ATI INC

ATI Inc. is a global manufacturer of technically advanced specialty materials and complex components, operating in two business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S). The company's largest end markets are aerospace & defense, representing approximately 68% of total sales, led by products for jet engines and airframes, with a strong presence also in the specialty energy end market, which includes products for nuclear and renewable energy applications. In aggregate, these markets represent over 73% of total revenue. The company also sells to several other end markets, including industrial, electronics and medical.

Within the HPMC segment, principal competitors include Berkshire Hathaway Inc. for nickel-based alloys and superalloys and specialty steel alloys, titanium and titanium-based alloys, and precision forgings through its ownership of Precision Castparts Corporation and subsidiaries; Howmet Aerospace Inc. for titanium and titanium-based alloys; Carpenter Technology Corporation for legacy nickel-based alloys and superalloys and specialty steel alloys; and Aubert & Duval for precision forgings. For the AA&S segment, principal competitors for nickel-based alloys, superalloys, and specialty alloys include Haynes International and VDM Metals GmbH, a subsidiary of Acerinox S.A. The company believes its research and development capabilities give it a competitive advantage in developing new products and manufacturing processes.

ATI produces specialty materials, highly differentiated by its materials science expertise and advanced process technologies. Revenue is generated through the sale of these materials and components, with a substantial portion of HPMC segment products sold under multi-year agreements. The company's primary customer segments include major aerospace market original equipment manufacturers (OEMs) such as The Boeing Company, Airbus S.A.S., Embraer, GE Aerospace, Rolls-Royce plc, Pratt & Whitney, and Safran Aircraft Engines, along with their suppliers. The company has long-term agreements (LTAs) in place with most major aerospace market OEMs.

The HPMC segment produces a wide range of high performance materials, components, and advanced metallic powder alloys from nickel-based alloys and superalloys, titanium and titanium-based alloys, and a variety of other specialty materials. Its capabilities range from cast/wrought and powder alloy development to production of highly engineered finished components, and 3D-printed aerospace products. The segment's primary focus is on maximizing jet engine materials and components growth, with approximately 92% of its revenue derived from the aerospace & defense markets, including nearly 68% from products for commercial jet engines. Sales of defense products comprise almost 11% of HPMC's total sales. For fiscal year 2025, HPMC sales to external customers were $2,441.7 million ¹, and Segment EBITDA was $575.8 million ², or 23.6% of sales ³.

The AA&S segment produces nickel-based alloys, titanium and titanium-based alloys, and specialty alloys, including zirconium, hafnium, and niobium, in a variety of forms including plate, sheet, and strip products. It focuses on high-value materials utilized in technically challenging and extreme environments that require materials that can withstand extreme heat, radiation and corrosion. Aerospace & defense now comprises approximately 41% of AA&S total revenue. AA&S also serves customers across several other markets, notably specialty energy and conventional energy, as well as electronics and certain industrial markets. For fiscal year 2025, AA&S sales to external customers were $2,145.7 million ⁴, and Segment EBITDA was $349.0 million ⁵, or 16.3% of sales ⁶.

In fiscal year 2025, ATI repurchased approximately 6.4 million shares of ATI stock for $470 million ⁷ under its Share Repurchase Program. The company also repaid $150 million ⁸ of debentures in the fourth quarter of 2025. During the year, ATI received $26.8 million ⁹ of proceeds from the sale of non-core businesses previously reported in the HPMC segment and proceeds of $11.1 million ¹⁰ from property, plant and equipment sales, primarily for oil and gas rights. On June 13, 2025, the company amended its Asset Based Lending (ABL) Credit Facility, extending it through June 2030, which includes a $600 million ¹¹ revolving credit facility, a letter of credit sub-facility of up to $200 million ¹², a $200 million ¹³ term loan, and a swing loan facility of up to $60 million ¹⁴, with the ability to borrow an additional term loan of up to $100 million ¹⁵ through June 13, 2026. On April 22, 2025, the company reached agreements with the USW for new CBAs covering approximately 1,100 ¹⁶ USW represented full-time employees within its AA&S operations for a six-year term that extends through February 28, 2031.

Sales in fiscal year 2025 increased 5% ¹⁷, to $4.6 billion ¹⁸, and gross profit increased 12% ¹⁹, to $1.0 billion ²⁰, compared to fiscal year 2024, reflecting increased demand for products within the aerospace & defense end markets. Net income attributable to ATI for fiscal year 2025 was $404.3 million ²¹, or $2.85 per share ²², compared to $367.8 million ²³, or $2.55 per share ²⁴, for fiscal year 2024. ATI Adjusted EBITDA for fiscal year 2025 was $859.3 million ²⁵, or 18.7% of sales ²⁶, compared to $729.1 million ²⁷, or 16.7% of sales ²⁸, for fiscal year 2024. Cash provided by operations was $614.3 million ²⁹ for fiscal year 2025, an increase of almost 51% ³⁰ compared to fiscal year 2024.

