Summary of American Axle & Manufacturing (NYSE: AXL) FY Conference Call Company Overview - **Company**: American Axle & Manufacturing (AAM) - **Industry**: Automotive parts manufacturing, specifically driveline systems - **Event**: Barclays Global Autos and Mobility Conference - **Date**: November 19, 2025 Key Financial Performance - **Sales Guidance**: Expected sales for the full year between $5.8 billion and $5.9 billion [2] - **EBITDA Guidance**: Projected EBITDA in the range of $710 million to $745 million [2] - **Adjusted Free Cash Flow**: Anticipated to be between $180 million and $210 million [2] Strategic Developments - **Acquisition**: AAM announced the acquisition of Dowlais Group (GKN Automotive and GKN Powder Metallurgy) in January 2025, with significant integration progress [3][4] - **Regulatory Approvals**: Received approvals from eight out of ten jurisdictions, with Mexico and China pending [4] - **Synergy Opportunities**: Expected to generate over $300 million in synergies from the acquisition [4][5] Market Dynamics - **Global Automotive Market**: Anticipated global production of 88-90 million units, with China contributing 29-30 million units [14] - **North American Market**: Steady demand for trucks and SUVs, with expectations of continued strength in GM truck franchises [15][16] - **European Market**: Concerns about competition and market share loss to Chinese OEMs, with a decline in market size from 22 million to 17 million units [15][19] Electrification and Product Strategy - **Electrification Outlook**: AAM believes in a slower adoption rate of electrification in the U.S., projecting only 20% market share by 2030, compared to earlier forecasts of 50% [20] - **Investment in Electrification**: AAM has been investing in electrification since 2010 and aims to strengthen its capabilities through the Dowlais acquisition [21][22] - **Product Portfolio**: Plans to expand product offerings to include ICE, hybrid, and electric vehicles, with a focus on being agnostic to market demands [5][38] Operational Efficiency and Margin Performance - **Margin Recovery**: Positive performance in EBITDA over the last eight quarters, with a focus on operational efficiency to offset inflation [28][29] - **Metal Forming Segment**: Aiming to recover margins to mid-teens levels through efficiency improvements [34] - **Capacity Utilization**: Emphasis on optimizing fixed costs and capacity utilization across all business segments [45][47] Synergy and Integration Plans - **Synergy Targets**: Committed to achieving $300 million in synergies, with 60% expected by the end of year two and full run rate by year three [54][57] - **Operational Integration**: Focus on consolidating offices and manufacturing plants to drive efficiency and cost savings [55][56] Financial Strategy and Capital Allocation - **Leverage Goals**: Targeting net leverage of under three times net debt to EBITDA, with a long-term goal of two times [67][68] - **CapEx Profile**: Aiming to maintain capital expenditures at 4-5% of sales, consistent with historical levels [70] - **Free Cash Flow**: Expected to generate positive free cash flow post-acquisition, despite initial restructuring costs [72] Conclusion - **Market Positioning**: AAM is strategically positioned to leverage its expanded global footprint and product portfolio, focusing on operational efficiency and synergy realization from the Dowlais acquisition [60][62] - **Future Outlook**: The company remains optimistic about its growth prospects, particularly in the context of evolving market dynamics and customer demands [19][20]

Core Insights - American Axle & Manufacturing Holdings (AXL) reported third-quarter 2025 adjusted earnings of 16 cents per share, exceeding the Zacks Consensus Estimate of 12 cents, but down from 20 cents per share in the same quarter last year [1][8] - The company generated quarterly revenues of $1.51 billion, surpassing the Zacks Consensus Estimate of $1.49 billion, but remained flat year-over-year [1][8] Segmental Performance - The Driveline segment achieved sales of $1.05 billion, nearly flat year-over-year, but exceeded the estimate of $1.02 billion. Adjusted EBITDA for this segment was $156.8 million, a 15.5% increase year-over-year, surpassing the estimate of $136 million [2] - The Metal Forming business reported revenues of $595 million, flat year-over-year, but fell short of the estimate of $600 million. Adjusted EBITDA for this segment was $37.9 million, down 2% year-over-year, missing the estimate of $40.7 million [3] Financial Position - Third-quarter SG&A expenses totaled $98.8 million, an increase from $94.6 million in the year-ago quarter [4] - Net cash provided by operating activities was $143.3 million, slightly down from $143.6 million in the previous year [4] - Capital spending for the quarter was $52.9 million, up from $46.6 million reported in the year-ago period [4] - Free cash flow for the three months ended September 30, 2025, was $79.5 million, compared to $70.7 million in the same period last year [5] - As of September 30, 2025, cash and cash equivalents