Howmet Aerospace(HWM) - 2025 Q1 - Quarterly Results

Executive Summary & Highlights Howmet Aerospace reported record first quarter 2025 results, exceeding guidance with strong growth, strategic capital deployment, and an upgraded credit rating First Quarter 2025 Performance Overview Howmet Aerospace reported record first quarter 2025 results, exceeding baseline guidance with significant year-over-year growth in revenue, profit, and adjusted metrics, primarily driven by strong performance in the commercial aerospace market Q1 2025 Performance Overview | Metric | Q1 2025 (GAAP) | Q1 2024 (GAAP) | YoY Change | Q1 2025 (Adj. Excl. Special Items) | Q1 2024 (Adj. Excl. Special Items) | YoY Change | | :-------------------------------- | :------------- | :------------- | :--------- | :--------------------------------- | :--------------------------------- | :--------- | | Revenue | $1.94B | $1.824B | +6% | - | - | - | | Operating Income | $494M | $369M | +34% | $491M | $369M | +33% | | Operating Income Margin | 25.4% | 20.2% | +520 bps | 25.3% | 20.3% | +500 bps | | Net Income | $344M | $243M | +42% | $351M | $238M | +47% | | Earnings per Share (Diluted) | $0.84 | $0.59 | +42% | $0.86 | $0.57 | +51% | | Adjusted EBITDA | - | - | - | $560M | $437M | +28% | | Adjusted EBITDA Margin | - | - | - | 28.8% | 24.0% | +480 bps | | Cash from Operations | $253M | $177M | +43% | - | - | - | | Free Cash Flow | $134M | $95M | +41% | - | - | - | - Record first quarter 2025 revenue of $1.94 billion, up 6% year over year, primarily driven by 9% growth in the commercial aerospace market[4] - Adjusted EBITDA excluding special items reached a record $560 million, up 28% year over year, with margin increasing by 480 basis points to 28.8%[7][8] Key Corporate Actions & Outlook The company deployed significant capital through share repurchases and increased dividends, while receiving a credit rating upgrade. The outlook remains positive for commercial and defense aerospace, with some uncertainty in commercial transportation due to tariffs - Repurchased $125 million of common stock in Q1 2025 and an additional $100 million in April 2025[3][8][9] - Paid a quarterly common stock dividend of $0.10 per share in Q1 2025, a 100% increase from Q1 2024[3][8][9] - Fitch Ratings upgraded Howmet Aerospace's Long-Term Issuer Default Rating from BBB to BBB+ on March 31, 2025, three notches into Investment Grade[8][9] - Commercial aerospace market is poised for continued growth with record backlogs, and healthy growth is expected in defense aerospace and industrial gas turbine markets. Commercial transportation faces uncertainty due to tariffs[10] 2025 Financial Guidance Howmet Aerospace updated its full-year 2025 guidance, widening the revenue range and increasing projections for Adjusted EBITDA, Adjusted EPS, and Free Cash Flow, while also providing Q2 2025 guidance 2025 Financial Guidance | Metric | Q2 2025 Low | Q2 2025 Baseline | Q2 2025 High | FY 2025 Low | FY 2025 Baseline | FY 2025 High | | :------------------ | :---------- | :--------------- | :----------- | :---------- | :--------------- | :----------- | | Revenue | $1.980B | $1.990B | $2.000B | $7.880B | $8.030B | $8.180B | | Adj. EBITDA | $555M | $560M | $565M | $2.225B | $2.250B | $2.275B | | Adj. EBITDA Margin | 28.0% | 28.1% | 28.3% | 28.2% | 28.0% | 27.8% | | Adj. Earnings per Share | $0.85 | $0.86 | $0.87 | $3.36 | $3.40 | $3.44 | | Free Cash Flow | - | - | - | $1.100B | $1.150B | $1.200B | - Full Year 2025 Guidance: Revenue range widened, with increases to Adjusted EBITDA, Adjusted EPS, and Free Cash Flow, including current assumptions of tariff impacts[2][9][10] First Quarter 2025 Financial Results This section details Howmet Aerospace's consolidated and segment-specific financial performance for Q1 2025, driven by strong aerospace market growth Consolidated Financial Performance (GAAP & Adjusted) Howmet Aerospace achieved record consolidated financial performance in Q1 2025, with significant year-over-year increases across key GAAP and adjusted metrics, driven by strong market growth and operational efficiency Q1 2025 Consolidated Financial Performance | Metric | Q1 2025 (GAAP) | Q1 2024 (GAAP) | YoY Change | Q1 2025 (Adj. Excl. Special Items) | Q1 2024 (Adj. Excl. Special Items) | YoY Change | | :-------------------------------- | :------------- | :------------- | :--------- | :--------------------------------- | :--------------------------------- | :--------- | | Revenue | $1.94B | $1.824B | +6% | - | - | - | | Operating Income | $494M | $369M | +34% | $491M | $369M | +33% | | Operating Income Margin | 25.4% | 20.2% | +520 bps | 25.3% | 20.3% | +500 bps | | Net Income | $344M | $243M | +42% | $351M | $238M | +47% | | Earnings per Share (Diluted) | $0.84 | $0.59 | +42% | $0.86 | $0.57 | +51% | | Adjusted EBITDA | - | - | - | $560M | $437M | +28% | | Adjusted EBITDA Margin | - | - | - | 28.8% | 24.0% | +480 bps | - Operating Income Margin increased by approximately 520 basis points year over year to 25.4%, with