Howmet Aerospace Inc. · NYSE:HWM
Howmet Aerospace — Q1 2024 Earnings Presentation
30 slides from Howmet Aerospace's earnings presentation, May 2, 2024
Slide 1: First Quarter 2024 Earnings Call
First Quarter 2024 Earnings Call John Plant: Executive Chairman and Chief Executive Officer Ken Giacobbe: EVP and Chief Financial Officer May 2, 2024
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 2024 Highlights
Q1 2024 Highlights Revenue and Profitability Excluding Special Items1,2 Q1 2023 Q4 2023 Q1 2024 Q1 YoY Revenue $1.603B $1.731B $1.824B +14% Adj EBITDA1 $360M $398M $437M +21% Adj EBITDA Margin1 22.5% 23.0% 24.0% +150 bps Adj Operating Income1 $291M $330M $370M +27% Adj Operating Income Margin1 18.2%
Slide 5: Q1 2024 Revenue Up 14% YoY, Commercial Aerospace Up 23% YoY
Q1 2024 Revenue Up 14% YoY, Commercial Aerospace Up 23% YoY Revenue by Market Revenue by Market YoY Sequential (% of total) (% change) Commercial Aerospace 51% ~60% in 2019 Commercial Aerospace 23% 5% Defense Aerospace 12% 12% $1.824B Total Commercial Transportation 1% 5% Industrial & 15% Revenue Ot
Slide 6: Q1 2024: Revenue Up 14% YoY, Adj EBITDA Margin 24.0%, Adj EPS Up 36% YoY
Q1 2024: Revenue Up 14% YoY, Adj EBITDA Margin1 24.0%, Adj EPS2 Up 36% YoY ▪ Exceeded high-end of guidance on Revenue, Adj EBITDA1, Adj EBITDA Margin1 and Adj Earnings Per Share2 Enhanced ▪ Revenue up 14% YoY Profitability ▪ Adj EBITDA1 of $437M, up 21% YoY. Adj EBITDA Margin1 of 24.0%, up ~150 bps
Slide 7: Engine Products: Revenue Up 11% Q1 YoY; Adj EBITDA Margin 28.1%
Engine Products: Revenue Up 11% Q1 YoY; Adj EBITDA Margin 28.1% Q1 Revenue by Market +11% (% of total) $821M $852M $885M $795M $798M Industrial & Other 23% 3rd Party Revenue 56% Commercial Aerospace Defense Aerospace 21% Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q1 2024 YoY +17% Segment $249M + Commer
Slide 8: Fastening Systems: Revenue Up 25% Q1 YoY; Adj EBITDA Margin 23.7%
Fastening Systems: Revenue Up 25% Q1 YoY; Adj EBITDA Margin 23.7% Q1 Revenue by Market +25% (% of total) $389M $348M $360M Industrial & Other $312M $329M 10% 3rd Party Revenue Commercial Transportation 17% 63% Commercial Aerospace 10% Defense Aerospace Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q1 2024
Slide 9: Engineered Structures: Revenue Up 27% Q1 YoY; Adj EBITDA Margin 14.1%
Engineered Structures: Revenue Up 27% Q1 YoY; Adj EBITDA Margin 14.1% Q1 Revenue by Market +27% (% of total) $244M $262M $207M $227M Industrial & Other $200M 6% 3rd Party Revenue Defense Aerospace 21% 73% Commercial Aerospace Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q1 2024 YoY +23% Segment $37M + Co
Slide 10: Forged Wheels: Volume Up 2% Q1 YoY; Adj EBITDA Margin 28.5%
Forged Wheels: Volume Up 2% Q1 YoY; Adj EBITDA Margin 28.5% Q1 Revenue by Region ~flat (% of total) $289M $298M $285M $288M $275M Other 14% 3rd Party Revenue 54% North America Europe 32% Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q1 2024 YoY +4% Segment $82M + Volume up 2% Q1 YoY $79M $81M $77M $72M Ad
Slide 11: On Track to Achieve 2024 GHG Goal, Establishing New 2027 GHG Goal
On Track to Achieve 2024 GHG Goal, Establishing New 2027 GHG Goal Environmental Achievements | 2023 Reductions vs 2022 -33.6% Goal by 2027 -21.5% Goal by 2024 -20.0% Achieved to date GHG Emissions Reduction 13.6% 13.1% 11.7% 1.9% 2019 2023 2024 2027 GHG Intensity Energy Intensity Freshwater Hazardou
Slide 12: 2024 Guidance
2024 Guidance Q2 2024 Guidance FY 2024 Guidance What we expect in 2024 Low Baseline High Low Baseline High ▪ FY 2024 Revenue up ~10% vs. FY 2023 Revenue $1.825B $1.835B $1.845B $7.225B $7.300B $7.375B Baseline Change +$200M ▪ FY 2024 Adj EBITDA1 up ~16% vs. FY 2023 Adj EBITDA1 $435M $440M $445M $1.7
Slide 13: Summary
Summary ▪ Revenue of $1.82B, up 14% YoY, driven by Commercial Aerospace up 23% YoY Revenue / ▪ Adj EBITDA1 of $437M, up 21% YoY Profit Q1 2024 ▪ Adj EBITDA Margin1 of 24.0%, up ~150 bps YoY ▪ Adj Earnings Per Share2 of $0.57, up 36% YoY ▪ Record Q1 Free Cash Flow3 of $95M Cash Generation / ▪ Capital
Slide 14: rr) HOWMET
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Slide 15: Appendix
Appendix FP HOWMET UILJ AEROSPACE
Slide 16: 2024 Assumptions
2024 Assumptions Full Year 2024 2024 Comments Corporate Overhead1 ~$83M • Included in Adj EBITDA1 Previous: ~$80M Depreciation and Amortization ~$270M Interest Expense ~$200M • Excludes any potential debt issuance, breakage, and tender fees Operational Tax Rate 21.0% – 22.0% • Cash Tax Rate ~15% • ~
Slide 17: Robust Liquidity; Each Debt Tower Below 2024 Free Cash Flow Expectations
