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00:02 Good morning ladies and gentlemen. Thank you for standing by. Welcome to the Haynes International Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] 00:15 I would now like to turn the call over to Controller, and Chief Accounting Officer, David Van Bibber. Please go ahead..

00:22 Thank you very much for joining us today. With me today are Mike Shor, President, and CEO of Haynes International; and Dan Maudlin, Vice President, and Chief Financial Officer. 00:31 Before we get started, I would like to read a brief cautionary note regarding forward-looking statements.

This conference call contains statements that are forward-looking within the meaning of the Private Securities Litigation and Reform Act of 1995 and Section 21E of the Securities and Exchange Act of 1934. The words believe, anticipate, plan, and similar expressions are intended to identify forward-looking statements.

00:54 Although we believe our plans, intentions, and expectations regarding or suggested by such forward-looking statements are reasonable, such statements are subject to a number of risks and uncertainties and we can provide no assurances such plans, intentions, or expectations will be achieved.

01:11 Many of these risks are discussed in detail in the company's filings with the Securities and Exchange Commission, in particular, Form 10-K for the fiscal year ended September 30, 2021.

The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. 01:31 With that, let me turn the call over to Mike..

01:34 Thank you, Dave. Good morning, everyone. Haynes had an excellent quarter and we believe that we will continue to gain momentum throughout fiscal year 2022. Our improved results reflect a significant fundamental changes that we’ve made to our business.

Our team believes that the results to date are a good start and that additional business performance improvements across all aspects of our business will continue. 01:59 The key safety, operational, balance sheet and financial performance highlights are as follows.

First, we finished the year with OSHA recordable rate approximately 25% below the prior year. Thanks to the continued company-wide focus on process improvement and safety leadership, and our ongoing efforts related to COVID. 02:19 Next, our efforts to be best in class in gross margin percentage in our slice of the industry have become reality.

We are continuing to drive pricing higher based on the high value of differentiated products and services we offer. And we continue to significantly reduce our variable cost to manufacturing. 02:37 Our Q1 gross margin improved 40 basis points sequentially and 1,650 basis points year-on-year.

The 17.9% gross margin achieved represents great progress and more as possible. We've also implemented numerous ESG initiatives and are currently installing our first solar installation, which is expected to provide an estimated 50% of our energy demand at our Wire facility in Mountain Home, North Carolina.

03:08 As far as earnings, we earned $4.7 million this quarter on just 3.9 million pounds sold. We've previously struggled to be profitable at 5 million pounds sold a quarter. The results of the last three quarters confirm that we’ve lowered the breakeven point of three years ago by approximately 25% based on the current mix.

To show the significant impact of the lower breakeven point, I'm providing the following example comparing similar volume quarters, four years apart.

03:40 Our volumes sold in Q1 of fiscal 2022 was similar to the volume sold in Q1 of fiscal 2018, yet when comparing the net income of both, we improved net income by $7.6 million driven by a gross margin improvement from 7.8% in Q1 of fiscal 2018 to 17.9% this past quarter.

I should note that these numbers exclude an adjustment for a tax law change in fiscal year 2018. 04:09 Continuing on, availability of labor has been an issue across our industry and many others in recent periods.

However, our facilities are now nearly fully staffed, thanks to the incredible work done by our human resource team to recruit the new employees required to handle the increase in bookings. 04:28 We've added 93 production and maintenance employees over the past seven months, across all of our manufacturing facilities.

Next, our raw materials and work-in-process inventories have grown to support the improved bookings, but our finished inventory has not materially increased as we continue to focus on improving finished inventory turns.

04:50 We are managing cash carefully, but we realize that the accelerated top line growth that we are expecting requires an investment in raw material and work-in-process inventory. We've made that investment as you can see by our cash balance.