stood at $714.1 million, up from $552.9 million as of December 31, 2024. Net long-term debt was $2.59 billion, slightly up from $2.58 billion as of December 31, 2024 [5] Revised Outlook for 2025 - American Axle revised its 2025 revenue guidance to a range of $5.8-$5.9 billion, compared to the previous estimate of $5.75-$5.95 billion. Adjusted EBITDA is now estimated to be between $710 million and $745 million, up from the previous guidance of $695-$745 million [6] - Adjusted free cash flow is anticipated to be between $180 million and $210 million, compared to the prior guidance of $175-$215 million [6] Zacks Rank & Key Picks - AXL currently holds a Zacks Rank 3 (Hold). Other better-ranked stocks in the auto sector include General Motors Company (GM), OPENLANE, Inc. (KAR), and Garrett Motion Inc. (GTX), each with a Zacks Rank 1 (Strong Buy) [7]

Core Insights - American Axle & Manufacturing's international operations are crucial for understanding its financial resilience and growth potential [1][2][3] Revenue Performance - The company's total revenue for the recent quarter reached $1.51 billion, showing no growth compared to the prior-year quarter [4] - Asia contributed $129.2 million, accounting for 8.6% of total revenue, with a decline of 9.12% from the expected $142.16 million [5] - Europe generated $191.8 million, representing 12.7% of total revenue, falling short of the projected $210.27 million by 8.78% [6] - South America contributed $56.4 million, making up 3.8% of total revenue, exceeding the consensus estimate of $46.95 million by 20.13% [7] Future Projections - Analysts expect total revenue of $1.39 billion for the current fiscal quarter, indicating a 0.9% increase from the prior-year quarter [8] - For the full year, total revenue is projected at $5.83 billion, down 4.8% from the previous year, with expected contributions from Asia ($573.26 million), Europe ($806.78 million), and South America ($179.69 million) [9] Market Dependency - The company's reliance on global markets for revenue presents both opportunities and challenges, making the monitoring of international revenue trends essential for predicting future performance [10] - Analysts closely observe these trends, especially for companies with significant international exposure, to adjust earnings forecasts [10][11] Stock Performance - Over the past four weeks, the stock price increased by 23.1%, outperforming the S&P 500's 0.3% rise [13] - In the last three months, the stock has appreciated by 14.1%, compared to a 6.4% increase in the S&P 500 [13]

Financial Performance - Net sales for Q3 2025 were $1,505.3 million, slightly up from $1,504.9 million in Q3 2024, while net sales for the nine months ended September 30, 2025, were $4,452.8 million, down from $4,744.1 million in the same period of 2024[14]. - Gross profit for Q3 2025 increased to $189.0 million, compared to $171.3 million in Q3 2024, while gross profit for the nine months ended September 30, 2025, was $563.6 million, down from $587.1 million in 2024[14]. - Operating income for Q3 2025 was $48.4 million, up from $41.7 million in Q3 2024, but down to $146.1 million for the nine months ended September 30, 2025, compared to $205.2 million in 2024[14]. - Net income for Q3 2025 was $9.2 million, a decrease from $10.0 million in Q3 2024, while net income for the nine months ended September 30, 2025, increased to $55.6 million from $48.7 million in 2024[14]. - Total revenue for the three months ended September 30, 2025, was $1,505.3 million, a slight increase from $1,504.9 million in the same period of 2024[79]. - The company reported a total of $4,452.8 million in revenue for the nine months ended September 30, 2025, down from $4,744.1 million in 2024, representing a decrease of 6.1%[79]. Assets and Liabilities - Total assets as of September 30, 2025, were $5,343.2 million, an increase from $5,059.9 million as of December 31, 2024[20]. - Cash and cash equivalents increased to $714.1 million as of September 30, 2025, compared to $552.9 million at the end of 2024[20]. - Total liabilities as of September 30, 2025, were $4,624.8 million, up from $4,497.1 million as of December 31, 2024[20]. - Total current liabilities rose to $1,269.4 million as of September 30, 2025, compared to $1,175.2 million as of December 31, 2024, indicating an increase of 8.0%[20]. - Long-term debt, net, was $2,594.0 million as of September 30, 2025, slightly up from $2,576.9 million as of December 31, 2024, an increase of 0.7%[20]. - The total stockholders' equity increased to $718.4 million as of September 30, 2025, compared to $562.8 million as of December 31, 2024, representing a growth of 27.7%[20]. Cash Flow and Investments - Net cash provided by operating activities for the nine months ended September 30, 2025, was $291.1 million, slightly down from $304.2 million in 2024, a decrease of 4.2%[22]. - The company reported a net cash used in investing activities of $108.3 million for the nine months ended September 30, 2025, an improvement from $174.2 million in 2024[22]. - Cash and cash equivalents at the end of the