Howmet Aerospace Inc. · NYSE:HWM
Howmet Aerospace — Q2 2023 Earnings Presentation
31 slides from Howmet Aerospace's earnings presentation, Aug 1, 2023
Slide 1: Second Quarter 2023 Earnings Call
Second Quarter 2023 Earnings Call John Plant: Executive Chairman and Chief Executive Officer Ken Giacobbe: EVP and Chief Financial Officer August 1, 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: Q2 2023 Highlights
Q2 2023 Highlights Revenue and Profitability Excluding Special Items1 Q2 2022 Q1 2023 Q2 2023 Revenue $1.393B $1.603B $1.648B Adj EBITDA1 $317M $360M $368M Adj EBITDA Margin1 22.8% 22.5% 22.3% Adj Earnings Per Share2 $0.35 $0.42 $0.44 • Q2 2023 Revenue up 18% YoY, driven by Commercial Aerospace up 2
Slide 5: Q2 2023 Revenue Up 18% YoY, Commercial Aerospace Up 23% YoY
Q2 2023 Revenue Up 18% YoY, Commercial Aerospace Up 23% YoY Revenue by Market Revenue by Market YoY Sequential (% of total) (% change) Industrial Aerospace - Commercial 23% 2% & Other ~60% in 2019 15% 1 Aerospace - Defense 17% 4% Aerospace - Commercial Subtotal - Aerospace 22% 3% Commercial 47% Tran
Slide 6: Q2 2023: Revenue Up 18% YoY, Adj EBITDA Margin 22.3%, Adj EPS Up 26% YoY
Q2 2023: Revenue Up 18% YoY, Adj EBITDA Margin1 22.3%, Adj EPS2 Up 26% YoY Revenue up 18% YoY, exceeding high end of Guidance; includes inflationary cost pass through ~$25M Adj EBITDA1 of $368M, up 16% YoY, exceeding high end of Guidance; Net Headcount up ~380 in Q2, up ~865 YTD Enhanced Adj E
Slide 7: Engine Products: Revenue +26% YoY; Adj EBITDA Margin 27.2%
Engine Products: Revenue +26% YoY; Adj EBITDA Margin 27.2% Revenue by Market +26% (% of total) $795M $821M Aerospace - Commercial $683M $732M $631M $652M Industrial Aerospace - Defense 3rd Party & Other 25% Industrial & Other Revenue Aerospace - Commercial Aerospace 54% - Defense 21% Q1 2022 Q2 2022
Slide 8: Fastening Systems: Revenue +19% YoY; Adj EBITDA Margin 19.5%
Fastening Systems: Revenue +19% YoY; Adj EBITDA Margin 19.5% Revenue by Market +19% (% of total) $312M $329M Aerospace - Commercial $277M $291M $285M Industrial Aerospace - Defense $264M & Other Commercial Transportation 3rd Party 11% Commercial Industrial & Other Revenue Transportation 19% Aerospac
Slide 9: Engineered Structures: Revenue +8% YoY; Adj EBITDA Margin 10.0%
Engineered Structures: Revenue +8% YoY; Adj EBITDA Margin 10.0% Revenue by Market +8% (% of total) Aerospace - Commercial $230M $193M $207M $200M Industrial $182M $185M & Other Aerospace - Defense 3rd Party 8% Aerospace Industrial & Other - Defense Revenue 21% Aerospace - Commercial 71% Q1 2022 Q2 2
Slide 10: Forged Wheels: Volume Up 6% YoY; Adj EBITDA Margin 27.2%
Forged Wheels: Volume Up 6% YoY; Adj EBITDA Margin 27.2% Revenue by Region +7% (% of total) $279M $289M $298M $247M $266M $266M Other North America 13% Europe 3rd Party North Other Revenue America Europe 55% 32% Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q2 2023 YoY +8% Segment $81M + Volumes u
Slide 11: Debt Reduction Actions Continue
Debt Reduction Actions Continue • In July 2023, Issued a Notice to Redeem $200M of 2024 Notes • Expected Annualized Interest Expense savings ~$10M • In Q1 2023, Debt Repurchased ~$176M, Annualized Interest Expense savings ~$9M Expect balance of • All Long-Term Debt unsecured at fixed rates ~$705M up
Slide 12: 2023 Guidance
2023 Guidance Q3 2023 Guidance FY 2023 Guidance What we expect in 2023 Low Baseline High Low Baseline High FY 2023 Revenue up ~14% vs. FY 2022, Revenue $1.580B $1.590B $1.600B $6.400B $6.440B $6.470B includes inflationary cost pass through ~$110M Baseline Change +$190M FY 2023 Adj EBITDA1 up ~13
Slide 13: Summary
Summary Revenue of ~$1.65B, up 18% YoY driven by Commercial Aero up 23%; inflationary cost pass through ~$25M Revenue / Adj EBITDA1 of $368M, up 16% YoY Profit Q2 2023 Adj EBITDA Margin1 of 22.3%; 22.7% excluding YoY inflationary cost pass through Adj Earnings Per Share2 of $0.44 up 26% YoY
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Slide 15: Appendix
Appendix fri HOWMET UJ AEROSPACE
Slide 16: 2023 Assumptions
2023 Assumptions Full Year 2023 2023 Comments Corporate Overhead ~$80M • Adjusted EBITDA1 Depreciation and Amortization ~$270M • Excludes any potential debt issuance, breakage, and tender fees Interest Expense ~$220M • Reduced for $200M Debt Reduction announced in July Operational Tax Rate 22.5% - 2
Slide 17: Reconciliation of Net Income and Diluted EPS Excluding Special Items
