Haynes International, Inc.

Hard numbers reported on the call: Q4 revenue was $160.6 million to $160.9 million; Q4 gross margin was 18.5%, with raw-material-neutral gross margin of 20.9%; Q4 net income was $13.1 million to $13.2 million; Q4 diluted EPS was $1.02; Q4 EBITDA, adjusted for raw material headwinds, was over $25 million. FY23 revenue was $590 million; FY23 adjusted/raw-material-neutral gross margin was 20.7%; FY23 net income was $42 million; FY23 EPS was $3.26; FY23 adjusted EBITDA was just under $100 million; FY23 raw material headwind was $12.6 million unfavorable, including $8.1 million from cobalt and $4.5 million from nickel. Backlog was $460.4 million; revolver balance was $114.8 million; working capital was $449.4 million; FY23 capex was $16.4 million. Guidance: FY24 revenue and earnings in Q1 are expected to be higher than Q1 FY23 but lower than Q4 FY23; FY24 full year is expected to see continued volume and revenue growth, incremental gross margin improvement, positive operating cash flow, and revolver paydown, with FY24 capex expected in the range of $25 million to $35 million.

Mike Shor emphasized that Haynes has positioned itself well through six consecutive quarters of roughly 21% raw-material-neutral gross margin, record aerospace and IGT sales, and a backlog that supports higher volumes ahead. He framed the company’s strategy as keeping focus on differentiated alloys, just-in-time supply, technical service, and relentless variable-cost reduction. His tone was confident but measured, repeatedly saying margin improvement is not done and that cash generation should inflect in FY24, especially in the second half.

Dan Maudlin focused on the quarter’s financial strength and the improvement in the underlying business, while highlighting the drag from raw materials. He cited Q4 revenue of $160.9 million, adjusted gross margin neutral of raw material headwinds of 20.9%, net income of $13.2 million, and FY23 revenue of $590 million with adjusted gross margin neutral of raw material headwinds at 20.7% and net income of $42 million. He also detailed the $12.6 million FY23 raw-material headwind, the $114.8 million revolver balance, $449.4 million of working capital, $460.4 million of backlog, FY23 capex of $16.4 million, and expected FY24 capex of $25 million to $35 million, while saying effective tax rate should normalize to 21% to 22%.

Analysts pressed on how much of the $460.4 million backlog reflected orders delayed by the cybersecurity incident, and management said the missed revenue remains in backlog and will be feathered into the next several quarters; they estimated an $18 million to $20 million revenue shortfall in Q3 from the incident. Questions also focused on the Kokomo/Drever furnace outage, which management said hurt margins more than volume and is now fixed, plus the planned Q1 A&K line shutdown that could affect efficiency but should improve reliability and support higher shipment levels. Analysts also asked about the rising raw-material headwind, and management explained the lag in nickel pricing, saying the Q1 impact could be worse than Q4 and may spill into Q2.