Arconic Reports Second Quarter 2023 Results

In the quarter ended March 31, 2023, Arconic recorded both a $74 charge and a $74 benefit in Cost of goods sold to establish a liability for a settlement in principle and a receivable for insurance reimbursement, respectively, related to a litigation matter.

On May 14, 2022, the Company and the United Steelworkers reached a tentative four-year labor agreement covering approximately 3,300 employees at four U.S. locations; the previous labor agreement expired on May 15, 2022. The tentative agreement was ratified by the union employees on June 1, 2022. In the quarter ended June 30, 2022, Arconic recognized $19 in Cost of goods sold primarily for a one-time signing bonus for the covered employees.

On May 4, 2023, Arconic entered into an Agreement and Plan of Merger to be acquired by funds managed by affiliates of Apollo Global Management, Inc., as well as a minority investment from funds managed by affiliates of Irenic Capital Management LP. The transaction is expected to close in the second half of 2023, subject to customary closing conditions, including approval by the Company's stockholders. Accordingly, in the quarter ended June 30, 2023, Restructuring and other charges includes $11 for costs incurred related to the proposed merger.

In the quarter ended June 30, 2022, Other income, net includes a $54 gain for the remeasurement of monetary balances, primarily cash, related to the Company's former operations in Russia from rubles to the U.S. dollar. This gain was the result of a significant strengthening of the Russian ruble against the U.S. dollar in the period.

On November 15, 2022, Arconic completed the sale of 100% of its operations in Russia to Promishlennie Investitsii LLC, the majority owner of VSMPO-AVISMA Corporation, for cash proceeds of $230. The transaction closed after the Company received all required approvals, resulting in the receipt of the cash consideration in exchange for all of Arconic's net assets in Russia. These net assets included $203 of cash held in Russia that was not available for distribution to the parent company because of injunctions imposed as a result of litigation initiated in March 2020 by the Federal Antimonopoly Service of The Russian Federation ("FAS"). The Company recorded a loss of $306 ($304 after-tax) in the fourth quarter of 2022 in connection with this transaction. At a hearing on December 22, 2022, the Samara Court dismissed the litigation.

Prior to the sale of Arconic's operations in Russia, VSMPO-AVISMA Corporation owned a limited portion of one of the legal entities included in the sale. VSMPO-AVISMA Corporation's share of net income (loss) of this legal entity was reported in this line item. Subsequent to the sale, there is no longer a noncontrolling interest in Arconic Corporation and its subsidiaries.

For periods in which the Company generates net income, the diluted weighted-average number of shares include common share equivalents associated with outstanding employee stock awards. For periods in which the Company generates a net loss, the diluted weighted-average number of shares does not include any common share equivalents as their effect is anti-dilutive.

At December 31, 2022, Arconic established both a liability of $61 (reported in Other current liabilities) for a potential settlement and a receivable of $53 (reported in Prepaid expenses and other current assets) for an anticipated insurance reimbursement of the potential settlement with respect to certain U.K. litigation in the Grenfell Tower matter. In the quarter ended March 31, 2023, the Company paid $43 for legal settlements applied against the liability and received insurance proceeds of $41. Also, in the quarter ended March 31, 2023, Arconic established both a liability of $74 (reported in Other current liabilities) for a settlement in principle and a receivable of $74 (reported in Prepaid expenses and other current assets) for an anticipated insurance reimbursement of the settlement in principle with respect to separate but related litigation in the Grenfell Tower matter (see footnote 1 to the Statement of Consolidated Operations included in this release).

See footnote 2 to the Statement of Consolidated Operations for the quarter ended June 30, 2023 included in this release.

Arconic has two separate arrangements, each with a single financial institution, to sell certain customer receivables outright without recourse on a continuous basis. All such sales are at the Company's discretion. The first arrangement, which was executed in January 2022, relates to certain of Arconic's U.S. operations and automatically renews each year unless terminated in accordance with the provisions of the underlying purchase agreement. The second arrangement, which was executed in July 2022, relates to certain of the Company's European operations. Under both arrangements, Arconic serves in an administrative capacity, including collection of the receivables from the respective customers and remittance of these cash collections to the respective financial institution. Accordingly, upon the sale of customer receivables to the financial institutions, the Company removes the underlying trade receivables from its Consolidated Balance Sheet and includes the reduction as a positive amount in the Decrease (Increase) in receivables line item within Operating Activities on its Statement of Consolidated Cash Flows. In the quarters ended June 30, 2023, March 31, 2023, and June 30, 2022, the Company sold customer receivables of $33, $151, and $329, respectively, and remitted cash to the financial institutions of $66, $116, and $267, respectively.