period increased to $714.1 million, compared to $542.5 million at the end of September 2024, reflecting a growth of 31.6%[22]. - The company completed the sale of AAM India Manufacturing Corporation Pvt., Ltd. for total cash proceeds of $64.4 million, with $58.1 million collected in July 2025 and $6.3 million in Q4 2025[37]. Earnings and Taxation - The company reported a basic earnings per share of $0.07 for Q3 2025, down from $0.08 in Q3 2024, while diluted earnings per share remained the same at $0.07[14]. - The effective income tax rate for the nine months ended September 30, 2025, was 35.9%, compared to 30.1% for the same period in 2024[88]. - The company recognized a discrete income tax benefit of $22.0 million during the three and nine months ended September 30, 2025, due to the enactment of new tax legislation[88]. Strategic Initiatives - The company is focusing on transitioning its business from internal combustion engine vehicle products to hybrid and electric vehicle products, amidst various market risks and competition challenges[11]. - AAM announced a pending business combination with Dowlais Group plc, indicating strategic expansion efforts in the automotive sector[35]. - The company expects to incur restructuring costs associated with the Tekfor acquisition into 2026, indicating ongoing integration efforts[82]. Segment Performance - Segment Adjusted EBITDA for the Driveline segment was $156.8 million for the three months ended September 30, 2025, compared to $135.7 million for the same period in 2024, reflecting a year-over-year increase of 15.8%[102]. - Total net external sales for the three months ended September 30, 2025, were $1,505.3 million, with Driveline contributing $1,050.6 million and Metal Forming contributing $454.7 million[102]. - Net external sales for the Metal Forming segment for the three months ended September 30, 2025, were $454.7 million, a decrease from $462.6 million in the same period of 2024[102]. Other Financial Metrics - The company recorded depreciation and amortization expenses of $342.0 million for the nine months ended September 30, 2025, compared to $354.3 million in 2024, a decrease of 3.2%[22]. - Stock-based compensation increased to $12.0 million in 2025 from $11.7 million in 2024, reflecting a growth of 2.6%[22]. - The company incurred restructuring and acquisition-related costs for Q3 2025 of $21.4 million, compared to $2.2 million in Q3 2024, indicating increased strategic initiatives[14]. - The company recorded a net change in accumulated other comprehensive income (loss) of $32.1 million for the three months ended September 30, 2025[68].

Core Insights - American Axle & Manufacturing (AXL) reported $1.51 billion in revenue for Q3 2025, showing no year-over-year change, with an EPS of $0.16 compared to $0.20 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $1.49 billion by +0.82%, while the EPS surprised by +33.33% against a consensus estimate of $0.12 [1] Financial Performance Metrics - Net Sales in Metal Forming were reported at $595 million, slightly below the two-analyst average estimate of $604.5 million, reflecting a year-over-year decline of -0.3% [4] - Net Sales in Driveline reached $1.05 billion, surpassing the $1.04 billion average estimate, indicating a year-over-year increase of +0.8% [4] - Adjusted EBITDA for Metal Forming was $37.9 million, lower than the average estimate of $45.57 million [4] - Adjusted EBITDA for Driveline was reported at $156.8 million, exceeding the average estimate of $137.49 million [4] Stock Performance - Shares of American Axle have returned +8.4% over the past month, contrasting with a -0.2% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - AAM's Q3 2025 sales were $1.51 billion, with adjusted earnings per share at $0.16, and operating cash flow of $143.3 million [4][12] - Adjusted EBITDA was $195 million, representing 12.9% of sales, a 130 basis point improvement year-over-year on flat sales [5][13] - GAAP net income was $9.2 million, or $0.07 per share, compared to $10 million, or $0.08 per share in Q3 2024 [17] Business Line Data and Key Metrics Changes - The driveline business unit achieved adjusted EBITDA margins of 14.9%, the highest since 2020, driven by operational efficiency and quality improvements [5][6] - Metal forming business still requires work to reach full margin potential, with ongoing assessments for optimization [5][6] Market Data and Key Metrics Changes - AAM is seeing onshoring opportunities within the metal forming group, with OEMs assessing long-range product plans due to changes in EV tax credits and emission regulations [6][8] - Demand for large trucks and SUVs remains healthy, which aligns with AAM's core products [6][7] Company Strategy and Development Direction - AAM aims for a propulsion-agnostic product portfolio to adapt to market demands, with a focus on electrification technologies [7][8] - The company completed financing for the Dauch acquisition, securing $850 million in senior secured notes and $1.25 billion in senior unsecured notes [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating market volatility and policy uncertainties while focusing on operational efficiency [11][24] - The company updated its 2025 guidance, targeting sales of $5.8 billion to $5.9 billion and adjusted EBITDA of approximately $710 million to $745 million [10][19] Other Important Information - AAM's net debt stood at $1.9 billion with a net leverage ratio of 2.6 times as of September 30, 2025 [18] - The company anticipates restructuring-related cash payments of approximately $20 million for 2025 to optimize business and reduce fixed costs [20] Q&A Session Summary Question: What drove the $9 million volume mix in EBITDA? - The strong performance on the RAM platform and elevated sales from the full-size truck franchise contributed to the mix, while declines in passenger car and crossover vehicle sales affected the overall dynamics [27][28] Question: Update on reshoring activities and customer conversations? - AAM is seeing opportunities for localization in metal forming, but cannot discuss Dauch acquisition benefits with customers until the deal closes [29][30] Question: Confidence in regulatory antitrust clearing? - AAM is confident in obtaining all necessary approvals, with Brazil and Mexico expected soon, and discussions ongoing in China [33][34] Question: Production assumptions for North America? - The production assumption of 15.1 million units reflects calibration to customer schedules and anticipated downtime [35][36] Question: Growth potential from onshoring and recent business wins? - AAM expects to benefit from onshoring in metal forming and sees opportunities for insourcing post-Dauch acquisition [41][42] Question: Factors affecting Q4 EBITDA range? - The primary factors include revenue, contribution margin, project expenses, and production volatility [45][46] Question: Sustainability of driveline margins? - Driveline margins have shown consistent strength, with expectations for continued strong performance [51][52] Question: Impact of tariffs on heavy-duty trucks? - Currently, there has been no negative impact from the expansion of tariffs on medium and heavy-duty trucks [53] Question: Breakdown of strong performance in other markets? - Two-thirds of the performance improvement is attributed to the driveline business, with expectations for continued strong operating performance [55][56] Question: Future leverage framework post-Dauch acquisition? - AAM plans to prioritize deleveraging and expects to maintain a leverage neutral position post-acquisition [71][72] Question: Integration of Dauch executives? - AAM is adjusting its management team following the Dauch acquisition, focusing on blending teams at all levels [80][81]

Core Insights - American Axle & Manufacturing (AXL) reported quarterly earnings of $0.16 per share, exceeding the Zacks Consensus Estimate of $0.12 per share, but down from $0.20 per share a year ago, representing an earnings surprise of +33.33% [1] - The company achieved revenues of $1.51 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.82% and showing a slight increase from $1.5 billion year-over-year [2] - American Axle has consistently surpassed consensus EPS estimates over the last four quarters, indicating strong performance in earnings [2] Earnings Outlook - The future performance of American Axle's stock will largely depend on management's commentary during the earnings call and the sustainability of the recent price movements [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.04 on revenues of $1.39 billion, while for the current fiscal year, the estimate is $0.44 on revenues of $5.83 billion [7] Industry Context - The Automotive - Original Equipment industry, to which American Axle belongs, is currently ranked in the top 37% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Interfor Investment Highlights - Interfor is a top three softwood lumber producer in North America with 28 strategically located facilities[6] - The company has high exposure to the US South and Eastern Canada with attractive log costs[6] - Interfor has top quartile EBITDA margins and returns on capital employed through the cycle[6] - As of October 1, 2025, Interfor had approximately $386 million of liquidity[6] Market and Operations - Softwood lumber accounted for 81% of Interfor's $3 billion in 2024 revenues[18] - Approximately 75% of Interfor's sales volumes are not exposed to lumber duties or tariffs[19] - Interfor has 47 billion board feet of lumber production capacity, with 50% in the US South, 23% in Eastern Canada, 16% in BC Interior and 12% in US Northwest[26] Lumber Market Fundamentals - Repair & Remodel accounts for 38%, New Home Construction 32%, and Industrial/Commercial/Other 30% of North American lumber demand[35] - Since 2016, nearly 54% of BC industry capacity has been curtailed due to declining log supply[45] - Approximately 25% of Interfor's shipments are exposed to duties[48]

