we always pass through inflation. Recently, we have seen some metals, especially hafnium, experience elevated cost increases, which have been more pronounced than normal, resulting in a higher-than-expected pass-through quantum. Hafnium is used largely within our IGT business. Passing this through to our customers meant there was no impact on our EBITDA, but it did slightly dilute the reported margin.

EBITDA for our Engine Products segments, both Europe and North America, grew 53% with the margin increasing 210 basis points to 23.5%, including the impact of metal cost inflation. We ended the quarter with a transaction-adjusted net cash position of $118 million, reflecting the net proceeds from the IPO and private placement. During the quarter, we signed our fourth strategic customer partnership with an aerospace OEM, which underpins the building of a new greenfield superalloy site in Alabama. Lastly, we are initiating guidance for the 2026 full year. We are on track to deliver significant long-term value creation. On to slide 5. For those of you who do not know us, Doncasters is a specialist manufacturer of precision castings and superalloys that are highly engineered, used in mission-critical applications within the hot zone of aerospace engines and industrial gas turbines.

We operate in substantial and growing markets of aerospace and IGT that are benefiting from long-term structural unprecedented demand. We have deep technical capabilities and proprietary metallurgy experience. We are vertically integrating, making our own superalloys, providing us with the supply, shorter lead times, and internalizing margin. On the customer front, we are a trusted supplier of major aero and IGT OEMs and have developed differentiated strategic customer partnerships which I will expand on in a minute. We are one of a small number of scale suppliers capable of meeting the technical qualification and capacity requirements of major aerospace and IGT OEMs. Those requirements create significant barriers to entry and high switching costs. Now post the IPO, we have a strong balance sheet, which will support our investment in organic and inorganic growth and operational improvements.

We have a long track record working with some of the leading names in both aerospace and IGT markets, and you will recognize a lot of the customer logos on our site. To summarize, we are well positioned for future growth supported by strong OEM relationships. Do not just listen to me, look at our customer support for our strategic partnerships. Moving to slide 6. These are long-term agreements that provide customers with dedicated production capacity while giving Doncasters enhanced commercial terms such as longer-dated LTAs, committed volumes, accretive margins, and sometimes customer contributions towards capacity investments. In return, these partnerships enable us to secure larger portfolio-level awards and strengthen long-term revenue visibility. These provide OEMs with access to their own capacity, which we believe is differentiated within the industry.

During the second quarter, we signed our fourth partnership with an aero OEM, which included long-dated multi-agreement LTAs of existing castings and superalloys and volume commitments that underpin the building of a new superalloy greenfield facility in Alabama. This is exciting news for the group and for the wider industry as this brings superalloy capacity into the casting supply chain. To date, we have four customer partnerships with two aero and two IGT OEMs ranging in duration from 5 to 15 years in terms of LTA length, and each of these partnerships are margin accretive to our group. Each partnership is bespoke in nature and has resulted in contributions from the OEMs, whether that be capital contributions or capacity reservation contributions. In total, we estimate these four partnerships represent in excess of $200 million of annual revenue, with full rate revenue being delivered in 2029.

This is $200 million plus in additional revenue and accretive to our base business. We continue to have an active pipeline of potential additional partnerships. We are building stronger relationships with our customers, and I believe that these strategic partnerships illustrate the confidence and support we have from our aero and IGT OEMs. Moving on to slide 7. We expect to deliver material value creation through organic growth, operational improvements, long-term cash generation, and investments. This is our long-term value creation model. We have many drivers of top-line growth, market demand, aftermarket, our LTAs and order backlog. The revenue generated from growing our capacity and value-based pricing. Moving on to margin. Expansion is expected to come from volume, which drives operating leverage, value-based pricing, and operational efficiencies. We expect to generate cash through profitable growth, capacity utilization, and working capital efficiency.

Lastly, we continue to invest in our capacity and our capital equipment. We expect to complement this with potential bolt-on acquisitions. Underpinning all of these drivers are our strategic customer partnerships, as we have talked about, which provide larger portfolio awards, are margin accretive, sometimes have cash or capital contributions, and support our capacity investment through volume commitments. This is our long-term value creation model. We are passionate about this across Doncasters. It is ingrained within our business model in every site and every function and every day. It is alive in our company and has become part of our DNA over the last six years. I would like to pass you over to David now.

Thank you, Mike, and good morning, everyone. Moving to slide 8. This was a record quarter for Doncasters. Revenue grew 34% year-on-year to $269 million, with strong growth in aerospace and IGT. The second quarter revenue growth included approximately four percentage points of growth from metal cost inflation pass-through year-on-year. Metal cost inflation, as Mike mentioned, is the normal course of our industry, so our LTAs include metal cost inflation pass-through clauses, and our purchase order or spot business uses spot metal prices. The metal cost inflation is passed through to our customers. In the second quarter, this led to four percentage points of sales benefit, and the dollar increase was passed through to cost of goods sold. There is no impact on adjusted EBITDA, but it did dilute the EBITDA margin by 60 basis points in the second quarter.

Adjusted EBITDA grew 33% to $48 million. Revenue and adjusted EBITDA in the quarter were ahead of expectations. Adjusted EBITDA margin in the quarter was 17.8%, broadly in line with last year, but well ahead from quarter 1. Engine Products, both Europe and North America, grew revenue by 39% and EBITDA by 53%, a 210 basis point improvement in margin to 23.5%, and this was due to higher volumes and value-based pricing. Adjusted net income moved into profit with $5.6 million during the second quarter against a $10.8 million loss in the prior year second quarter, giving adjusted EPS of $0.05. We ended the quarter with a transaction-adjusted net cash position of $118 million due to the IPO and private placement proceeds. Working capital increased in the quarter due to growth investment to support demand and the higher metal cost inflation pass-through that I mentioned just previously.

We continued to invest in expanding our capacity and capabilities through capital expenditure programs. Moving to slide 9 to look at our end market growth in the second quarter, Aerospace grew by 47% due to demand from engine structural castings and components from global passenger travel growth, aircraft backlogs and aging global fleet driving aftermarket revenue. IGT grew 42%, reflecting global electricity demand growth, with gas turbines critical for supporting energy needs and ensuring grid reliability for the integration of renewables. The transportation end market was flat. Moving on to our divisions. Slide 10 reports our Engine Products business in Europe. Gross segment revenue grew 49%, driven by strong growth in the IGT end market, which accounts for approximately 75% of the division's revenue, including OEM build rates. EBITDA increased by 54%, with the margin improving 80 basis points to 24.2%, reflecting a drop-through rate of nearly 26%.