This cash deployment in response to the surge in our backlog is designed to enable top line revenue growth in subsequent quarters. 05:13 Our balance sheet is clean and our pension glide path is in place. As of the end of the quarter, our U.S.

net pension liability was approximately $24.2 million, meaning the liability is now $81 million below the $105.2 million would carry at the beginning of fiscal year 2021. If you add in the retiree healthcare and UK pension, the net liability decrease is $94 million since the beginning of fiscal year 2021.

05:45 Continuing on, our innovative alloy and application development activities continue to generate significant interest among our customers and the end users of our products. We believe that our culture of innovation is a core strength, and provides in conjunction with our sales and technical service, a true competitive advantage.

06:05 Each quarter on these calls, I review a segment of our innovative alloy and application development work. Today, I'll talk about some of our alloys for the chemical processing industry. Haynes has invented and developed a number of corrosion-resistant alloys for this market.

HASTELLOY C-276, C-22, C-2000, B-3, and several others are very well-known in the chemical, agrochemical, pharmaceutical, and other industries where corrosion-resistance to highly complex corrosive media is required.

06:39 In addition, HASTELLOY G-35, a Haynes proprietary alloy has had tremendous success in many diverse chemical industry applications. One of the most noteworthy applications is its continued and increasing use in the agrochemical industry for processing of fertilizer used in food production.

06:59 Finally, related to CPI, one of our latest proprietary corrosion-resistant alloys HASTELLOY HYBRID-BC1 is in the advanced stages of being specified by a major process developer for a proprietary refinery technology using next generation catalysts.

This technology is expected to help refineries improve safety, efficiency, and the environmental impact of their operations. 07:26 I'd now like to transition and provide comments on our backlog and our markets. Our backlog is up sequentially across aerospace, CPI, and IGT, with aerospace up 28%, CPI up 26%, and IGT up 36%.

Our total backlog dollars were up sequentially $42.2 million or 24%. 07:50 We believe the aerospace backlog increase shows the beginning of the supply chain actions required to support the estimated record levels of leap engine builds for 2023.

We're also encouraged by the build rate projections for the 777x, which uses the GE9X engine that will contain two of our proprietary alloys. 08:13 Our aerospace revenue was up 97% year-over-year and up 24% sequentially. Aerospace order entry during Q1 was $75 million and backlog for Q1 was $121 million, up 28% sequentially and 42% year-over-year.

We believe our aerospace market is poised to once again become our strongest market. 08:38 Industrial gas turbine Q1 revenue was sequentially down due to the timing of some shipments to certain customers, but we expect a strong rebound in Q2 and the balance of the year, driven by our market share gains and an uptick in market demand.

08:53 Order entry during Q1 was $23 million and our backlog was $36 million, up 36% sequentially and 105% year-over-year. Chemical processing Q1 revenue was up 14% year-over-year and up 10% sequentially. Order entry during Q1 was $25 million and our backlog for Q1 was $39 million, up 26% sequentially, and 106% year-over-year.

09:22 We continue to see opportunities for our alloys and unique CPI applications. This is where our technical marketing team are experts at discovering applications and engaging in the development of special projects for innovative alloys.

09:37 Our other markets category includes products used in wear FGD, which is Flue Gas Desulphurization, electronic ceramics, automotive, renewable energy, oil and gas, and waste incineration applications. This segment experienced a 10% sequential decline led by decreased shipments into the FGD market.

10:00 As I also noted last quarter, our business conditions continue to improve in the aerospace, IGT, and CPI markets. As that continue to happen, we are seeing a reduction in FGD’s shipments as we utilize our manufacturing capacity on higher value products.

10:18 Other revenue was at $4.4 million, sequentially lower by 25% this quarter and 21% year-over-year. Other revenue contains various items, but mostly our conversion work. 10:32 As I wrap up my comments, I again want to thank the entire Haynes team for all that they have done to improve our business fundamentals.

Their hard work and accountability for results have changed our company.

