American Axle & Manufacturing (AXL) - 2024 Q3 - Quarterly Results

Third Quarter 2024 Financial Results AAM's Q3 2024 financial performance, key metrics, and management commentary are presented Key Financial Highlights (Q3 2024 vs Q3 2023) AAM reported solid Q3 2024 financial performance, achieving positive net income and Adjusted EBITDA despite a slight sales decrease | Metric | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | Change (YoY) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :----------- | :--------- | | Sales | $1,504.9 | $1,551.9 | $(47.0) | -3.0% | | Net Income (Loss) | $10.0 | $(17.4) | $27.4 | N/A | | Adjusted EBITDA | $174.4 | $156.8 | $17.6 | 11.2% | | Diluted EPS | $0.08 | $(0.15) | $0.23 | N/A | | Adjusted EPS | $0.20 | $(0.11) | $0.31 | N/A | | Net Cash from Operations | $143.6 | $178.3 | $(34.7) | -19.5% | | Adjusted Free Cash Flow | $74.6 | $135.8 | $(61.2) | -45.1% | - Sales for Q3 2024 were negatively impacted by lower volumes on certain platforms[2] Management Commentary AAM's CEO highlighted solid Q3 performance driven by productivity and operating efficiencies - AAM's Chairman and CEO, David C. Dauch, stated that the solid Q3 financial performance was driven by productivity and operating efficiencies[2] - Management will continue to focus on controllable factors and remain agile to changing propulsion trends with their comprehensive product portfolio[2] 2024 Updated Financial Outlook AAM's updated full-year 2024 financial targets and underlying assumptions are detailed Full Year 2024 Targets AAM updated its full-year 2024 financial targets, adjusting Sales and Adjusted Free Cash Flow ranges | Metric | Prior Target (Billions USD) | Updated Target (Billions USD) | Change | | :------------------------ | :-------------------------- | :---------------------------- | :----- | | Sales | $6.1 - $6.3 | $6.1 - $6.15 | Lowered | | Adjusted EBITDA | $705 - $755 million | $715 - $745 million | Narrowed | | Adjusted Free Cash Flow | $200 - $240 million | $200 - $220 million | Lowered | | Capital Spending (as % of sales) | N/A | ~4% | N/A | Underlying Assumptions Updated 2024 financial targets are based on assumptions for North American light vehicle production and AAM's production estimates - North American light vehicle production is assumed to be approximately 15.5 million units for 2024[6] - Targets are based on AAM's production estimates of key programs and current customer launch schedules and operating environment[6] Company Information AAM's company description, conference call details, forward-looking statements, and contacts are provided Company Description AAM is a global Tier 1 Automotive and Mobility Supplier specializing in Driveline and Metal Forming technologies - AAM is a leading global Tier 1 Automotive and Mobility Supplier[15] - The company designs, engineers, and manufactures Driveline and Metal Forming technologies for electric, hybrid, and internal combustion vehicles[15] - AAM is headquartered in Detroit with over 80 facilities in 18 countries[15] Conference Call Details A conference call was held November 8, 2024, to discuss AAM's third-quarter results - A conference call to review Q3 results was scheduled for November 8, 2024, at 10:00 a.m. ET[7] - Participants could listen via AAM's investor website or by phone, with a replay available until November 15, 2024[7] Forward-Looking Statements The report contains forward-looking statements subject to various risks and uncertainties - Statements concerning future expectations and performance are considered 'forward-looking' statements[17] - Forward-looking statements are not guarantees of future performance and are subject to risks that may cause actual results to differ materially[17] - Key factors causing differences include global economic conditions, reduced purchases by major customers (GM, Stellantis, Ford), technological changes, competition, supply chain disruptions, and risks related to transitioning to hybrid/electric vehicle products[17] Investor & Media Contacts Contact information for AAM's investor relations and media inquiries is provided - Investor Contact: David H. Lim, Head of Investor Relations, (313) 758-2006, david.lim@aam.com[18] - Media Contact: Christopher M. Son, Vice President, Marketing & Communications, (313) 758-4814, chris.son@aam.com[18] Condensed Consolidated Financial Statements AAM's condensed consolidated financial statements, including operations, balance sheets, and cash flows, are presented Statements of Operations AAM's Q3 2024 statements of operations show net income of $10.0 million, a significant improvement | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | | Net Sales | $1,504.9 | $1,551.9 | | Cost of Goods Sold | $1,333.6 | $1,421.3 | | Gross Profit | $171.3 | $130.6 | | Selling, General and Administrative | $94.6 | $81.8 | | Amortization of Intangible Assets | $20.8 | $21.4 | | Impairment Charge | $12.0 | — | | Restructuring & Acquisition-related | $2.2 | $3.5 | | Operating Income | $41.7 | $23.9 | | Interest Expense | $(45.2) | $(50.8) | | Interest Income | $7.1 | $7.1 | | Income (Loss) Before Income Taxes | $(2.1) | $(19.4) | | Income Tax Expense (Benefit) | $(12.1) | $(2.0) | | Net Income (Loss) | $10.0 | $(17.4) | | Diluted Earnings (Loss) Per Share | $0.08 | $(0.15) | | Metric (in millions) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | $4,744.1 | $4,616.5 | | Cost of Goods Sold | $4,157.0 | $4,147.1 | | Gross Profit | $587.1 | $469.4 | | Selling, General and Administrative | $298.1 | $271.2 | | Amortization of Intangible Assets | $62.1 | $64.2 | | Impairment Charge | $12.0 | — | | Restructuring & Acquisition-related | $9.7 | $16.2 | | Operating Income | $205.2 | $117.8 | | Interest Expense | $(142.1) | $(151.5) | | Interest Income | $21.5 | $18.9 | | Income (Loss) Before Income Taxes | $69.7 | $(11.2) | | Income Tax Expense (Benefit) | $21.0 | $3.3 | | Net Income (Loss) | $48.7 | $(14.5) | | Diluted Earnings (Loss) Per Share | $0.40 | $(0.12) | Balance Sheets AAM's balance sheet as of Sep 30, 2024, shows slight decreases in total assets and liabilities | Metric (in millions) | Sep 30, 2024 | Dec 31, 2023 | | :----------------------------------- | :----------- | :----------- | | ASSETS | | | | Cash and cash equivalents | $542.5 | $519.9 | | Accounts receivable, net | $900.1 | $818.5 | | Inventories, net | $465.6 | $482.9 | | Total current assets | $2,135.5 | $2,006.6 | | Property, plant and equipment, net | $1,657.0 | $1,760.9 | | Goodwill | $174.1 | $182.1 | | Other intangible assets, net | $477.5 | $532.8 | | Total assets | $5,328.3 | $5,356.3 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current portion of long-term debt | $42.7 | $17.0 | | Accounts payable | $805.7 | $773.9 | | Total current liabilities | $1,294.2 | $1,201.6 | | Long-term debt, net | $2,638.3 | $2,751.9 | | Total liabilities | $4,712.0 | $4,751.4 | | Total AAM stockholders' equity | $616.3 | $604.9 | | Total liabilities and stockholders' equity | $5,328.3 | $5,356.3 | Statements of Cash Flows Net cash from operating activities decreased in Q3 2024, with increased cash used in investing activities | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :---------------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $10.0 | $(17.4) | | Net cash provided by operating activities | $143.6 | $178.3 | | Net cash used in investing activities | $(79.3) | $(48.8) | | Net cash used in financing activities | $(47.5) | $(20.8) | | Net increase in cash and cash equivalents | $22.6 | $104.5 | | Cash and cash equivalents at end of period | $542.5 | $615.6 | | Metric (in millions) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $48.7 | $(14.5) | | Net cash provided by operating activities | $304.2 | $343.2 | | Net cash used in investing activities | $(174.2) | $(126.7) | | Net cash used in financing activities | $(106.0) | $(108.2) | | Net increase in cash and cash equivalents | $22.6 | $104.1 | | Cash and cash equivalents at end of period | $542.5 | $615.6 | Supplemental Non-GAAP Financial Data Supplemental non-GAAP financial measures and their GAAP reconciliations are provided Non-GAAP Financial Measures Overview AAM provides non-GAAP financial measures for additional insights into business and operating performance - AAM provides non-GAAP financial measures including Adjusted EBITDA, Adjusted earnings per share, and Adjusted free cash flow[8] - These measures are reconciled to GAAP and are considered useful for management, investors, and banking institutions for analysis and operational planning[8][10] - Non-GAAP measures should not be considered a substitute for GAAP measures and may not be comparable to similarly titled measures reported by other companies[11] Reconciliation of EBITDA and Adjusted EBITDA AAM reconciles Net Income to EBITDA and Adjusted EBITDA, excluding specific non-operating items | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $10.0 | $(17.4) | | Interest expense | $45.2 | $50.8 | | Income tax expense (benefit) | $(12.1) | $(2.0) | | Depreciation and amortization | $116.9 | $120.4 | | EBITDA | $160.0 | $151.8 | | Restructuring and acquisition-related costs | $2.2 | $3.5 | | Debt refinancing and redemption costs | $0.2 | $0.3 | | Impairment charge | $12.0 | — | | Loss on equity