Carpenter Technology Corporation

Q3 2026 Earnings Call — April 29, 2026

Analyst Gautam Khanna (TD Cohen): Hey, thanks. Good morning, guys. Just wanted to ask if you could comment on lead times, if they changed at all, broadly, engine and other key sub markets. Also wanted to get a sense for what do you think is possible with respect to increasing output? I know you guys are kind of 24-7 full out. But, you know, just as we think about 27 and 28, outside of pricing, you know, how much tonnage could grow over those couple years? Thanks.

Executive Name: Yeah, sure. On lead times, they remain fairly consistent quarter over quarter, but I do anticipate those starting to push out here in the near term. As you well know, we kind of cap lead times anyway, based on our order activity. But I see those pushing out as we go over the next couple of quarters, even higher than they are right now. Your second question is a really good one. And that's one of the reasons I kind of alluded to the fact that we're producing record earnings when the aerospace market specifically is still accelerating. And it's also the reason why we've noted a couple of times DSA order intake acceleration of aerospace structural materials because although you say we're operating 24/7 which is correct on specific process or production flow paths particularly on the engine side but on some of the other aerospace sub markets we are not. We have pockets of opportunity there and because you know, the structural market was not ordering. So we have a very nice opportunity from a volume standpoint in some of those sub-markets over the next couple quarters, over the next couple years, as you stated. And I think Brian mentioned in his prepared remarks, you're still, we've done a tremendous amount of work on productivity. I mean, that just jumps off the page. But there's still a lot more to do there. So from a volume standpoint, Gotham, I guess to summarize my answer, there's still a lot left in the tank there for us.

Analyst Scott Dushel (Deutsche Bank): Hey, good morning. Tony, for the transactional price increases that you referenced in the press release, is that mostly referring to favorable transactional pricing for aerospace structural alloys, or are you saying those transactional prices creep up more broadly across the portfolio?

Executive Name: Yeah, Scott, remind me. I'm not sure I specifically mentioned price in my prepared remarks. I talked about order intake increasing on that specific sub-market, but I will say that we continue to see pricing as a tailwind force. Again, you know this very well, but you see our price per pound potentially being flat. That's good news for our overall earnings because you see structural business being a bigger ratio of our total volume. That's good. It does have a relatively lower price point than, for example, engines. But if you look at aerospace in total, you'll still see a positive trend there. Come back with a follow-up there if I didn't quite answer your question.

Analyst: Okay, yeah, that's fine. And has the frequency of expedite requests been increasing pretty steadily each month this year, or have those expedite requests been pretty erratic each month?

Executive Name: Yeah, that's an interesting question. I guess there is a feel of a little bit that they're a little bit unpredictable from that standpoint. But if I can't say they've been consistently, you know, unpredictable, we're getting those on a pretty regular basis. I think those are going to increase if history is any indication. As I said in the prepared remarks, we share the same sentiment at the OEMs where they do not believe that the order intake, although increasing, is not enough yet. There's concern on the OEMs that suppliers are not ordering enough material fast enough. We agree with that. And I think as that continues to step up, you'll get more and more emergency orders. I mean, also, as you all know, I really don't want to be in the emergency order business. I'd like for all the customers to order at a nice, you know, consistent pace so we can plan our facilities the best possible we can. But I do see that that's going to happen. That's going to increase for us over the next couple of quarters. I think that's pretty well an absolute.

Analyst: Okay. And then last question, Tim, can you say how much IGT revenue specifically was up in the quarter? And then can you give us an updated sense as to how much of the energy mix is now IGT at this point, as opposed to oil and gas?

Executive Name: Yeah. You see on that one slide, you said the total energy, that was almost 100% driven by IGT. And right now IGT is, I would say, dominating that space. Oil and gas is rather subdued from quarter to quarter. So IGT was the big driver of this quarter. Now, keep in mind also, big increase in IGT. Remember, last quarter, I believe you had a pretty material decrease, and that's just the order patterns of IGT. So I don't get too excited if I see a plus 36% because you had a big order come in, you could be minus 20% the next quarter. But over a long period of several quarters time, we've seen significant and consistent increasing on the IGT business.

Analyst Josh Sullivan (Jones Trading): Hey, good morning. Just want to say congratulations, Tony, to the next phase here. You know, great job done stewarding Carpenter to these heights. And to Brian, congratulations on the next leg here.