Our focus on providing high value differentiated products and services on getting paid for that value provided, on relentlessly pursuing improved yields and lower variable cost to manufacturing, on significantly reducing our pension liability, and on helping provide more innovative product and service solutions have all resulted in a company with impressive earnings potential and a strong transform balance sheet, both of which provide a foundation for growth and continued improving profitability.

11:15 With that, I'll hand the call over to Dan to provide more details of our financial results..

11:20 Thank you, Mike. We had a solid financial performance for the quarter to start the fiscal year. The pricing and cost initiatives that we've been working on since well before the pandemic has lowered our breakeven point by 25% with current mix.

This is significant, and this enables us to be profitable at volume levels that previously would have resulted in losses. 11:43 We shipped 3.9 million pounds and made $4.7 million in net income when historically, we would struggle to even be profitable at 5 million pounds.

It is also notable that our first quarter is typically a seasonally lower quarter with a sizable dip in revenue and profit with holidays, maintenance outages, and customers managing their calendar year and balance sheets, but not this year.

12:07 In prior calls, we mentioned our expectation that aerospace order entry would arise at the end of the calendar year, which definitely happened in a very strong way.

As demand begin to increase, we were able to invest cash into inventory and increase our production staff to enable the mill to increase production levels, especially for aerospace products.

This put our volume at about even with last quarter and revenue sequentially above last quarter by nearly $4.2 million and above last year's first quarter by $27.3 million. 12:43 In addition, we further expanded our gross margin percentage to 17.9%, as we continue to see the benefits of both pricing actions and cost reductions.

And remember that these cost reductions are related to improved yields, productivity, and process improvements which are expected to be further realized with continued higher mill production levels. 13:08 Our production level this quarter was high enough to eliminate the direct charge.

As you may remember in the second half of FY 2020 and across FY 2021, volume levels dropped so that fixed cost absorption was a significant issue, and we directly charged to expense these costs, as the cost per pound was too high to be capitalized into inventory.

13:31 This action has now helped eliminate and avoid that high cost per pound drag on our earnings as the product is sold, had we not direct charge these costs as incurred. It is good to see the direct charges behind us.

13:47 Raw material market price increases for nickel and cobalt provided a moderate tailwind to margins this quarter of roughly $1.7 million similar to last quarter. And with more recent increases in raw materials, we believe this is likely to continue to be favorable next quarter as well.

14:07 We've diligently managed through challenges with increasing our production labor, supply chain issues, and inflationary cost pressures. These have been significant industry wide issues to manage through. And as Mike mentioned, we increased our production headcount recently, which is very beneficial to our future volume growth.

14:28 Regarding inflation, we have seen elevated costs for freight and supply costs. However, we have been striving to cover this with our escalators for the consumer price index and our customer contracts or price increases in quoting spot type business or mill direct business with the goal of margin protection.

14:49 As I mentioned, the result in gross margin was 17.9%, which we believe can continue to expand and with increased volumes as aerospace more fully recovers, we expect favorable profitability leverage resulting in growing gross margin dollars.

15:07 SG&A including research and technical expense was 12.3 million in the first quarter or 12.3% of net sales, which was higher than last year's first quarter by $1.7 million.

The year-over-year increase was mainly due to last year's pandemic cost savings measures that were in place such as headcount reductions, furloughs, reduced executive salaries, reduced board fees etcetera, which are largely no longer in place this year.

15:37 Below SG&A is operating income of 5.5 million this quarter, which represents sequential growth of 15.4% compared to the fourth quarter of fiscal 2021. Further down the P&L is non-operating retirement benefit income of 1.1 million, which was favorable to last year's quarterly expense by over $1.45 million.

16:02 We took the largest liability on the balance sheet, the U.S. pension plan and with the help of strong asset returns and favorable interest rate movements, knocked it down $81 million from 105.2 million at the beginning of FY 2021 to 24.2 million at 12/31/2021.

16:23 If you also include the retiree healthcare and UK pension, the liability decrease goes from 81 million to 94 million, a significant reduction. The pension plan is approximately 93% funded currently.