Reconciliation of Net Income and Diluted EPS Excluding Special Items ($ in millions, except per-share amounts) Q2 2022 Q1 2023 Q2 2023 YTD 2023 Net income $147 $148 $193 $341 Diluted EPS $0.35 $0.35 $0.46 $0.81 Special items: $12 favorable impact to Restructuring and other charges $6 $1 $3 $4 Loss o
Slide 18: Reconciliation of Operational Tax Rate
Reconciliation of Operational Tax Rate ($ in millions) Quarter ended June 30, 2023 Six months ended June 30, 2023 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 before
Slide 19: Calculation of Segment Information
Calculation of Segment Information ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Engine Products Third-party sales $ 631 $ 652 $ 683 $ 732 $ 2,698 $ 795 $ 821 Inter-segment sales $ 1 $ 1 $ 1 $ 1 $ 4 $ 2 $ 5 Provision for depreciation and amortization $ 31 $ 31 $ 31 $ 32 $ 1
Slide 20: Calculation of Segment Information (continued)
Calculation of Segment Information (continued) ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Engineered Structures Third-party sales $ 182 $ 185 $ 193 $ 230 $ 790 $ 207 $ 200 Inter-segment sales $ 1 $ 1 $ 3 $ 1 $ 6 $ — $ 1 Provision for depreciation and amortization $ 12 $
Slide 21: 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 Q2 2023 Third-party sales – Engine Products $631 $652 $683 $732 $2,698 $795 $821 Third-party sales – Fastening Systems $264 $277 $291 $285 $1,117 $312 $329 Third-pa
Slide 22: Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes
Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Income before income taxes $171 $183 $104 $148 $606 $220 $243 Loss on debt redemption — 2 — — 2 1 — Interest expense 58 57 57 57 229 57 5
Slide 23: Reconciliation of Adjusted Corporate Expense Excluding Depreciation and Special Items
Reconciliation of Adjusted Corporate Expense Excluding Depreciation and Special Items ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Corporate expense $22 $25 $46 $26 $119 $29 $34 Provision for depreciation and amortization 1 3 1 2 7 5 1 Adjusted Corporate expense excluding
Slide 24: Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin Excluding Special Items and Incremental Margin
Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin Excluding Special Items and Incremental Margin ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Third-party sales $1,209 $1,195 $1,283 $1,285 $4,972 $1,324 $1,393 $1,433 $1,513
Slide 25: Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Inflationary Cost Pass Through
Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Material and Other Inflationary Cost Pass Through ($ in millions) Q1 2023 Q2 2023 Net income $148 $193 Add: Provision for income taxes $72 $50 Other expense (income), net 7 (13) Loss on debt redemption 1 — Interest expense, net
Slide 26: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow ($ in millions) Q1 2023 Q2 2023 YTD 2023 Cash provided from operations $23 $229 $252 Capital expenditures (64) (41) (105) Free cash flow $(41) $188 $147 The Accounts Receivable Securitization program remains unchanged at $250 outstanding. Free cash flow is a non-GAAP
Slide 27: Reconciliation of Net Debt
Reconciliation of Net Debt ($ in millions) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Short-term debt $1 $1 $— $— $— Long-term debt, less amount due within one year 4,169 4,170 4,162 3,988 3,989 Total debt $4,170 $4,171 $4,162 $3,988 $3,989 Less: Cash, cash equiv
Slide 28: Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items
Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items ($ in millions) Trailing-12 months ended March 31, 2023 June 30, 2023 Net income $ 486 $ 532 Add: Provision for income taxes $ 169 $ 183 Other expense, net 88 76 Loss on debt redemption 3 1 Interest expense, net 228 226 Restructur
Slide 29: Calculation of Segment Markets Revenue
Calculation of Segment Markets Revenue Engine Fastening Engineered Forged ($ in millions) Products Systems Structures Wheels Total Segment Second quarter ended June 30, 2022 Aerospace - Commercial $362 $155 $108 $— $625 Aerospace - Defense $123 $37 $63 $— $223 Commercial Transportation $— $53 $— $27
Slide 30: Diluted EPS Excluding Special Items
Diluted EPS Excluding Special items ($ 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 Q2 2023 Net income $36 $106 $80 $74 $27 $77 $131 $147 $80 $111 $148 $193 Diluted EPS $0.08 $0.24 $0.18 $0.17 $0.06 $0.18 $0.31 $0.35 $
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