Executive Name: Thank you.

Analyst Josh Sullivan (Jones Trading): But I guess just to follow up on the Eurostructures question, you know, Boeing made some comments. You know, I think above, what was it, 47, it would take a bigger investment on the supplier inventory side, you know, versus some of the previous jumps. And so when you talk about, you know, supply chain underordering, would you expect that, or is it your sense that we're going to, the supply chain is going to see that and tighten up in the near term? Or do you think we need to be, you know, at above 47, as Boeing's kind of talking about, to really see the supply chain react?

Executive Name: Well, Josh, that's a really good question. In many ways, that's the million-dollar question, right? What is that last piece of information that drives that increased behavior? I can say we speak regularly to our customers about that. I would say every month you see more and more activity. I don't necessarily think that it needs to be at 47 before you see a big jump in activities, particularly on the structural side, only because we've already seen a nice jump up. Now, it's not enough. I think another really important point that I made there too, Josh, is where Boeing stated that they have basically, you know, exhausted their inventory. That's a key piece of information. So let's see how it plays out. But I don't necessarily think we have to wait for the 47 to see that next push up in orders. Let's see how it goes over the next 30, 60 days.

Analyst: Got it. And then I guess just kind of relatedly on the cashflow profile for Carpenter, whenever that does happen and you start to see that order intake, I mean, is there any working capital builds? You know, I know you guys are, you're out so far in your lead times, maybe not just curious that when that bow wave does finally hit, I mean, is there any sort of thought process on the cashflow profile or should be pretty consistent?

Executive Name: Yeah, I'd say it's pretty consistent, Josh, over time. I mean, we still think inventory is an opportunity for us and that'd be the biggest, I mean, other than sales increasing in AR and days and things like that. But we view all the work that's being done on productivity, we view inventory as an opportunity. So I don't see us investing heavily in inventory just to meet demand.

Analyst: And then just one last one, you know, just on more of the jet engine aftermarket bookings characteristics for the quarter, just on that, and then I'll jump back in the queue. And while it's a question, just the bookings online, yeah, forging jet engine side, you know, more aftermarket kind of related activity is, you know, just some questions around, obviously, the broader air traffic environment and maintenance market. Just any comments you might have there.

Executive Name: Yeah, sure. Usually Gotham asked me this question, what sales are of engines are up sequentially. So I'll tell you that we're engines sequentially were up 24% sales year over year, 44%. So still see very strong sales on the engine side. Fasteners were up 9% or 10% sequentially, about 20% year over year. So you see good movement there. Orders were pretty much in line. We had a big quarter last quarter, had another big quarter this quarter in orders. And as I've said before, I think you'll continue to see that increase over the next couple of quarters.

Analyst Bennett Moore (JP Morgan): Good morning, Tony, Tim, Brian. Congrats on the quarter, and thank you for taking my questions.

Executive Name: Good morning, Bennett.

Analyst Bennett Moore (JP Morgan): I wanted to come to defense and wondering if you've seen any uptick in defense-related orders since the onset of the conflict, and maybe if you could provide any color on you know, where you might have more exposure within those sub markets, you know, for instance, munitions versus jets, et cetera.

Executive Name: Yeah. You know, it's a great question. We saw increased activity even in advance of the Middle East conflict, just because, you know, with the department of war wanting to revitalize and restock it, if you will. So we had seen that in the past already. And just

as a reminder, just as you start talking about different sub-markets there, I mean, we're a supplier, I think you know, Bennett, on many platforms, fixed wing, rotorcraft, naval, missile, armored vehicle.

So we're across multiple sub-markets, if you will, that are all very program specific. So again, it is a more of a lumpy order pattern depending on the program. But we see this as a sub market that's going to continue to increase. In many ways, the impact of the conflict has not been felt yet. I mean, there could potentially be another push upward on orders just to do that replenishment. So that's not always an immediate signal that we see through the supply chain. So I think there's probably more to come on the order intake from the defense standpoint, which was already elevated I think it goes to the next level.

Analyst: Thanks for that context. And then I think this quarter's buybacks were the strongest since the program started. And despite the Athens capex, the free cash flow outlook is improving. So I'm wondering how this might impact any capital allocation decisions. Could we expect to see a relatively higher quarterly buyback run rate moving forward?