Arconic maintains a five-year credit agreement, dated May 13, 2020, with a syndicate of lenders named therein and Deutsche Bank AG New York Branch as administrative agent (the "ABL Credit Agreement"). The ABL Credit Agreement provides for a $1,200 senior secured asset-based revolving credit facility (the "ABL Credit Facility") to be used, generally, for working capital or other general corporate purposes. In the quarters ended June 30, 2023 and March 31, 2023, the Company borrowed $25 and $150, respectively, and in the quarters ended June 30, 2023, March 31, 2023 and June 30, 2022, repaid $75, $100, and $50, respectively, under the ABL Credit Facility.

On November 16, 2022, Arconic announced that its Board of Directors approved a new share repurchase program authorizing the Company to repurchase shares of its outstanding common stock up to an aggregate transactional value of $200 over a two-year period expiring November 17, 2024. In the quarter ended March 31, 2023, the Company repurchased 35,615 shares of its common stock under this program.

In the quarter ended June 30, 2022, the Company repurchased 1,324,027 shares of its common stock under its previous share repurchase program, which was authorized in May 2021 and completed in August 2022. Cumulatively, the Company repurchased 9,776,177 shares of its common stock for $300 under this program. In connection with the authorization of the new program, Arconic's previous repurchase program was terminated.

Cash and cash equivalents and restricted cash at beginning of period for all periods presented and Cash and cash equivalents and restricted cash at end of period for all periods presented includes Restricted cash of less than $0.03.

Arconic's profit or loss measure for its reportable segments is Segment Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization). The Company calculates Segment Adjusted EBITDA as Total sales (third-party and intersegment) minus each of (i) Cost of goods sold, (ii) Selling, general administrative, and other expenses, and (iii) Research and development expenses, plus each of (i) Stock-based compensation expense, (ii) Metal price lag (see footnote 3), and (iii) Unrealized (gains) losses on mark-to-market hedging instruments and derivatives. Arconic's Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies' reportable segments.

Total Segment Adjusted EBITDA is the sum of the respective Segment Adjusted EBITDA for each of the Company's three reportable segments: Rolled Products, Building and Construction Systems, and Extrusions. This amount is being presented for the sole purpose of reconciling Segment Adjusted EBITDA to the Company's Consolidated net income.

Corporate expenses are composed of general administrative and other expenses of operating the corporate headquarters and other global administrative facilities.

Metal price lag represents the financial impact of the timing difference between when aluminum prices included in Sales are recognized and when aluminum purchase prices included in Cost of goods sold are realized. This adjustment aims to remove the effect of the volatility in metal prices and the calculation of this impact considers applicable metal hedging transactions.

See footnote 2 to the Statement of Consolidated Operations for the quarter ended June 30, 2023 included in this release.

Other includes certain items that impact Cost of goods sold and Selling, general administrative, and other expenses on the Company's Statement of Consolidated Operations that are not included in Segment Adjusted EBITDA, including those described as "Other special items" (see footnote 5 to the reconciliation of Adjusted EBITDA within Calculation of Non-GAAP Financial Measures included in this release).

See footnote 3 to the Statement of Consolidated Operations for the quarter ended June 30, 2022 included in this release.

See footnote 4 to the Statement of Consolidated Operations included in this release.

Adjusted EBITDA

See footnote 4 to the Statement of Consolidated Operations included in this release.

See footnote 3 to the Statement of Consolidated Operations for the quarter ended June 30, 2022 included in this release.

See footnote 2 to the Statement of Consolidated Operations for the quarter ended June 30, 2023 included in this release.

Metal price lag represents the financial impact of the timing difference between when aluminum prices included in Sales are recognized and when aluminum purchase prices included in Cost of goods sold are realized. This adjustment aims to remove the effect of the volatility in metal prices and the calculation of this impact considers applicable metal hedging transactions.

