Howmet Aerospace Inc. · NYSE:HWM
Howmet Aerospace — Q1 2023 Earnings Presentation
32 slides from Howmet Aerospace's earnings presentation, May 2, 2023
Slide 1: First Quarter 2023 Earnings Call
First Quarter 2023 Earnings Call John Plant: Executive Chairman and Chief Executive Officer Ken Giacobbe: EVP and Chief Financial Officer May 2, 2023
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: Q1 2023 Highlights
Q1 2023 Highlights Revenue and Profitability Excluding Special Items1 Q1 2022 Q4 2022 Q1 2023 Revenue $1.324B $1.513B $1.603B Adj EBITDA1 $300M $336M $360M Adj EBITDA Margin1 22.7% 22.2% 22.5% Adj Earnings Per Share2 $0.31 $0.38 $0.42 • Q1 2023 Revenue up 21% YoY, driven by Commercial Aerospace up 2
Slide 5: Q1 2023 Revenue Up 21% YoY, Commercial Aerospace Up 29% YoY
Q1 2023 Revenue Up 21% YoY, Commercial Aerospace Up 29% YoY Revenue by Market Revenue by Market YoY Sequential (% of total) (% change) Industrial Aerospace - Commercial 29% 4% & Other 15% 1 ~60% in 2019 Aerospace - Defense 11% 0% Aerospace - Commercial Commercial Subtotal - Aerospace 24% 3% 47% Tran
Slide 6: Q1 2023: Revenue Up 21% YoY, Adj EBITDA Margin 22.5%, Adj EPS Up 35% YoY
Q1 2023: Revenue Up 21% YoY, Adj EBITDA Margin1 22.5%, Adj EPS2 Up 35% YoY ▪ Revenue up 21% YoY, exceeding high end of Guidance; includes inflationary cost pass through ~$35M Enhanced ▪ Adj EBITDA1 of $360M, up 20% YoY, exceeding high end of Guidance Profitability ▪ Adj EBITDA Margin1 of 22.5%, in l
Slide 7: Engine Products: Revenue +26% YoY; Adj EBITDA Margin 26.7%
Engine Products: Revenue +26% YoY; Adj EBITDA Margin 26.7% Revenue by Market +26% (% of total) $732M $795M Aerospace - Commercial $631M $652M $683M Industrial Aerospace - Defense 3rd Party & Other 25% Industrial & Other Aerospace - Revenue Commercial 54% Aerospace - Defense 21% Q1 2022 Q2 2022 Q3 20
Slide 8: Fastening Systems: Revenue +18% YoY; Adj EBITDA Margin 18.6%
Fastening Systems: Revenue +18% YoY; Adj EBITDA Margin 18.6% Revenue by Market +18% (% of total) Aerospace - Commercial $291M $312M $264M $277M $285M Industrial Aerospace - Defense & Other Commercial Transportation 3rd Party 12% Commercial Aerospace - Industrial & Other Revenue Transportation 20% Co
Slide 9: Engineered Structures: Revenue +14% YoY; Adj EBITDA Margin 14.5%
Engineered Structures: Revenue +14% YoY; Adj EBITDA Margin 14.5% Revenue by Market (% of total) +14% Aerospace - Commercial $230M $193M $207M Industrial $182M $185M & Other Aerospace - Defense Aerospace 6% 3rd Party - Defense Industrial & Other Revenue 21% Aerospace - Commercial Q1 2022 Q2 2022 Q3 2
Slide 10: Forged Wheels: Volume Up 18% YoY; Adj EBITDA Margin 27.3%
Forged Wheels: Volume Up 18% YoY; Adj EBITDA Margin 27.3% Revenue by Region +17% (% of total) $279M $289M $247M $266M $266M North America Other 14% Europe 3rd Party North Other Revenue America 54% Europe 32% Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q1 2023 YoY +18% Segment $79M + Volumes up 18% $75M
Slide 11: Howmet Committed to ESG; Closing in on 2024 Targets
Howmet Committed to ESG; Closing in on 2024 Targets Environmental Achievements | 2022 Reductions vs 2021 Achieved 20% GHG emissions reduction vs 2019 baseline Leveraged our differentiated technologies to help our GOAL customers manufacture lighter, more fuel-efficient by 2024 aircraft and commercial
Slide 12: 2023 Guidance
2023 Guidance Q2 2023 Guidance FY 2023 Guidance What we expect in 2023 Low Baseline High Low Baseline High ▪ FY 2023 Revenue up ~10% vs. FY 2022 Revenue $1.600B $1.610B $1.620B $6.200B $6.250B $6.325B Baseline Change +$150M ▪ FY 2023 Adj EBITDA1 up ~11% vs. FY 2022 Adj EBITDA1 $359M $362M $365M $1.4
Slide 13: Summary
Summary ▪ Q1 2023 Revenue ~$1.6B up 21% YoY driven by Commercial Aero up 29%; inflationary cost pass through ~$35M ▪ Adj EBITDA1 of $360M, up 20% YoY Revenue / Profit ▪ Adj EBITDA Margin1 22.5%; 23.0% excluding YoY inflationary cost pass through; YoY Incremental Margin of ~25% ▪ Adj Earnings Per Sha
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Slide 15: Appendix
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Slide 16: 2023 Assumptions
2023 Assumptions Full Year 2023 2023 Comments Corporate Overhead ~$80M • Adjusted EBITDA1 Depreciation and Amortization ~$265M • Excludes any potential debt issuance, additional debt reduction, Interest Expense ~$222M breakage, and tender fees Operational Tax Rate 22.5% - 23.5% • Cash Tax Rate ~15%
Slide 17: Q1 2023 Paid Down ~$176M of 2024 Debt; Annual Interest Reduced ~$9M
Q1 2023 Paid Down ~$176M of 2024 Debt; Annual Interest Reduced ~$9M 2024 Debt Reduction with Cash on Hand (originally $1.25B tower) • Since 2021, paid down ~$345M of 2024 Debt with Cash on Hand • Annual Interest Expense Reduction of ~$18M $1,200M $100 Paid down ~$100M in FY 2021 • All debt unsecured