Executive Name: Well, it's possible. I mean, it's a good position to be in, right? I think it's very important, and I said it in my prepared remarks, because I think it's critical to our shareholders, is that we're going to stay balanced. We're going to have a repurchase program. We're working on our current brownfield. That's our focus. And that type of relationship, if you will, you should anticipate that being pretty close to the same going forward. That's how we're going to run the company. And, you know, I got Brian sitting here right next to me. He's shaking his head. That's obviously exactly the way he feels as well.

Analyst: Understood. Thanks for the context and best of luck.

Executive Name: Thank you, sir.

Analyst Andre Madrid (BTIG): Tony, Tim, John, thanks for the question and good morning.

Executive Name: Good morning.

Analyst Andre Madrid (BTIG): I kind of wanted to dig into LTAs a little bit further. I think in the release you had talked about and in your comments as well, you know, a willingness to kind of further advance some of those LTAs. There's some that are in the works right now, really pushing for, you know, volume visibility and pricing consistency. Is that an indication that you think, you know, LTA mix might increase through, you know, the coming quarters and years? I guess I'm trying to figure out how that mix might evolve with where we are in the demand environment.

Executive Name: Yeah, Andre, that's a good question. Total carpenter, I mean, our percent LTA is in the 40%. Now, if you look at aerospace only, it jumps up quite a bit. You're in the low 60%, you know, so 60%. 60 to 65% of aerospace revenue is under some type of LTA. Honestly, I don't see that changing a lot going forward. Mutually, there's some customers that don't operate under an LTA based on their preference. I would say what's changing is the customers that historically have been doing business with us under an LTA would like for those to be longer. Of course, and that's another data point to suggest that they also believe in the tightness of the market, and it's only going to get tighter. That's why they'd like to have it longer. We work with each of our customers individually on what's best for both of us. So I guess I gave you a little bit more than what you asked for, but at a high level, I don't see that percentage changing drastically going forward.

Analyst: Got it. No, that's all helpful color. I think pivoting back, you know, not to beat the dead horse here, but, you know, aero structure orders. What kind of quantifiable color can you give there? I remember last quarter you guys had said, you know, like January month to date orders were higher than any month in 25. Is there a similar metric that you can give us right now to kind of, you know, show just where demand is after structures?

Executive Name: Well, we had a, I'll say it this way without getting into specifics on all the submarkets, you had a continued strong order demand for structural last quarter, and you saw a similar type of increase this quarter. So no pullback on the structural side. And Andre, to be honest, I think that's going to continue. And that's why we made the point about I don't think the order rate that's coming into us, although it's increasing significantly, I'm speaking on the structural side, those more distribution value add customers, even though it's increased significantly, I think there's still a lot more to go there.

Analyst: Got it. Got it. No, that's really helpful, Tony. I'll leave it there and jump back in the queue. Thanks so much.

Executive Name: Thank you, sir.

Analyst Simuel McKinney (KeyBank Capital Markets): Hey, good morning.

Executive Name: Good morning.

Analyst Simuel McKinney (KeyBank Capital Markets): It sounds like some of that fiscal year 26 CapEx has been pushed into next year. Could you give us a little more color on the reasons behind the delayed cash spend at the Brownfield expansion?

Executive Name: Yes, Sam, this is Tim Lane. So you're right. We did defer about 40 million of the expected. We set a number for CapEx as we started the year around 300. We're down, and that includes the annual 125 million of targeted CapEx in addition to the brownfield capacity. It's a pretty complex project. You make a set of assumptions on the activities that are going to happen, and then on top of that, you've also got to project what you think cash payments are going to be relative to different milestones and payment terms. And again, a lot of variability. So throughout the year, we're looking relatively positive. We just finished Q3. We have a good handle on what's going to happen in the next 90 days. So it isn't an indication. It's an indication of the cash, not necessarily an indication of the progress on the project. The project's still on track from a timing and budget perspective. It's really just the timing of cash payments. So that's why we reduced the estimate to 260 for the year for CapEx.

Analyst: Okay. Then I ask this, because I know we all get questions about it on our end, and I know you said you'd touch on it next call, but the release generally talked about continued momentum into next year. Did you guys give any thought to updating that existing EBIT guidance range for next year, given the commercial aerospace production momentum has clearly improved meaningfully since you gave that outlook last year?

Executive Name: It's a question, Sam. Did we give any thought to giving that update this quarter?

Analyst: Yes, that's the question.

