Slide 1: Third Quarter 2021 Earnings Call
Third Quarter 2021 Earnings Call John Plant: Executive Chairman and Chief Executive Officer Ken Giacobbe: EVP and Chief Financial Officer November 4, 2021
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) On April 1, 2020, Arconic Inc. completed the separation of its businesses into two independent, publicly-traded companies: Howmet Aerospace Inc. (the new name for Arconic Inc.) and Arconic Corporation. The historical results of the businesses that comprise Arconic C
Slide 4: Q3 2021 Highlights
Q3 2021 Highlights Revenue and Profitability Excluding Special Items1 Q3 2020 Q2 2021 Q3 2021 Revenue $1.134B $1.195B $1.283B Adj EBITDA1 $168M $272M $292M Adj EBITDA Margin1 14.8% 22.8% 22.8% Adj Operating Income2 $100M $205M $224M Adj Earnings Per Share3 $0.03 $0.22 $0.27 • Q3 2021 Revenue up 7% S
Slide 5: Q3 2021 at Expectations; Revenue Growth, Margin Expansion, Solid Cash Flow
Q3 2021 at Expectations; Revenue Growth, Margin Expansion, Solid Cash Flow Q3 2021 Revenue up 13% YoY and 7% Sequentially Commercial Aerospace up 15% YoY and 16% Sequentially driven by Engine Products Markets Commercial Transportation up 38% YoY. Sequential Growth impacted by customer supply c
Slide 6: Q3 2021 Adjusted EBITDA Margin 22.8%; Up 800 Basis Points YoY
Q3 2021 Adjusted EBITDA Margin 22.8%1; Up 800 Basis Points YoY Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q3 2021 Revenue Growth driven by Commercial 3rd Party Revenue $1,253M $1,134M $1,238M $1,209M $1,195M $1,283M Aerospace, Commercial Transportation, and Industrial Gas Turbine Q3 2021 at
Slide 7: Q3 2021 Revenue Up 13% YoY and Up 7% Sequentially
Q3 2021 Revenue Up 13% YoY and Up 7% Sequentially Revenue by Market Revenue by Market YoY Sequential (% of total) (% change) Aerospace - Commercial 15% 16% Industrial & Other1 17% Aerospace - Defense (11%) 3% Aerospace - Commercial 42% Subtotal - Aerospace 6% 12% Commercial Transportation 23% Commer
Slide 8: Engine Products: Commercial Aerospace Returning; Headcount Adds for Growth
Engine Products: Commercial Aerospace Returning; Headcount Adds for Growth Revenue by Market (% of total) $781M +24% Aerospace - Commercial $585M $555M $599M $534M $544M 3rd Party Aerospace - Defense $485M Industrial & Other Revenue 28% Aerospace - Commercial Industrial & Other 50% Aerospace - Defen
Slide 9: Fastening Systems: Commercial Aerospace Decline ~25%; Cost Reductions Continue
Fastening Systems: Commercial Aerospace Decline ~25%; Cost Reductions Continue Revenue by Market (% of total) Aerospace - Commercial $385M -6% Industrial $326M & Other Aerospace - Defense 3rd Party $271M $263M $272M $262M $254M 12% Commercial Transportation Industrial & Other Revenue Commercial Tran
Slide 10: Engineered Structures: Commercial and Defense Aerospace Flat; Cost Reductions
Engineered Structures: Commercial and Defense Aerospace Flat; Cost Reductions Revenue by Market (% of total) $275M -3% Industrial Aerospace - Commercial $229M $217M Aerospace - Defense $206M $199M & Other 3rd Party $176M $160M 8% Industrial & Other Revenue Aerospace Aerospace - - Defense 33% Commerc
Slide 11: Forged Wheels: Market Recovery Moderated by Supply Chain Constraints
Forged Wheels: Market Recovery Moderated by Supply Chain Constraints Revenue by Region (% of total) +34% North America $227M $229M $231M $191M $203M Other Europe 3rd Party $172M 15% Other Revenue $113M North America Europe 59% 26% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q3 2021 YoY +