This funding level allowed us to implement a customized liability driven investment strategy, which means we have to some degree locked in or secured this funding gain. This reduced our interest rate risk significantly where our plan was previously extremely interest rate sensitive and it reduced our equity risk as well.

17:02 It also reduces our expected pension and post retirement expense by $6 million this fiscal year, compared to last year. We are happy with the progress on our pension plan strategy. Our effective tax rate was 26.1% in the first quarter of fiscal 2022 reflecting the increased statutory tax rate in the UK.

17:23 We're currently projecting the full-year effective tax rate to be roughly at that level for fiscal year 2022. Our net income this quarter of $4.7 million represents an 81% sequential improvement.

Our diluted earnings per share of $0.37, represents an 85% sequential increase, which is a slightly higher percentage than the net income increase, due to the effect of fewer shares outstanding following the share repurchase program.

17:54 While on the topic of the share repurchase plan, we purchased an additional 142,000 shares at a cost of $5.7 million during the first quarter fiscal 2022. Since adoption of the plan, we repurchased 255,000 shares at a total cost of approximately $10 million.

We discontinued the share repurchase plan at the end of the calendar year, due to the 24% increase in our backlog. 18:23 Our capital allocation process includes continually evaluating different cash deployment opportunities.

With our backlog surging, we seize the opportunity to invest cash into inventory that enabled us to sequentially grow revenues this quarter and drive expected top line growth in future quarters. 18:42 Order entry and backlog.

Our backlog increased 24% over the quarter and 50% year-over-year to 217.5 million at December 31, 2021, driven by strength in aerospace order entry. Aerospace order entry for the quarter was $75.2 million with a book-to-bill ratio of 1.6, which is impressive.

19:06 We had strong book-to-bill in our other core markets as well with CPI and 1.4, IGT at 1.6, and other markets at 1.0. Total product order entry for the quarter was $138 million. As far as our outlook for next quarter, we expect volume, revenue, and profitability to improve throughout the fiscal year.

19:33 We currently anticipate that revenue in the second quarter will be approximately 10% higher than the first quarter of fiscal 2022.

We also currently believe that the sequential earnings growth rate would be greater than the growth rate of revenue, due to the profitability leverage based upon anticipated increased volumes along with continued pricing and cost improvements. 19:57 Capital spending was 3.3 million in the first quarter of fiscal 2022.

We're planning to spend 17.7 million in fiscal 2022, a sizable increase from last year and approaching our depreciation level.

20:12 Liquidity, we had cash on the balance sheet of 14.3 million at December 31, 2021 and 3 million borrowed on the company's credit facility as a result of investments in working capital made as backlog grew and production levels increased.

Our liquidity is strong at 111.3 million with 97 million available on the credit facility at December 31, 2021.

20:39 In conclusion, it is exciting to see the recovery gaining traction with profitability growth and strengthen order entry as backlog levels increase, led by our largest market aerospace, yet our aerospace volume sold this quarter was 27.5% below the pre-pandemic levels of the average quarter of fiscal 2019.

21:02 And as Mike mentioned, we expect monthly aerospace shipping levels to be at pre-pandemic levels by the end of this fiscal year. This is encouraging. And as these volume levels improve at our gross margin level, we expect to create profitability leverage and solid net income growth going forward.

21:21 Mike, with that, I will now turn the discussion back over to you..

21:24 Thank you, Dan. Our entire team here at Haynes continues to be encouraged by the progress and the future potential of our business. I want to thank all of you for your continued interest in our company. 21:37 With that, Kelly, let’s open the call up to questions..

21:40 Certainly. [Operator Instructions] Your first question is coming from Marisa Hernandez at Sidoti & Company. Please pose your question. You line is live..

22:06 Hi. Good morning. Thank you and congratulations on the results..

22:12 Thank you..

22:13 Thank you. Good morning..