Executive Name: Well, you know, we have a very detailed process right and I could tell you right now at what 27, 28, 29, 30. I've got a number for each one of those but I want to drive and Brian wants to drive ownership down throughout the entire organization so we have a process that we do our first cut in the fall. We come back in the spring and we do a bottoms up cut of that again, right? Where the commercial team does customer by customer, product by product, operations folks come in, piece of equipment by piece of equipment, what the productivity rates are going to be. And we're in the process of doing that right now. Now, Brian and I both know what that number in 27 needs to be, but I want the ownership of the people out on the shop floor that they're not only going to hit that number, but exceed that number. So I don't want to interrupt a process that has worked very, very well for us over the last several years. And we'll be wrapping that up here shortly. And then the next time we speak publicly will be the fourth quarter. So that's why you'll get it in the fourth quarter. And that's why we've done it the last couple years. Sam, that works for us. And that gets a buy-in from our entire organization. But as I said in my notes, I mean, it's clear that the 2027 number as it stands now is outdated, and we'll be doing much better than that.

Analyst: No, that's completely fair. I understand. Thanks, Tony and Tim.

Executive Name: Thank you, sir.

Analyst Scott Duchelle (Deutsche Bank): Tony, did I hear you right that jet engine revenue was up 44% year over year? And then was there any sub-market with an A&D that moved against you in a meaningful way to offset that?

Executive Name: I did say that. I think total A&D was up 17%. You know, I think some of the other ones you'll have, you know, different pockets that were plus and minus a little bit. Fasteners was up as well. You had a really, really big structural sales month. Sorry, not month, quarter, last quarter. So this quarter, the structural distribution was actually down from a sales standpoint a little bit, but the orders were high. So you know how that works, Scott. It doesn't always match up in that tight 90-day window.

Analyst: Okay, that's helpful. Thank you.

Executive Name: Yep. Thank you, sir.

Analyst David Strauss (Wells Fargo): Good morning. Thanks for taking my question. You know, the incremental margins that you've been putting up, you know, X surcharge at SAO have been extraordinary. I think this past quarter, 80-some percent. It looks like you're forecasting or baking in kind of something similar in Q4, but how do we think about what might be more normal incremental margins for that business as you know, the structural piece kind of becomes a bigger portion, I would assume, going forward.

Executive Name: Yeah, David number one welcome to the call, we appreciate that you picking up coverage, I think I'm gonna get Brian involved in the call here, let him give a comment, at least from a high level from operating margins, and then maybe I can fill back in afterwards.

Executive Name: Yeah, yeah. So as you've seen, we've delivered steady increase in SAO margins, and we're very happy with the efforts of the commercial and operating teams to achieve the 35.6% this quarter. But we've got a strong performance mindset. We obviously have action plans in place to continue to grow from here. Just remind you that, you know, quarter by quarter, the margin expansion isn't going to be linear. So there are a lot of factors we mentioned in our prepared comments that operating margins can be in any given quarter, you know, different. But overall, we see a positive trend upwards. I'm not going to start forecasting quarterly operating margins, but I will say that my expectation is that 35.6 is not the ceiling. We expect the dynamics that are driving margins today to only get stronger in the coming years.

Executive Name: And David, I would just add on to that, you know, because you mentioned structural specifically, and that's a very good point. Certainly, as the market grows and we want it all to grow and you see that structural business get higher, that could have an impact. Now, just because something is at a lower price doesn't necessarily mean it's a lower margin, right, because it has a different process flow. But we've been able to offset any of those type of mixed movements with some of our other levers. So hopefully that answered your question.

Analyst: Yeah, yeah. And then I appreciate that. That's helpful. And then on the price per pound discussion with regard to SAO, how do we kind of reconcile, you know, flattish price with, you know, I think, relatively flat year over year with engine up so much year over year, I thought you were kind of, you know, implying or my understanding is engine price per pound would be higher than kind of structural and fastener. So just asking, you know, kind of how do we reconcile that?

Executive Name: Yeah, I'll tell you this, David, I don't want to get into a habit of giving price movement by every sub market, but it is a good question. And I will say, remember, we're about 65% aerospace. So that number you saw was total CRS. You saw some improvement, some higher sales in some of our non-aerospace markets that have traditionally a lower price. I will give you this, that if you look at aero only year-over-year, price is up almost 10%. So that's the real driver. It is so mix-dependent. But from an aero only standpoint, you see that continue to go up. As you see other non-aero markets, businesses or sub-markets increase in volume, that's a good thing for overall earnings. That could have a, you know, more of a, you know, a lowering the impact on the overall carpenter total price per pound.

