ATI Lifts Guidance Third Straight Quarter as Margins Widen
ATI posted second-quarter sales of $1.26 billion and adjusted EBITDA margin of 22.6%, prompting the company to raise its full-year profit outlook for the third consecutive quarter.
ATI (ATI) reported second-quarter sales of $1.26 billion, up 10% sequentially from $1.15 billion in the first quarter and 11% higher than the $1.14 billion posted a year earlier, exceeding the high end of its own guidance. The specialty metals maker, which supplies aerospace and defense manufacturers with advanced alloys and titanium products, posted GAAP diluted earnings of $1.09 a share, up from $0.85 in the first quarter and $0.70 in the second quarter of 2024.
The results extend a trajectory that first bent upward after a soft patch. Fourth-quarter 2024 net income had fallen 12% sequentially to $96.6 million as adjusted EBITDA margin held flat at 19.7%, but the first and second quarters of 2025 reversed that pattern, with net income climbing to $118.2 million and then $151.0 million, a 50% year-over-year increase. Adjusted EBITDA rose to $284.4 million in the second quarter, up 23% from $231.7 million in the first quarter and 37% from $207.7 million a year earlier, pushing margin to 22.6% of sales from 20.1% in the prior quarter and 18.2% a year ago.
The gains centered on ATI's Advanced Alloys & Solutions segment, where sales jumped 16% sequentially to $624.0 million and segment margin expanded to 23.7% from 18.1% in the first quarter, aided by pricing, mix and a $9.9 million gain on the sale of a closed manufacturing facility. Aerospace and defense sales within the segment rose 19% sequentially and 34% year-over-year, including a 90% surge in defense orders. The company's High Performance Materials & Components segment moved the other way, with margin slipping to 24.1% from 24.9% in the first quarter on higher manufacturing costs tied to a Mexico facility qualification and titanium electron-beam furnace expenses, though it remained above the 23.7% margin posted a year earlier.
Aerospace and defense work now accounts for 68% of total sales, and defense revenue specifically climbed to $162.0 million, or 13% of sales, from $139.0 million in the first quarter and $118.8 million a year ago. ATI has a record backlog of $4.4 billion, up 18% year-over-year, which reflects demand for aerospace and defense materials outpacing available supply.
ATI raised its full-year 2025 adjusted EBITDA guidance to a range of $1.135 billion to $1.185 billion from $1.010 billion to $1.060 billion, the guide it had set just one quarter earlier, and lifted its adjusted earnings guidance to $4.90 to $5.18 a share from $4.20 to $4.48. It is the third straight quarter the company has raised its outlook, following an increase to the fiscal 2024 EBITDA range in the third-quarter 2024 release and the initiation of the 2025 range at $975 million to $1.025 billion in the fourth-quarter release. Adjusted free cash flow guidance for the year rose to $550 million to $600 million from $465 million to $525 million.
Cash and cash equivalents more than doubled to $783.0 million at quarter-end from $416.7 million at the end of 2024, helped by a $450 million senior notes issuance completed in the first half of the year. Managed working capital improved to 34.3% of annualized sales from 34.8% in the first quarter, though it remained above the 32.5% level at year-end 2024. ATI's effective tax rate rose to 20.0% from 11.8% in the first quarter on the timing of discrete tax benefits tied to share-based compensation, though it stayed below the 22% rate recorded a year earlier.
ATI repurchased $50 million of stock during the quarter at an average price of $159.53 a share, retiring about 0.3 million shares and leaving $495 million of remaining buyback authorization. Corporate expenses fell to $14.9 million from $17.0 million in the first quarter, partly reflecting an insurance claim benefit.