22:15 So, it looks like the expected recovery in aerospace is playing out. I am curious to know how the latest search in COVID-19 cases, the omicron variant is impacting at all the outlook.

How are you and your clients thinking about that in terms of the risk of potential order push-out from OEM?.

22:46 Sure. First, I'll talk about COVID and our workforce and our employees. It's something we certainly are paying a great deal of attention to, and continuing to work with our employees to make sure we're following all the appropriate guidelines.

We these days typically have between 60 and 80 people out because of quarantine, but we have – our manufacturing people and across the board have done a wonderful job of making sure that we backfill and get out to our customers what we've committed to get out.

23:17 Now, as far as the aerospace industry itself, we've probably seen TSA numbers of 15% plus or minus drop from where they had peaked, but what I find very, very interesting about this market, it's truly a long lead time market. By the time we make [indiscernible] it's probably nine months to a year before it's into a completed engine.

23:40 So, we've not seen any hesitation whatsoever. And what you hear from the engine manufacturers and for that matter from the airframe manufacturers is the full steam ahead and keep going, and I’ve talked about the leap engine a lot, we're facing between 2021 and 2023, a doubling of leap engines to we built and we continue to hear keep going.

24:03 Last point I'll make, it was interesting I heard the Boeing CEO recently talk about, when they're going to move to 42 and it would not commit to it. And one of the reasons he said, he would not commit to it or the main reason is he's worried about metal through the supply chain. So, I don't see an issue at this point at all.

It's something we watched carefully, something we talked to customers about all the time, but not been an issue at this point..

24:28 That's great. Thank you for that color. Moving on to the price situation and the very fluid cost environment that we have. I understood from your press release that you've been able to pretty much offset or the cost pressures that you've seen so far, how is that playing out in your view in the future.

I know that you have contracts with the unions related to wages, and so when are those, do you see any need to renegotiate those? And if you could also talk about the price hikes that are that you're planning for this year, you have a lot of contract business, are we going to see significant price increases now in the January timeframe? Thank you..

25:29 As far as our employees, we have long term agreements with the unions. They continue as is, and no real change there whatsoever. As far as pricing, it's a very, very interesting time. I think when we talk about pricing, got to take a step back and look what's happening in the industry.

Lead times are extending, competitors, one of our competitors remains in work stop and there's obviously concern about inventory that exist in supply chain. And yet on our side, we've added the employees that we need to address the volume that's coming.

26:03 We have finished stock in our customer owned service centers and we supply these high value differentiated products and services. All of that Marisa, in my mind, results in a really good pricing environment for us.

I think we're doing a really good job of keeping up with the rising supply cost rate that increases in freight costs and obviously raw material costs and we are both on a transactional side and on the contract side, raising prices not only to address inflation, but also to find ways to improve our margins.

And I just want to point out what's happened with LTAs, I know you're interested in that, in January. 26:44 Our LTAs we continue to raise our contract pricing. We had in January, probably about $50 million in our Kokomo product come due and probably half of that and our tubing product come due. We were successful with price increases.

These are real bottom line price increases, not related to raw material. This is on top of that. We were successful across the board with these price increases ranging from 3% to over 10% based on the product involved..

27:17 So, is that effective January, Mike?.

27:20 That would be effective January. That's correct. That’s as of January 1. We continue both on the transactional side and the LTA side to continue to push the fact that we have significant value that we're providing. Again, we're different because of our service centers. We can do just in time inventory.

We can do cut pieces for customers and with all the innovations. So, yes, we continue to go after price increases. That's the LTA on the transactional side. It's really interesting. 27:48 We are – in the past, I talked about transactional increases on the top half of our mix, the richer part of our mix.

We are now going after price increases and have been across our entire product form across all alloys and we've been successful..

28:05 That's pretty impressive.

And so, if you look at your [breadth] [ph] of product you see, just to make sure I understand, you see price increases across the board effective January?.

