ATI INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview ATI is a global manufacturer of technically advanced specialty materials and complex components. Our largest market is aerospace & defense, representing 66% of sale s for the year-to-date period ended June 29, 2025, led by products for jet engines and airframes. Additionally, we have a strong presence in the specialty energy, medical and electronics markets. In aggregate, these markets represented 79% of our sales for the year-to-date period ended June 29, 2025. ATI is a market leader in manufacturing differentiated products that require our materials science capabilities and unique process technologies, including our new product development competence. Our capabilities range from cast/wrought and powder alloy development to final production of highly engineered finished components, including those used in latest generation jet engines and 3D-printed aerospace products. ATI follows a 4-4-5 or 5-4-4 fiscal calendar, whereby each fiscal quarter consists of thirteen weeks grouped into two four-week months and one five-week month, and its fiscal year ends on the Sunday closest to December 31. Unless otherwise stated, references to years and quarters in this Quarterly Report on Form 10-Q relate to fiscal years and quarters, rather than calendar years and quarters. Results of Operations Sales Second quarter 2025 sales increased 4% to $1.14 billion, compared to $1.10 billion of sales for the second quarter 2024, primarily due to increased demand for commercial jet engines, partially offset by a decline in sales for commercial airframes. In aggregate, ATI’s aerospace & defense market sales increased 11% to $762 million, or 67% of total sales in the second quarter 2025, compared to $684 million, or 62% of total sales in the second quarter 2024. The increase in aerospace & defense market sales was partially offset by sales declines of 37% to the medical market and 17% to the specialty energy market. Sales for the year-to-date period ended June 29, 2025 increased 7% to $2.28 billion, compared to sales of $2.14 billion for the comparable 2024 period. The increase in sales was primarily due to a 17% increase in the aerospace & defense markets, driven by higher demand for commercial jet engines. The increase was partially offset by a 20% decline in sales to our other core markets, including declines of 33% and 14% in sales to the medical and specialty energy markets, respectively. 27 Comparative information regarding our overall revenues (in millions) by end market and their respective percentages of total revenues for the quarters and year-to-date periods ended June 29, 2025 and June 30, 2024 is shown below. Quarter ended Quarter ended Markets June 29, 2025 June 30, 2024 Aerospace & Defense: Jet Engines- Commercial $ 447.8 39 % $ 352.8 32 % Airframes- Commercial 195.2 17 % 210.8 19 % Defense 118.8 11 % 120.3 11 % Total Aerospace & Defense 761.8 67 % 683.9 62 % Specialty Energy 63.5 6 % 76.6 7 % Electronics 43.7 4 % 40.8 4 % Medical 38.9 3 % 61.7 6 % Other Core Markets 146.1 13 % 179.1 17 % Core End Markets 907.9 80 % 863.0 79 % Conventional Energy 92.9 8 % 66.1 6 % Automotive 64.8 6 % 70.8 7 % Construction/Mining 33.3 3 % 44.2 4 % Other 41.5 3 % 51.2 4 % Industrial Markets 232.5 20 % 232.3 21 % Total $ 1,140.4 100 % $ 1,095.3 100 % Year-to-date period ended Year-to-date period ended Markets June 29, 2025 June 30, 2024 Aerospace & Defense: Jet Engines- Commercial $ 869.2 38 % $ 664.0 31 % Airframes- Commercial 401.0 17 % 400.9 19 % Defense 246.0 11 % 234.7 11 % Total Aerospace & Defense 1,516.2 66 % 1,299.6 61 % Specialty Energy 114.0 5 % 132.7 6 % Electronics 83.3 4 % 93.7 4 % Medical 81.3 4 % 120.8 6 % Other Core Markets 278.6 13 % 347.2 16 % Core End Markets 1,794.8 79 % 1,646.8 77 % Conventional Energy 214.7 9 % 168.6 8 % Automotive 125.4 5 % 126.8 6 % Construction/Mining 66.2 3 % 71.4 3 % Other 83.7 4 % 124.6 6 % Industrial Markets 490.0 21 % 491.4 23 % Total $ 2,284.8 100 % $ 2,138.2 100 % For the second quarter 2025, international sales increased to $490 million, or 43% of total sales, from $457 million, or 42% of total sales, in the second quarter 2024. ATI’s international sales are mostly to our core end markets. 28 Comparative information regarding our major products based on their percentages of revenues are shown below. HRPF conversion service sales in the AA&S segment are excluded from this presentation. Quarter ended Year-to-date period ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Nickel-based alloys and specialty alloys 48 % 44 % 48 % 44 % Precision forgings, castings and components 21 % 19 % 21 % 19 % Titanium and titanium-based alloys 17 % 20 % 18 % 19 % Zirconium and related alloys 9 % 8 % 8 % 9 % Precision rolled strip products 5 % 9 % 5 % 9 % Total 100 % 100 % 100 % 100 % Gross Profit Gross profit for the second quarter of 2025 was $242.5 million, or 21.3% of sales, compared to $227.4 million, or 20.8% of sales for the second quarter 2024. Second quarter 2025 gross profit includes a benefit of $7.0 million related to the recognition of previously deferred employee retention tax credits, of which $4.4 million related to the HPMC segment and $2.6 million related to the AA&S segment. Second quarter 2025 gross profit also includes $7.1 million of start-up and transaction related costs, which are excluded from Adjusted EBITDA. Second quarter 2024 gross profit includes a benefit of $8.6 million related to the recognition of previously deferred employee retention tax credits, of which $3.5 million related to the HPMC segment and $5.1 million related to the AA&S segment. Second quarter 