Howmet Aerospace Inc. · NYSE:HWM
Howmet Aerospace — Q4 2022 Earnings Presentation
33 slides from Howmet Aerospace's earnings presentation, Feb 14, 2023
Slide 1: Fourth Quarter and Full Year 2022 Earnings Call
Fourth Quarter and Full Year 2022 Earnings Call John Plant: Executive Chairman and Chief Executive Officer Ken Giacobbe: EVP and Chief Financial Officer February 14, 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: 2022 Highlights
2022 Highlights Revenue and Profitability Excluding Special Items1 Q4 2021 Q3 2022 Q4 2022 FY 2021 FY 2022 Revenue $1.285B $1.433B $1.513B $4.972B $5.663B Adj EBITDA1 $296M $323M $336M $1,135M $1,276M Adj EBITDA Margin1 23.0% 22.5% 22.2% 22.8% 22.5% Adj Earnings Per Share2 $0.30 $0.36 $0.38 $1.01 $1
Slide 5: Q4 2022 Revenue Up 18% YoY, driven by Commercial Aero Up 29%
Q4 2022 Revenue Up 18% YoY, driven by Commercial Aero Up 29% Q4 2022 Revenue by Market Revenue by Market Q4 FY22 (% of total) (% change) YoY YoY Industrial Aerospace - Commercial 29% 28% & Other 14% 1 ~60% in 2019 Aerospace - Defense 13% (3%) Commercial Aerospace - Transportation Commercial Subtotal
Slide 6: Six Consecutive Quarters of Revenue, Adj EBITDA, and Adj EPS Growth
Six Consecutive Quarters of Revenue, Adj EBITDA, and Adj EPS Growth ▪ FY Revenue $5.7B up 14% YoY, up 9% YoY excluding material pass through; Adj EBITDA1 of $1,276M, up 12% YoY Enhanced ▪ Adj EBITDA Margin1 of 22.5%; 23.5% excluding YoY material cost pass through, YoY Incremental Margin of ~30% Prof
Slide 7: Engine Products: Revenue +21% YoY driven by Narrow Body
Engine Products: Revenue +21% YoY driven by Narrow Body, Adj EBITDA Margin up 110 bps YoY Revenue by Market +21% (% of total) $683M $732M Aerospace - Commercial $599M $605M $631M $652M $534M $544M Industrial Aerospace - Defense 3rd Party & Other 24% Industrial & Other Revenue Aerospace - Commercial
Slide 8: Fastening Systems: Revenue +11% YoY driven by Narrow Body
Fastening Systems: Revenue +11% YoY driven by Narrow Body, Adj EBITDA Margin 20.4% Revenue by Market +11% (% of total) Aerospace - Commercial $272M $262M $254M $256M $264M $277M $291M $285M Industrial Aerospace - Defense & Other Commercial Transportation 3rd Party 9% Commercial Industrial & Other Tr
Slide 9: Engineered Structures: Revenue +21% YoY due to Share Gain
Engineered Structures: Revenue +21% YoY due to Share Gain, Adj EBITDA Margin 14.8% Revenue by Market +21% (% of total) Aerospace - Commercial $230M Industrial $199M $190M $182M $185M $193M Aerospace - Defense $176M $160M & Other 6% 3rd Party Aerospace - Defense Industrial & Other Revenue 27% Aerospa
Slide 10: Forged Wheels: Volume Up 3% YoY; Adj EBITDA Margin 27.1%
Forged Wheels: Volume Up 3% YoY; Adj EBITDA Margin 27.1% Revenue by Region +14% (% of total) $279M $266M $266M North America $247M $227M $229M $231M $234M Other 13% Europe 3rd Party Other Revenue Europe 27% North America 60% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2021 2021 2021 2021 2022 2022 2022 2022 Q4 2022 YoY
Slide 11: 2023 Guidance
2023 Guidance Q1 2023 Guidance FY 2023 Guidance What we expect in 2023 Low Midpoint High Low Midpoint High ▪ FY 2023 Revenue up ~8% vs. FY 2022 Revenue $1.475B $1.500B $1.525B $6.000B $6.100B $6.200B ▪ FY 2023 Adj EBITDA1 up ~8% vs. FY 2022 Adj EBITDA1 $325M $335M $345M $1.335B $1.375B $1.415B Adj E
Slide 12: Summary
Summary ▪ FY Revenue $5.7B up 14% YoY driven by Commercial Aero up 28%; includes material cost pass through ~$225M Revenue / ▪ Adj EBITDA1 of $1,276M, up 12% YoY Profit FY 2022 ▪ Adj EBITDA Margin1 22.5%; 23.5% excluding YoY material cost pass through, YoY Incremental Margin of ~30% ▪ Adj Earnings P
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Slide 14: Appendix
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Slide 15: 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 repurchases, Interest Expense ~$227M breakage, and tender fees Operational Tax Rate 22.5% - 23.5% • Cash Tax Rate ~15
Slide 16: Reconciliation of Net Income and Diluted EPS Excluding Special Items
Reconciliation of Net Income and Diluted EPS Excluding Special Items ($ in millions, except per-share amounts) Q4 2021 Q3 2022 Q4 2022 FY 2021 FY 2022 Net income $77 $80 $111 $258 $469 Diluted EPS $0.18 $0.19 $0.26 $0.59 $1.11 Special items: Restructuring and other charges: Pension and other post-re
Slide 17: Reconciliation of 2022 Operational Tax Rate
Reconciliation of 2022 Operational Tax Rate ($ in millions) Quarter ended December 31, 2022 Year ended December 31, 2022 Effective tax rate, Operational tax Effective tax rate, Operational tax as reported Special items(1)(2) rate, as adjusted as reported Special items(1)(2) rate, as adjusted Income
Slide 18: Reconciliation of 2021 Operational Tax Rate
