Howmet Aerospace Reports Third Quarter 2024 Results

Revenue Up 11% Year Over Year; Strong Profit and Cash from Operations

$282 Million Debt Reduction; $100 Million Deployed for Common Stock Repurchases

2025 Preliminary Revenue Guidance: Up Approximately 7.5% Year over Year

Howmet Aerospace (NYSE:HWM):

Third Quarter 2024 GAAP Financial Results

• Revenue of $1.84 billion, up 11% year over year, driven by commercial aerospace, up 17%, partially offset by commercial transportation, down 12%
• Net income of $332 million versus $188 million in the third quarter 2023; earnings per share of $0.81 versus $0.45 in the third quarter 2023
• Operating income margin of 22.9%
• Generated $244 million of cash from operations; $441 million of cash used for financing activities; and $80 million of cash used for investing activities
• Share repurchases of $100 million; $0.08 per share dividend on common stock

Third Quarter 2024 Adjusted Financial Results

• Adjusted EBITDA excluding special items of $487 million, up 27% year over year
• Adjusted EBITDA margin excluding special items of 26.5%
• Adjusted operating income margin excluding special items of 22.8%
• Adjusted earnings per share excluding special items of $0.71, up 54% year over year
• Generated $162 million of free cash flow

2024 Guidance

Third Quarter Key Announcements

• Redeemed the remaining outstanding principal amount of $205 million of its 5.125% Notes due October 2024 with cash on hand
• Issued $500 million aggregate principal amount of notes due 2031 (the "2031 Notes")
• Redeemed the remaining outstanding principal amount of $577 million of its 6.875% Notes due May 2025 with proceeds from the 2031 Notes plus cash on hand
• All combined debt actions year to date through the third quarter 2024 will reduce annualized interest expense by approximately $33 million
• Repurchased $100 million of common stock at an average price of $94.22 per share
• Increased the common stock dividend by 60% to $0.08 per share
• Raised full year 2024 guidance for Adjusted EBITDA^*1 and Adjusted earnings per share^*1 above the third quarter 2024 outperformance despite industry challenges

Howmet Aerospace (NYSE:HWM) today reported third quarter 2024 results. The Company reported third quarter 2024 revenue of $1.84 billion, up 11% year over year, primarily driven by growth in the commercial aerospace market of 17%, partially offset by declines in the commercial transportation market of 12%.

Howmet Aerospace reported net income of $332 million, or $0.81 per share, in the third quarter 2024 versus $188 million, or $0.45 per share, in the third quarter 2023. Net income included approximately $42 million in net benefits from special items in the third quarter 2024. Third quarter 2024 operating income was $421 million, up 37% year over year. Operating income margin was 22.9%, up approximately 440 basis points year over year.

Howmet Aerospace reported adjusted net income excluding special items of $290 million, or $0.71 per share, in the third quarter 2024 versus $192 million, or $0.46 per share, in the third quarter 2023. Adjusted EBITDA excluding special items was $487 million, up 27% year over year. The year-over-year increase was driven by strong growth in the commercial aerospace market. Adjusted EBITDA margin excluding special items was up approximately 350 basis points year over year at 26.5%. Third quarter 2024 adjusted operating income excluding special items was $419 million, up 33% year over year. Adjusted operating income margin excluding special items was 22.8%, up approximately 390 basis points year over year.

Howmet Aerospace Executive Chairman and Chief Executive Officer John Plant said, "The Howmet team delivered a healthy set of results in the third quarter 2024. The results exceeded the high end of guidance for Adjusted EBITDA*, Adjusted EBITDA margin* and Adjusted earnings per share*. Revenue growth of 11% year over year took account of actions which restricted volumes shipped to the Boeing Company and notably weaker Europe market conditions impacting Forged Wheels. We are pleased that the Boeing strike was settled on November 4^th, and we look forward to Boeing's gradual production recovery. Engines spares volumes increased again in the quarter and are expected to be approximately $1.25 billion for the full year. Adjusted EBITDA* grew faster than revenue, up 27% year over year, resulting in margins up approximately 350 basis points to 26.5%. Adjusted earnings per share* grew 54%, while free cash flow was a third quarter record at $162 million."

Mr. Plant continued, "Turning to 2025, the demand outlook for commercial aerospace remains robust, driven by healthy air traffic growth. The under-production of aircraft in recent years has resulted in a very large order backlog which, combined with the significant needs for additional engine spare parts, is supportive of future revenue growth. We expect above-trend growth in commercial aerospace to continue in 2025, while we continue to take a cautious approach to the assumed pace of new aircraft builds. We expect growth in 2025 in our defense aerospace and industrial end markets, while we assume that the commercial transportation end market will remain soft until the second half 2025. Our 2025 outlook envisions total revenue growth of approximately 7.5% year over year."