28:19 Yes. For the LTA business, what we have [does add] [ph] 50 million on the nickel side and about half of that on the titanium side on the LTA side.

And in the transactional side, we are reacting to the demand that's coming in by continuing to raise prices to offset inflation, to offset raw materials, and again to be honest to increase margins where we can..

28:42 And those LTAs that don't come due this year, we still have those escalators in place. In most cases quarterly or maybe semi-annually that will adjust for any raw material change. And most have a CPI consumer price index factor in there as well.

So, general inflation will get covered, as well for all the LTAs, not just the ones that came due this January..

29:07 Thank you. I like to ask one quick one and then I’ll come back into queue. And that's regarding capacity.

You are [indiscernible] volume from your FGD product as aerospace and CPI picks up, what is your capacity constraint right now? And could you be looking at expanding that down the road?.

29:34 Yes, it's less capacity constrained and more are concerned with lead times. We don't want – the FGD has been an excellent product for us, but it in essence fills in when we need volume and we've been very honest about that all along. We are probably only running our facilities between 70% and 80%.

We're bringing the new employees in and getting them trained. What we just don't want to have is for our core customers in particular in aerospace. 30:08 The lead times go out too far, which is why we tend [payback] [ph] a high volume, lower margin product like our flu gas desulfurization product..

30:17 And if you recall Marisa, back a few years ago, we spent a lot of capital with expanding our capacities. So, we still believe overall, we have some headroom to grow with those investments we've already made..

30:33 Great. Thank you. I’ll turn back into queue..

30:35 Okay. Thank you, Marisa..

30:37 Your next question is coming from Michael Leshock at KeyBanc Capital Markets. Please pose your question. Your line is live..

30:46 Hey, Mike and Dan, good morning..

30:47 Good morning, Michael..

30:48 Hi Mike, how are you?.

30:50 Good. First, I just wanted to ask on the raw material benefit in the quarter.

Maybe I missed it, but did you give the approximate benefit you saw from raw pricing in 1Q? And then as we look into 2Q, what would you expect that benefit to be at least relative to the magnitude that you saw in this prior quarter?.

31:15 Yes, I mentioned our benefit that we estimate to be 1.7 million tailwind this quarter, which was pretty similar last quarter, and that's both rising nickel and rising cobalt. So, both of those are driving part of that 1.7. And certainly, we've seen nickel continue to go up. So, we're expecting some favorable tailwind into next quarter.

How much will that be, I'm not sure. I would estimate either similar to or maybe slightly less than the tailwind that we had this quarter..

31:51 Got it. That's helpful.

And obviously, your profitability will ebb and flow with the price of nickel, but I wanted to get your take on what's been driving the price movement in that market and any other new dynamics you’re seeing there because the EV push looks like it’s here to stay, so, I'm just wondering if there's any reason to think that this pricing cycle is more sustainable than one's path..

32:16 Yes. One thing I will not do because I'm usually wrong is estimate where the price of nickel is going. We know what has happened to [LME stocks] [ph]. They're 50% of what they were not too long ago.

Obviously, there's interesting dynamics with supply and demand out there also because of the EV market, because of stainless steel, and because of nickel beginning to come back. 32:40 So, they are all pieces of the puzzle, but at the same time, there are other sources of nickel. There's more capacity in mind.

So, really when our customers asked and I got asked as recently is, two days ago, where is it going? I don't know. Really don't know. That's an honest answer. 32:57 And if you remember in the past, when nickel really started picking up, nickel pig iron was created and took away some of the demand for nickel sulfate.

And I think something similar to that is happening now to what degree will that impact the market? I'm not sure, and that's what nickel matte. 33:13 Nickel matte being produced as well, maybe a similar takeaway from demand that Nickel pig iron was.

So we'll see where it goes and nobody really knows, right?.

33:26 Got it. That's helpful. And then there was a strike at one of your competitors in the quarter.