Slide 12: Annualized Interest Expense Reduced ~$70M; Net Debt-to-LTM EBITDA Improves to 3.2x
Annualized Interest Expense Reduced ~$70M; Net Debt-to-LTM EBITDA Improves to 3.2x1 • Debt Actions: Repurchased • Paid down ~$835M Gross Debt with cash on hand2 $100M with • Tendered $600M of 6.875% Notes due 2025 Cash on Hand2 Oct • Issued $700M of 3.000% Notes due 2029 5.125% $1,200M $1,150 • Repu
Slide 13: 2021 Guidance
2021 Guidance Q4 2021 Guidance FY 2021 Guidance What we expect in 2021 Low Outlook High Low Outlook High Second half Revenue up ~8% vs. first half Revenue $1.295B $1.315B $1.325B ~$4.980B ~$5.000B ~$5.010B Outlook Q4 Sequential Segment Incremental Change -$100M Operating Margin ~28% Adj EBITDA1
Slide 14: Summary
Summary Strong performance in-line with Guidance Q3 marked the start of the Commercial Aerospace Recovery with Commercial Aerospace Revenue up 16% sequentially Q3 Revenue / Price Increases continued in-line with expectations primarily tied to long-term agreements Profit Structural Cost Reduc
Slide 15: Howmet Aerospace
rr) HOWMET LJ AEROSPACE
Slide 16: Appendix
Appendix fri HOWMET UJ AEROSPACE
Slide 17: 2021 Assumptions
2021 Assumptions Full Year 2021 2021 Comments Corporate Overhead ~$74M • Adj Operating Income excluding special items Depreciation and Amortization ~$270M • Excludes special items • Excludes debt issuance, breakage and tender fees Interest Expense $255M – $260M • Annualized Run Rate after 2021 Debt
Slide 18: Special Items of $93M Driven By Debt Tender
Special Items of $93M Driven By Debt Tender Income Income Earnings per Q3 2021 Special Items ($M, except per share amounts) Before Tax After Tax Share Diluted AS REPORTED $23 $27 $0.06 Debt tender and other financing costs $120 $93 Costs associated with closures, shutdowns, pension plan $19 $14 sett
Slide 19: Combined Segment Incremental Margins
Combined Segment Incremental Margins1 Q3 2020 Q3 2021 Q3 2021 YoY Engine Products $485M $599M $114M Fastening Systems $271M $254M ($17M) Engineered Structures $206M $199M ($7M) Forged Wheels $172M $231M $59M Combined Segment 3rd Party Revenue2 $1,134M $1,283M $149M Engine Products $39M $120M $81M Fa
Slide 20: Reconciliation of Income from Continuing Operations Excluding Special Items
Reconciliation of Income from Continuing Operations Excluding Special Items ($ in millions, except per-share amounts) Q3 2020 Q2 2021 Q3 2021 YTD 2021 Income from continuing operations $36 $74 $27 $181 Diluted EPS $0.08 $0.17 $0.06 $0.41 Special items: Restructuring and other charges $22 $5 $8 $22 D
Slide 21: Reconciliation of Operational Tax Rate
Reconciliation of Operational Tax Rate ($ in millions) Quarter ended September 30, 2021 Nine months ended September 30, 2021 As reported Special items (1)(2) As adjusted As reported Special items (1)(2) As adjusted Income from continuing operations before income taxes $23 $139 $162 $246 $179 $425 (B
Slide 22: Calculation of Segment Information
Calculation of Segment Information Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Engine Products Third-party sales $ 781 $ 585 $ 485 $ 555 $ 2,406 $ 534 $ 544 $ 599 Inter-segment sales $ 2 $ 1 $ 1 $ 1 $ 5 $ 1 $ 1 $ 1 Segment operating profit $ 165 $ 105 $ 39 $ 108 $ 417 $ 101 $ 100
Slide 23: Calculation of Segment Information (continued)
Calculation of Segment Information (continued) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Engineered Structures Third-party sales $ 275 $ 229 $ 206 $ 217 $ 927 $ 176 $ 160 $ 199 Inter-segment sales $ 3 $ 2 $ 1 $ 1 $ 7 $ 1 $ 2 $ 1 Segment operating profit $ 28 $ 19 $ 10 $ 16 $ 73