Analyst: Okay. Got it. Thanks very much.

Executive Name: Thank you, sir.

Executive Name: I would now like to hand the call back to John Hewitt for closing remarks.

Executive Name: Thank you, operator, and thank you, everyone, for joining us today for our fiscal year 2026 third quarter conference call. Have a great rest of your day. Thank you for attending today's call. You may now disconnect. Goodbye.

Q2 2026 Earnings Call — January 29, 2026

Analyst Gautam Khanna (TD Cowen): Yeah, thanks. Good morning, guys. I was wondering, Tony, if you could elaborate on how broad-based you're starting to see the Airframe customers participate in ordering. And is this kind of Boeing-specific stuff where you were, you know, previously experienced a bit of a destock post-strike over at Boeing?

Executive Tony: Hey, good morning, Nathan. Hope you're doing well. Yes, I think two really important points that I made in the prepared remarks. I will say at a high level across all of our aerospace sub markets, whether that be engine, fastener, structural, we're seeing increased activity with increasing forward demand. Specifically, though, in this quarter, the two things that stood out the most are that you had engine orders continue to increase sequentially, 30% this quarter. That's significant. Maybe you could argue even more significant is what our structural customers did in the quarter. And you rightly said, Gotham, the impact of Boeing really put them on the sidelines. Prior to those issues, they had been probably the top sub-market in terms of ordering quantity. So they had a lot of inventory. To see them now come off the sidelines, and two things, not only one place some significant orders, but then immediately come back to us and say, there's more coming and they're going to be bigger and more urgent, that's a big positive sign. And I would agree with you that, at least on the structural side, that that was primarily driven by the confidence in Boeing, not just in what they believe they can do, but what they've actually achieved in this last month.

Analyst Gautam Khanna (TD Cowen): Okay, that's very helpful. And you mentioned the defense sub-market saw a bit of a government shutdown impact. Do you have any visibility from customers in that sub-market as to how they expect to kind of put in orders over the next couple quarters?

Executive Tony: Yeah, we've already seen that come back. I mean, quite frankly, they would have liked to have been placing orders during that time but weren't able to do so, weren't allowed to do so because of the government shutdown. So you've got some pent up order demand there. So we see that coming back very rapidly.

Analyst Gautam Khanna (TD Cowen): Okay, and last one for me, just on, you mentioned the mix and the quarter itself. So the basic message I think is that Overall pricing saw no reduction. This is purely a mixed dynamic. Pricing is still trending, as you've said, for the last couple of years, higher for longer. Is that right?

Executive Tony: Well, it's 100% right. Maybe if you allow me to speak more about this. This is something that we've talked about a lot. In fact, we signaled this on the last call where we said, based on some of the planned maintenance that we're going to do specifically in some of the testing equipment at the back end that a lot of the higher priced aerospace needs to go through, that that would impact that. All right. So I've talked about that quite a bit. And I think that if there's some belief that a small sequential price decline, which we've said could happen multiple times, it's somehow a red flag. I don't think it could be any more wrong than that. I mean, We just talked about it, Gotham. Aerospace only bookings up 23%. Aerospace engine bookings up 30%. Just completed three aerospace engine LTAs at substantial price increases. I can tell you very clearly we are not or we did not discount premium aerospace products in the quarter. There's absolutely no reason to do so. And I've repeated this many, many times and we said it probably several times over the last year that we see pricing actions continue to be a positive tailwind for us going forward.

And I would just say, quite frankly, this should be obvious due to the supply, demand and balance that exists today. And that's only expected to intensify. So there is no issue with what happened in this in this quarter in terms of a slight price per pound decrease. And you'll see that continuing to go up over the next several quarters. Hopefully that's helpful.

Analyst Scott Duchelle (Deutsche Bank): Hey, good morning. Tony, I'm going to take a shot at a question. I'm not sure if you'll be able to answer, but for the aerospace LTAs that have renewed over the last six months, can you say whether the average price increase is more or less than 30%?

Executive Tony: Scott, I think you already know the answer to that. I mean, these are substantial price increases going forward. 30% is not substantial. And these are post-COVID LTAs? There have been one or two that are longer, you know, that were signed prior to COVID, but primarily these are ones that are have come due again since that time yes okay and 30 is not substantial for those i agree with you.