Core Viewpoint - American Axle & Manufacturing Holdings, Inc. (AAM) has revised its full-year 2025 sales guidance to a range of $5.80 billion to $5.90 billion, which is narrower than the previous range of $5.75 billion to $5.95 billion [1] Group 1 - The company expects average revenues of $5.86 billion for the year based on analyst forecasts [1] - The updated guidance is based on an assumption of North American light vehicle production of approximately 15.1 million units, an increase from the prior forecast range of approximately 14.6 million to 15.1 million units [2]

Financial Performance - AAM's sales for Q3 2025 were $1.51 billion, a slight increase from $1.50 billion in Q3 2024[5] - Net income for Q3 2025 was $9.2 million, or 0.6% of sales, compared to $10.0 million, or 0.7% of sales in Q3 2024[6] - Adjusted EBITDA for Q3 2025 was $194.7 million, representing 12.9% of sales, up from $174.4 million, or 11.6% of sales in Q3 2024[7] - Adjusted free cash flow for Q3 2025 was $98.1 million, an increase from $74.6 million in Q3 2024[8] - Net sales for Q3 2025 were $1,505.3 million, slightly up from $1,504.9 million in Q3 2024, while net sales for the nine months ended September 30, 2025, decreased to $4,452.8 million from $4,744.1 million in the same period of 2024[26] - Gross profit for Q3 2025 increased to $189.0 million, compared to $171.3 million in Q3 2024, while gross profit for the nine months ended September 30, 2025, decreased to $563.6 million from $587.1 million in 2024[26] - Operating income for Q3 2025 was $48.4 million, up from $41.7 million in Q3 2024, but down from $146.1 million for the nine months ended September 30, 2025, compared to $205.2 million in 2024[26] - Net income for Q3 2025 was $9.2 million, a slight decrease from $10.0 million in Q3 2024, while net income for the nine months ended September 30, 2025, increased to $55.6 million from $48.7 million in 2024[26] - Adjusted EBITDA for Q3 2025 was $194.7 million, compared to $174.4 million in Q3 2024, while for the nine months ended September 30, 2025, it decreased to $574.2 million from $588.4 million in 2024[32] - Free cash flow for Q3 2025 was $79.5 million, up from $70.7 million in Q3 2024, while for the nine months ended September 30, 2025, it decreased to $105.7 million from $139.8 million in 2024[37] Financial Outlook - AAM's updated financial outlook for FY 2025 targets sales between $5.8 billion and $5.9 billion, up from the previous range of $5.75 billion to $5.95 billion[18] - The company is targeting Adjusted EBITDA in the range of $710 million to $745 million for FY 2025, compared to the prior range of $695 million to $745 million[18] - AAM expects Adjusted free cash flow for FY 2025 to be between $180 million and $210 million, slightly adjusted from the previous range of $175 million to $215 million[18] - The company targets full year 2025 adjusted EBITDA in the range of $710 million to $745 million, indicating a focus on improving operational efficiency[42] - Full year 2025 targeted free cash flow is projected to be between $115 million and $145 million, highlighting the company's cash generation capabilities[42] - Adjusted free cash flow for 2025 is expected to be between $180 million and $210 million, reflecting the company's commitment to managing cash flow effectively[42] Asset and Liability Management - Total assets as of September 30, 2025, increased to $5,343.2 million from $5,059.9 million as of December 31, 2024[28] - Total liabilities as of September 30, 2025, rose to $4,624.8 million from $4,497.1 million as of December 31, 2024[28] - Cash and cash equivalents at the end of Q3 2025 were $714.1 million, an increase from $552.9 million at the end of 2024[28] Segment Performance - Driveline segment sales for Q3 2025 were $1,051.1 million, a slight increase from $1,042.8 million in Q3 2024, while Metal Forming segment sales decreased to $595.0 million from $596.5 million[39] - Segment adjusted EBITDA for the Driveline segment was $156.8 million in Q3 2025, up from $135.7 million in Q3 2024, indicating strong performance in this area[39] - Total segment adjusted EBITDA for Q3 2025 was $194.7 million, compared to $174.4 million in Q3 2024, representing an increase of about 11.8%[39] Strategic Initiatives - AAM continues to progress towards its combination with Dowlais, enhancing its position as a global supplier[5] - The company emphasizes the importance of non-GAAP financial measures for operational planning and decision-making[13] - The company is focused on strategic initiatives to enhance market position and operational performance, including ongoing investments in new technologies and market expansion efforts[42] Restructuring and Costs - The company reported restructuring-related costs of $45 million and acquisition-related costs of $55 million for the full year 2025, which will impact overall profitability[42] Sales Trends - The company experienced a decline in total sales for the nine months ended September 30, 2025, with total sales of $4,860.2 million compared to $5,167.4 million in 2024, a decrease of approximately 5.9%[39] - Total net external sales for the nine months ended September 30, 2025, were $4,452.8 million, down from $4,744.1 million in the same period of 2024, reflecting a decrease of approximately 6.1%[39]