Thanks. Do you guys hear me? Okay, great. Good afternoon, everyone. Thank you for joining us. My name is Peter Arment. I'm the Senior Aerospace Analyst here at Baird. We're delighted to have with us Howmet Aerospace this afternoon. With us from Howmet Aerospace, we have John Plant, who's the Executive Chairman and Chief Executive Officer of Howmet. John, thank you for joining us. Nice to be here, Peter. It's great to have you. So we're gonna jump right into Q&A. At a high level, I guess, John, you've, it's been quite a year in aerospace. How are you thinking about commercial, you know, aerospace landscape as we're kind of exiting 2020, 2024? The overall health of kind of the supply chain, all things that you've kind of talked about, but, you know, anything that there's been like kind of a permanent damage to the global output of capabilities or leaving, you know, with the two plane makers? Okay, so first of all, welcome. I'm gonna do my best to answer the question about plane makers, but that's a tough one given what's been a pretty turbulent year this year. I think everybody knows that aircraft manufacturers would like to make more production than they're currently being able to do, and certainly, 2024 has been yet another year where, I'd say, production plans have not been fulfilled, and you get into, so like, why might that be, well, clearly, in the last month or two, it's been because of strikes at Boeing, and prior to that, it's because of, let's say, the slowdown of production to improve quality with FAA oversight, and then if it's not that, then the word which is reached for so many times these days has been supply chain. The question is, you know, is that always the case? It's supply chain. And, you know, so yes, in certain circumstances, I'm convinced there have been supply issues. But at the same time, it's almost become, you know, the word of the day in response to any question, which is supply chain. So, you know, and I reject the premise that supply chain is the cause of all the issues. And, you know, I really believe that there's a capability there to raise production. And so when I look forward into 2025, while I don't believe for a second there's gonna be the state of grace that I've talked to in terms of, you know, smooth production with Boeing, you know, easily increasing their production quantities, you know, starting with rate 38 or anything like that to a better future. Airbus just goes up naturally from there, let's say, rate 50 to their 65. It's not gonna be straight line. There is gonna be, I would say, some turmoil along the way, and it's difficult to be absolutely certain. The one thing that I really am clear about is that 2025 is going to be a year where more aircraft are produced, probably not to the degree of increase that is being looked at by some of the external agencies, but aircraft production will increase. I think the supply chains that have been referred to are able to support much higher production than we have today. We'll see the benefit of all of that, but it's not gonna be night and day. I think there's gonna be further improvements as we get into 2026 and 2027. But to me, the fundamentals of a large backlog with supply chains easing, with aircraft manufacturers themselves improving their own labor utilization, training, and output, all of that's gonna occur. So I'm absolutely convinced that tomorrow is better than today. Terrific. For me, that's good. Yeah, that's good. I like that. Well, one of the things that, you know, has come up recently in your most recent results was a discussion around spares. You know, and how are you thinking about the relative mix of OE and aftermarket when we think about 2025 as the industry as a whole? And, you know, obviously, we're assuming there'll be a higher OEM mix just given the comments you just said. What's gonna be really good is that I think we're gonna see both increased demand for spares and increased OE production. So. Double one. In one sense, it doesn't really get better than that. Now, which ultimately turns out to be the greatest level of increase. I mean, that's a TBD. But if I were to look and take a guess, I think the demand for increased spares is fundamentally there, and therefore, I'm much clearer about what I think that increase might be. And that's borne of, first of all, CFM56 and V2500s of Pratt & Whitney. You know, we are gonna see increased demand for that because we haven't reached peak yet for the old aircraft. Then we're gonna have that demand supplemented by the, what I call, well-publicized time on wing issues for the current LEAP and Geared Turbofan engine and increased frequency of shop visits. And then there's a longer-term trend of, I would say, fundamentally increased shop visits for those newer engines over the next, I would say, one or two decades. And so I think each builds on its own. And so while I don't think there's gonna be a constant increase in percentage each year, but I'm clear that the dollar value of spares will improve. The rate of, you know, increase is, is gonna be good. And, you know, there, there could be a year where OE production paces it because I don't think that's gonna be even, in terms of increase between 2025, 2026, or 2027. But I'll bet on that, the spares weighting is gonna improve for Howmet in terms of our total content of revenues because of what we see happening in the spares, spares market. Terrific. 