Adjusted Operating Income Margin up 500 basis points to 25.3%[6] - Adjusted EBITDA growth was driven by strong performance in commercial and defense aerospace markets, partially offset by declines in commercial transportation[7] Segment Performance Segment performance in Q1 2025 showed strong growth in Engine Products, Fastening Systems, and Engineered Structures, primarily driven by aerospace markets, while Forged Wheels experienced a decline due to lower commercial transportation volumes Engine Products The Engine Products segment experienced significant growth in sales and Adjusted EBITDA, driven by strong demand across commercial and defense aerospace, industrial gas turbine, and oil and gas markets Engine Products Q1 2025 Performance | Metric | 1Q24 | 1Q25 | YoY Change | | :-------------------------- | :--- | :--- | :--------- | | Third-party sales | $885M | $996M | +13% | | Segment Adjusted EBITDA | $249M | $325M | +31% | | Segment Adjusted EBITDA Margin | 28.1% | 32.6% | +450 bps | | Capital expenditures | $55M | $86M | +56% | - Growth driven by commercial aerospace, defense aerospace, industrial gas turbine, and oil and gas markets. The segment absorbed approximately 500 net headcount in support of expected revenue increases[11] Fastening Systems The Fastening Systems segment reported increased revenue and Adjusted EBITDA, primarily due to growth in the commercial aerospace market and productivity gains, despite some offset from commercial transportation declines Fastening Systems Q1 2025 Performance | Metric | 1Q24 | 1Q25 | YoY Change | | :-------------------------- | :--- | :--- | :--------- | | Third-party sales | $389M | $412M | +6% | | Segment Adjusted EBITDA | $92M | $127M | +38% | | Segment Adjusted EBITDA Margin | 23.7% | 30.8% | +710 bps | | Capital expenditures | $7M | $10M | +43% | - Revenue and EBITDA growth driven by the commercial aerospace market and productivity gains, partially offset by declines in the commercial transportation market[13] Engineered Structures The Engineered Structures segment achieved notable revenue and Adjusted EBITDA growth, primarily propelled by strong performance in the defense aerospace market and operational productivity improvements Engineered Structures Q1 2025 Performance | Metric | 1Q24 | 1Q25 | YoY Change | | :-------------------------- | :--- | :--- | :--------- | | Third-party sales | $262M | $282M | +8% | | Segment Adjusted EBITDA | $37M | $60M | +62% | | Segment Adjusted EBITDA Margin | 14.1% | 21.3% | +720 bps | | Capital expenditures | $6M | $5M | -17% | - Revenue and EBITDA growth driven by the defense aerospace market and productivity gains[14] Forged Wheels The Forged Wheels segment experienced a decline in revenue and Adjusted EBITDA due to lower volumes in the commercial transportation market, partially mitigated by cost pass-throughs Forged Wheels Q1 2025 Performance | Metric | 1Q24 | 1Q25 | YoY Change | | :-------------------------- | :--- | :--- | :--------- | | Third-party sales | $288M | $252M | -13% | | Segment Adjusted EBITDA | $82M | $68M | -17% | | Segment Adjusted EBITDA Margin | 28.5% | 27.0% | -150 bps | | Capital expenditures | $12M | $15M | +25% | - Revenue and EBITDA decreased due to lower volumes in the commercial transportation market, partially offset by aluminum and other inflationary cost pass-through[15] Corporate & Financial Updates This section outlines Howmet Aerospace's strategic financial activities, including share repurchases, dividend increases, and a significant credit rating upgrade Share Repurchase Program Howmet Aerospace actively repurchased common stock in Q1 2025 and April 2025, demonstrating a commitment to returning capital to shareholders and reducing share count - Repurchased $125 million of common stock in Q1 2025 at an average price of $124.24 per share, retiring approximately 1.0 million shares[3][9][16] - Repurchased an additional $100 million of common stock in April 2025 at an average price of $125.61 per share, retiring approximately 0.8 million shares[8][9][16] - As of April 30, 2025, total share repurchase authorization available was $1.972 billion[16] Common Stock Dividend The company significantly increased its quarterly common stock dividend, reflecting strong financial performance and a commitment to shareholder returns - Paid a quarterly dividend of $0.10 per share on common stock in Q1 2025, a 100% increase from the $0.05 per share dividend paid in Q1 2024[3][9][17] - The Board of Directors announced a quarterly dividend of $0.10 per share to be paid on May 27, 2025[17] Credit Rating Upgrade Fitch Ratings upgraded Howmet Aerospace's long-term credit rating, recognizing the company's strengthening balance sheet and financial stability - On March 31, 2025, Fitch Ratings upgraded Howmet Aerospace's Long-Term Issuer Default Rating from BBB to BBB+, placing it three notches into Investment Grade[8][9][18] Company Information & Disclaimers This section provides an overview of Howmet Aerospace's business, along