Other special items include the following:

• for the quarter ended June 30, 2023, costs related to several legal matters, including Grenfell Tower ($4) and other ($2);

• for the quarter ended March 31, 2023, costs related to several legal matters, including Grenfell Tower ($3) and other ($1), and other items ($3);

• for the quarter ended June 30, 2022, costs related to a new labor agreement with the United Steelworkers ($19), a charge for two environmental remediation matters ($9), costs related to several legal matters, including Grenfell Tower ($3) and other ($4), and other items ($4).

Adjusted EBITDA excluding Russian operations⁽¹⁾

Adjusted EBITDA is a non-GAAP financial measure. See the reconciliation of Adjusted EBITDA included in this release for (i) the Company's definition of Adjusted EBITDA and (ii) management's rationale for the presentation of this non-GAAP measure. The "As reported" column presents a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure.

Adjusted EBITDA excluding Russian operations is also a non-GAAP financial measure. On November 15, 2022, Arconic completed the sale of 100% of its operations in Russia (see footnote 4 to the Statement of Consolidated Operations included in this release). Accordingly, management believes the presentation of Adjusted EBITDA excluding Russian operations is meaningful to investors because such measure provides context as to the contribution made by the Company's former operations in Russia relative to Arconic's total financial performance. Additionally, this measure provides a historical basis with which to compare the Company's financial performance in future periods.

The "Russia" column presents the unaudited combined financial information of Arconic's subsidiaries that held the Company's former operations in Russia prepared from the historical accounting records of these legal entities. This information is not equivalent to that which would be presented as consolidated financial information prepared in accordance with accounting principles generally accepted in the United States of America if these subsidiaries were to be presented as a standalone consolidated reporting entity. Other amounts related to Arconic's former operations in Russia recorded in the historical accounting records of other legal entities included in the Company's consolidated group, such as the loss on the sale of the previously mentioned former subsidiaries recorded by the direct parent company of these legal entities, were presented in the "As recast" column. However, the amount presented as Adjusted EBITDA excluding Russian operations is the same whether these amounts related to Arconic's former operations in Russia are presented in the "Russia" column or the "As recast" column.

The amounts in the "As recast" column are equal to the amounts in the "As reported" column less the amounts in the "Russia" column. Consequently, there are limitations in the usefulness of the amounts presented in the "As recast" column for Net income attributable to Arconic Corporation and Provision for income taxes. For example, the Provision for income taxes would need to be recalculated on a "without" approach to consider the consolidated company excluding the former operations in Russia, the impact of which may extend beyond subtracting the amount for Provision for income taxes presented in the "Russia" column from the consolidated amount in the "As reported" column. Conversely, the amount presented for Adjusted EBITDA excluding Russia does not contain any such limitations.

See footnote 4 to the Statement of Consolidated Operations included in this release.

See footnote 3 to the Statement of Consolidated Operations included in this release.

See footnote 4 to the reconciliation of Adjusted EBITDA included in this release.

See footnote 5 to the reconciliation of Adjusted EBITDA included in this release.

Adjusted EBITDA to

Free Cash Flow Bridge

Adjusted EBITDA is a non-GAAP financial measure. See the reconciliation of Adjusted EBITDA included in this release for (i) Arconic's definition of Adjusted EBITDA, (ii) management's rationale for the presentation of this non-GAAP measure, and (iii) a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure.

Arconic's definition of working capital is Receivables plus Inventories less Accounts payable, trade.

Other includes the impact of metal price lag as follows: 2Q23-$(20); 1Q23-$—; 4Q22-$8; 3Q22-$15; and 2Q22-$30. See footnote 4 to the reconciliation of Adjusted EBITDA included in this release for additional information on metal price lag.

Arconic's definition of Free Cash Flow is Cash from operations less capital expenditures. Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures, which are both necessary to maintain and expand the Company's asset base and expected to generate future cash flows from operations. It is important to note that Free Cash Flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure.

• 2Q23: Cash provided from operations of $189 less capital expenditures of $57 = free cash flow of $132

• 1Q23: Cash used for operations of $(39) less capital expenditures of $82 = free cash flow of $(121)

• 4Q22: Cash provided from operations of $188 less capital expenditures of $70 = free cash flow of $118

• 3Q22: Cash provided from operations of $91 less capital expenditures of $47 = free cash flow of $44