Howmet Aerospace Inc. · NYSE:HWM
Howmet Aerospace — Q3 2023 Earnings Presentation
32 slides from Howmet Aerospace's earnings presentation, Nov 2, 2023
Slide 1: Third Quarter 2023 Earnings Call
Third Quarter 2023 Earnings Call John Plant: Executive Chairman and Chief Executive Officer Ken Giacobbe: EVP and Chief Financial Officer November 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: Q3 2023 Highlights
Q3 2023 Highlights Revenue and Profitability Excluding Special Items1,2 Q3 2022 Q2 2023 Q3 2023 Revenue $1.433B $1.648B $1.658B Adj EBITDA1 $323M $368M $382M Adj EBITDA Margin1 22.5% 22.3% 23.0% Adj Operating Income Margin1 18.0% 18.3% 18.9% Adj Earnings Per Share2 $0.36 $0.44 $0.46 • Q3 2023 Revenu
Slide 5: Q3 2023 Revenue Up 16% YoY, Commercial Aerospace Up 23% YoY
Q3 2023 Revenue Up 16% YoY, Commercial Aerospace Up 23% YoY Revenue by Market Revenue by Market YoY Sequential (% of total) (% change) Industrial Aerospace - Commercial 23% 6% & Other ~60% in 2019 15%1 Aerospace - Defense 13% (4%) Aerospace - Commercial Commercial Subtotal - Aerospace 20% 4% Transpo
Slide 6: Q3 2023: Revenue Up 16% YoY, Adj EBITDA Margin 23.0%, Adj EPS Up 28% YoY
Q3 2023: Revenue Up 16% YoY, Adj EBITDA Margin1 23.0%, Adj EPS2 Up 28% YoY ▪ Revenue up 16% YoY, exceeding high end of Guidance; includes inflationary cost pass through ~$15M ▪ Adj EBITDA1 of $382M, up 18% YoY, exceeding high end of Guidance; Net Headcount up ~645 in Q3, up ~1,510 Q3 YTD Enhanced ▪
Slide 7: Engine Products: Revenue +17% YoY; Adj EBITDA Margin 27.4%
Engine Products: Revenue +17% YoY; Adj EBITDA Margin 27.4% Revenue by Market +17% (% of total) $795M $821M $798M Aerospace - Commercial $732M $631M $652M $683M Industrial Aerospace - Defense 3rd Party & Other 23% Industrial & Other Revenue Aerospace - Aerospace Commercial - Defense 56% 21% Q1 2022 Q
Slide 8: Fastening Systems: Revenue +20% YoY; Adj EBITDA Margin 21.8%
Fastening Systems: Revenue +20% YoY; Adj EBITDA Margin 21.8% Revenue by Market +20% (% of total) Aerospace - Commercial $329M $348M $291M $312M Industrial $264M $277M $285M & Other Aerospace - Defense Commercial Transportation 3rd Party 9% Commercial Industrial & Other Revenue Transportation 19% Aer
Slide 9: Engineered Structures: Revenue +18% YoY; Adj EBITDA Margin 13.2%
Engineered Structures: Revenue +18% YoY; Adj EBITDA Margin 13.2% Revenue by Market +18% (% of total) Aerospace - Commercial $230M $227M $207M $200M Industrial $182M $185M $193M & Other Aerospace - Defense 7% 3rd Party Aerospace - Defense Industrial & Other Revenue 20% Aerospace - Commercial 73% Q1 2
Slide 10: Forged Wheels: Volume Up 13% YoY; Adj EBITDA Margin 27.0%
Forged Wheels: Volume Up 13% YoY; Adj EBITDA Margin 27.0% Revenue by Region +7% (% of total) $279M $266M $266M $289M $298M $285M North America $247M Other 14% Europe 3rd Party North Other Revenue America Europe 55% 31% Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q3 2023 YoY +20% Segment
Slide 11: Debt Reduction ~$545M of 2024 Bonds with Cash on Hand since 2021
Debt Reduction ~$545M of 2024 Bonds with Cash on Hand since 2021 • Q3 YTD 2023 Debt Reduction ~$376M, Annualized Interest Expense savings ~$19M • FY 2022 Debt Reduction ~$69M, Annualized Interest Expense savings ~$4M Paid down ~$100M • FY 2021 Debt Reduction ~$100M, Annualized Interest Expense savin
Slide 12: 2023 Guidance
2023 Guidance Q4 2023 Guidance FY 2023 Guidance What we expect in 2023 Low Baseline High Low Baseline High ▪ FY 2023 Revenue up ~16% vs. FY 2022, Revenue $1.620B $1.635B $1.650B $6.530B $6.545B $6.560B includes inflationary cost pass through ~$90M Baseline Change +$105M ▪ FY 2023 Adj EBITDA1 up ~16%
Slide 13: Summary
Summary ▪ Revenue of ~$1.66B, up 16% YoY driven by Commercial Aero up 23%; inflationary cost pass through ~$15M Revenue / ▪ Adj EBITDA1 of $382M, up 18% YoY Profit Q3 2023 ▪ Adj EBITDA Margin1 of 23.0%; 23.3% excluding YoY inflationary cost pass through ▪ Adj Earnings Per Share2 of $0.46 up 28% YoY
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Slide 15: Appendix
Appendix FP HOWMET UILJ AEROSPACE
Slide 16: 2023 Assumptions
2023 Assumptions Full Year 2023 2023 Comments Corporate Overhead ~$80M • Included in Adjusted EBITDA1 Depreciation and Amortization ~$270M Interest Expense ~$220M • Excludes any potential debt issuance, breakage, and tender fees Operational Tax Rate 22.0% – 23.0% • Cash Tax Rate ~15% Previous: 22.5%
Slide 17: Reconciliation of Net Income and Diluted EPS Excluding Special Items