Did that impact you? Were you able to pick up any of that business as a result? And if you did, what's the likelihood you're able to maintain that new share gain?.

33:44 Okay. Certainly, there's been a reduction in capacity because of the strike that is still ongoing. It had no impact as far as the results in Q1.

And what we were looking at in Q2 when we take a step back and look at it, first of all, on our aero business, no impact, Our business there is LTA business, and so really little impact there or the IGT side, where we're seeing increased demand and it typically came to us in December, so the last month the quarter.

And if the strike continues, we'll expect to continue to see it. It's on the commodity side of the CPI business. 34:27 Our best view and this is not an exact science to determine these numbers, somewhere in the range of $5 million to $7 million in December of our bookings.

So, obviously a small part of our bookings, but it's meaningful for us, was more in the transactional side. That business came to us at prices that we would want. And so that's one of the reasons why CPI was as strong as it was in the quarter because of that. 34:55 So, if it continues yes, but this is more transactional versus LTA type business.

So, we'll just have to take this one month at a time and one quarter a time to view what happens next with us..

35:10 Got it. I appreciate the detail there. Thanks guys..

35:13 Thank you..

35:13 Thank you..

35:17 [Operator Instructions] Your next question is coming from Chris Olin at Tier4 Research. Please pose your question. Your line is live..

35:37 Hey, good morning..

35:38 Good morning, Chris..

35:39 Good morning, Chris. Congratulations on another quarter that’s better than expected. Good to see..

35:45 Thank you. Appreciate it. Thank you..

35:47 So, I'm going to start with an apology because I [indiscernible] on the call and hopefully, I don't ask about the topic that was already addressed, so bear with me. But in my defense, it just won’t stop snowing in Cleveland. It feels like I'm [indiscernible]. So, it's not really my fault..

36:08 Don't worry, we're good..

36:10 Okay.

So, I want to focus on the demand strength that we've been seeing over the past few months at your company, and backlog improvements and if you have a sense on how much of the relative strength is related to this kind of weird competitive environment and maybe some supply from tenant purchases out there? You could sense that your market share is moving related to that..

36:40 Sure. The environment, I would say that the aerospace is [real pull] [ph] and a real need to begin to fill the supply chain through aerospace both on the airframe side and on the engine side. So, demand is real.

And as Dan pointed out, what's really interesting about where we were, we're still, I can't remember the number 29% plus or minus – 27.5% below the average quarter in 2019. So, we still have a long way to go. So that's just pure in our opinion. 37:14 As far as power generation, we did have a quarter that was obviously down.

We've had the last three quarters though, they've been up year-on-year, which is the way I like to look at this, and we brought in more in our backlog over the last quarter in IGT than we have in many, many years. So that share gain, that's our alloy 282 being substituted for some older alloys.

37:41 That's MRO business the – I'm sorry, the repair business beginning to come back. So, we're beginning to see real demand there and you've heard everyone talk about ITG for a while where there was no oversupply that's gone. So, we're seeing a real pull there. So, these are good.

CPI, same thing on the special project side, we're just beginning to see more inquiries come in, which hopefully will turn in orders on the special product side. So, we see good things happening with that going forward.

38:12 And as I talked about response to Mike's question, at the bottom end of our CPI market, we're seeing some of that because of the lack of supply, because of one of our competitors not currently in the market.

Did I hit your question, Chris?.

38:26 Yeah.

I think there was two competitors having problems, and I was just wondering if you could take on that aerospace business, if needed going forward and how much you've already seen?.

38:40 I think I've got your question. But on the aerospace business, remember, this company spent a lot of money between 2012 and 2018 to significantly increase both our titanium tubing for airframe and our nickel cold-finished flat business. So, we've got significant capacity available.

39:00 One of the things that concerned me, when I got here, 3.5 years ago, was if we start saying no to aerospace customers, they are going to find somebody else to go to. And so, significant expansion for our company, the money we spend in tubing and in cold-finished flats was to not only protect our core but find ways to expand our business..