Analyst Scott Duchelle (Deutsche Bank): Okay, um Tony just to deliver this strong sao guide for the third quarter should we expect volume price per pound and even per pound to all move up sequentially?

Executive Tony: Yeah, you know, Scott, I would say yes to that. I don't manage at that level of detail. Like, I know I am sitting on a goldmine here, right, doing something that very few people in the world can do. So I'm going to supply all of those customers to the best of our ability to maximize their profitability. If one quarter, my margin goes down a half a percentage point, Scott, that's not an issue. The overall trajectory is going forward. And I think we get very hung up with this fact of quarter over quarter, you have some of these small movements, basically because you've got a complex production system that's making a thousand different types of alloys in any one quarter. So I wouldn't get so hung up on slight movements to that quarter over quarter. I will say year over year, absolutely, you will see increases in price per pound, and, and earnings profound. There is no doubt. It's impossible for us not to deliver that based on the overall market dynamics going forward. Does that make sense?

Analyst Scott Duchelle (Deutsche Bank): Thank you. Absolutely. And just last question, the medical distribution channel, is there any real sizable revenue left in that channel that you're shipping this past quarter? Or I'm just trying to think, is there still downward pressure potential there, or is it basically completely bottomed out and near zero?

Executive Tony: Well, I can tell you that the good news in January, from a booking standpoint, that we saw that specific area come back and have the highest order intake than it had of any month in 2025. So that would suggest that I agree that, yes, you're right, that it's probably hit the bottom. And I think the big piece here is That's very impactful to the PEP segment. As you all know, Scott, you cover us very closely. It's not material to overall Carpenter, and it doesn't impact what I say about my guidance whatsoever. I want to see that bounce up, and I think when it does here in the next couple of quarters, it will be a tailwind for us. But it's not something I rely on to hit my guidance numbers.

Analyst Josh Sullivan (Jones Trading): Hey, good morning.

Executive Tony: Good morning, Josh.

Analyst Josh Sullivan (Jones Trading): Tony, you made an interesting comment there. You said jet engine OEMs are asking you if their own supply chains have ordered enough materials to meet projected build rates. But you kind of left us on a cliffhanger there. You know, what was your answer? And I guess how are those conversations, you know, translating to the expectations of their suppliers?

Executive Tony: Well, I mean, the answer can be different depending on the customer. I would say that in many cases, our answer to that is no, they're not ordering quick enough. There needs to be more orders in the system based on the demand or the build rate that you want to achieve. So I would say, and that's a positive thing for me to say, is that there needs to be more orders to hit this build rate projection that's out there. We just talked about specifically on the structural side, their hesitation to place orders and wanting to see more and more evidence of prolonged performance from the airframers, specifically Boeing. You're starting to see that. So you see them now coming off the sidelines. I've said that phrase several times now and placing large orders. So I've talked about this, Scott, more than once, about there is not going to be a gradual increase in orders. You're seeing it now, and then you're going to see a significant hockey stick. That's the way it's happened in the past. I believe that's the way it'll happen again this time. And I think the structural customers with the activity they had in this last quarter is one of the leading indicators to that.

Analyst Josh Sullivan (Jones Trading): And actually, that dovetails nicely into just the conversation on the long-term agreements you highlighted. You know, what's your calculus or your mindset on, you know, committing to those versus leaving spot capacity open, as you've talked about in the past, how you've got the golden goose? You know, just curious on your thoughts there.

Executive Tony: Well, I don't – I mean, that's another – you know this. I mean, the words matter to me. I don't have spot pricing, right? I don't have a generic – alloy sitting on the shelf waiting for the highest bidder to come get, right? My LTAs are based on a mutual beneficial relationship with my customers. You have a lot of volume, I'm going to give you surety of supply. So I'm not here trying to be the riverboat gambler, trying to say, let's keep it all speculative. That's not what I'm trying to do. But I do understand the value of my product, as do my customers. So when there's that beneficial relationship to say, let's enter into a an LTA with increasing prices, that's good for both of us. So I think, Josh, you know this. I'm not sitting on the sidelines waiting for somebody to bid on my products. I'm pretty sure that's not what you were trying to allude to anyway.

Analyst Josh Sullivan (Jones Trading): No, I was just curious in the long term. And I guess just relatedly, just outside of aerospace, are you seeing more interest in those types of relationships as you talk about IGT and some of those other markets? Are you seeing similar levels?