2024 gross profit also includes $5.5 million of charges for inventory write-downs related to our European restructuring and $1.8 million of start-up related costs, which are excluded from Adjusted EBITDA. Our gross profit was $478.3 million, or 20.9% of sales, for the year-to-date period ended June 29, 2025, compared to $424.8 million, or 19.9% of sales for the year-to-date period ended June 30, 2024. Year-to-date 2025 gross profit includes a benefit of $7.2 million related to the recognition of previously deferred employee retention tax credits, of which $4.4 million of related to the HPMC segment and $2.8 million related to the AA&S segment. Year-to-date 2025 gross profit also includes start-up and transaction related costs of $11.1 million, which are excluded from Adjusted EBITDA. Year-to-date 2024 gross profit includes a benefit of $8.6 million related to the recognition of previously deferred employee retention tax credits, of which $3.5 million related to the HPMC segment and $5.1 million related to the AA&S segment. Year-to-date 2024 gross profit also includes $5.5 million of charges for inventory write-downs related to our European restructuring and $4.7 million of start-up related costs, which are excluded from Adjusted EBITDA. Selling and Administrative Expenses Selling and administrative expenses for the second quarter 2025 were $82.8 million, a decline of 7% compared to $88.9 million for the second quarter 2024. The decrease was primarily due to lower incentive compensation costs and foreign exchange gains, partially offset by higher research and development expenses. Second quarter 2025 includes $1.6 million of losses on the sale of customer accounts receivable, which are excluded from Adjusted EBITDA. Selling and administrative expenses for the year-to-date 2025 period were $167.8 million, a decline of 2% compared to $170.9 million for the second quarter 2024. The decrease was primarily due to lower incentive compensation costs and foreign exchange gains, partially offset by higher research and development expenses. Year-to-date 2025 includes $3.2 million of losses on the sale of customer accounts receivable, which are excluded from Adjusted EBITDA. Restructuring Charges Restructuring charges were a credit for the second quarters of 2025 and 2024 of $1.3 million and $1.9 million, respectively, due to a reduction in severance-related reserves based on revised workforce reduction estimates. Restructuring charges were a credit for the year-to-date periods ended June 29, 2025 and June 30, 2024 of $1.3 million and $1.7 million, respectively, due to a reduction in severance-related reserves based on revised workforce reduction estimates. Loss (Gain) on Asset Sales and Sales of Businesses, net The year-to-date 2025 loss on asset sales and sales of businesses of $3.9 million was mostly comprised of a $3.7 million loss for the sale of certain immaterial, non-core operations in Birmingham, UK and Dusseldorf, Germany, which were part of our European business in the HPMC Segment. 29 Gains on asset sales and sales of businesses of $2.2 million for both the second quarter and year-to-date 2024 were mostly comprised of a $2.3 million gain on the sale of our idled Houston, PA facility. Interest Expense, Net Interest expense, net decreased to $25.4 million in the second quarter of 2025 compared to $28.4 million in the second quarter of 2024. Capitalized interest reduced interest expense by $2.1 million in the second quarter 2025 and $1.9 million in the second quarter 2024. In addition, interest expense, net in the year-to-date period ended June 29, 2025 decreased to $48.4 million compared to $55.0 million in the year-to-date period ended June 30, 2024. For the year-to-date periods ended June 29, 2025 and June 30, 2024, capitalized interest was $5.2 million and $5.9 million, respectively. The decrease in interest expense, net in both the quarter and year-to-date periods was primarily due to the redemption of the 2025 Convertible Notes in the third quarter of 2024. Income Taxes Our effective tax rate for the second quarter of 2025 was 22.0%, resulting in an income tax provision of $29.3 million, and our effective tax rate for the second quarter of 2024 was 22.8%, resulting in an income tax provision of $25.3 million. The effective tax rate for the second quarter of 2025 includes discrete tax expense of $0.6 million. The effective tax rate for the second quarter of 2024 includes discrete tax benefits of $1.6 million, which includes the recognition of a stranded deferred tax valuation allowance in accumulated other comprehensive loss due to the maturity of our interest rate swap. Excluding the discrete tax items, the Company’s effective tax rate for the second quarter of 2025 and 2024 was 21.5% and 24.2%, respectively. The decline in the effective tax rate was primarily due to deductions previously limited by net operating losses. Our effective tax rate for the year-to-date period ended June 29, 2025 was 19.7%, resulting in an income tax provision of $50.3 million. Our effective tax rate for the year-to-date period ended June 30, 2024 was 21.5%, resulting in an income tax provision of $42.2 million. The effective tax rate for the year-to-date period ended June 29, 2025 includes discrete tax benefits of $4.5 million, inclusive of $4.1 million for share-based compensation. The effective tax rate for the year-to-date period ended June 30, 2024 includes discrete tax benefits of $4.7 million, inclusive of $3.2 million for share-based compensation as well as the impact from the recognition of a stranded deferred tax valuation allowance in accumulated other comprehensive loss due to the maturity of our interest rate swap. Excluding the discrete tax items, the Company’s effective tax rate for the sear-to-date periods ended June 29, 2025 and June 30, 2024 was 21.5% and 23.9%, respectively. The decline in the effective tax rate was primarily due to deductions previously limited by net operating losses. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes permanent extensions of most expiring Tax Cuts and Jobs Act provisions and international tax changes. Pursuant to ASC 740, Income Taxes, the effects of changes in tax law are recognized in the period of enactment. The Company is still evaluating the potential impacts of the OBBBA; however, the Company does not anticipate it will have a material impact on the Company’s financial statements. Net Income Net income attributable to ATI was $100.7 million, or $0.70 per share, in the second quarter of 2025, compared to $81.9 million, or $0.58 per share, for the second quarter of 2024. Net income attributable to ATI was $197.7 million, or $1.38 per share, in the year-to-date period ended June 29, 2025, compared to a net income attributable to ATI of $148.0 million, or $1.04 per share, for the prior year period. 30 Business Segment Results Comparative financial information (in millions) for our segments and corporate operations for the quarters and year-to-date periods ended June 29, 2025 and June 30, 2024 is shown below. Quarter Ended Year-to-date period ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Sales: High Performance Materials & Components $ 608.8 $ 562.0 $ 1,192.9 $ 1,091.9 Advanced Alloys & Solutions 531.6 533.3 1,091.9 1,046.3 Total external sales $ 1,140.4 $ 1,095.3 $ 2,284.8 $ 2,138.2 Segment EBITDA (a) : High Performance Materials & Components $ 144.0 $ 113.8 $ 275.0 $ 211.4 % of Sales 23.7 % 20.2 % 23.1 % 19.4 % Advanced Alloys & Solutions 76.7 87.5 160.1 159.3 % of Sales 14.4 % 16.4 % 14.7 % 15.2 % Corporate, Closed Operations and Other (income) expense (b) : Corporate expense $ 15.4 $ 19.4 $ 32.8 $ 36.5 Closed operations and other (income) expense (2.4) (0.7) — 0.6 Total Corporate, Closed Operations and Other expense $ 13.0 $ 18.7 $ 32.8 $ 37.1 Depreciation & Amortization: High Performance Materials & Components $ 20.9 $ 17.9 $ 40.6 $ 34.2 Advanced Alloys & Solutions 19.1 18.3 38.6 36.3 Other 1.6 1.7 3.2 3.4 Total depreciation & amortization $ 41.6 $ 37.9 $ 82.4 $ 73.9 (a) The Company’s Chief Operating Decision Maker (“CODM”) utilizes the Segment EBITDA as a key metric to evaluate segment performance. Our measure of Segment EBITDA, which we use to analyze the performance and results of our business segments, excludes net interest expense, income taxes, depreciation and amortization, special charges, unallocated corporate expenses, closed operations and other income (expense). See Note 11 for the reconciliation of Segment EBITDA to Income before taxes. (b) Amounts exclude depreciation and amortization. 31 High Performance Materials & Components Segment Second quarter 2025 sales were $608.8 million, an increase of $46.8 million, or 8%, compared to the second quarter 2024, which included a negative impact of $30 million due to the first quarter 2025 disposition of certain non-core operations in Europe. Overall, the sales increase in second quarter 2025 compared to second quarter 2024 was primarily due to an $81.2 million, or 17%, increase in sales to the aerospace & defense market. The increase in aerospace & defense sales was primarily driven by an $87.8 million, or 26%, increase in commercial jet engine sales, partially offset by a $16.4 million, or 18%, decrease in sales of commercial airframes, which included the impact of inventory destocking by current customers. Sales were also lower to the medical and specialty energy markets. Comparative information for our HPMC segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the quarters ended June 29, 2025 and June 30, 2024 is as follows: Quarter ended Quarter ended Markets June 29, 2025 June 30, 2024 Aerospace & Defense: Jet Engines- Commercial $ 419.6 69 % $ 331.8 59 % Airframes- Commercial 77.3 13 % 93.7 17 % Defense 61.8 10 % 52.0 9 % Total Aerospace & Defense 558.7 92 % 477.5 85 % Medical 15.4 3 % 33.0 6 % Specialty Energy 14.7 2 % 22.5 4 % Electronics — — % 2.0 — % Other Core Markets 30.1 5 % 57.5 10 % Core End Markets 588.8 97 % 535.0 95 % Construction/Mining 8.1 1 % 8.3 2 % Automotive 2.8 1 % 3.8 1 % Convention Energy 1.4 — % 2.4 — % Other 7.7 1 % 12.5 2 % Industrial Markets 20.0 3 % 27.0 5 % Total $ 608.8 100 % $ 562.0 100 % International sales represented 43% of total segment sales for the second quarter 2025, compared to 52% in the prior year period. Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the quarters ended June 29, 2025 and June 30, 2024, is as follows: Quarter ended June 29, 2025 June 30, 2024 Nickel-based alloys and specialty alloys 44 % 39 % Precision forgings, castings and components 39 % 37 % Titanium and titanium-based alloys 17 % 24 % Total 100 % 100 % Segment EBITDA in the second quarter 2025 was $144.0 million, or 23.7% of total sales, compared to $113.8 million, or 20.2% of total sales, for the second quarter 2024. The increase in segment EBITDA, as a percentage of sales, was primarily due to higher sales and favorable pricing of nickel-based and specialty alloys. Results in the second quarter of 2025 and 2024 included benefits of $4.4 million and $3.5 million, respectively, from the recognition of previously deferred employee retention tax credits. Sales for the year-to-date period ended June 29, 2025 were $1,192.9 million , an increase of $101.0 million, or 9%, compared to the year-to-date period ended June 30, 2024 , which included a negative impact of $67 million due to the first quarter 2025 disposition of certain non-core operations in Europe . Sales to the aerospace & defense market increased $176.1 million, or 19% , primarily due to higher commercial jet engine sales of $188.2 million, or 30%, partially offset by a decline in sales of commercial airframes of $20.3 million, or 11%, which included the impact of inventory destocking by current customers . Sales were also lower to the medical, industrial, and specialty energy markets. 