"Howmet Aerospace's balance sheet remains a source of strength, with leverage at a record low and free cash flow generation of approximately $600 million year to date through the third quarter 2024. Debt actions year to date will reduce annualized interest expense by approximately $33 million. The Company repurchased $100 million of common stock in the third quarter 2024 and repurchased an additional $90 million in October 2024, bringing October year-to-date repurchases to $400 million. Subject to Board approval, we also expect to increase the common stock dividend by 25% in the first quarter 2025 to $0.10 per share."

Third Quarter 2024 Segment Performance

Engine Products reported revenue of $945 million, an increase of 18% year over year, due to growth in the commercial aerospace, defense aerospace, industrial gas turbine and oil & gas markets. Segment Adjusted EBITDA was a record $307 million, up 40% year over year, driven by growth in the commercial aerospace, defense aerospace, industrial gas turbine and oil & gas markets. The Segment absorbed approximately 235 net headcount in the quarter and 985 year to date through the third quarter 2024 in support of expected revenue increases. Segment Adjusted EBITDA margin increased approximately 510 basis points year over year to a record 32.5%.

Fastening Systems reported revenue of $392 million, an increase of 13% year over year due to growth in the commercial aerospace market, including wide body aircraft recovery. Segment Adjusted EBITDA was $102 million, up 34% year over year, driven by growth in the commercial aerospace market. Segment Adjusted EBITDA margin increased approximately 420 basis points year over year to 26.0%.

Engineered Structures reported revenue of $253 million, an increase of 11% year over year due to growth in the commercial aerospace and defense aerospace markets. Segment Adjusted EBITDA was $38 million, up 27% year over year, driven by growth in the commercial aerospace and defense aerospace markets. Segment Adjusted EBITDA margin increased approximately 180 basis points year over year to 15.0%.

Forged Wheels reported revenue of $245 million, a decrease of 14% year over year due to lower volumes in the commercial transportation market as well as a decrease in aluminum cost pass through. Segment Adjusted EBITDA was $64 million, a decrease of approximately 17% year over year. Segment Adjusted EBITDA margin decreased approximately 90 basis points year over year to 26.1%.

Redeemed Remaining $205 Million of 5.125% Notes due October 2024 on July 1, 2024

On July 1, 2024, Howmet Aerospace completed the redemption of the remaining outstanding principal amount of $205 million of its 5.125% Notes due October 2024 (the "2024 Notes"). The 2024 Notes were redeemed with cash on hand at an aggregate redemption price of approximately $208 million, including accrued interest of approximately $3 million.

Issued $500 Million of 2031 Notes at an Effective Rate of 3.72% in August 2024; Redeemed Remaining $577 Million of 6.875% Notes due May 2025

On August 22, 2024 the Company issued $500 million aggregate principal amount of 4.850% Notes due October 2031 (the "2031 Notes"). The Company entered into a cross-currency swap to synthetically convert the 2031 Notes into a Euro liability of approximately €458 million with a fixed annual interest rate of 3.72%.

On August 23, 2024 the Company redeemed the remaining outstanding principal amount of $577 million of its 6.875% Notes due May 2025 (the "2025 Notes"). The 2025 Notes were redeemed with proceeds from the 2031 Notes plus cash on hand at an aggregate redemption price of approximately $594 million, including accrued interest of approximately $12 million.

All combined debt actions year to date through the third quarter 2024 will reduce annualized interest expense by approximately $33 million.

All of the Company's outstanding debt is unsecured and at fixed interest rates. The Company's next debt maturity is in November 2026.

Repurchased $100 Million of Common Stock in Third Quarter 2024, $90 Million in October 2024

In the third quarter 2024, Howmet Aerospace repurchased $100 million of common stock at an average price of $94.22 per share, retiring approximately 1.1 million shares. Through the third quarter 2024, the Company has repurchased $310 million of common stock at an average price of $76.75 per share, retiring approximately 4 million shares. In October 2024, the Company repurchased an additional $90 million of common stock at an average price of $103.15 per share, retiring approximately 0.9 million shares. As of October 31, 2024, total share repurchase authorization available was $2,297 million.

Quarterly Common Stock Dividend of $0.08 Per Share

On September 25, 2024, the Board of Directors declared a dividend of $0.08 per share on the Company's common stock, an increase of 60% from the second quarter 2024 dividend of $0.05 per share.