Slide 18: Reconciliation of Net Income and Diluted EPS Excluding Special Items
Reconciliation of Net Income and Diluted EPS Excluding Special Items ($ in millions, except per-share amounts) Q1 2022 Q4 2022 Q1 2023 Net income $131 $111 $148 Diluted EPS $0.31 $0.26 $0.35 Special items: Restructuring and other charges $2 $44 $1 Discrete tax items: Tax litigation $— $— $20 Other d
Slide 19: Reconciliation of 2023 Operational Tax Rate
Reconciliation of 2023 Operational Tax Rate ($ in millions) Quarter ended March 31, 2023 Effective tax rate, Operational tax as reported Special items(1)(2) rate, as adjusted Income before income taxes $220 $7 $227 Provision for income taxes $72 $(20) $52 Tax rate 32.7% 22.9% Operational tax rate is
Slide 20: Calculation of Segment Information
Calculation of Segment Information ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Engine Products Third-party sales $ 631 $ 652 $ 683 $ 732 $ 2,698 $ 795 Inter-segment sales $ 1 $ 1 $ 1 $ 1 $ 4 $ 2 Provision for depreciation and amortization $ 31 $ 31 $ 31 $ 32 $ 125 $ 32 Segment Ad
Slide 21: Calculation of Segment Information (continued)
Calculation of Segment Information (continued) ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Engineered Structures Third-party sales $ 182 $ 185 $ 193 $ 230 $ 790 $ 207 Inter-segment sales $ 1 $ 1 $ 3 $ 1 $ 6 $ — Provision for depreciation and amortization $ 12 $ 12 $ 12 $ 12 $ 48
Slide 22: Calculation of Total Segment Adjusted EBITDA and Adjusted EBITDA Margin
Calculation of Total Segment Adjusted EBITDA and Adjusted EBITDA Margin ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Third-party sales – Engine Products $631 $652 $683 $732 $2,698 $795 Third-party sales – Fastening Systems $264 $277 $291 $285 $1,117 $312 Third-party sales – Engine
Slide 23: Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes
Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Income before income taxes $171 $183 $104 $148 $606 $220 Loss on debt redemption — 2 — — 2 1 Interest expense 58 57 57 57 229 57 Other expense (i
Slide 24: Reconciliation of Adjusted Corporate Expense Excluding Depreciation and Special Items
Reconciliation of Adjusted Corporate Expense Excluding Depreciation and Special Items ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Corporate expense $22 $25 $46 $26 $119 $29 Provision for depreciation and amortization 1 3 1 2 7 5 Adjusted Corporate expense excluding depreciation $
Slide 25: Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin Excluding Special Items and Incremental Margin
Reconciliation of Adjusted EBITDA and Adjusted EBITDA 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 Q4 2022 FY 2022 Q1 2023 Third-party sales $1,209 $1,195 $1,283 $1,285 $4,972 $1,324 $1,393 $1,433 $1,513 $5,663
Slide 26: Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Inflationary Cost Pass Through
Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Material and Other Inflationary Cost Pass Through ($ in millions) Q1 2023 Net income $148 Add: Provision for income taxes $72 Other expense, net 7 Loss on debt redemption 1 Interest expense, net 57 Restructuring and other charg
Slide 27: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow ($ in millions) Q1 2023 Cash provided from operations $23 Capital expenditures (64) Free cash flow $(41) The Accounts Receivable Securitization program remains unchanged at $250 outstanding. Free cash flow is a non-GAAP financial measure. Management believes that thi
Slide 28: Reconciliation of Net Debt
Reconciliation of Net Debt ($ in millions) March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 Short-term debt $3 $1 $1 $— $— Long-term debt, less amount due within one year 4,228 4,169 4,170 4,162 3,988 Total debt $4,231 $4,170 $4,171 $4,162 $3,988 Less: Cash, cash equi
Slide 29: Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items
Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items ($ in millions) Trailing-12 months ended December 31, 2022 March 31, 2023 Net income $ 469 $ 486 Add: Provision for income taxes $ 137 $ 169 Other expense, net 82 88 Loss on debt redemption 2 3 Interest expense, net 229 228 Restru
Slide 30: Calculation of Segment Markets Revenue
Calculation of Segment Markets Revenue Engine Fastening Engineered Forged ($ in millions) Products Systems Structures Wheels Total Segment First quarter ended March 31, 2022 Aerospace - Commercial $329 $148 $109 $— $586 Aerospace - Defense $137 $32 $57 $— $226 Commercial Transportation $— $53 $— $24
Slide 31: Diluted EPS Excluding Special Items
Diluted EPS Excluding Special items ($ in millions, except per-share amounts) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Net income $36 $106 $80 $74 $27 $77 $131 $147 $80 $111 $148 Diluted EPS $0.08 $0.24 $0.18 $0.17 $0.06 $0.18 $0.31 $0.35 $0.19 $0.26 $0
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