32 Comparative information for our HPMC segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the year-to-date periods ended June 29, 2025 and June 30, 2024 is as follows: Year-to-date period ended Year-to-date period ended Markets June 29, 2025 June 30, 2024 Aerospace & Defense: Jet Engines- Commercial $ 816.9 69 % $ 628.7 58 % Airframes- Commercial 159.1 13 % 179.4 16 % Defense 120.2 10 % 112.0 10 % Total Aerospace & Defense 1,096.2 92 % 920.1 84 % Medical 31.2 3 % 68.9 6 % Specialty Energy 27.1 2 % 40.7 4 % Electronics — — % 3.0 — % Other Core Markets 58.3 5 % 112.6 10 % Core End Markets 1,154.5 97 % 1,032.7 94 % Construction/Mining 15.2 1 % 15.0 1 % Automotive 4.2 1 % 8.8 1 % Convention Energy 3.1 — % 5.9 1 % Other 15.9 1 % 29.5 3 % Industrial Markets 38.4 3 % 59.2 6 % Total $ 1,192.9 100 % $ 1,091.9 100 % International sales represented 44% of total segment sales for the first half of 2025. Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the year-to-date periods ended June 29, 2025 and June 30, 2024, is as follows: Year-to-date period ended June 29, 2025 June 30, 2024 Nickel-based alloys and specialty alloys 43 % 39 % Precision forgings, castings and components 39 % 36 % Titanium and titanium-based alloys 18 % 24 % Precision rolled strip products — % 1 % Total 100 % 100 % Segment EBITDA in the first half of 2025 increased to $275.0 million, or 23.1% of total sales, compared to $211.4 million, or 19.4% of total sales, for the first half of 2024. The increase in segment EBITDA, as a percentage of sales, was primarily due to higher sales and favorable pricing of nickel-based and specialty alloys. Results in the first half of 2025 and 2024 included benefits of $4.4 million and $3.5 million, respectively, from the recognition of previously deferred employee retention tax credits. The Company’s investments to increase capacity and focus on continuous improvement are driving improvements to our work-flow processes and operations. HPMC results for 2025 reflected year-over-year improved operating leverage and pricing as we continued to experience increasing demand from the aerospace & defense market, especially for commercial jet engines. Although macro risks and uncertainty continue, we believe our capabilities, strong backlog and long-term agreements (“LTAs”) with aerospace market OEMs for our specialty materials, including powders, parts and components, position the HPMC segment for profitable growth for the next several years. ATI has prepared for the potential risks of tariffs for many years, and we have taken actions to minimize the impact of these tariffs in our contracts and supply chains. While we expect continued, near-term challenges, we believe the backlog of commercial aircraft production, increasing requirements for maintenance, repair, and operations, and the current OEM production forecasts support our long-term growth expectations in this end market. 33 Advanced Alloys & Solutions Segment Second quarter 2025 sales of $531.6 million were relatively flat compared to the second quarter 2024, decreasing $1.7 million. Sales to the aerospace & defense market declined by $3.3 million, or 2%, as stronger demand for commercial jet engines was offset by a decline in sales of defense related applications. Sales to our other core markets also declined by $5.6 million, or 5%, primarily due to lower demand in the specialty energy and medical markets. These decreases were partially offset by an increase of $7.2 million, or 4%, in the industrial markets, primarily due to higher sales to the conventional energy market. Comparative information regarding our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the quarters ended June 29, 2025 and June 30, 2024 is shown below. Quarter ended Quarter ended Markets June 29, 2025 June 30, 2024 Aerospace & Defense: Jet Engines- Commercial $ 28.2 5 % $ 21.0 4 % Airframes- Commercial 117.9 22 % 117.1 22 % Defense 57.0 11 % 68.3 13 % Total Aerospace & Defense 203.1 38 % 206.4 39 % Specialty Energy 48.8 9 % 54.1 10 % Electronics 43.7 8 % 38.8 7 % Medical 23.5 4 % 28.7 5 % Other Core Markets 116.0 22 % 121.6 22 % Core End Markets 319.1 60 % 328.0 61 % Convention Energy 91.5 17 % 63.7 12 % Automotive 62.0 12 % 67.0 13 % Construction/Mining 25.2 5 % 35.9 7 % Other 33.8 6 % 38.7 7 % Industrial Markets 212.5 40 % 205.3 39 % Total $ 531.6 100 % $ 533.3 100 % International sales represented 44% of total segment sales for the second quarter of 2025, compared to 31% in the prior year’s second quarter. Comparative information regarding the AA&S segment’s major product categories, based on their percentages of revenue for the quarters ended June 29, 2025 and June 30, 2024, is presented in the following table. HRPF conversion service sales are excluded from this presentation. Quarter ended June 29, 2025 June 30, 2024 Nickel-based alloys and specialty alloys 53 % 49 % Zirconium and related alloys 19 % 18 % Titanium and titanium-based alloys 17 % 15 % Precision rolled strip products 11 % 18 % Total 100 % 100 % Segment EBITDA was $76.7 million, or 14.4% of sales, for