Slide 24: Calculation of Total Segment Operating Profit Margin
Calculation of Total Segment Operating Profit Margin ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Third-party sales – Engine Products $781 $585 $485 $555 $2,406 $534 $544 $599 Third-party sales – Fastening Systems $385 $326 $271 $263 $1,245 $272 $262 $254 Third-par
Slide 25: Reconciliation of Total Segment to Consolidated Totals
Reconciliation of Total Segment to Consolidated Totals Reconciliation of Total Segment Operating Profit to Consolidated Income (Loss) Before Income Taxes ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Income (loss) from continuing operations before income taxes $198
Slide 26: Reconciliation of Operating Income and Margin Excluding Special Items
Reconciliation of Operating Income and Margin Excluding Special Items ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Operating income $258 $74 $73 $221 $626 $189 $207 $205 Special items: Restructuring and other charges 39 105 22 16 182 9 5 8 Costs associated with the
Slide 27: Reconciliation of Adjusted EBITDA Excluding Special Items
Reconciliation of Adjusted EBITDA Excluding Special Items ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Income (loss) from continuing operations after income taxes $153 $(84) $36 $106 $211 $80 $74 $27 Add: Provision (benefit) for income taxes $45 $(2) $(48) $(35) $(
Slide 28: Reconciliation of Adjusted Free Cash Flow
Reconciliation of Adjusted Free Cash Flow ($ in millions) Q1 2021 Q2 2021 Q3 2021 YTD 2021 Cash (used for) provided from operations $(6) $85 $67 $146 Cash receipts from sold receivables 57 115 95 267 Capital expenditures (55) (36) (47) (138) Adjusted free cash flow $(4) $164 $115 $275 The net cash f
Slide 29: Reconciliation of Net Debt
Reconciliation of Net Debt ($ in millions) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021 Short-term debt $384 $376 $489 $13 $14 Long-term debt, less amount due within one year 4,697 4,699 4,224 4,227 4,272 Total debt $5,081 $5,075 $4,713 $4,240 $4,286 Less: Cas
Slide 30: Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items
Reconciliation of Net Debt to Adjusted EBITDA Excluding Special Items ($ in millions) Trailing-12 months ended June 30, 2021 September 30, 2021 Income from continuing operations after income taxes $ 296 $ 287 Add: (Benefit) provision for income taxes (14) 30 Other expense, net 94 87 Loss on debt red
Slide 31: Reconciliation of Corporate Expense Excluding Special Items
Reconciliation of Corporate Expense Excluding Special Items ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Corporate expense (income) $42 $21 $22 $(3) $82 $28 $10 $30 Special items: Costs associated with the Arconic Inc. Separation Transaction 4 3 — — 7 — — — Legal a
Slide 32: Calculation of Segment End Markets Revenue
Calculation of Segment End Markets Revenue Engine Fastening Engineered Forged ($ in millions) Products Systems Structures Wheels Total Segment Third quarter ended September 30, 2020 Aerospace - Commercial $199 $169 $104 $— $472 Aerospace - Defense $142 $37 $82 $— $261 Commercial Transportation $— $3
Slide 33: Reconciliation of Segment Adjusted EBITDA
Reconciliation of Segment Adjusted EBITDA ($ in millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Engine Products Segment operating profit $165 $105 $39 $108 $417 $101 $100 $120 Provision for depreciation and amortization 30 31 31 31 123 31 30 31 Adjusted EBITDA $195 $136 $70
Slide 34: Howmet Aerospace
rr) HOWMET LJ AEROSPACE