Robust Liquidity; Each Debt Tower Below 2024 Free Cash Flow Expectations • All Debt at Fixed Rates and Unsecured • Investment Grade by all Credit Rating Agencies • Undrawn Revolver of $1B • Established $1B Commercial Paper Program $1,000M $800M Jan 3.0% Feb $700 Feb May 5.9% 5.95% 6.875% $625 $625 $
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 2023 Q4 2023 Q1 2024 Net income $148 $236 $243 Diluted EPS $0.35 $0.57 $0.59 Special items: Restructuring and other charges(1) $1 $15 $— Loss on debt redemption and related costs 1 1 — P
Slide 19: Reconciliation of Operational Tax Rate
Reconciliation of Operational Tax Rate ($ in millions) Quarter ended March 31, 2024 Effective tax Operational rate, as Special tax rate, as reported items (1)(2) adjusted Income before income taxes $303 $1 $304 Provision for income taxes $60 $6 $66 Tax rate 19.8% 21.7% Operational tax rate is a non-
Slide 20: Calculation of Segment Markets Revenue
Calculation of Segment Markets Revenue Engine Fastening Engineered Forged ($ in millions) Products Systems Structures Wheels Total Segment First quarter ended March 31, 2023 Aerospace - Commercial $432 $170 $152 $— $754 Aerospace - Defense $163 $44 $44 $— $251 Commercial Transportation $— $63 $— $28
Slide 21: Calculation of Segment Information
Calculation of Segment Information ($ in millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Engine Products Third-party sales $ 795 $ 821 $ 798 $ 852 $ 3,266 $ 885 Inter-segment sales $ 2 $ 5 $ 5 $ 1 $ 13 $ 2 Provision for depreciation and amortization $ 32 $ 32 $ 33 $ 33 $ 130 $ 33 Segment A
Slide 22: Calculation of Segment Information (continued)
Calculation of Segment Information (continued) ($ in millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Engineered Structures Third-party sales $ 207 $ 200 $ 227 $ 244 $ 878 $ 262 Inter-segment sales $ — $ 1 $ — $ 2 $ 3 $ 1 Provision for depreciation and amortization $ 12 $ 12 $ 12 $ 11 $ 47
Slide 23: Calculation of Total Segment Adj. EBITDA and Adj. EBITDA Margin
Calculation of Total Segment Adj. EBITDA and Adj. EBITDA Margin ($ in millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Third-party sales – Engine Products $795 $821 $798 $852 $3,266 $885 Third-party sales – Fastening Systems $312 $329 $348 $360 $1,349 $389 Third-party sales – Engineered Str
Slide 24: Reconciliation of Total Segment Adj. EBITDA to Income Before Income Taxes
Reconciliation of Total Segment Adj. EBITDA to Income Before Income Taxes ($ in millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Income before income taxes $220 $243 $242 $270 $975 $303 Loss on debt redemption 1 — — 1 2 — Interest expense 57 55 54 52 218 49 Other expense (income), net 7 (13
Slide 25: Reconciliation of Adj. Corporate Exp. Excluding Depreciation & Special Items
Reconciliation of Adj. Corporate Exp. Excluding Depreciation & Special Items ($ in millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Corporate expense $29 $34 $24 $12 $99 $26 Provision for depreciation and amortization 5 1 1 3 10 2 Adjusted Corporate expense excluding depreciation $24 $33 $2
Slide 26: Reconciliation of Adj. EBITDA and Adj. EBITDA Margin Excluding Special Items and Incremental Margin
Reconciliation of Adj. EBITDA and Adj. EBITDA Margin Excluding Special Items and Incremental Margin ($ in millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Third-party sales $1,603 $1,648 $1,658 $1,731 $6,640 $1,824 Operating income $285 $285 $307 $326 $1,203 $369 Operating income margin 17.
Slide 27: Reconciliation of Adj. Operating Income & Margin Both Excluding Special Items
Reconciliation of Adj. Operating Income & Margin Both Excluding Special Items ($ in millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Third-party sales $1,603 $1,648 $1,658 $1,731 $6,640 $1,824 Operating income $285 $285 $307 $326 $1,203 $369 Operating income margin 17.8% 17.3% 18.5% 18.8% 1
Slide 28: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow ($ in millions) Q1 2023 Q1 2024 Cash provided from operations $23 $177 Capital expenditures (64) (82) Free cash flow $(41) $95 The Accounts Receivable Securitization program remains unchanged at $250 outstanding. Free cash flow is a non-GAAP financial measure. Manage
Slide 29: Reconciliation of Net Debt and Net Debt to Adjusted EBITDA Excluding Special Items
Reconciliation of Net Debt and Net Debt to Adjusted EBITDA Excluding Special Items ($ in millions) Trailing-12 months ended December 31, 2023 March 31, 2024 Net income $765 $860 Add: Provision for income taxes $210 $198 Other expense, net 8 18 Loss on debt redemption 2 1 Interest expense, net 218 21
Slide 30: rr) HOWMET
rr) HOWMET Lw.JJ AEROSPACE