the second quarter 2025, compared to segment EBITDA of $87.5 million, or 16.4% of sales, for the second quarter 2024. The margin decrease compared to the prior year was primarily due to sales mix changes and unfavorable manufacturing cost absorption. Further, s econd quarter 2025 included a $2.6 million benefit from the recognition of previously deferred employee retention tax credits compared to $5.1 million of such benefits in the second quarter 2024. Sales for the first half of 2025 were $1,091.9 million, an increase of $45.6 million or 4% compared to the first half of 2024. Sales to the aerospace & defense market increased by $40.5 million, or 11%, while sales to industrial markets increased $19.4 34 million, or 5%, driven by demand in the conventional energy market. These increases were partially offset by a decline in sales to our other core markets of $14.3 million, or 6%, primarily due to the electronics and specialty energy market. Comparative information regarding our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the year-to-date periods ended June 29, 2025 and June 30, 2024 is shown below. Year-to-date period ended Year-to-date period ended Markets June 29, 2025 June 30, 2024 Aerospace & Defense: Jet Engines- Commercial $ 52.3 5 % $ 35.3 3 % Airframes- Commercial 241.9 22 % 221.5 21 % Defense 125.8 12 % 122.7 12 % Total Aerospace & Defense 420.0 39 % 379.5 36 % Specialty Energy 86.9 8 % 92.0 9 % Electronics 83.3 8 % 90.7 9 % Medical 50.1 5 % 51.9 5 % Other Core Markets 220.3 20 % 234.6 23 % Core End Markets 640.3 59 % 614.1 59 % Convention Energy 211.6 19 % 162.7 16 % Automotive 121.2 11 % 118.0 11 % Construction/Mining 51.0 5 % 56.4 5 % Other 67.8 6 % 95.1 9 % Industrial Markets 451.6 41 % 432.2 41 % Total $ 1,091.9 100 % $ 1,046.3 100 % International sales represented 43% of total segment sales for the first half of 2025, compared to 33% the prior year. Comparative information regarding the AA&S segment’s major product categories, based on their percentages of revenue for the quarters ended June 29, 2025 and June 30, 2024, is presented in the following table. HRPF conversion service sales are excluded from this presentation. Year-to-date period ended June 29, 2025 June 30, 2024 Nickel-based alloys and specialty alloys 54 % 50 % Zirconium and related alloys 18 % 19 % Titanium and titanium-based alloys 17 % 13 % Precision rolled strip products 11 % 18 % Total 100 % 100 % Segment EBITDA was $160.1 million, or 14.7% of sales, in the first half of 2025, compared to segment EBITDA of $159.3 million, or 15.2% of sales, for the second quarter 2024. The margin decrease compared to the prior year was primarily due to sales mix changes, unfavorable manufacturing cost absorption and higher operating costs, which offset the benefit of higher sales volumes. In addition, r esults in the first half of 2025 include a benefit of $2.8 million from the recognition of previously deferred employee retention tax credits and a benefit of $2.6 million due to a customer recovery for previously reserved accounts receivable. The first half of 2024 includes a benefit of $5.1 million from the recognition of previously deferred employee retention tax credits. While our margins for the AA&S segment declined on a year-over-year basis, we expect to see margin expansion in the second half of 2025 through improved sales mix and improved operating performance. We are also closely monitoring macro risks and uncertainty, and have taken actions to minimize the impact of tariffs in our contracts and supply chains. 35 Corporate Items Corporate expenses for the second quarter of 2025 were $15.4 million, compared to $19.4 million for the second quarter 2024. For the year-to-date period ended June 29, 2025, corporate expenses were $32.8 million, compared to $36.5 million for the year-to-date period ended June 30, 2024. The decrease in corporate expenses for the quarter and year-to-date periods ended June 29, 2025 was primarily due to lower incentive compensation costs. Closed operations and other income/expense for the second quarter 2025 was income of $2.4 million, compared to income of $0.7 million for the second quarter 2024. For the year-to-date period ended June 29, 2025, closed operations and other income/expense offset, compared to expense of $0.6 million for the year-to-date period ended June 30, 2024. Closed operations and other income/expense for the quarter and year-to-date periods ended June 29, 2025 benefited from foreign exchange gains and a favorable bankruptcy settlement related to an insurance claim. Managed Working Capital As part of managing the performance of our business, we focus on Managed working capital, a non-GAAP financial measure that we define as gross accounts receivable, short-term contract assets and gross inventories, excluding the effects of reserves for uncollectible accounts receivable and inventory valuation reserves, less accounts payable and short-term contract liabilities. We assess Managed working capital performance as a percentage of the prior three months annualized sales. Managed working capital is not intended to replace working capital or other GAAP financial measures or to be used as a measure of liquidity. Management believes this non-GAAP financial measure focuses on the assets and liabilities most closely attributable to our core operations, allowing Management to quantify and evaluate the asset intensity of our business. Further, Management believes this non-GAAP financial measure provides investors with additional insights into the Company’s effectiveness in balancing the need to maintain appropriate asset levels to support sales