2025 looks seemingly better all around. One of the things that came up on your third quarter call was IGT, which I don't think has been talked about a lot, you know, in recent times. Maybe you could just talk about a little bit of the opportunity that you talked about a little bit on Q3. Yeah. Well, I thought I'd better find a way of getting AI into the conversation, and I only mentioned the word once, in our August call, and said I would talk about it more in the future, so I think I mentioned it at least twice. Twice. Yeah. In our call, I was gonna say in November. It's only last week, so it's pretty fresh in my mind, and maybe I'll mention it three times in the next call because it's guaranteed for $10. Yeah. is the way I think about it. But it, I mean, in talking on a more serious vein is that, you know, for me, clearly, the requirement for data centers in particular is increasing. And whether it's cloud storage or whether it's gonna be the increases because of AI searches or just generally, I think everybody's, you can, I track it by looking at the property market and which property companies are building data centers, you know, what's the scale of that increase in investment. And then for us, it's not a data center per se, but it's the electricity demand which comes from that buildout, which is so critical. I think about it in that if an AI search takes 10 times the electricity of a Google search, if the publicized, I'm gonna say, maybe backward-looking, forecasts from three of the utility companies which are in the states where these data centers have been built out, it's a very significant increase in gigawatts of electricity demand for them. And for us, that means more demand for our turbine blades that go into, you know, the industrial gas turbines. And I know the counter to that is, well, what's IGT gonna be as a percentage of electricity generation? Well, it comes, first of all, in two ways. One is certain of these data center campuses are gonna have their own energy source because the ability of the grid to provide that transmission capability won't be there. So it's gonna be whether it's aero derivatives or small gas turbines, even the large H-class and J-class turbines, there's gonna be some of those which will be required for these data centers. But utility companies are also, you know, I was gonna say it's part of the blend of electricity generation. And of course, in one sense, we don't know what will come from nuclear, but there's been no new permitting for nuclear. There's been one, I'll say, repurposing and refurbishment of Three Mile Island from Microsoft Energy. But given the demand, clearly IGT was gonna be up, is gonna be up. But I think the landscape changed again since last week. And what I mean by that is that we were the morning after the election. It's pretty clear the result. Yeah. But my guess is the amount of, I would say, provision of electricity from wind turbines might be a little bit less than was thought. A little smaller. I think that the provision of electricity from gas turbines might be a little bit more. It's not just gonna be a U.S. phenomenon 'cause we're gonna be shipping liquefied natural gas to Europe as well, and they're gonna use it for their gas turbines. I think they need it. I mean, everybody's gonna need it. So it's a global phenomenon. I expect that the major turbine manufacturers are gonna be a beneficiary of all of that. Then because of them, we're the, you know, most significant supplier of blades for gas turbines in the world. So for us, we're indifferent to is it a GE Vernova solution, or a Siemens, or a Mitsubishi Heavy, or Ansaldo? That is, we're the biggest supplier to each of those companies. We, you know, we're building out our global network further. When we have our next round of planning meetings, we had a second round planned for December. I think the landscape shifted again. You get lucky sometimes in life. We take a lot of problems on board, but this time, a little bit of luck is good. Like a building tailwind for IGT. Yeah, 'cause we're, and we've done nothing. We're just gonna sit there and hopefully enjoy it. But we've taken our problems as well. You know, we, you know, like strikes and stuff and. So let's talk about engine products. It's 50% of your total, you know, kind of group sales. You've materially increased the EBITDA margins for the segment from 22% in 2019. You're now 30% plus. How much of this step-up is tied to operational execution, automation efforts, which we certainly saw at Whitehall in Cedar Rapids, price increases, market share gains from your closest competitors? How would you, you know? I think there's probably different emphases at different points in the journey that we've had. 