DPC Holdings (DPC) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Michael Joseph Quinn
• Chief Financial Officer - David John Egan
• Head of Investor Relations - Lucy Sharma

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TAKEAWAYS

• Revenue -- $308.1 million, representing 39.2% growth driven by outperformance in the aerospace and industrial gas turbine end markets.
• Adjusted EBITDA -- $58.2 million, an increase of 55.6% year over year reflecting strong volume growth.
• Adjusted EBITDA Margin -- 18.9%, which expanded by 200 basis points despite a 90-basis-point dilution from metal cost inflation pass-through.
• Engine Products Europe Revenue -- $157.5 million, growing 47.3% due to higher build rates and value-based pricing.
• Engine Products North America Revenue -- $100.6 million, up 37.1% primarily from capacity investment output at the Groton, CT, facility.
• Order Book -- Approximately $1 billion, increasing from $725 million at the end of fiscal 2025.
• FY 2026 Revenue Guidance -- $1.115 billion to $1.130 billion, upgraded from previous estimates due to third quarter business performance.
• FY 2027 Revenue Guidance -- $1.23 billion to $1.33 billion, which incorporates the acquisition of Montana Precision Products and the divestment of Ivostud.
• FY 2027 Adjusted EBITDA Guidance -- $240 million to $260 million, representing 22% growth at the midpoint of the range.
• FY 2027 Adjusted EPS Guidance -- $1.00 to $1.10.
• Strategic Customer Partnerships -- Five agreements signed to date are expected to deliver over $300 million in annual incremental revenue by 2031.
• Montana Precision Products Acquisition -- $73 million cash paid for a 50% stake from SeaCast, with the transaction expected to be earnings accretive within the first year.
• Fifth Strategic Partnership -- A minimum 10-year contract with an IGT OEM expected to generate over $100 million in annual revenue at full ramp.
• Customer Funding Support -- Approximately 80% of the $200 million-plus capital cost for the fifth strategic partnership is funded by the customer.
• Turbo Wheels Revenue -- $50.9 million, growing 11.9% year over year including the company's first supply contract for the Unmanned Aerial Vehicle market.
• Metal Cost Pass-Through -- This mechanism contributed approximately 6 percentage points of top-line growth during the third quarter.
• Net Cash Position -- $191.5 million as of Sept. 27, 2026, comprising $277.1 million in cash and equivalents against $85.6 million in borrowings.
• Adjusted Free Cash Flow -- $111.2 million for the quarter, excluding $211.7 million in management incentive plan payments.
• FY 2027 CapEx Guidance -- $145 million to $170 million, driven by strategic partnership requirements and the purchase of a building in the United Kingdom.
• Aerospace Revenue Growth -- 45% year over year, supported by rising air travel and demand for fuel-efficient engines.
• IGT Revenue Growth -- 43% year over year, with management reporting that OEM customer order books are sold out through 2031 or 2032.
• Debt Refinancing -- A new $325 million unsecured senior revolving credit facility was established to replace the previous term loan and ABL facilities.
• Transportation Revenue -- 21% growth, benefiting from the ramp-up of automotive contracts won in 2024.
• Engine Products EBITDA Growth -- 70% year over year, with segment margins reaching 23.8% due to operating leverage and value-based pricing.
• MPP Freehold Acquisition -- $7.5 million paid for a 50% share of the land and buildings associated with the Montana Precision Products joint venture.

SUMMARY

DPC Holdings PLC (NYSE:DPC) reported record financial results for the third quarter of 2026, led by a 39% increase in revenue and a 56% rise in adjusted EBITDA. Management attributed the performance to strong demand in the aerospace and industrial gas turbine (IGT) end markets, which both grew over 40% during the period. The company emphasized its strategic transition toward long-term customer partnerships, announcing a fifth major agreement that includes significant customer funding for capacity expansion. These partnerships, combined with the acquisition of a 50% stake in Montana Precision Products, are intended to provide long-term revenue visibility and enhance returns on invested capital. The divestment of the noncore Ivostud business further focuses the portfolio on high-growth engine products and superalloys.

• CEO Quinn noted the strategic expansion into the drone sector, stating, "We believe we can utilize our Turbowheel capability and capacity for UAVs and I am delighted to report that we have won our first supply contract within this market."
• Regarding the long-term nature of the IGT replacement cycle, Quinn stated, "These turbines have long asset life cycles, which deliver recurring service demand."
• Management is doubling heavy frame capacity in the IGT segment, with Quinn noting, "Our strategic customer partnerships, all have customer funding and volume commitments, including a take or pay clause."
• CFO Egan clarified the impact of metal cost dynamics, stating that metal cost inflation pass-through diluted the margin by 90 basis points while having no effect on total EBITDA dollars.
• The company reported that the business case for its greenfield superalloy facility in Auburn, Alabama, has been underwritten by its fourth strategic customer partnership.

INDUSTRY GLOSSARY

• IGT: Industrial Gas Turbine, used for utility-scale power generation.
• DS/SX: Directionally Solidified and Single Crystal, advanced casting technologies for high-temperature turbine components.
• LTA: Long-Term Agreement, a multiyear contract securing supply and pricing between a manufacturer and an OEM.
• MPP: Montana Precision Products, an aerospace manufacturing joint venture with GE Aerospace company Unison.
• UAV: Unmanned Aerial Vehicle, commonly referred to as a drone.
• Superalloy: A high-performance metal alloy that can operate at a high fraction of its melting point, essential for turbine engines.
• Aero airfoil: A blade or vane component designed to provide lift or thrust within an aircraft engine.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the DPC Holdings Reports Third Quarter 26 Results. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press 1 again. If you have logged in via the webcast, please submit your questions using the Q&A button. We will now hand the conference over to Lucy Sharma, Head of Investor Relations. Please go ahead.

Lucy Sharma: Good morning, and welcome to DPC Holdings Third Quarter 26 Results Conference Call. I am Lucy Sharma, responsible for Investor Relations and I am joined by Mike Quinn, Chief Executive Officer; and David John Egan, Chief Financial Officer. Mike and David will run through a presentation outlining our results, strategic updates and outlook. We will then open the call for questions. Before I hand over, I would like to note that today's discussion will include forward looking statements regarding our future performance. Plans and expectations. Information about characters. Factors that could cause actual results to differ materially from these statements can be found in today's presentation our earnings release, and our SEC filings.

During the presentation, we will refer to certain non GAAP financial measures, with reconciliations to the most comparable GAAP measures available in the earnings release issued today as well as in the appendix to the presentation. Unless otherwise indicated, all performance comparisons are on a year over year basis and all numbers will be in US dollars. With that, I will hand the call over to Mike on slide 4.

Michael Joseph Quinn: Great. Thanks, Lucy. Good morning, everyone. Welcome to DPC Holdings third quarter 26 earnings call. We have a lot to cover today. We have had a very strong quarter both financially beating consensus expectations and strategically. Revenue grew 39% year on year to a record $308 million with engine products growing 43%. Adjusted EBITDA increased 56% to a record $58 million with the margin increasing 200 basis points to 18.9%. Engine Products adjusted EBITDA grew 70%, with the margin increasing 380 basis points to 23.8%. Alongside these strong results, we have made significant strategic progress during the quarter. We acquired CCaaS 50% stake in Montana Precision Products, MPP, through an established joint venture with Unison, a GE aerospace company.

We signed our fifth strategic customer partnership our largest to date, This is a minimum 10-year contract expected to generate over $100 million of annual revenue when fully ramped with the customer providing funding support for over 80% of the capital cost. We refinanced our debt facilities with a new $325 million revolving credit facility, replacing this to existing term loan in ABL, and have also exited our Evostud business, which was held for sale. Reflecting the strength of the business and the visibility we have, we are updating our full year 2026 guidance and introducing 2027 guidance.

In summary, it has been a busy and successful quarter, which demonstrates clearly that we are delivering against our plan to generate significant value. So turning to Slide 5. First, I would like to detail the Duncaster's casting portfolio. Where we play on our growth opportunities. Within the aerospace end market, we manufacture largely nickel based superalloy structural castings accounting for over 80% of our aero casting revenue. These include products such as the turbine center frame shown in Picture 1. Aero airfoils account for less than 10% of our aero casting revenue currently. However, our first strategic customer partnership which includes significant customer funded capital expenditure, is to develop and supply aero blades and veins from 2027.

We already do this, including single crystal technology, but not in volume. And once this expanded production is up and running, this could lead to opportunities with other players within a consolidating market. Our Turbowheels business, which currently serves the transportation end market, makes small high volume castings. These are similar to castings required for UAVs and drones. We believe we can utilize our Turbowheel capability and capacity for UAVs and I am delighted to report that we have won our first supply contract within this market. it is relatively small financially at this stage, but it is significant in terms of our ability to win this type of business. Moving to our IGT offering.

We make turbine airfoils mainly for heavy duty gas turbines. I. E. Those that are producing over 100 megawatts of power. The turbines have extremely high blade complexity and are used for utility scale generation. They are differentiated from small to medium industrial gas turbines, where we are seeing new entrants moving into the market. Such as those players looking to internalize their own supply. The smaller turbines and aero derivatives variations have a faster installation setup So many are being installed in tandem to power data centers until larger, more efficient heavy duty frame turbines can be supplied.

The benefits of heavy frame versus smaller turbines are better economies of scale, higher fuel efficiencies, increasingly important to generate significant dollar savings, provide stronger grid support, and have lower maintenance complexity. So I have said Doncaster specializes in heavy duty frame gas turbines accounting for approximately 85% of our IGT casting revenue. This is where we have significant demand, and so we are planning to double our heavy frame capacity given our contracted LTAs and strategic customer partnerships. I would like to clarify that. Especially on the IGT side. Our strategic customer partnerships, all have customer funding and volume commitments, including a take or pay clause. Meaning a capacity growth and earnings opportunity is supported by large OEMs.

And our capacity expansion and estimates are demand led, based on base power generation and associated order books. Now I would like to talk about our end markets of aerospace and IGT. They both continue to benefit from strong structural growth drivers, significant supply backlogs, constrained capacity and high barriers to entry. Turning to Slide 6. In aerospace, the structural drivers we have discussed previously remain firmly in place. Rising air travel, record aircraft backlogs aging fleets, and long term engine platforms. All of this is driving demand for newer, more fuel efficient aircraft. Research forecasts continue to point to significant growth of nearly double digit in commercial aircraft deliveries through the end of the decade.

The chart on the top right of the slide shows the requirements for new engines, Over 84,000 new engines are required between now and 2045. Highlighting the visible backlog. Moving to Slide 7. In IGT, we have based our growth assumptions upon record demand and backlog. We are seeing from our customers. Due to increasing electricity demand and growing energy needs driven by energy transition from coal and oil to gas, security of supply, climate change and reliability and renewables integration and also from growing replacement parts demand. OEM customer order books are sold out now to 2031, 2032.

Most importantly, with over 2 terawatts of industrial gas turbines installed globally and growing, which require maintenance and servicing and so driving increasing demand for replacement parts. Heavy frame turbines where we play has seen meaningful growth in 2015-2016, and is now entering into the early stages of the blades and veins replacement cycle. With the installed base growing from 140 gigawatts to 350 to 400 gigawatts by 2035. These turbines have long asset life cycles, which deliver recurring service demand. We expect this to underpin significant OE and replacement parts volume growth over the coming years. The right hand side of the slide highlights the significant capacity growth quoted by some major OEMs.

On our IPO roadshow, we set our base case long term revenue growth in IGT excluding AI related growth, was based on 7-9% CAGR to 2035 based on independent research. And I am pleased to say it has come in at the high end of those estimates. Moving to Slide 8. Against that demand backdrop, the industry supply environment continues to remain constrained. Demand is coming from multiple end markets, commercial aerospace, defense, electrification, space, data centers, and AI related power demand, and UAV applications. There are limited number of independent scale casting suppliers that have the technical capability cost customer qualifications and capital intensive assets required to serve this huge demand. Doncasters remains well positioned within a consolidating market.

We are a trusted independent scale supplier. We are providing OEMs with committed capacity through our long term strategic customer partnerships. We are expanding our aero airfoil capacity And following the IPO and refinancing, our balance sheet gives us the opportunity to invest in disciplined bolt-on acquisition opportunities to increase capacity further. These markets have significant barriers to entry, technical expertise, metallurgy, customer qualifications, and large scale capital equipment cannot be replicated quickly. We believe that makes scarce qualified capacity increasingly valuable and places Doncasters in a strong competitive position. Moving to Slide 9. Let's explain our new JV.

We have acquired CCaaS 50% stake in Montana Precision Products, an established joint venture with Unison, is a GE aerospace company that designs and manufactures specialized engine components and systems for aerospace. MPP manufactures small structural castings and tubes and duct assemblies for aerospace applications. With GE Aerospace accounting for the majority of MPP's revenue. Given the ongoing changes within the casting industry, we are excited about building a partnership with Unison and strengthening both our aerospace proposition and opportunities and our commercial relationship with GE Aerospace. We currently make large structural castings for GE, accounting for less than 5% of Doncaster's group revenue.

We plan to use our specialist technical expertise and advanced foundry capabilities to support MPP's capacity growth and product expansion through contracted LTAs and a committed investment plan. Also, we see the potential opportunity to supply MPP's alloy from Doncaster capacity. We acquired MPP for cash on October 30th with a transaction anticipated to be earnings accretive within the first year. This acquisition is in line with Doncaster's inorganic growth strategy. We are super excited about the opportunity to work in partnership with Unison in growing MPP further and the value creation opportunity. Moving to Slide 10. Our fifth strategic customer partnership is another major milestone. It is our largest to date.

We have signed with a major IGT OEM, a minimum 10-year contract with extension provisions to manufacture some of the largest and most complex DS Single Crystal IGT blade and vein castings in the world. To support the contract, we expect to invest more than $200 million in additional capacity. Crucially, the customers plan to contribute funding that covers approximately 80% of that $200 million-plus investment. By 2032, the partnership is expected to generate more than $100 million of incremental annual margin accretive revenue. There are a few points worth emphasizing. The duration of the agreement gives us significant long term visibility. We are securing margin accretive revenue and generating strong returns on our capital investment.

And most importantly, the level of customer funding support demonstrates strategic importance for the OEMs to secure qualified capacity within the supply constrained casting market. Moving on to Slide 11. This details our 5 strategic customer partnerships signed to date. Each contract is bespoke in nature. And due to this, takes time to negotiate. However, we thought it would be helpful to provide some details showing the length of the partnerships through multiyear LTAs, what we are supplying. For example, we are moving into volume production of aero airfoils in the first partnership. But making more of the same parts we already make with the others.

We have provided the associated capital investment and have some are supported by customer funding. And the protections we have put in place to ensure we can reuse the invested capacity if needs be although we would expect OEMs to prioritize utilizing capacity that they have invested in rather going Although the individual structures differ, the benefits to Doncasters are consistent. Securing earnings visibility through contracted long term margin accretive revenue driving market share growth, and providing customer support for the capital required to increase capacity. And further deepening our technical and commercial relationships with major OEMs.

Across the 5 strategic customer partnerships, we now expect more than $300 million of annual incremental revenue by 2031, And all that investment associated with our partnerships, approximately 2-thirds is supported by OEM investment. Delivering an enhanced return on invested capital. This shows the voting confidence the OEMs have in Doncasters. We see our pipeline of strategic customer partnerships continue to strengthen and grow, as the market becomes increasingly constrained. I will now hand over to David to take you through the third quarter financial performance.

David John Egan: Thank you, Mike, and good morning, everyone. Moving to slide 12. Quarter 3 was a record quarter for Doncasters. With revenue and adjusted EBITDA ahead of our expectations. Revenue grew 39% year on year to $308 million with strong growth in our end markets of aerospace and IGT. The third quarter revenue growth included approximately 6 percentage points of growth from metal cost inflation pass through year on year. The adjusted EBITDA grew 56% with the margin improving by 200 basis points to 18.9% Metal cost inflation pass through which does not affect our EBITDA dollars, led to a 90 basis point dilution of the margin in the quarter.

Engine products in both Europe and North America grew revenue by 43% and EBITDA by 70%, an 83-basis-point improvement in margin to 23.8% and this was due to higher volumes and value based pricing. We delivered $111 million of adjusted free cash flow through the quarter through a combination of higher adjusted EBITDA and customer contributions. Ending the period with an adjusted net cash position of $192 million On Slide 13, we show strong revenue growth of 39% across our end markets. In the third quarter, we have delivered revenue growth through a combination of higher volumes value based pricing, and metal cost inflation pass through. Specifically aerospace grew by 45% and IGT by 43%. For the reasons just mentioned.

Transportation grew by 21% benefiting from new automotive contracts won in prior years. Ramping up in 2026. Moving on to our segments. Slide 14 reports our engine products business in Europe. Gross segment revenue grew 47% driven by strong growth in the IGT end market which accounts for nearly 80% of the segment's revenue. Including OEM build rate metal cost inflation pass through, and value based pricing. Segment adjusted EBITDA increased by 46%. The margin decreased by 20 basis points to 23.9%, with operating leverage and value based pricing benefits. Offset by dilution from the pass through of metal cost inflation.

We are investing in expanding our capacity, especially within our German and UK sites to support increased customer growth and the IGT strategic customer partnerships. Onto slide 15. And Engine Products North America. Gross segment revenue grew by 37% to $97 million Third party growth, which excludes last year's super alloy sales, sold internally to Turbowheels, increased 45% This reflects strong growth in the aerospace end market which accounts for 80% of segment revenue. And increased output following capacity investments. The EBITDA margin grew 950 basis points to 23.5% reflecting the operating leverage impact of the revenue increase and value based pricing. But also assisted by weaker Q3 2025 comps.

We are continuing to invest in capacity to support increased customer demand and the delivery of the 2 aerospace strategic customer partnerships. Including deposits paid for equipment for our Greenfield Superalloy facility in Alabama. On slide 16, our Turbowheel segment which accounted for 17% of revenue and 4% of EBITDA during the third quarter. The segment was negatively affected from Evostud, which was sold on October 23, 2026. Excluding Ivostud, revenue grew 20% due to the ramping up of new automotive contracts and the growth in Asia and Americas offsetting a flat market in Europe. Segment adjusted EBITDA, excluding Ivostud, grew 12%. And delivered a margin of 10.2% in the quarter.

In the last 5 years, turning to Slide 17 and capital expenditure. In the last 5 years to the end of 25, we have invested over $170 million in the business adding both capacity and equipment upgrades. Looking forward, we plan to continue to add capacity in both aerospace and IGT. Including a greenfield superalloy facility in Alabama. These investments are supported by our strategic customer partnerships, including capital contributions. The chart on the slide shows our capital expenditure for 2026 and 2022. 2027 based on our agreed plans of today. Aligned to the 5 strategic customer partnerships signed. And the capital requirements of our recently acquired joint venture of MPP.

The gray blocks at the bottom show our normalized maintenance and growth CapEx, which is broadly 2% of revenue relating to maintenance and approximately 3% to 5% of revenue on growth expenditure in the ordinary course. Then, we have split out CapEx related to each of the strategic customer partnerships. Including adding in our fifth partnership announced today, which as Mike said, involves over $200 million of total CapEx more than we have spent during 2023 to 2025. The majority of our strategic customer partnerships have customer funding or asset investment. Supporting our capacity expansion and heightened capital expenditure. The customer funding results in enhanced return on invested capital.

We believe that the investment by the OEMs in our capacity provides longer term security and earnings opportunities and continues to demonstrate their confidence in Doncasters. While the capital investment has an impact on our free cash flow in the near term, This is expected to drive future cash generation growth, and value creation over the longer term. Moving on to slide 18 and our outlook. We have raised our full year 26 guidance due to due to strong business performance in quarter 3. We now expect full year 2026 to deliver revenue between $1.115 billion and $1.130 billion.

We expect EBITDA in the range of $204 million to $207 million giving an adjusted EBITDA margin of approximately 18% including dilution from the higher metal cost inflation pass through. We have seen in the second and third quarters. We have also introduced full year 2027, guidance which includes a 100% contribution from MPP given our accounting controlling interest.

Capital expenditure relating to our fifth strategic partnership, and the exclusion of Ivostud following its divestment For the full year of 2027, we are guiding to revenue between $1.23 billion and $1.33 billion with a midpoint of $1.28 billion adjusted EBITDA in the range of $240 million and $260 million with a midpoint of $250 million and at that midpoint, that is generating growth of 22%. And giving an adjusted EBITDA margin of approximately 19.5%. Assuming no change in metal cost pass through. We have provided some key assumptions on the bottom of the slide to help with financial modeling. And with that, I will now hand it back to Mike.

Michael Joseph Quinn: Great. Thanks, David. Moving to Slide 19, I would like to talk about the medium term and our drivers of revenue growth and margin expansion. Starting on the left hand side of the slide, and as David just outlined, you can see our upgraded 2026 revenue. From that, we have a significant number of visible growth drivers. Market growth from 2 strong long term structural growth markets of aerospace and IGT Approximately 70% of our revenue was under contracted long term agreements, which typically span 5 years or longer. The majority of which have been renegotiated within the past 2 years.

Our strategic customer partnerships with 5 to date which are contracted multiyear long term agreements anticipate to deliver over $300 million of annualized revenue as a ramp up to 2031. And inorganic opportunities given our net cash position with many smaller bolt on targets in our sites. We have already started deploying our capital with the acquisition of a 50% stake in MPP. On margins, we continue to see a clear pathway from the approximately 18% adjusted EBITDA margin we are going to be delivering this year. The 3 main margin drivers of roughly equal sized opportunities.

Higher operating leverage from higher volumes, value based pricing, including the benefit of our margin accretive strategic customer partnerships and operational efficiencies as we improve our margin drop through. When we look forward, we see a business with increasing visibility in our revenue growth and multiple identifiable drivers of continued margin expansion. That gives us considerable confidence in the medium term opportunity ahead and in our ability to deliver against the value creation plan. Moving on to our final slide, Slide 20, and our long term value creation model. The model is not new and has been driving the business since 2020.

As you have seen during Q3, we delivered across all 4 areas of the model, through organic growth with strong growth outperforming our 2 end markets. The addition of a fifth customer partnership and the strengthening of a key customer relationship with our new joint venture partner, GE. Our order book, which equates to contracted purchase orders only, is approximately $1 billion Given Approximately 70% of revenue is covered by LTAs, of 5 years duration, this provides greater long term visibility. On margin expansion, we added 200 basis points of EBITDA margin in the quarter. On cash, we continue to improve our cash generation supplemented by customer funding and a refinance balance sheet.

And on investment, we divested of our noncore Evostud business and acquired a 50% stake in the business supplying a key OEM with the aerospace within the aerospace end market. Consistent with our capital allocation priorities and focused bolt on opportunities. In summary, this has been an exciting quarter for Doncasters. With strong financial performance and significant strategic progress. Our visible growth has never been stronger or clearer. And we are excited about our strength and positioning within a changing industry and the opportunities it presents for Doncasters to continue capturing profitable market share and generate significant long term value creation.

Before I finish, I would like to take the opportunity to thank the employees of our company and the new ones who have just joined in MPP. They show up every day, do a brilliant job for our customers and our company. And with that, I would like to thank you for your interest in Doncaster's and hand the call back over to the operator for Q&A.

Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. If you have logged in via the webcast, please submit your questions using the Q&A button. Please standby while we compile the Q&A roster. Your first question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is now open. Please go ahead.

Sheila Kahyaoglu: Thank you so much, and good morning, guys. And way to crush it, the first year out of the gate. From your IPO. So lots to digest with your prepared remarks, but maybe I will just start off the 2027 guidance, which is coming well ahead of our expectations. 13% growth at the midpoint, 20% plus EBITDA. Can you just walk through some of the underlying assumptions that put that forecast forward, whether it is underlying markets, new pricing and the partnerships that are weaving into that growth? Thank you.

David John Egan: Sure. Good morning, Sheila. Sure. With regards to guidance for 2027, with regards to revenue, no material assumption change with regards to metal. Cost, so more of this in terms of the metal cost assumptions year on year. We are excluding Evostud in 2027. We have got the MPP, which is also the new acquisition, which we will be then incorporating as a 100% Even though it is a joint venture, we do have controlling interest. So we will be consolidating MPP And then from a volume and price perspective, we see continuation.

It would be more pronounced in volume, although, you know, we are sort of beginning to reach the capacity which is also then linked back to the capacity partnerships that we are introducing, but they start to come online at the back end of 27. So overall for guidance for 2027, it is driven by more pronounced volume, some pricing and then the acquisition of MPP with Ivostud coming out.

Sheila Kahyaoglu: Okay. And if I could perhaps follow-up on MPP. Can you tell us just how the size of it the revenue contribution, and what the business adds? Is there an opportunity to extend beyond GE programs, or is this just getting you guys more embedded with GE? Thank you.

David John Egan: I will let Mike talk about the strategic side of the acquisition, and then I am happy to cover the numbers.

Michael Joseph Quinn: Yes. Good morning, Sheila. Obviously, this is a. We are very excited by this acquisition it is bang in line with our M&A strategy. it is a digestible bolt-on for us. it is castings. It leans into our core capabilities. Obviously, it is it is a contract and, you know, partnering with 1 of our aerospace customers it is got significant growth opportunities. As, you know, in line with the bill rating increases. We do not supply the super alloy there today. But obviously, that is a synergy play for us. Now that we are. We were involved in the business, it is earnings accretive you know, it ticks every single box we want in our M&A strategy.

So we have been working on it for a while. We got the clearance, and we closed at the end of October. So very excited.

David John Egan: In terms of the numbers, we paid $73 million for our 50% We have also, off the back of that, acquired the freehold of building it is it is a low double digit EV to EBITDA multiple And in terms of the contribution, it is a very low double-digit 100%.

Sheila Kahyaoglu: Really appreciate it. Thank you, guys. Congrats. Thank you.

Operator: Your next question comes from the line of Kristine Liwag with Morgan Stanley. Your line is now open. Please go ahead.

Kristine Liwag: Hey. Good morning, everyone, and congrats on a very strong quarter plus these announcements that you have made. But maybe pivoting to the balance sheet, Mike, David, you paid cash for MPP. And the initiatives announced today with the strategic partnership expansion. Imply higher 2027 CapEx than what you guys had previously provided. Now how do we think about the liquidity buffer that you want to maintain through this investment cycle? Especially when we look at 2027 and it is, you know, the midpoint of free cash flow is around breakeven. How do we think about the timing of customer funding, you know, when you look at that spend?

Is there a timing that you are assuming for when the customer investments will come through? Will that flow through working capital? And then, ultimately, what leverage are you comfortable operating within? And how much flexibility does that leave for additional acquisitions as you look out from here?

David John Egan: Sure. Thanks, Kristine. So in terms of you know, our overall liquidity, our cash position at the end of Q3 was net cash of $192 million. Just bear in mind that was pre the payment of the acquisition of MPP. So that is a Q4 payment that took place at the end of October of this year. As we look forward you know, our capital allocation priorities are very much organic growth and continuing to invest in the business. Through capital expenditure and working capital. And then secondly, you know, looking down the path of the inorganic with MPP being. being the first acquisition for Doncaster's post IPO.

In terms of overall leverage, we have not set a leverage target as a group, but certainly we will. You know, we have the have the ability within our covenants to have leverage just above 3 times. We would not look to be pushing it anywhere near that sort of number, so somewhere around the 1 to up to 2 is probably where we would feel most comfortable in terms of the overall leverage of the group. In terms of the customer funding, contributions, they are very much driven based on milestones through the build process.

So there was customer funding that took place in Q3, there is no additional customer funding in Q4, but there will be some funding during the course of 2027. And then 2028 and then 2029.

Kristine Liwag: Great. Great. Super helpful. And as a follow-up, I am not sure if I just missed it. But how much was the purchase price for the 50% of MPP that is going to come out in 4Q? And also just to confirm, for the free cash flow guidance that you gave in 2027, could there be contra accounts from customers to offset some of your cash outflows?

David John Egan: Sure. So the cost of MPP was $73 million so that is a payment made in Q4. And then in addition, we have also made a contribution towards the freehold The cost of the freehold was $15 million for 100%. So we paid half of that And then in terms of the free cash flow guidance, we provided free cash flow guidance including customer funding from the OEMs and also including the gross or the total capital expenditure cost through 2027. So you know, we are guiding to, at the midpoint, you know, free cash flow at 0. And that is incorporating all of the funding, all of the CapEx through 2027.

Kristine Liwag: Great. Thank you.

Operator: Your next question comes from the line of Margaret Schooley with Rothschild. Your line is now open. Please go ahead.

Margaret Schooley: Good morning, everybody. Thanks for taking the question. I just had 1. Earlier in the presentation, you touched on this 7-9% CAGR in IGT out to 2030, which clearly is very supportive of your long term demand, but IGT has historically been quite a cyclical sector. So, if we think very long term, immense growth in the installed base, on a through cycle basis when we get to really focusing just on the aftermarket. Can you give us some indication about what you think that growth rate would be much longer term?

Michael Joseph Quinn: Yeah. Thanks, Margaret. So look, we are on the install base. We outlined in the presentation Our main focus is the heavy frame 85% of our casting revenue comes from there. You know, and the growth in the heavy frame really has taken off since 2015-2016, and has accelerated in recent years. So, you know, we have talked about a 140 gigawatts growing to 350 to 400 gigawatts. But just in terms of units, you know, that is somewhere between sort of 23 and 53 units at the moment, and that will grow to 35 to sort of somewhere between 750 and 800 units. And it is interesting to listen to the to the earnings calls of our main customers.

Right? They are they are pretty much aligned on saying that every gigawatt of installed capacity generates about $500 million of service revenue over the life of the life cycle of the asset, which is somewhere between 20 and 25 years You know, and a significant portion of that goes to blades and veins replacement. You know, not to get too technical on the call, but there are 4 stages in the turbine and those blades and veins, particularly in stages 1 and 2, which run at 1.5 thousand°C, they need to be replaced, you know, multiple times, 3 to 4 times during the life cycle of the engine.

When you go out to the cooler section Stage 3 maybe 2 to 3 times, sorry, and 2 to 3 times, sorry, and stage 4, twice. that is a very long term recurring revenue stream once these units get installed. And, of course, that is great for Doncasters because we do not differentiate between an OEM and an aftermarket or a replacement spare part that goes into these turbines. So just because we ship 1 set when we ship the turbine, we know we are getting these repeat orders for many, many years to come. You know, and that. Because the fleet is so new, we are just getting in just at the very start of those replacement cycles.

So we expect the replacement parts demand from 2030 to 2035 and onwards to be very, very significant and growing far above our OE shipments.

Margaret Schooley: Excellent. Thank you so much for that.

Operator: Your next question comes from the line of Kenneth Herbert with RBC Capital Markets. Your line is now open. Please go ahead.

Kenneth Herbert: Hey. Good morning, guys. This is Steve on for Kenneth Herbert. I was hoping you would touch on the pipeline for incremental customer agreements and kind of what that looks like. And then should we expect the incremental 1 to also majority of the CapEx funded by the customer? Or are you potentially trading off any pricing for the customer funded CapEx?

Michael Joseph Quinn: I will take the easy 1 first. Absolutely not trading price for this capacity. Right? That. that is an easy 1. So just on what is ahead of us. So we have done 5 of them. If you recall from our investor roadshow, we hope to. We had a gate process sort of 1 going through the construction stage and then into ramp, And as 1 went into ramp, we wanted to bring another 1 in the front end. We have done that. Look, we have been very fortunate with the scale of the 1 we have just done also outlined, you know, because these are very large projects, they take many months to negotiate.

You know, somewhere between 6 and 12 months. We need a constant pipeline of these. And what I can say is 5 done Pipeline is full and getting fuller of further opportunities on these strategic partnerships. Both on aerospace and IGT, You know, we have added to the pipeline. We completed 1, and I think we have added more than the 1 we have completed into the pipeline. So I am pretty excited about what is to come on that. Each 1 is bespoke. I think David's touched on this in prior discussions. Where it makes sense, we will fund the CapEx ourselves. We have done on strategic partnership number 4.

And obviously, we have we have we have got some decent pricing around that. Depends on the contract. Every single 1 of them has a different characteristic. Right? You can see in the slides in the deck, we have actually structured So if it makes sense to take in customer funding, we will absolutely do that. If it is a better option for us to fund it ourselves, we will absolutely do that. We are not. We do not have a hard and fast criteria for how we construct these projects. Good.

Kenneth Herbert: And then maybe if I could squeeze in 1 more. I wanted to talk about your aerospace airfoil production and how that is ramping, I guess, to what extent do you see GE's pending acquisition of CPP as an opportunity in terms of kind of gaining work from CPP's non GE work today?

Michael Joseph Quinn: So I. Look. I was in the facility about 3 weeks ago. We remain fully on track. it is very impressive. The build out that is happening in our Oxford, Alabama facility We remain on track to schedule, which we have we have talked about again today. We start to ship the first parts in sort of the third quarter and ramp from there through 2028 and into 2029. I would say that there are you know, significant amount of RFQ activity from the OEMs We have a very you know, executable opportunity list. Terms of whether we can win stuff from CPP because of the acquisition of GE, You know?

GE are on record of saying that is business as normal for them. They are going to continue to service the market. We will focus on our own opportunity pipeline. Right? So I can tell you long before CPP deal was announced, we had a lot of very long list of airfoil opportunities across multiple engine OEMs and that is the list we are working off. Right? We have to focus on what is available to us today I can tell you that the opportunity that is there would fill far beyond what our capacity is in Oxford. And that is an opportunity for future growth.

Kenneth Herbert: Really appreciate the color. Thanks, guys.

Operator: Your next question comes from the line of Anthony with Barclays. Your line is now open. Please go ahead.

Analyst: Hey. Good morning. This is Ryan, on for Anthony. Thanks for taking my question. And I just had 1. So it is exciting that you announced your first deal in the drone market. What can you tell us about the end product you are supplying into? And whether there is potential to take more share with the customer over time? And, ultimately, how big do you think the drone market can be for you?

Michael Joseph Quinn: Good morning. Thank you for the question. Look, we are as I mentioned on the last earnings call, this is an area that I have been reading into over the last sort of 6 months or so. Got a lot of. I got on a lot of insight to it. You got the Farnborough Air Show. Lots and lots of folks there in the sector. We are very excited by this sector, right? it is. And from a production manufacturing capability, it is right in our sweet spot in our transportation division. The products are very, very similar. We have also got the added benefit for our for those customers of being able to supply the superalloy, right?

And that is very important when you are supplying the defense parts. So we have got our factory in Sheffield in The UK for European manufacturers, we have got our factory in Long Beach plus our new capacity coming on stream in Auburn in Alabama for our US customers. The types of end markets we are looking at, you know, primarily defense at the moment. it is a very hot market. there is lots of established players, there is lots of startups. 1 of the challenges we are working on right now is to try and figure out who the winners are you know, because we cannot we cannot serve everybody. But we are making great progress.

We have got a very large pipeline of opportunities. We are doing lots of prototyping. We have obviously been very successful on our first order. I think, yes, to your question, is there more market share there? Absolutely. You know, and I had thought this, you the more I read into this, the more I thought this sector was sort of well into the ramp phase. And in fact, when you look at it, it is not. it is still very early doors in this sector. there is lots of volume to come on stream. You know, just on that transportation business, we make 14 million of these wheels that we make for the turbochargers every year.

So we are very used to high volume And the other thing I will say about the UAV sector is the volumes are high. So they do not really suit our traditional casting plans. Example, the structural casting plans. So I think we are we are very well positioned I had said that we will give an update really after the end of the year to whether we are going to be successful or not. That first order we booked was ahead of schedule, I am very excited about that.

And I would be very hopeful that we are going to close more orders this side of the end of the year And at the next earnings call, I will be able to give you an update on sort of the scale of the opportunity.

Analyst: Perfect. Thanks for the color. Thank you.

Operator: You are in Your next question comes from the line of Jason with CORE Partners. Your line is now open. Please go ahead.

Analyst: Hey, Mike. David, thanks, congrats on a good quarter. 2 questions here. Is it possible just to understand the aftermarket content a bit more on IGT? I think you mentioned frame ramping. So I am just trying to figure out what happens in a world where data center production slows and you have less production? Like, how does your 2030 number change? And then separately on the aerospace side, how is the OEM aftermarket content different on the aerospace side of your business? Thank you.

Michael Joseph Quinn: Yes. So, you on just on the we-- let's talk about the data center AI thing first. Right? Firstly, good morning. So we have been very clear on this and been consistent on this the whole way through our IPO roadshow cycle, right? Our growth assumptions, the 7 to 9% CAGR that I spoke about, excludes data center AI growth. It was never in our base case scenario. And it is interesting listening to the CEOs of the big IGT OEMs over the last number of weeks. You know, in fact, the CEO of Siemens came out yesterday at their results and said that in their backlog, you know, 10% or less of their backlog is associated with data centers.

We have got a-- yes, it is an element of it, for sure and an important element of it. But it is not the main driver of the growth that we are seeing in the IGT sector. Today, right? it is a broad number of factors. I think we touched on some of them during the call in terms of electrification, industrial growth, We have got the climate change, HVAC, you have got the renewables integration, you have got baseload supply. So they are important data points, I think. So, you know. And then second point then, you know, I think Maggie asked the question in relation to the replacement spares, right? The H-class fleet is pretty new.

You know, it is the meaningful turn in sort of install based started in 2015-2016, obviously been growing every year. And we have got significant growth that is taken place from now until 2030, right? You talked about our 2030 numbers. We feel very confident in those, right? I mean, if you look at the likes of the IDT OEMs, they are booked out now to 2031, 2032. They give us great visibility. I think I talked about this before. They have given us multi, multiyear contracts oh, sorry, visibility in their forecasts. And we have been very you know, they have come they have come absolutely come through on those forecasts.

So in the last 3 years, we have had a 100% conversion from forecast to actual purchase orders. So we feel very good about that from an OE perspective. And then because of the age of the fleet, the fact that it is it is just starting to enter that replacement cycle, we will see orders for the long term out into the 2020, you know, well past 2035 for these replacements spares that I spoke about earlier on to replace the parts. So from an IGT point of view, we are very comfortable with the outlook. You know, both to 20, 30 and indeed beyond And I suppose the biggest validation--that is my view.

The biggest validation is these strategic customer partnerships that we are you know, that we are securing and the 1 we announced today. I mean, the scale of that and the confidence that OEM has in the long term you know, the long term order profile or demand profile in IGT really validates what I am saying in terms of that long term demand. Hopefully that answers your first question. On the second question, in terms of our aerospace aftermarket, You know, we primarily operate today in structural castings. They tend to go into the aircraft engine and do not really get replaced during the life of the engine. You know, obviously, we are getting into aero airfoils at scale.