2024 Guidance

Howmet Aerospace will hold its quarterly conference call at 10:00 AM Eastern Time on Wednesday, November 6, 2024. The call will be webcast via www.howmet.com. The press release and presentation materials will be available at approximately 7:00 AM ET on November 6, via the "Investors" section of the Howmet Aerospace website.

About Howmet Aerospace

Howmet Aerospace Inc., headquartered in Pittsburgh, Pennsylvania, is a leading global provider of advanced engineered solutions for the aerospace and transportation industries. The Company's primary businesses focus on jet engine components, aerospace fastening systems, and airframe structural components necessary for mission-critical performance and efficiency in aerospace and defense applications, as well as forged aluminum wheels for commercial transportation. With approximately 1,150 granted and pending patents, the Company's differentiated technologies enable lighter, more fuel-efficient aircraft and commercial trucks to operate with a lower carbon footprint. For more information, visit www.howmet.com.

Dissemination of Company Information

Howmet Aerospace intends to make future announcements regarding Company developments and financial performance through its website at www.howmet.com.

Forward-Looking Statements

This release 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 containing such words as "anticipates", "believes", "could", "envisions", "estimates", "expects", "forecasts", "goal", "guidance", "intends", "may", "outlook", "plans", "projects", "seeks", "sees", "should", "targets", "will", "would", or other words of similar meaning. All statements that reflect Howmet Aerospace's expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, statements, forecasts and outlook relating to the condition of end markets; future financial results or operating performance; future strategic actions; Howmet Aerospace's strategies, outlook, and business and financial prospects; and any future dividends, debt issuances, debt reduction and repurchases of its common stock. These statements reflect beliefs and assumptions that are based on Howmet Aerospace's perception of historical trends, current conditions and expected future developments, as well as other factors Howmet Aerospace believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and changes in circumstances that are difficult to predict, which could cause actual results to differ materially from those indicated by these statements. Such risks and uncertainties include, but are not limited to: (a) deterioration in global economic and financial market conditions generally; (b) unfavorable changes in the markets served by Howmet Aerospace; (c) the impact of potential cyber attacks and information technology or data security breaches; (d) the loss of significant customers or adverse changes in customers' business or financial conditions; (e) manufacturing difficulties or other issues that impact product performance, quality or safety; (f) inability of suppliers to meet obligations due to supply chain disruptions or otherwise; (g) failure to attract and retain a qualified workforce and key personnel, labor disputes or other employee relations issues; (h) the inability to achieve revenue growth, cash generation, restructuring plans, cost reductions, improvement in profitability, or strengthening of competitiveness and operations anticipated or targeted; (i) inability to meet increased demand, production targets or commitments; (j) competition from new product offerings, disruptive technologies or other developments; (k) geopolitical, economic, and regulatory risks relating to Howmet Aerospace's global operations, including geopolitical and diplomatic tensions, instabilities, conflicts and wars, as well as compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations; (l) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation, which can expose Howmet Aerospace to substantial costs and liabilities; (m) failure to comply with government contracting regulations; (n) adverse changes in discount rates or investment returns on pension assets; and (o) the other risk factors summarized in Howmet Aerospace's Form 10-K for the year ended December 31, 2023 and other reports filed with the U.S. Securities and Exchange Commission. Market projections are subject to the risks discussed above and other risks in the market. Under its share repurchase program, the Company may repurchase shares from time to time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions, legal requirements and other considerations. The Company is not obligated to repurchase any specific number of shares or to do so at any particular time. The declaration of any future dividends is subject to the discretion and approval of the Board of Directors after the Board's consideration of all factors it deems relevant and subject to applicable law. The Company may modify, suspend, or cancel its share repurchase program or its dividend policy in any manner and at any time that it may deem necessary or appropriate. Credit ratings are not a recommendation to buy or hold any Howmet Aerospace securities, and they may be revised or revoked at any time at the sole discretion of the credit rating organizations. The statements in this release are made as of the date of this release, even if subsequently made available by Howmet Aerospace on its website or otherwise. Howmet Aerospace disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.

Non-GAAP Financial Measures

Some of the information included in this release 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 generally accepted in the United States of America (GAAP). Certain of these data are considered "non-GAAP financial measures" under SEC rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. Reconciliations to the most directly comparable GAAP financial measures and management's rationale for the use of the non-GAAP financial measures can be found in the schedules to this release.

Other Information

In this press release, the acronym "FY" means "full year" and "Q" means "quarter"; and references to Howmet Aerospace performance that is "record" means its best result since April 1, 2020 when Howmet Aerospace Inc. (previously named Arconic Inc.) separated from Arconic Corporation.

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