Howmet Aerospace Inc. · NYSE:HWM
Howmet Aerospace — Q1 2022 Earnings Presentation
30 slides from Howmet Aerospace's earnings presentation, May 3, 2022
Slide 1: First Quarter 2022 Earnings Call
First Quarter 2022 Earnings Call John Plant: Executive Chairman and Chief Executive Officer Ken Giacobbe: EVP and Chief Financial Officer May 3, 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: Q1 2022 Highlights
Q1 2022 Highlights Revenue and Profitability Excluding Special Items1 Q1 2021 Q4 2021 Q1 2022 Revenue $1.209B $1.285B $1.324B Adj EBITDA1 $275M $296M $300M Adj EBITDA Margin1 22.7% 23.0% 22.7% Adj Earnings Per Share2 $0.22 $0.30 $0.31 • Revenue up 10% YoY driven by Commercial Aerospace • Adj EBITDA1
Slide 5: Q1 2022 Revenue Up 10% YoY
Q1 2022 Revenue Up 10% YoY Revenue by Market Revenue by Market YoY Sequential (% of total) (% change) Aerospace - Commercial 29% 4% Industrial & Other 1 16% Aerospace - Defense (16%) 1% Aerospace - Commercial 44% Subtotal - Aerospace 12% 3% Commercial Transportation ~60% in 2019 23% ~40% in 2021 Com
Slide 6: Q1 2022: Strong Profit / Cash Performance, Adj EPS +41%, Share Repurchase $175M
Q1 2022: Strong Profit / Cash Performance, Adj EPS1 +41%, Share Repurchase $175M ▪ Healthy start with Adj EBITDA2 of $300M, exceeded Guidance midpoint Enhanced ▪ Adj EBITDA Margin2 of 22.7%, in line with Guidance midpoint Profitability ▪ Revenue up 10% YoY including ~$40M of material pass through ▪
Slide 7: Engine Products: Adj EBITDA Margin Up 270 bps YoY driven by Narrow Body
Engine Products: Adj EBITDA Margin Up 270 bps YoY driven by Narrow Body Revenue by Market +18% (% of total) $599M $605M $631M Aerospace - Commercial $534M $544M Industrial Aerospace - Defense 3rd Party & Other 26% Aerospace - Industrial & Other Revenue Commercial 52% Aerospace - Defense 22% Q1 2021
Slide 8: Fastening Systems: Headcount Adds for Growth; Defense Aerospace Decline
Fastening Systems: Headcount Adds for Growth; Defense Aerospace Decline Revenue by Market -3% (% of total) $272M $262M $254M $256M $264M Aerospace - Commercial Industrial Aerospace - Defense & Other Commercial Transportation 3rd Party 12% Commercial Industrial & Other Revenue Transportation 20% Aero
Slide 9: Engineered Structures: Narrow Body Recovery; Defense Aero Decline
Engineered Structures: Narrow Body Recovery; Defense Aero Decline Revenue by Market +3% (% of total) Aerospace - Commercial $199M $190M $176M $182M Industrial $160M & Other Aerospace - Defense 9% 3rd Party Industrial & Other Revenue Aerospace - Defense Aerospace - Commercial 31% 60% Q1 2021 Q2 2021
Slide 10: Forged Wheels: Material Price Up; Volumes Down/Customer Supply Chain Constraints
Forged Wheels: Material Price Up; Volumes Down/Customer Supply Chain Constraints Revenue by Region +9% (% of total) $229M $231M $234M $247M $227M North America Other 14% Europe 3rd Party Other North Revenue Europe America 30% 56% Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q1 2022 YoY -16% Segment $80M
Slide 11: Howmet's Commitment to ESG
Howmet’s Commitment to ESG 11
Slide 12: 2022 Guidance: EPS Increased; Revenue, EBITDA, EBITDA % Unchanged
2022 Guidance: EPS Increased; Revenue, EBITDA, EBITDA % Unchanged Q2 2022 Guidance FY 2022 Guidance What we expect in 2022 Low Midpoint High Low Midpoint High ▪ FY 2022 Revenue up ~13% vs. FY 2021, includes material pass through Revenue $1.350B $1.370B $1.390B $5.560B $5.640B $5.720B ▪ FY 2022 Adj E
Slide 13: Summary
Summary ▪ Revenue up 10% YoY; Adj EBITDA1 up 9% YoY; Adj Earnings Per Share2 up 41% YoY Revenue / Profit ▪ Healthy start with Adj EBITDA1 of $300M, exceeded Guidance midpoint Q1 2022 ▪ Adj EBITDA Margin1 22.7%, in line with Guidance midpoint ▪ Free Cash Flow3 essentially breakeven, including ~($85M)
Slide 14: rr) HOWMET
rr) HOWMET Lw.JJ AEROSPACE
Slide 15: Appendix
Appendix FP HOWMET UILJ AEROSPACE
Slide 16: 2022 Assumptions
2022 Assumptions Full Year 2022 2022 Comments • Adjusted EBITDA excluding special items Corporate Overhead ~$76M • Corporate Depreciation and Amortization ~$1M per quarter Depreciation and Amortization ~$270M Interest Expense ~$232M • Excludes debt issuance, breakage and tender fees Operational Tax