growth and operations while deploying our cash effectively. We employ several strategies to actively manage our Managed working capital, seeking to effectively balance the need to maintain appropriate levels of Managed working capital to support our growth and operations while deploying our cash efficiently. Our strategies include, but are not limited to, taking advantage of favorable customer and supplier payment terms, participating in supplier financing programs, accounts receivable factoring arrangements and other customer financing programs, managing the timing of purchases of raw materials, and leveling manufacturing process throughput and shipping to limit periodic increases in Managed working capital. At June 29, 2025, Managed working capital increased as a percentage of annualized sales to 36.5% compared to 30.9% at December 29, 2024. The increase in Managed working capital as a percentage of annualized sales was primarily due to seasonal inventory builds and the timing of shipments, which impacts days sales outstanding, and vendor payments in the quarter. Days sales outstanding, which measures actual collection timing for accounts receivable, worsened by 14% as of June 29, 2025 compared to year end 2024. Gross inventory turns, which measures how many times we turn over our inventory relative to cost of sales in a year, worsened by 8% as of June 29, 2025 compared to year end 2024. 36 The computations of Managed working capital at June 29, 2025 and December 29, 2024, reconciled to the financial statement line items as computed under U.S. GAAP, were as follows. The December 29, 2024 amounts include management working capital balances that are classified as held for sale. June 29, December 29, (In millions) 2025 2024 Accounts receivable $ 787.9 $ 709.2 Short-term contract assets 86.4 75.6 Inventory 1,412.6 1,353.0 Accounts payable (532.3) (609.1) Short-term contract liabilities (171.7) (169.4) Subtotal 1,582.9 1,359.3 Allowance for doubtful accounts 3.4 15.0 Inventory valuation reserves 80.3 68.5 Net managed working capital held for sale — 8.5 Managed working capital $ 1,666.6 $ 1,451.3 Annualized prior 3 months sales $ 4,561.4 $ 4,690.5 Managed working capital as a % of annualized sales 36.5 % 30.9 % Liquidity and Financial Condition On June 13, 2025, we amended our Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of our operations. As amended, the ABL facility also provides us with the option of including certain machinery and equipment as additional collateral for purposes of determining availability under the facility. This amendment extended the ABL facility through June 2030. The amended ABL includes a $600 million revolving credit facility, a letter of credit sub-facility of up to $200 million, a $200 million term loan (Term Loan), and a swing loan facility of up to $60 million. Additionally, the amendment gives the Company the ability, through June 13, 2026 and as long as no default or event of default has occurred and is continuing, to borrow an additional term loan of up to $100 million in total, using one or two draws (the Delayed-Draw Term Loan). As of June 29, 2025, there were no outstanding borrowings under the revolving portion of the ABL facility, and $29.4 million was utilized to support the issuance of letters of credit. At June 29, 2025, we had $319.6 million of cash and cash equivalents, available additional liquidity under the ABL facility of approximately $570 million, and up to $100 million of availability under the Delayed-Draw Term Loan. Our next significant debt maturity is in the fourth quarter of this year and relates to the 6.95% Debentures due 2025 issued by our wholly owned subsidiary, Allegheny Ludlum LLC. Periodically, our Board of Directors authorizes the repurchase of ATI common stock (the “Share Repurchase Program”), the most recent of which was $700 million that was announced in September 2024. Repurchases under these programs are made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs. Open market repurchases are structured to occur within the pricing and volume requirements of SEC Rule 10b-18. In the quarter and year-to-date period ended June 29, 2025, ATI used $250 million and $320 million, respectively, to repurchase 3.2 million and 4.4 million, respectively, of its common stock under the Share Repurchase Program. At June 29, 2025, the Company has utilized $430 million of the $700 million currently authorized under the Share Repurchase Program. In the year-to-date period ended June 30, 2024, ATI used $150.0 million to repurchase 3.4 million shares of its common stock under the Share Repurchase Program. We believe that internally generated funds, current cash on hand and available borrowings under the ABL facility will be adequate to meet our liquidity needs. In the event we decide to obtain additional financing, the cost and terms and conditions of such borrowings may be influenced by our credit rating. In addition, we regularly review our capital structure, various financing alternatives, and conditions in the debt and equity markets in order to opportunistically enhance our capital structure. As a result, we may seek to refinance or retire existing indebtedness, incur new or additional indebtedness or issue equity or equity-linked securities, in each case, depending on market and other conditions. We have no off-balance sheet arrangements as defined in Item 303(a)(4) of SEC Regulation S-K. In managing our overall capital structure, we focus on the ratio of net debt to Adjusted EBITDA, which we use as a measure of our ability to repay our incurred debt. We define net debt as the total principal balance