A primary growth vector is the commercial aerospace market, which has been the main source of sales and EBITDA growth for HPMC over the last several years and is expected to continue to drive HPMC and overall ATI results in the future. The company believes that through alloy development, internal growth efforts, and long-term supply agreements on current and next-generation jet engines and airframes, it is well-positioned with a fully qualified asset base to meet the expected multi-year demand growth from the commercial aerospace market. Boeing and Airbus continue to have multi-year backlogs of orders for both legacy models and next-generation aircraft, and there are over 30,000 jet engines with firm orders. Use of newer materials, particularly for jet engine applications, is expected to continue to increase for several years, with strong growth expected in powder metal alloys, including increased usage of iso-thermal forging and additive manufacturing production processes.

Another major growth vector is the defense market. HPMC experienced strong growth in defense products, with fiscal year 2025 sales growth of 24% ³¹. Sales of defense products comprise almost 11% of HPMC's total sales. In fiscal year 2025, sales to the defense end market increased by 14% ³² and the company expects continued growth in this important end market in the coming years. The company produces a wide-range of military-grade materials including titanium, nickel-based alloys, zirconium, tungsten, and hafnium, as well as components for defense customers, used in applications including naval nuclear products, military jet engines, fixed wing and rotorcraft products, armor applications and munitions materials.The company continues to increase its production capacity for advanced metallic powders for use in next-generation aerospace products, including additive manufacturing applications. ATI also has a dedicated additive manufacturing and post-processing facility to tap into significant aerospace & defense demand for additively manufactured laser powered bed fusion parts. The company believes clean energy needs, the electrification of developing countries, and energy requirements to support data center growth will continue to drive demand for its specialty materials and products over the long term.

Capital expenditures in fiscal year 2025 were $280.6 million ³³ to grow capacity and capabilities with a focus on the aerospace & defense market. In fiscal year 2025, ATI used $470 million ³⁴ to repurchase 6.4 million shares of its common stock under the Share Repurchase Program. As of December 28, 2025, there is $120 million ³⁵ of authorization remaining under the Share Repurchase Program. The company currently does not pay a dividend.

The company faces headwinds from the cyclical nature of the commercial aerospace industry, which has historically been cyclical due to factors including general economic conditions, airline profitability, consumer demand for air travel, varying fuel and labor costs, changes in projected build rates, price competition, and international and domestic political conditions such as military conflict and the threat of terrorism. The length and degree of cyclical fluctuation are influenced by these factors and are difficult to predict with certainty.

The company also faces constraints from its dependence on critical raw materials subject to price and availability fluctuations. Purchase prices and availability of critical items such as nickel, titanium sponge, zirconium sand, and other alloying materials are subject to volatility, and in some cases, the company has supply arrangements with only a limited number of suppliers. The company sources some materials from China, which has imposed, and may in the future continue to impose, export controls that could limit or significantly delay access to such materials. Additionally, changes in global trade policies could materially impact the total cost of imported materials.

A significant portion of ATI's sales are to the commercial aerospace industry, which has historically been cyclical due to factors such as general economic conditions, airline profitability, consumer demand for air travel, and varying fuel and labor costs, and a downturn could materially adversely affect results. The company relies on third parties for critical raw materials like nickel, titanium sponge, and zirconium, whose prices and availability are subject to volatility; for example, a hypothetical $1.00 per pound change in nickel prices would result in increased costs of approximately $70 million ³⁶ based on fiscal year 2025 usage of approximately 70 million pounds ³⁷ of nickel. The company's substantial indebtedness, totaling approximately $1.7 billion ³⁸ as of December 28, 2025, could make it more difficult to satisfy obligations and increase vulnerability to adverse economic conditions. The company is subject to various environmental laws and regulations, and at December 28, 2025, reserves for environmental matters totaled approximately $15 million ³⁹, with a reasonably possible range of costs exceeding recorded reserves by as much as $16 million ⁴⁰. The company's operations depend on the continued and efficient functioning of its facilities, and disruptions to manufacturing processes due to equipment malfunction, supply chain interruptions, or other factors could have a material adverse effect.

Management's message emphasizes that ATI's mission is to solve the world's challenges through materials science. The overall tone is one of confidence in the company's strategic direction, highlighting that commercial aerospace products have been the main source of sales and EBITDA growth for HPMC over the last several years and are expected to continue to drive HPMC and overall ATI results in the future. Key strategic priorities emphasized include maximizing jet engine materials and components growth, continuing a disciplined approach to capital allocation by funding growth while returning cash to shareholders through stock repurchases, and continuing to deleverage the balance sheet. Management also highlights the company's focus on operational improvements to positively impact the inventory intensity of the business and reduce the required investment of managed working capital in relation to growth in sales.