39:20 Okay. That's very helpful.

Reference to the GE9X, I was wondering if the supply chain has started to fill in inventory? And have you seen the sourcing benefit from that program yet?.

39:38 Which growth – you talking about the …?.

39:44 The 9x..

39:46 You know, it’s interesting, you read what we read related to the 9x. We're seeing – the good news for us, we're seeing one of our proprietary alloys, which is called Haynes 244 goes into the 9x and we are seeing more activity than we've seen in quite a while for the product to go into the 9x for the 777.

So, we're beginning to see positive signals there..

40:08 Awesome. Last question.

Regarding that tubing plant there down in Arcadia, can you give me a sense on which way tightening titanium inventory has been moving, I guess over the past quarter, given what's [going out] [ph] 77 kind of market?.

40:27 And I can only really talk about the titanium inventory for tubing for hydraulic applications for the airframe, beyond that, that's really where we're involved with Titanium.

And what we have seen is a lag from talk about demand improvement on the airframe Titanium tube side versus the nickel side, but I would say over the last couple of months, we've seen a significant increases in communication and even demand in that supply chain getting [finned-out] [ph] and us beginning to have to refill that..

41:04 Okay.

[Indiscernible] reflect that in 2022?.

41:09 And that's probably based on some demand in 737 for the titanium tubing, yeah..

41:16 Got it. [Indiscernible] Appreciate it. Thanks..

41:19 Thanks, Chris. Be careful shoveling.

Okay?.

41:23 You have a follow-up question from Marisa Hernandez at Sidoti & Company. Please pose your question. Your line is live..

41:31 Thank you for taking my follow-up. So, I wanted to ask about the working capital build-up. So, obviously, you’ve made an investment in the first quarter here. How do you see that evolving to the rest of the year? And how much more is needed and your thoughts on free cash flow for the year? Whether that will be profited? Thank you..

41:57 Sure. Let me just start. We obviously had a significant cash usage during the quarter, I’ll really start with my last comment or to me the most important comment, once we achieve a more steady state in our business levels, our company we believe has significant cash generation capability going forward.

However, before we get there, you've seen what we've talked about with our bookings, which are backlogs growing between 26% and 30%. 42:29 I think the most telling number is the book-to-bill about 1.5. I haven't seen that since I've been here. I don't think we've seen in a while and the backlog increase.

So, for us to keep our lead times down and to satisfy our customers, we've got to invest in relatively high cost nickel and cobalt and bring that in. Of course, the customers are paying for it. And we've got to significantly increase our wip inventory to get product through here.

42:55 I think an important point, by the way is, we continue to focus on not increasing our finished inventory. This is about increasing with an increasing raw material. In fact, during the quarter, our finished goods inventory actually decreased about 5%.

So, as we go through this year, as we continue to see, we believe bookings that are greater than what we are shipping for that period of time.

43:19 We'll continue to invest in the inventory necessary to match up with the customer backlogs that'll likely need some incremental borrowing on our credit facility over the next few quarters, but still a very low utilization of our line..

43:35 Thank you.

And any thoughts or preliminary thoughts on what it means for free cash flow for the year?.

43:43 I mean, with this investment in inventory and working capital as that top line grows significantly, that's going to require cash as we've already seen in Q1, now. What we're expecting in Q2 maybe not that significant, but still an investment in cash.

So, when you look at it across the full fiscal year, it will probably be a usage of cash is what we're expecting. And then we'll get back to those pre-pandemic levels that will generate some cash going forward, probably in FY 2023..

44:14 Thank you..

44:15 Yeah. You're welcome..

44:19 There appear to be no further questions in queue at this time. I would now like to turn the floor back over to Mike Shor for any closing remarks..

44:26 Thanks, Kelly. Thank you everyone for your time today and thank you for your interest in support of Haynes. We'll talk to you next quarter. Thanks, everyone..

44:36 Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation..