Howmet Aerospace Inc. · NYSE:HWM
Howmet Aerospace — Q3 2022 Earnings Presentation
29 slides from Howmet Aerospace's earnings presentation, Oct 31, 2022
Slide 1: Third Quarter 2022 Earnings Call
Third Quarter 2022 Earnings Call John Plant: Executive Chairman and Chief Executive Officer Ken Giacobbe: EVP and Chief Financial Officer October 31, 2022
Slide 2: Important Information
Important Information Forward–Looking Statements This presentation contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those
Slide 3: Important Information (continued)
Important Information (continued) Non-GAAP Financial Measures Some of the information included in this presentation is derived from Howmet Aerospace’s consolidated financial information but is not presented in Howmet Aerospace’s financial statements prepared in accordance with accounting principles
Slide 4: Q3 2022 Highlights
Q3 2022 Highlights Revenue and Profitability Excluding Special Items1 Q3 2021 Q2 2022 Q3 2022 Revenue $1.283B $1.393B $1.433B Adj EBITDA1 $292M $317M $323M Adj EBITDA Margin1 22.8% 22.8% 22.5% Adj Earnings Per Share2 $0.27 $0.35 $0.36 • Revenue up 12% YoY, driven by Commercial Aerospace up 23% YoY •
Slide 5: Q3 2022 Revenue Up 12% YoY, driven by Commercial Aero Up 23% YoY
Q3 2022 Revenue Up 12% YoY, driven by Commercial Aero Up 23% YoY Revenue by Market Revenue by Market YoY Sequential (% of total) (% change) Industrial Aerospace - Commercial 23% 7% & Other 14%1 Aerospace - Defense (4%) Flat Aerospace - Commercial Commercial Subtotal - Aerospace 15% 5% Transportation
Slide 6: Q3 2022: Revenue Up 12% YoY, Adj EBITDA Margin 22.5%, Adj EPS Up 33%
Q3 2022: Revenue Up 12% YoY, Adj EBITDA Margin1 22.5%, Adj EPS2 Up 33% YoY ▪ Revenue up 12% YoY, in line with Guidance; includes material pass through ~$70M ▪ Adj EBITDA1 of $323M, up 11% YoY and Adj EBITDA Margin1 of 22.5%; both in line with Guidance Enhanced ▪ Adj EBITDA Margin1 excluding YoY mate
Slide 7: Engine Products: Adj EBITDA Margin Up 200 bps YoY, driven by Narrow Body
Engine Products: Adj EBITDA Margin Up 200 bps YoY, driven by Narrow Body Revenue by Market +14% (% of total) $652M $683M $599M $605M $631M Aerospace - Commercial $534M $544M Industrial Aerospace - Defense 3rd Party & Other 25% Industrial & Other Revenue Aerospace - Commercial Aerospace 57% - Defense
Slide 8: Fastening Systems: Revenue +15% due to Narrow Body, Adj EBITDA Margin 22.0%
Fastening Systems: Revenue +15% due to Narrow Body, Adj EBITDA Margin 22.0% Revenue by Market +15% (% of total) $272M $262M $254M $256M $264M $277M $291M Aerospace - Commercial Industrial Aerospace - Defense & Other Commercial Transportation 3rd Party 9% Commercial Aerospace - Industrial & Other Rev
Slide 9: Engineered Structures: Adj EBITDA Margin Up 140 bps YoY, driven by Narrow Body
Engineered Structures: Adj EBITDA Margin Up 140 bps YoY, driven by Narrow Body Revenue by Market -3% (% of total) Aerospace - Commercial $199M $190M $176M $182M $185M $193M Industrial $160M & Other Aerospace - Defense 7% 3rd Party Aerospace Industrial & Other Revenue - Defense 29% Aerospace - Commer
Slide 10: Forged Wheels: Volumes Up 2%; Material Pass Through and FX Compress Margins
Forged Wheels: Volumes Up 2%; Material Pass Through and FX Compress Margins Revenue by Region +15% (% of total) $279M $266M North America $247M $227M $229M $231M $234M Other 14% Europe 3rd Party Other Revenue Europe North 27% America 59% Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q3 202
Slide 11: 2022 Guidance
2022 Guidance Q4 2022 Guidance FY 2022 Guidance What we expect in 2022 Low Baseline High Low Baseline High ▪ FY 2022 Revenue up ~13% vs. FY 2021, Revenue $1.450B $1.470B $1.500B $5.600B $5.620B $5.650B includes ~$225M material pass through ▪ FY 2022 Adj EBITDA1 up ~12% vs. FY 2021 Adj EBITDA1 $325M
Slide 12: Summary
Summary ▪ Revenue up 12% YoY; Adj EBITDA1 up 11% YoY; Adj Earnings Per Share2 up 33% YoY Revenue / Profit ▪ Adj EBITDA1 of $323M, in line with Guidance; Net Headcount up ~350 sequentially from Q2 2022 Q3 2022 ▪ Adj EBITDA Margin1 22.5%, in line with Guidance; 23.7% excluding YoY material pass throug
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Slide 14: Appendix
Appendix fri HOWMET UELJ AEROSPACE
Slide 15: 2022 Assumptions
2022 Assumptions Full Year 2022 2022 Comments; Change versus prior Guidance Corporate Overhead ~$78M • Adjusted EBITDA excluding special items Depreciation and Amortization ~$265M • Reduced by ~$5M Interest Expense ~$230M • Excludes debt issuance, breakage and tender fees • Midpoint of Operational T
Slide 16: Reconciliation of Net Income and Diluted EPS Excluding Special Items
Reconciliation of Net Income and Diluted EPS Excluding Special Items ($ in millions, except per-share amounts) Q3 2021 Q2 2022 Q3 2022 YTD 2022 Net income $27 $147 $80 $358 Diluted EPS $0.06 $0.35 $0.19 $0.84 Special items: Restructuring and other charges $8 $6 $4 $12 Discrete tax items(1) $(12) $(7
Slide 17: Reconciliation of Operational Tax Rate
Reconciliation of Operational Tax Rate ($ in millions) Quarter ended September 30, 2022 Nine months ended September 30, 2022 As reported Special items (1)(2) As adjusted As reported Special items (1)(2) As adjusted Income before income taxes $104 $95 $199 $458 $110 $568 Provision for income taxes $2
Slide 18: Calculation of Segment Information
Calculation of Segment Information ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Engine Products Third-party sales $ 534 $ 544 $ 599 $ 605 $ 2,282 $ 631 $ 652 $ 683 Inter-segment sales $ 1 $ 1 $ 1 $ 1 $ 4 $ 1 $ 1 $ 1 Provision for depreciation and amortization $ 31
Slide 19: Calculation of Segment Information (continued)
Calculation of Segment Information (continued) ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Engineered Structures Third-party sales $ 176 $ 160 $ 199 $ 190 $ 725 $ 182 $ 185 $ 193 Inter-segment sales $ 1 $ 2 $ 1 $ 2 $ 6 $ 1 $ 1 $ 3 Provision for depreciation and am
Slide 20: Calculation of Total Segment Adjusted EBITDA and Margin
Calculation of Total Segment Adjusted EBITDA and Margin ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Third-party sales – Engine Products $534 $544 $599 $605 $2,282 $631 $652 $683 Third-party sales – Fastening Systems $272 $262 $254 $256 $1,044 $264 $277 $291 Third-
Slide 21: Reconciliation of Total Segment to Consolidated Totals
Reconciliation of Total Segment to Consolidated Totals Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Income before income taxes $113 $110 $23 $78 $324 $171 $183 $104 Loss on d
Slide 22: Adjusted Corporate Expense Excluding Depreciation and Special Items
Adjusted Corporate Expense Excluding Depreciation and Special Items ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Corporate expense $28 $10 $30 $33 $101 $22 $25 $46 Provision for depreciation and amortization 3 2 3 1 9 1 3 1 Adjusted Corporate expense excluding depr
Slide 23: Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Incremental Margin
Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Incremental Margin ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Net income $80 $74 $27 $77 $258 $131 $147 $80 Add: Provision (benefit) for income taxes $33 $36 $(4) $1 $66 $40 $36 $24 Other ex
Slide 24: Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Material Pass Through
Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin Excluding Special Items and Material Pass Through ($ in millions) Q1 2022 Q2 2022 Q3 2022 Net income $131 $147 $80 Add: Provision for income taxes $40 $36 $24 Other expense (income), net 1 (1) 67 Loss on debt redemption — 2 — Interest expe
Slide 25: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow ($ in millions) Q1 2022 Q2 2022 Q3 2022 YTD 2022 Cash provided from operations $55 $158 $65 $278 Capital expenditures (62) (44) (42) (148) Free cash flow $(7) $114 $23 $130 The Accounts Receivable Securitization program remains unchanged at $250 outstanding. The proc
Slide 26: Reconciliation of Net Debt
Reconciliation of Net Debt ($ in millions) September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 Short-term debt $14 $5 $3 $1 $1 Long-term debt, less amount due within one year 4,272 4,227 4,228 4,169 4,170 Total debt $4,286 $4,232 $4,231 $4,170 $4,171 Less: Cash, cash
Slide 27: Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items
Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items ($ in millions) Trailing-12 months ended June 30, 2022 September 30, 2022 Net income $ 382 $ 435 Add: Provision for income taxes $ 73 $ 101 Other expense, net 7 73 Loss on debt redemption 125 7 Interest expense, net 236 230 Restru
Slide 28: Calculation of Segment Markets Revenue
Calculation of Segment Markets Revenue Engine Fastening Engineered Forged ($ in millions) Products Systems Structures Wheels Total Segment Third quarter ended September 30, 2021 Aerospace - Commercial $299 $126 $118 $— $543 Aerospace - Defense $130 $37 $65 $— $232 Commercial Transportation $— $59 $—
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