securities | — | $1.2 | | Adjusted EBITDA | $174.4 | $156.8 | | Metric (in millions) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $48.7 | $(14.5) | | Interest expense | $142.1 | $151.5 | | Income tax expense (benefit) | $21.0 | $3.3 | | Depreciation and amortization | $354.3 | $365.8 | | EBITDA | $566.1 | $506.1 | | Restructuring and acquisition-related costs | $9.7 | $16.2 | | Debt refinancing and redemption costs | $0.5 | $0.3 | | Impairment charge | $12.0 | — | | Loss on equity securities | $0.1 | $1.2 | | Adjusted EBITDA | $588.4 | $523.8 | Reconciliation of Adjusted Earnings Per Share Adjusted EPS for Q3 2024 was $0.20, a significant improvement from Q3 2023 | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Diluted earnings (loss) per share | $0.08 | $(0.15) | | Restructuring and acquisition-related costs | $0.02 | $0.04 | | Impairment charge | $0.10 | — | | Loss on equity securities | — | $0.01 | | Tax effect of adjustments | — | $(0.01) | | Adjusted earnings (loss) per share | $0.20 | $(0.11) | | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Diluted earnings (loss) per share | $0.40 | $(0.12) | | Restructuring and acquisition-related costs | $0.08 | $0.14 | | Impairment charge | $0.10 | — | | Loss on equity securities | — | $0.01 | | Tax effect of adjustments | $(0.01) | $(0.03) | | Adjusted earnings (loss) per share | $0.57 | — | - Adjusted earnings (loss) per share are based on weighted average diluted shares outstanding of 122.2 million for Q3 2024 and 117.1 million for Q3 2023[28] Reconciliation of Free Cash Flow and Adjusted Free Cash Flow AAM's Adjusted free cash flow for Q3 2024 was $74.6 million, a decrease from Q3 2023 | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :---------------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $143.6 | $178.3 | | Less: Capital expenditures net of proceeds | $(72.9) | $(47.5) | | Free cash flow | $70.7 | $130.8 | | Cash payments for restructuring and acquisition-related costs | $3.9 | $5.0 | | Insurance proceeds related to Malvern fire, net | — | — | | Adjusted free cash flow | $74.6 | $135.8 | | Metric (in millions) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $304.2 | $343.2 | | Less: Capital expenditures net of proceeds | $(164.4) | $(137.8) | | Free cash flow | $139.8 | $205.4 | | Cash payments for restructuring and acquisition-related costs | $11.3 | $16.1 | | Insurance proceeds related to Malvern fire, net | — | $(7.0) | | Adjusted free cash flow | $151.1 | $214.5 | Segment Financial Performance AAM operates in Driveline and Metal Forming segments, with Metal Forming showing significant Adjusted EBITDA growth | Segment (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | | Segment Sales | | | | Driveline | $1,042.8 | $1,061.2 | | Metal Forming | $596.5 | $624.8 | | Total Sales | $1,639.3 | $1,686.0 | | Intersegment Sales | $(134.4) | $(134.1) | | Net External Sales | $1,504.9 | $1,551.9 | | Segment Adjusted EBITDA | | | | Driveline | $135.7 | $137.3 | | Metal Forming | $38.7 | $19.5 | | Total Segment Adjusted EBITDA | $174.4 | $156.8 | | Segment (in millions) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :----------------------------- | :----------------------------- | | Segment Sales | | | | Driveline | $3,273.7 | $3,161.5 | | Metal Forming | $1,893.7 | $1,878.1 | | Total Sales | $5,167.4 | $5,039.6 | | Intersegment Sales | $(423.3) | $(423.1) | | Net External Sales | $4,744.1 | $4,616.5 | | Segment Adjusted EBITDA | | | | Driveline | $444.9 | $403.5 | | Metal Forming | $143.5 | $120.3 | | Total Segment Adjusted EBITDA | $588.4 | $523.8 | Full Year 2024 Financial Outlook Reconciliation AAM provides reconciliation of full-year 2024 targeted Adjusted EBITDA and Adjusted Free Cash Flow | Metric (in millions) | Low End | High End | | :---------------------------------------- | :------ | :------- | | Net income | $15 | $35 | | Interest expense | $190 | $190 | | Income tax expense | $5 | $15 | | Depreciation and amortization | $475 | $475 | | Full year 2024 targeted EBITDA | $685 | $715 | | Restructuring and acquisition-related costs | $15 | $15 | | Other, principally impairment charge | $15 | $15 | | Full year 2024 targeted Adjusted EBITDA | $715 | $745 | | Metric (in millions) | Low End | High End | | :---------------------------------------- | :------ | :------- | | Net cash provided by operating activities | $435 | $455 | | Capital expenditures net of proceeds | $(250) | $(250) | | Full year 2024 targeted Free Cash Flow | $185 | $205 | | Cash payments for restructuring and acquisition-related costs | $15 | $15 | | Full year 2024 targeted Adjusted Free Cash Flow | $200 | $220 |