of our outstanding indebtedness excluding deferred financing costs, net of cash, at the balance sheet date. See above for our definition of Adjusted EBITDA, which is a non-GAAP measure and is not intended to represent, and should not be considered more meaningful than, or as an 37 alternative to, a measure of operating performance as determined in accordance with U.S. GAAP. Our ratio of net debt to Adjusted EBITDA (Adjusted EBITDA Leverage Ratio) measures net debt at the balance sheet date to Adjusted EBITDA as calculated on the trailing twelve-month period from this balance sheet date. Our Total Debt to Adjusted EBITDA Leverage ratio improved in the second quarter of 2025 compared to year end 2024, while our Net Debt to Adjusted EBITDA Leverage ratio worsened in the second quarter of 2025 compared to year end 2024, largely due to a lower cash balance. The reconciliations of our Adjusted EBITDA Leverage Ratios to the balance sheet and income statement amounts as reported under U.S. GAAP are as follows: Quarter ended Trailing 12-month period ended Year ended June 29, 2025 June 30, 2024 June 29, 2025 December 29, 2024 Net income attributable to ATI $ 100.7 $ 81.9 $ 417.5 $ 367.8 Net income attributable to noncontrolling interests 3.3 3.7 15.7 14.9 Net income 104.0 85.6 433.2 382.7 Interest expense 25.4 28.4 101.6 108.2 Depreciation and amortization 41.6 37.9 160.0 151.5 Income tax provision (benefit) 29.3 25.3 111.5 103.4 Pension remeasurement loss — — 14.1 14.1 Restructuring and other charges 7.4 5.4 26.6 22.1 Loss on asset sales and sale of businesses, net — — (49.2) (52.9) Adjusted EBITDA $ 207.7 $ 182.6 $ 797.8 $ 729.1 Debt $ 1,890.0 $ 1,895.3 Add: Debt issuance costs 12.9 14.2 Total debt 1,902.9 1,909.5 Less: Cash (319.6) (721.2) Net debt $ 1,583.3 $ 1,188.3 Total Debt to Adjusted EBITDA 2.39 2.62 Net Debt to Adjusted EBITDA 1.98 1.63 Cash Flow Cash provided by operations was $69.0 million in the year-to-date period ended June 29, 2025, compared to $2.3 million in the year-to-date period ended June 30, 2024. Both periods reflect higher accounts receivable and higher inventory balances due to increased operating levels as well as seasonal inventory builds. Working capital balances, and consequently cash from operations, can fluctuate throughout any operating period based upon the timing of receipts from customers and payments to vendors. Other significant first half 2025 and 2024 operating cash flow items included payment of the annual cash incentive compensation. Cash used in investing activities was $119.2 million in the in the year-to-date period ended June 29, 2025, which included $125.4 million for capital expenditures. Cash used in investing activities was $117.1 million in the year-to-date period ended June 30, 2024, reflecting $126.0 million in capital expenditures primarily to support various growth projects in our aerospace & defense and other core markets. We expect to fund our capital expenditures with cash on hand and cash flow generated from our operations and, if needed, borrowings under the ABL facility. Cash used in financing activities was $365.8 million in the year-to-date period ended June 29, 2025, which included $320.0 million to repurchase 4.4 million shares of ATI stock under our Share Repurchase Program. For the year-to-date period ended June 30, 2024, cash used in financing activities was $193.9 million, which included $150.0 million to repurchase 3.4 million shares of ATI stock under our Share Repurchase Program. At June 29, 2025, cash and cash equivalents on hand totaled $319.6 million, a decrease of $401.6 million from year end 2024. Cash and cash equivalents held by our foreign subsidiaries was $146.0 million at June 29, 2025, of which $86.7 million was held by the STAL joint venture. 38 Reconciliation of Adjusted EBITDA to Net Income ATI utilizes Adjusted EBITDA, which is a non-GAAP financial measure, to assist in assessing operating performance on a consistent basis across multiple reporting periods by removing the impact of special items, which can vary from period to period, that management does not believe are directly reflective of the Company’s core operations. The Company defines special items as significant non-recurring or non-operational charges or credits, including restructuring charges or credits, gains or losses on the sale of accounts receivable, strike related costs, goodwill and long-lived asset impairments, debt extinguishment charges, pension remeasurement gains and losses, other postretirement/pension curtailment and settlement gains and losses, and gains or losses on sales of businesses. We define Adjusted EBITDA as net income, excluding net interest expense, income taxes, depreciation and amortization, and special items. Management believes presenting this non-GAAP financial measure is useful to investors because it (1) provides investors with meaningful supplemental information regarding financial and operating performance by excluding certain items management believes do not directly impact the Company’s core operations, (2) permits investors to view performance using the same metrics that management uses to forecast, evaluate performance, and make operating and strategic decisions, and (3) provides additional information useful to investors on a period-to-period consistent basis that are commonly used to analyze companies’ operating performance. Management believes that consideration of Adjusted EBITDA, together with Net Income, and the corresponding reconciliation, provides investors with additional understanding of the Company’s performance and trends that would be absent such disclosures. Non-GAAP