'Cause I, I think margin rate also goes to the angle of increasing your top line. So sometimes if the angle's too steep, you can end up with excess costs and labor training and, and I say just materials management and expedites. At the same time, you know, generally, you know, more is better 'cause you get the benefit of fixed cost leverage. And we've been pretty, I'll say, disciplined over fixed costs, all the way through this, both during the COVID times and in the aftermath of the pandemic. We've had periods where we've accelerated labor recruitment, because of the oncoming, you know, demand and periods where we've, I'll say, pulled back and emphasized productivity. And if you look at 2024, then I think we've made significant strides forward in our productivity and also made some improvements in our recruitment and retention of employees. And, you know, turnover's been a little bit better than it was in 2023 and 2022, even though I'm not yet satisfied with it. And you've seen at a most extraordinary, you say, one of our businesses, which was our fastener business, where we'd put like 23%-25% increase of revenue through with no increase in people, which is, I think, really, really impressive, even though I probably shouldn't say it myself, but yeah, I quite liked it. But I mean, it's never linear. You know, we know that we're gonna improve, or increase the rate of our recruitment in 2025 because of the capital investments in making the training required to get people ready. If I look through the periods of time, we've had periods of accelerated margin improvement and periods of rate stability. It's not linear, so I think that's what, you know, we have to plan for. It's, you know, nothing ever moves, you know, totally in a straight line, but we've had mixed improvements, content improvements, price improvements, productivity improvements, you name it. Yeah. We've got it. And all the time been coping with some pretty tumultuous markets over the last two or three years. Where would you say you are in that automation journey? I should have mentioned automation. Thank goodness for you mentioning it twice now and reminding me politely that you've forgotten all about it. And we have emphasized a lot of automation improvements. And it's been one to go to economics in that, you know, clearly a machine produces repeatable performance, and it doesn't really require the same, doesn't have the problems of recruitment and retention in quite the same way. But it's also provided an avenue for upskilling our existing workforce and retraining and providing jobs managing that automation with improved pay as well. So it's been beneficial for everybody. But now I think we're at the point where with the complexity of some of the parts we're making, that to do it with a higher content of labor will be very problematic. And so we've been able to improve our production rates, and automation's played a large part in that. And to get the repeatability and in particular the quality levels that we have to do because of the extreme tolerances of the parts we're making, particularly in the turbine section of the engine, automation has become, you know, essential. It's not an option. Right. And to meet the requirements of what we're gonna see on the, I'll say, the Geared Turbofan Advantage engine or the, I'll say, the improved turbine parts in the LEAP engines, then, automation is gonna be fundamental to it. And as each generation has come along, we've tried to improve that. And certainly for the investments and the like a couple of new buildings we're actually constructing today and building out and capitalizing, in 2025, the level of automation is gonna be taken to another level. That's, I guess, is that a big part of the CapEx, kind of the elevated CapEx that you're seeing for this year and a little bit next year? Is that part? We've elevated the automation as percentage of our capital significantly in 2022, 2023, and 2024. 2025 is more about capacity, but we're not just putting in the same, it's not same old. Yeah. We're, you know, we're combining both, I say, capacity buildout with improved automation at the same time. So it's hard to pick that one apart. But we certainly have emphasized, and, you know, I could talk probably for a minimum of 30 minutes about, I'll say, the improvements we've made in bringing a different way of thinking because to automation in aerospace, because, you know, it's a different volume variety. It's not like. Right. Casting. It's not like an automotive company, and that volume variety requires you to think differently to enable automation to occur. Yeah. Yeah. Let's talk a little bit about, I guess, the spares catalog for the F-35. You know, similar margins, I guess, to conventional OEM sales. How do we think about it, the spares portfolio and F-35? Is it a more attractive margin perspective, or is it just simply kind of the supply of the parts to the MROs, or how is it? We supply at the same prices for MRO, I'll say, aftermarket product to the OE product, so there's no differentiation on price. We sell to, in this case, Pratt & Whitney at the same price. It does go to mix within it, and when we look at that on an LTA refreshment, and you know what's the proportionality of where we apply economic differential, but the most important aspect is given there's now 1,025 or starting to change obviously every month, of the numbers of F-35s around the world, and I quoted a number of like 600-plus F-35s destined for the European theater alone, by 2030. I mean, we are gonna be, I think, approaching, I don't know, 2,000 sometime in the early 2030s. That is a lot of fighter jets with obviously a fundamentally different duty cycle to a commercial jet. In other words, the frequency of shop visit is obviously much higher. By a significant factor, but just because of the expected maneuverability, the hovering capability in there for the heat soak through, I'll say, airflow management as the jet is just poised in the air and stable. All of those things go to a fundamentally different requirement for both those that turbine and also the thermal performance and also the content point of those blades. Therefore, you know, it goes to price as well. Getting larger and larger. So it's gonna be a great business over the next 10, 20 years. It's a long way of saying that. Getting bigger and bigger. Yeah. It's getting bigger and it's gonna last a long time. Yeah. Yeah. Let's move on to one where I think the margin performance is still really strong, but you are seeing a little bit of a softer top line on the forged wheels, which you. You had to bring it up, didn't you? You just had to sort of spoil the vibe. I gotta look like I'm banging tough up here. Come on. Yeah, I know. But you've managed to keep, you know, really strong elevated margins, high twenties, you know, year to date, despite kind of their guidance, which you've been very clear about, that coming down. You expected that. But you also talked a lot about that you think it could be also short-lived, but, you know, in terms of the snapback as we, you know, some of the mandates. But could you talk about the ability to kind of maintain elevated margins during this kind of softer period? Yeah. Well, first of all, I mean, my estimate that we're gonna see now continuing 20% reductions in Europe for the next couple of quarters and then maybe 10% in the US. So it's a little bit more, I'll say severe, but we're probably seeing some inventory effect as we go through this. It's not just what changes by way of truck or trailer production, you know, as they trim their inventories. But, and then expecting some improvement because of the prebuys ready for the 2027 emissions increase requirements, which are significant in terms of the dollar value per truck. It's like an extra $15,000 or $20,000 per truck increase, which is really, you know, incentivized people to buy, you know, more and earlier. But we've been trying to really work hard to hold our margins. It's always a combination of things, which is, you know, we did try to build up the temporary element of our workforce so that we could adjust manning. We also, during good times, try not to be totally self-sufficient. We outsource certain of the processes and then try to insource when food is scarce, let's say when times are a little bit tougher, and use, you know, without totally moving the work inside, you know, a balance so that we rebalance towards ourselves. We keep our own plants working, you know, more. Yeah. That helps us, you know, manage our margin to a respectable, I think a very respectable decremental margin that you've seen. Yeah, and let's switch over. Having said that, it's tough. Yeah. You know, so basically I think we're all rooting obviously for hopefully Boeing getting a recovery back going and the supply chain kind of healing itself. But one of the things that constantly comes up is that there's a need for new plane designs and there are clean sheets. And obviously I don't think Boeing has the balance sheet to deal with that at this moment, but it does come up quite a bit. How do you think about, you know, is there propulsion technology advances? Is there any opportunities for new plane designs in this, you know, near term, what's called the next, you know, five to eight years? Maybe I'd separate out engine and airframe from that. So, an engine is never static during its life. So over 20-30-year life, then generally within five or six years, there's some form of upgrade. And the current upgrades, which a couple of years ago were meant to be really focused on, say, fuel efficiency, really the mission became more an improvement in robustness to deal with the time on wing issues in certain climates or certain countries where air pollution was that much greater than the flying hours between shop visits was vastly reduced. So the robustness solution, which is the focus of what we are doing now, which starts hopefully fairly soon on the LEAP-1A, even though we are still not totally date certain yet on that. And then probably in certain quarters, you know, future quarters from now, we'll be seeing that same changeover on the LEAP-1B. But then there's also on the Geared Turbofan, the introduction, probably in the first half of next year, the improvements and content for the GTF Advantage. So we've got all of that going on, but it doesn't stop there because probably by the end of the decade, we'll be looking at the next steps to elevate the fuel efficiency, or if not for the emissions for that. So an engine never stays still. And while historically it's also been used to keep out the PMA guys, today the complexity of the turbine is such that it's, I believe it's almost impossible to, you know, reverse engineer those parts anyway. And so it plays then to our strengths. Then, you know, maybe there's the RISE engine to come or something else in terms of maybe the water-injected MTU technology. I mean, again, all to be decided. But in terms of airframe, you know, there has been talk about putting back an NMA for Boeing or when does it start or when there is a need. You know, clearly at some point there will be an investment in a new platform. What that will be, you know, is. I'll say who knows whether it goes composite in the way that more recent aircraft have become, or at least composite wings on them, if not, more than that. Then what with the engine technology. You know, I don't think we are at that point of knowing and can be certain about it. To some degree, neither does it matter because the backlog of current aircraft is so high. Right. I mean, if you place an order for an Airbus narrow body today, you won't get it before 2032. And the price for those airframe manufacturers is very strong given that backlog. And the same for Boeing, maybe not that far out in the future, but still, you know, there's no economic case today, but I'm sure that whether it's in a year or two or what the lead time is to introduce a new airframe, I mean, that's significant, especially given today's FAA and EASA certification requirements. So at some point it'll move. And then the question is to what and or whether there are partial upgrades to be made to the existing aircraft. But in one sense, for the next five, seven decade, you know, years, decade, there's no immediate need. Yeah. Yeah. Flying on, you know, an Airbus, I think, on the new XLR for Airbus or, you know, flying on a new MAX is a pleasure. Yeah. Yeah. All right. In the marine events, let's talk about your balance sheet optionality. You've got your net leverage down to, I believe it was, 1.6 turns, roughly, below kind of the net leverage targets of two that you've kind of always talked about from a balance sheet efficiency standpoint. So how should we think about, you know, kind of your thoughts around capital deployment or, given that particularly M&A has not been part of your strategy, in recent years? We said that at the end of 2024, we hit what we think is a sort of target leverage of one and a half times. I mean, you're never gonna, I'll say, why I don't believe in this financial engineering just to, you know, just to go and borrow a lot of money to buy back stock. I think it's far better you generate the money and use that. We are in the position of choice in so many dimensions at the moment, which is, you know, what do we think? We think EBITDA is going up next year. So that would improve leverage on, you know, you know, there's a little bit done by way of on the debt side, you know, could do a bit, but there's no, there's no big juice left in debt pay down without becoming fundamentally underleveraged. So far we've been paying pretty much out everything that we've earned. You know, we sort of like that. You know, we, in fact, I think we, you know, paid more to our shareholders last year than we'd earned, which is, you know, which is really good, and so what have we been doing? Well, the answer is we've been buying back stock, which I think goes to shareholders. I think paying down debt effectively goes to shareholders as well, and we've been increasing the dividend and our dividend has probably increased 5x since 2022. So, you know, it's still not exactly a great yield. You know, it's. That's not your target though to begin with, right? No, we don't set out with a yield target. We wouldn't like it to degrade. But on the other hand, the rate of increase in dividend is quite extraordinary. But then, so is everything else about Howmet. Yeah. You know, so I gotta tell you, it's good. So what can you look forward to? The answer is, I think increased share buyback, increased dividends, maybe the debt pay down, hopefully a bit of more EBITDA and revenue goes up. More of the same. And the story continues. Why don't we leave it there? I appreciate everyone joining us. John, thank you.