Reconciliation of 2021 Operational Tax Rate ($ in millions) Year ended December 31, 2021 Effective tax rate, as Operational tax rate, as reported Special items (1)(2) adjusted Income from continuing operations before income taxes $324 $265 $589 Provision for income taxes $66 $81 $147 Tax rate 20.4%
Slide 19: Reconciliation of 2020 Operational Tax Rate
Reconciliation of 2020 Operational Tax Rate ($ in millions) Year ended December 31, 2020 Effective tax rate, as Operational tax rate, as reported Special items (1)(2) adjusted Income from continuing operations before income taxes $171 $317 $488 Provision for income taxes $(40) $174 $134 Tax rate (23
Slide 20: Calculation of Segment Information
Calculation of Segment Information ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Engine Products Third-party sales $ 534 $ 544 $ 599 $ 605 $ 2,282 $ 631 $ 652 $ 683 $ 732 $ 2,698 Inter-segment sales $ 1 $ 1 $ 1 $ 1 $ 4 $ 1 $ 1 $ 1 $ 1 $ 4 Provision f
Slide 21: 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 Q4 2022 FY 2022 Engineered Structures Third-party sales $ 176 $ 160 $ 199 $ 190 $ 725 $ 182 $ 185 $ 193 $ 230 $ 790 Inter-segment sales $ 1 $ 2 $ 1 $ 2 $ 6 $ 1 $ 1 $ 3 $ 1 $
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 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Third-party sales – Engine Products $534 $544 $599 $605 $2,282 $631 $652 $683 $732 $2,698 Third-party sales – Fastening Systems $272
Slide 23: Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes
Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Income before income taxes $113 $110 $23 $78 $324 $171 $183 $104 $148 $606 Loss on debt redemption — 23 118 5 146
Slide 24: Reconciliation of Adjusted Corporate Expense Excluding Depreciation and Special Items
Reconciliation of Adjusted Corporate Expense Excluding Depreciation and Special Items ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Corporate expense $28 $10 $30 $33 $101 $22 $25 $46 $26 $119 Provision for depreciation and amortization 3 2 3 1 9 1 3
Slide 25: Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Incremental Margin
Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin Excluding Special Items and Incremental Margin ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Third-party sales $1,209 $1,195 $1,283 $1,285 $4,972 $1,324 $1,393 $1,433 $1,513 $5,663 Operatin
Slide 26: Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Material Cost Pass Through
Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin Excluding Special Items and Material Cost Pass Through ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Net income $131 $147 $80 $111 $469 Add: Provision for income taxes $40 $36 $24 $37 $137 Other expense (income), net 1 (1) 67 15
Slide 27: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 YTD 2022 Cash provided from operations $55 $158 $65 $455 $733 Capital expenditures (62) (44) (42) (45) (193) Free cash flow $(7) $114 $23 $410 $540 The Accounts Receivable Securitization program remains unchanged at $25
Slide 28: Reconciliation of Net Debt
Reconciliation of Net Debt ($ in millions) December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Short-term debt $5 $3 $1 $1 $— Long-term debt, less amount due within one year 4,227 4,228 4,169 4,170 4,162 Total debt $4,232 $4,231 $4,170 $4,171 $4,162 Less: Cash, cash e
Slide 29: Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items
Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items Trailing-12 months ended ($ in millions) September 30, 2022 December 31, 2022 Net income $ 435 $ 469 Add: Provision for income taxes $ 101 $ 137 Other expense, net 73 82 Loss on debt redemption 7 2 Interest expense, net 230 229 Re
Slide 30: Calculation of Segment Markets Revenue
Calculation of Segment Markets Revenue ($ in millions) Engine Fastening Engineered Forged Products Systems Structures Wheels Total Segment Fourth quarter ended December 31, 2021 Aerospace - Commercial $319 $134 $110 $— $563 Aerospace - Defense $121 $38 $64 $— $223 Commercial Transportation $— $54 $—
Slide 31: Reconciliation of Adjusted Free Cash Flow including Pre-Separation Allocations
Reconciliation of Adjusted Free Cash Flow including Pre-Separation Allocations as a Percentage of Income from Continuing Operations Excluding Special Items and Allocation Adjustments ($ in millions) FY 2020 FY 2021 FY 2022 Cash provided from operations $9 $449 $733 Cash receipts from sold receivable
Slide 32: Reconciliation of Net Income and Diluted EPS Excluding Special Items
Reconciliation of Net Income and Diluted EPS Excluding Special Items ($ in millions, except per-share amounts) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Net income $36 $106 $80 $74 $27 $77 $131 $147 $80 $111 Diluted EPS $0.08 $0.24 $0.18 $0.17 $0.06 $0.18 $0.31
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