Executive Tony: Absolutely. Absolutely. Primarily on the power generation side, because as you all know, in many cases they use the same assets. But we also see some of that on the medical side as well. Primarily on the SAO business, you know, because there's times that there can be overlap on some of the production assets between some of those alloys. So you see more interest in those specific alloys for medical customers. Because in many cases, we're the sole supplier and have a proprietary alloy there. So in both non-distribution medical and especially in power generation, we see some of the same dynamics as far as the openness or the willingness or wanting to have an LTA with us in those areas.

Analyst Bennett Moore (JP Morgan): Good morning, Tony and Tim. Congrats on yet another impressive quarter.

Executive Tony: Thank you.

Analyst Bennett Moore (JP Morgan): Quick, I wanted to thank you for all the color and commentary on the bookings, but could you also comment on how engine and fastener sales trended during the quarter and year over year, and also what lead times look like for structural products relative to engine alloys?

Executive Tony: Yeah, it's a good question. You know, our overall aerospace, you saw their sales were relatively flat quarter over quarter, basically because of the number of operating days you've written about this, as well as the holidays. So aerospace engine sales were relatively flat, down a couple percent. Engine fasteners was flat, I think, up 1%. So all of the sub markets inside of aerospace were, you know, plus or minus one or two on a sequential basis, certainly on a year-over-year basis, all of them up quite substantially, as you would expect. The second part of your question was on lead times. You're also very well aware, you know, that lead times isn't a universal indicator of demand increasing just because we limit we capped lead times. But I can say that in that area, you have seen them extend across all the areas inside of aerospace. And I think we'll be pushing right back up to that same level that we were before in very short order. But yes, we did see expansion of lead times.

Analyst Bennett Moore (JP Morgan): And I guess in the context of your you know, positive commentary around structural customers moving off the sidelines. Is it just fair to assume that lead times generally for the structural alloys are, you know, shorter than the engine alloys, so we could see that benefit sooner?

Executive Tony: Yes, I think in general, that is a true statement.

Analyst Bennett Moore (JP Morgan): Great. And then real quick, I just wanted to ask about the additive business, and you showed strong growth during the quarter. You know, is this lumpy or are you seeing improved adoption in this space? And can you remind us how the margin profile compares for these products and if this is a space Carpenter would look to grow into into the future?

Executive Tony: Yeah, I think the second part of

your question is the right way to look at it. We see it as something that could be a tailwind for us in the future. We've been inside the additive business for quite some time. This is a higher adoption rate and, you know, increased activity with some very large customers that we bring proprietary alloy in that area. So it's still relatively small in the whole scheme of things, Bennett. But yes, I think it's something we want to stay in. And I think going forward, we'll see continued growth in that area. So I'm very happy, quite frankly, with the performance of additive. Again, relatively small from an earnings standpoint, but very happy with the way they've been performing over the last couple of quarters.

Analyst Andre Madrid (BTIG): Hey, good morning.

Executive Tony: Good morning, sir.

Analyst Andre Madrid (BTIG): As we look at the LTA sign in the quarter, I mean, are any of these first-time customers on an LTA basis? And, I mean, how should we expect the mix of LTAs to trend in the quarters and years to come?

Executive Tony: Well, it's going to be, there's not a trend. They're all at different times. It seems like we're always working on some type of LTA. And to answer the first part of your question, these are longer-term customers, so not new.

Analyst Andre Madrid (BTIG): Got it. Got it. And then we've been hearing a lot of chatter from recent conversations with customers about potentially exploring capacity expansion that they helped fund. I mean, is that something that you guys would ever look into?

Executive Tony: Maybe if something became more than just chatter, I could comment on that. So we have already made our position known. We have gone out there and announced capacity expansion in a very professional manner. We've told you exactly what the pounds will be. We've told you exactly when it will come online. We've told you exactly what the equipment will be. And we've told you exactly what the impact will be, not only to Carpenter Technologies' financials, but the overall supply-demand dynamic. So we've been very, very clear and professional on what that would be. So we've told you already how we would react, and we were able and willing to fund that 100% ourselves.

Analyst Andre Madrid (BTIG): Got it got it that's clear and then, if I could sneak one more in I mean, can you just maybe break down a little more clearly where the orders are exactly coming from, I mean jet engine versus airframe OEM versus MRO like is there a split that you can provide.