Slide 17: Reconciliation of Net Income and Diluted EPS Excluding Special Items
Reconciliation of Net Income and Diluted EPS Excluding Special Items ($ in millions, except per-share amounts) Q1 2021 Q4 2021 Q1 2022 Net income $80 $77 $131 Diluted EPS $0.18 $0.18 $0.31 Special items: Restructuring and other charges $9 $68 $2 Discrete tax items(1) $(1) $18 $(2) Other special item
Slide 18: Reconciliation of Operational Tax Rate
Reconciliation of Operational Tax Rate ($ in millions) Quarter ended March 31, 2022 As reported Special items (1)(2) As adjusted Income before income taxes $171 $4 $175 Provision for income taxes $40 $3 $43 Operational tax rate 23.4% 24.6% Operational tax rate is a non-GAAP financial measure. Manage
Slide 19: Calculation of Segment Information
Calculation of Segment Information ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Engine Products Third-party sales $ 781 $ 585 $ 485 $ 555 $ 2,406 $ 534 $ 544 $ 599 $ 605 $ 2,282 $ 631 Inter-segment sales $ 2 $ 1 $ 1 $ 1 $ 5 $ 1 $ 1 $ 1 $ 1 $
Slide 20: Calculation of Segment Information (continued)
Calculation of Segment Information (continued) ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Engineered Structures Third-party sales $ 275 $ 229 $ 206 $ 217 $ 927 $ 176 $ 160 $ 199 $ 190 $ 725 $ 182 Inter-segment sales $ 3 $ 2 $ 1 $ 1 $ 7 $ 1
Slide 21: Calculation of Total Segment Adjusted EBITDA and Margin
Calculation of Total Segment Adjusted EBITDA and Margin ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Third-party sales – Engine Products $781 $585 $485 $555 $2,406 $534 $544 $599 $605 $2,282 $631 Third-party sales – Fastening Systems $385 $3
Slide 22: Reconciliation of Total Segment to Consolidated Totals
Reconciliation of Total Segment to Consolidated Totals Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income (Loss) Before Income Taxes ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Income (loss) before income taxes $198 $(86
Slide 23: Adjusted Corporate Expense Excluding Depreciation and Special Items
Adjusted Corporate Expense Excluding Depreciation and Special Items ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Corporate expense $28 $10 $30 $33 $101 $22 Less: Provision for depreciation and amortization 3 2 3 1 $9 1 Adjusted Corporate expense excluding depreciation $25 $8 $27 $
Slide 24: 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 Net income $80 $74 $27 $77 $258 $131 Add: Provision (benefit) for income taxes $33 $36 $(4) $1 $66 $40 Other expense, net 4 8 1 6 19 1 Loss on d
Slide 25: Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Material Pass-through
Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Material Pass-through ($ in millions) Q1 2022 Net income $131 Add: Provision for income taxes $40 Other expense, net 1 Interest expense, net 58 Restructuring and other charges 2 Provision for depreciation and amortization 66 Ad
Slide 26: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow ($ in millions) Q1 2022 Cash provided from operations $55 Capital expenditures (62) Free cash flow $(7) The Accounts Receivable Securitization program remains unchanged at $250 outstanding. Free cash flow is a non-GAAP financial measure. Management believes that this
Slide 27: Reconciliation of Net Debt
Reconciliation of Net Debt ($ in millions) March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Short-term debt $489 $13 $14 $5 $3 Long-term debt, less amount due within one year 4,224 4,227 4,272 4,227 4,228 Total debt $4,713 $4,240 $4,286 $4,232 $4,231 Less: Cash, cash
Slide 28: Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items
Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items ($ in millions) Trailing-12 months ended December 31, 2021 March 31, 2022 Net income $ 258 $ 309 Add: Provision for income taxes 66 73 Other expense, net 19 16 Loss on debt redemption 146 146 Interest expense, net 259 245 Restruct
Slide 29: 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, 2021 Aerospace - Commercial $227 $148 $80 $— $455 Aerospace - Defense $151 $42 $77 $— $270 Commercial Transportation $— $46 $— $227
Slide 30: rr) HOWMET
rr) HOWMET Lw.JJ AEROSPACE