financial measures should be viewed in addition to, and not superior to or as an alternative for, the Company’s reported results prepared in accordance with GAAP. The following table provides the reconciliation of net income attributable to ATI to the Adjusted EBITDA non-GAAP financial measures: Quarter Ended Year-to-date period ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Net income attributable to ATI $ 100.7 $ 81.9 $ 197.7 $ 148.0 Net income attributable to noncontrolling interests 3.3 3.7 6.8 6.0 Net income 104.0 85.6 204.5 154.0 (+) Depreciation and amortization 41.6 37.9 82.4 73.9 (+) Interest expense 25.4 28.4 48.4 55.0 (+) Income tax provision 29.3 25.3 50.3 42.2 EBITDA $ 200.3 $ 177.2 $ 385.6 $ 325.1 Adjustments for special items, pre-tax: (+) Restructuring and other charges (a) 7.4 5.4 13.0 8.5 (+) Loss on sales of businesses (b) — — 3.7 — Adjusted EBITDA $ 207.7 $ 182.6 $ 402.3 $ 333.6 Adjusted EBITDA as a % of sales 18.2 % 16.7 % 17.6 % 15.6 % (a) Restructuring and other charges of $ 7.4 million for the second quarter of 2025 include $ 7.1 million of start-up and transaction related costs, which are included within cost of sales on the consolidated statements of operations, and $ 1.6 million for losses on sale of accounts receivable, which are included in selling and administrative expenses on the consolidated statement of operations . These charges were partially offset by credits of $ 1.3 million due to a reduction in severance-related reserves for a previous restructuring in the AA&S segment. Restructuring and other charges of $ 5.4 million for the second quarter of 2024 include $ 5.5 million of inventory write-downs related to our European restructuring and $ 1.8 million of start-up costs, both of which are included within cost of sales on the consolidated statements of operations. These charges were partially offset by credits of $ 1.9 million primarily due to a reduction in severance-related reserves. Restructuring and other charges of $ 13.0 million for the year-to-date period ended June 29, 2025 include $ 11.1 million of start-up and transaction related costs , which are included within cost of sales on the consolidated statements of operations, and $ 3.2 million for losses on sale of accounts receivable, which are included in selling and administrative expenses on the consolidated statement of operations . These charges were partially offset by credits of $ 1.3 million due to a reduction in severance-related reserves for a previous restructuring in the AA&S segment. Restructuring and other charges of $ 8.5 million for the year-to-date period ended June 30, 2024 include $ 5.5 39 million of inventory write-downs related to our European restructuring and $ 4.7 million of start-up costs, both of which are included within cost of sales on the consolidated statements of operations. These charges were partially offset by credits of 1.7 million primarily due to a reduction in severance-related reserves. (b) Loss on sales of businesses of $3.7 million for the year-to-date period ended June 29, 2025 includes the sale of certain non-core European operations from the HPMC segment. Critical Accounting Policies Our critical accounting policies are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 29, 2024. The preparation of the financial statements in accordance with U.S. generally accepted accounting principles requires us to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities. Significant areas of uncertainty that require judgments, estimates and assumptions include the accounting for derivatives, retirement plans, income taxes, environmental and other contingencies, as well as asset impairment, inventory valuation and collectability of accounts receivable. We use historical and other information that we consider to be relevant to make these judgments and estimates. However, actual results may differ from those estimates and assumptions that are used to prepare our financial statements. Pending Accounting Pronouncements See Note 1 of the Notes to Consolidated Financial Statements for information on new and pending accounting pronouncements. Forward-Looking and Other Statements From time to time, we have made and may continue to make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this report relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control, that may cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty materials and changes in international trade duties and other aspects of international trade policy; (b) material adverse changes in the markets we serve; (c) our inability to achieve the level of cost savings, productivity improvements, synergies, growth or other benefits anticipated by management, from strategic investments and the integration of acquired businesses; (d) volatility in the price and availability of the raw materials that are critical to the manufacture of our products; (e) declines in the value of our defined benefit pension plan assets or unfavorable changes in laws or regulations that govern pension plan funding; (f) labor disputes or work stoppages; (g) equipment outages; (h) the risks of business and economic disruption associated with extraordinary events beyond our control, such as war, terrorism, international conflicts, public health issues, such as epidemics or pandemics, natural disasters and climate-related events that may arise in the future; and (i) other risk factors summarized in our Annual Report on Form 10-K for the year ended December 29, 2024, and in other reports filed with the Securities and Exchange Commission. We assume no duty to update our forward-looking statements.