Executive Tony: Well, I mean we're having orders are up across the board, I mean I give you a couple of examples engines were up 30% that's significant right. So I mean we have order intake increasing across. all of the sub markets. The one I called out, you know, from a sales standpoint, you obviously saw a bit of a dip in defense from a sales standpoint, but now you see orders, you know, I think we'll start picking back up again. So, you know, we have order intake increase across all of the markets. And again, you know, Andre, that shouldn't be a surprise. Look what you have out there. Look what Boeing and Airbus and MRO and what all that is doing. That's increasing significantly. Of course, orders are going to have to increase also.

Analyst Andre Madrid (BTIG): Yeah no i agree completely and i see it so i appreciate the call tony i'll hop back in thanks.

Executive Tony: All right thank you sir.

Analyst Phil Gibbs (Key Bank Capital Markets): Hey, good morning.

Executive Tony: Hey Phil good morning.

Analyst Phil Gibbs (Key Bank Capital Markets): Tim, can you give us a review of the CapEx this year again, just in terms of how much you expect to spend overall and how much of that is going to the new project and how much carries over into fiscal 27?

Executive Tim: Yeah, Phil, I'll break that into pieces and then you can follow up if you want to. The full year guidance for total CapEx was $300 to $315 million. That includes the 175 to 185 million for the brownfield capacity expansion. I also said that, you know, given where we are, we spent about a little over $80 million through the first half. We said that we expect the brownfield capacity expansion spending to increase pretty rapidly in the second half as activity ramps up. There's a fair amount of assumptions there. Look, it's a big capital project complex. The timing of those capital expenditures may vary. I mean, we're making assumptions about progress payments, when the equipment gets delivered, payment terms. We'll provide an update in the next quarter, but I mean, the guidance out there still holds true for now. And that's incorporated into our free cash flow guidance.

Analyst Phil Gibbs (Key Bank Capital Markets): Thank you. Tony, any of the LTAs that you signed, have they been with PowerGen manufacturers at all?

Executive Tony: Well, the three that I mentioned on the call here were all aerospace. But none of the prior five, for example, that you mentioned last quarter? Traditionally, that's not been an area that's been LTAs for us, but it's an area, I think it was to Josh's question earlier, It's an area that we're now exploring that the customers in that sub-market would like to enter into an LTA, and that could be something that we're interested in as well. But traditionally, that has not been for us because the size has been relatively small to the rest of the business. It's becoming, obviously, much bigger now.

Analyst Phil Gibbs (Key Bank Capital Markets): And then lastly, I know it's a small business for you all relative to SAA. excuse me, relative to SAO and PEP, but what surprised you just relative to the outcome? Because I know you expected to do better. I know you had mentioned outright medical, but usually you have pretty good visibility within a given quarter.

Executive Tony: You're speaking specifically of that sub-market inside of medical?

Analyst Phil Gibbs (Key Bank Capital Markets): I'm just saying in general for the segment, I know you expected to do better a few months ago, and you usually have very good inter-quarter visibility. So I'm just saying kind of what surprised you.

Executive Tony: Yeah, in the PEP segment, correct?

Analyst Phil Gibbs (Key Bank Capital Markets): Yes.

Executive Tony: Yeah, I mean, yeah, listen, I think that's a fair question. I think we do usually have pretty good visibility. This one on medical distribution, quite frankly, has been a little elusive for us to get a handle around that, quite frankly. I think that's a fair comment. But a good point is that, you know, the order intake for that specific sub-market was the highest in January had been in any month in 2025. So Phil, I'm hoping that on that for the PEP segment, that's hit the bottom. But as you can see with our guidance, we're still remaining fairly cautious in that area. And as you said, again, doesn't impact our overall guidance, but it's important to us to do the best we can as far as forecasting what we think PEP can do as well. So a little bit of information you know, conservatism maybe or a little bit of let's wait and see to make sure we can get it.

Analyst Phil Gibbs (Key Bank Capital Markets): Thank you so much.

Executive Tony: Yeah, thanks, Phil.

Executive: That concludes the question and answer session. I would like to turn the call back over to John Hewitt for closing remarks.

Executive John Hewitt: Thank you, operator, and thank you, everyone, for joining us today for our fiscal year 2026 second quarter conference call. Have a great rest of your day.

Executive: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.