So over time, you will see an increase in our aftermarket content from the airfoils. Blades and veins, you know, and that is part of that sector. Right? But again, if, you know, we talked in 1 of the slides about the structural demand drivers in aerospace. We are gonna have a lot of new engines coming into the sector over the next. out to 2044-2045. Around 84,000 engines. But you have also got a very significant growing fleet. Right? So lots of opportunities for aftermarket. That is a growth area for us because we are not in that today. But as we ramp up, as I said, on airfoils, we will see our aftermarket content increase. Got it.

That makes sense. Thank you, Mike. Appreciate it.

Operator: There are no further questions in the audio Q&A. I will now turn it back to the management team to address any webcast questions.

Lucy Sharma: Thank you very much, Alexandra. So we have got some coming in. First 1 is another 1 on GE CPP. Acquisition or potential acquisition. Does it change the competitive landscape for Doncasters in terms of our castings pricing power? Our share or other factors, and have competitors to GE source additional business from Doncaster's because of the pending acquisition.

Michael Joseph Quinn: Yeah. Thanks, Lucy. Just on CPP for a minute. You know, we mentioned earlier on in the call that you know, GE is around 5% of our annual revenue at the moment. And obviously, that will grow now with the partnership with MPP and some of the other pipeline opportunities we are working on with GE. When I look at CPP, know, my view of that business is it is it is a lot different than we are, right? You know, it makes airfoils at volume today, and has been doing that for a period of time, which we do not do. It also has titanium structural castings again, which we do not do.

It also has sand castings, at scale, which we do not do. So I think somewhere between sort of around the 70% mark of their products we do not compete in, right, in terms of their annual revenue. And then on the other 30%, Duncasters makes very large structural castings You know, our main competition is really PCC. We very rarely bump up against CPP and competitive processes. So, you know, we are seeing the fact that GE has bought CPP with their current product profile as having no impact on Doncasters.

You know, we expect GE to be a long term customer for Doncasters You know, we are good at what we do, we deliver on time, and that, you know, they were very happy that we took the 50% of MPP, very supportive of that transaction. So that is 1 thing. In terms of opportunities to pick up work from CPP based on their acquisition by GE. We have our own pipeline already ready and we are. You know, we have massive opportunity long before the CPP-GE thing happened. We have got more than enough on our table in our in our opportunity pipeline.

To deliver the growth that we have we have shown you guys going out into the in the medium to long term. So if we end up getting work from GE, you know, from CPP, over time, that is just the way the market operates. Right? And we will take--we will review those opportunities when they. If and when they happen. And if they do not, it is gonna have no bearing whatsoever on our long term growth forecast. Thank you.

Lucy Sharma: I have got a question on strategic customer partnerships. Asking, what is the logic of entering into 10 year contracts and is the pricing fixed over the. Over that term? And what protections does Doncasters have against cost escalations? Or even if something like another COVID happened.

Michael Joseph Quinn: Well, again, let me address the easy 1. I am really hoping COVID does not happen because if it does, it does not. it is not I will not need to be aerospace and IGT. Look. The easy ones to knock off first, so the protections, you know, for those of you that have been with us on the journey since 2020, our commercial contracts were pretty poor back then. We have really strengthened our contracts, right? So all of our contracts have inflation escalators and they cover things like transportation costs, labor costs, energy costs, etcetera, etcetera. So I think we are in pretty good shape on that. And those inflation adjusters happen on an annual basis, right?

So I think we are we are in pretty decent shape on the on the protection side. Why the length of the contracts? Well, look, we are we are in this to generate long term visibility of our growth. These contracts, 10-15 years, the strategic partnership number 1, is a 15 year contract on aerospace airfoils. You know, these customers are putting you know, their balance sheet behind Doncasters, they have got great trust in us. But before that you know, in exchange for that sort of capital contribution, they wanna make sure that we are partners for the long term. And that really suits us because as they grow, we grow it is locked in for the long term.

We talked about this long term revenue visibility that we see and these contracts are great for that. In terms of the pricing mechanisms, you know, some of the longer contracts have 5 year pricing resets. They will get an opportunity to reset back to market pricing. that is in keeping with our normal contracts, right? So these strategic partnerships are the long ones. there is 5 of them now. You must remember, we have multiple of the long term agreements with our customers that are still in the normal cycle of LTA renewals, which is those 5 year periods.

So again, you know, we have been very careful about how we structure these long term contracts and I think we are in a. They are fairly commercially robust. The other build is that we have said in the past that, you know, 1 of the key margin drivers for us is operational efficiencies. it is something is continuing to ramp up. Investing in the business, improving our efficiencies, reducing our scrap rates, etcetera. So you know, that is also margin for us to maintain and keep. You know, from each of the customer partnerships. And also the duration of them.

Lucy Sharma: And I think many of the other questions that have come online we have already answered. If you do not think you have, then please come back to me. But 1 last quick 1 is, is the Auburn superalloy facility partnership for MPP/GE? Or is that just excess capacity and the partner is someone else?

Michael Joseph Quinn: Great question, but 1 I am not going to answer. Right? So, look, the just on that, superalloy is becoming very prominent in the casting world these days. Right? it is becoming a very serious constraint. We are in a very fortunate position to have our own in house superalloy capacity We see huge demand from the market. The facility business case has been underwritten by strategic partnership number 4. I am not gonna disclose who that customer is. What I will tell you is if you go there today, lots of activity on-site, the furnace has been ordered, it is on schedule. And the overall project remains on schedule.

So again, pretty excited about that. it is our first greenfield since I have been involved. And everything remains on track. Thank you. Thanks. Thanks, Lucy. That is the end of our earnings update today. Again, I would just like to thank you all for your interest in Doncaster's Thanks for attending our call today. Thank you.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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