Reconciliation of Net Income and Diluted EPS Excluding Special Items ($ in millions, except per-share amounts) Q3 2022 Q2 2023 Q3 2023 YTD 2023 Net income $80 $193 $188 $529 Diluted EPS $0.19 $0.46 $0.45 $1.27 Special items: Restructuring and other charges $4 $3 $4 $8 Loss on debt redemption and rel
Slide 18: Reconciliation of Operational Tax Rate
Reconciliation of Operational Tax Rate ($ in millions) Quarter ended September 30, 2023 Nine months ended September 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 Inc
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 Q3 2023 Engine Products Third-party sales $ 631 $ 652 $ 683 $ 732 $ 2,698 $ 795 $ 821 $ 798 Inter-segment sales $ 1 $ 1 $ 1 $ 1 $ 4 $ 2 $ 5 $ 5 Provision for depreciation and amortization $ 31
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 Q3 2023 Engineered Structures Third-party sales $ 182 $ 185 $ 193 $ 230 $ 790 $ 207 $ 200 $ 227 Inter-segment sales $ 1 $ 1 $ 3 $ 1 $ 6 $ — $ 1 $ — Provision for depreciation and am
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 Q3 2023 Third-party sales – Engine Products $631 $652 $683 $732 $2,698 $795 $821 $798 Third-party sales – Fastening Systems $264 $277 $291 $285 $1,117 $312
Slide 22: Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes
Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Q3 2023 Income before income taxes $171 $183 $104 $148 $606 $220 $243 $242 Loss on debt redemption — 2 — — 2 1 — — Interest expense 58 57
Slide 23: Reconciliation of Adjusted Corporate Expense Excluding Depreciation and Special Items
Reconciliation of Adjusted Corporate Expense Excluding Depreciation and Special Items ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Q3 2023 Corporate expense $22 $25 $46 $26 $119 $29 $34 $24 Provision for depreciation and amortization 1 3 1 2 7 5 1 1 Adjusted Corporate expe
Slide 24: Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin Excluding Special Items and Incremental Margin
Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin Excluding Special Items and Incremental Margin ($ 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 Q3 2023 Third-party sales $1,209 $1,195 $1,283 $1,285 $4,972 $1,324 $1,393 $1,43
Slide 25: Reconciliation of Adjusted Operating Income Excluding Special Items
Reconciliation of Adjusted Operating Income Excluding Special Items and Adjusted Operating Income Margin Excluding Special Items ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Q3 2023 Third-party sales $1,324 $1,393 $1,433 $1,513 $5,663 $1,603 $1,648 $1,658 Operating income
Slide 26: Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Inflationary Cost Pass Through
Reconciliation of Adjusted EBITDA and Margin Excluding Special Items and Material and Other Inflationary Cost Pass Through ($ in millions) Q1 2023 Q2 2023 Q3 2023 Net income $148 $193 $188 Add: Provision for income taxes $72 $50 $54 Other expense (income), net 7 (13) 11 Loss on debt redemption 1 — —
Slide 27: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow ($ in millions) Q1 2023 Q2 2023 Q3 2023 YTD 2023 Cash provided from operations $23 $229 $191 $443 Capital expenditures (64) (41) (59) (164) Free cash flow $(41) $188 $132 $279 The Accounts Receivable Securitization program remains unchanged at $250 outstanding. Free
Slide 28: Reconciliation of Net Debt
Reconciliation of Net Debt ($ in millions) September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 Short-term debt $1 $— $— $— $— Long-term debt, less amount due within one year 4,170 4,162 3,988 3,989 3,794 Total debt $4,171 $4,162 $3,988 $3,989 $3,794 Less: Cash, cash
Slide 29: Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items
Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items ($ in millions) Trailing-12 months ended June 30, 2023 September 30, 2023 Net income $ 532 $ 640 Add: Provision for income taxes $ 183 $ 213 Other expense, net 76 20 Loss on debt redemption 1 1 Interest expense, net 226 223 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 Third quarter ended September 30, 2022 Aerospace - Commercial $388 $156 $124 $— $668 Aerospace - Defense $124 $43 $56 $— $223 Commercial Transportation $— $63 $—
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 Q2 2023 Q3 2023 Net income $36 $106 $80 $74 $27 $77 $131 $147 $80 $111 $148 $193 $188 Diluted EPS $0.08 $0.24 $0.18 $0.17 $0.06 $0.18 $0
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