with standard disclaimers regarding forward-looking statements and non-GAAP financial measures About Howmet Aerospace Howmet Aerospace is a global leader in advanced engineered solutions for the aerospace and transportation industries, focusing on critical components for jet engines, aerospace fastening systems, airframe structures, and forged aluminum wheels - Headquartered in Pittsburgh, Pennsylvania, Howmet Aerospace provides advanced engineered solutions for aerospace and transportation[21] - Primary businesses include jet engine components, aerospace fastening systems, airframe structural components, and forged aluminum wheels for commercial transportation[21] - The company holds approximately 1,170 granted and pending patents, enabling lighter, more fuel-efficient aircraft and commercial trucks[21] Forward-Looking Statements This section contains standard forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from projections, including economic conditions, market changes, supply chain disruptions, and geopolitical risks - Statements relate to future events and expectations, constituting forward-looking statements under the Private Securities Litigation Reform Act of 1995[23] - Subject to risks and uncertainties such as global economic deterioration, cyber attacks, loss of significant customers, manufacturing difficulties, supply chain disruptions, workforce issues, competition, geopolitical risks, and legal contingencies[23] - The company disclaims any obligation to publicly update forward-looking statements, except as required by applicable law[23] Non-GAAP Financial Measures The report includes non-GAAP financial measures to supplement GAAP disclosures, providing additional insights into operating performance and financial obligations, with reconciliations provided in the schedules - Certain data are considered 'non-GAAP financial measures' under SEC rules, supplementing GAAP disclosures and not considered an alternative to GAAP measures[24] - Reconciliations to the most directly comparable GAAP financial measures and management's rationale for their use are provided in the schedules[24] Unaudited Financial Statements This section presents Howmet Aerospace's unaudited consolidated financial statements for Q1 2025, including the Statement of Operations, Balance Sheet, and Cash Flows Statement of Consolidated Operations The unaudited Statement of Consolidated Operations details Howmet Aerospace's financial performance for the first quarter ended March 31, 2025, showing significant increases in sales, operating income, and net income compared to prior periods Statement of Consolidated Operations (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :------------------------------------ | :------ | :------ | | Sales | $1,942M | $1,824M | | Operating income | $494M | $369M | | Net income | $344M | $243M | | Earnings per share - diluted | $0.84 | $0.59 | Consolidated Balance Sheet The unaudited Consolidated Balance Sheet as of March 31, 2025, shows the company's financial position, with an increase in total assets and total equity compared to December 31, 2024 Consolidated Balance Sheet (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Total current assets | $3,554M | $3,362M | | Total assets | $10,772M | $10,519M | | Total current liabilities | $1,548M | $1,549M | | Total liabilities | $5,980M | $5,965M | | Total equity | $4,792M | $4,554M | Statement of Consolidated Cash Flows The unaudited Statement of Consolidated Cash Flows for Q1 2025 indicates strong cash generation from operations, which was partially used for financing and investing activities, resulting in a net decrease in cash and cash equivalents Statement of Consolidated Cash Flows (Q1 2025 vs. Q1 2024) | Activity | Q1 2025 | Q1 2024 | | :------------------------------------ | :------ | :------ | | Cash provided from operations | $253M | $177M | | Cash used for financing activities | $(167)M | $(178)M | | Cash used for investing activities | $(115)M | $(75)M | | Net change in cash, cash equivalents and restricted cash | $(28)M | $(76)M | | Cash, cash equivalents and restricted cash at end of period | $537M | $534M | Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of various non-GAAP financial measures to their most directly comparable GAAP counterparts Total Segment Adjusted EBITDA Reconciliation This section provides the reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes, highlighting the adjustments made for depreciation, amortization, restructuring, and corporate expenses to present a non-GAAP measure of operating performance Total Segment Adjusted EBITDA Reconciliation (Q1 2025 vs. Q1 2024) | Metric | 1Q25 | 1Q24 | | :------------------------------------ | :----- | :----- | | Income before income taxes | $446M | $303M | | Operating income | $494M | $369M | | Segment provision for depreciation and amortization | $68M | $65M | | Restructuring and other charges (credits) | $(4)M | $0M | | Corporate expense | $22M | $26M | | Total Segment Adjusted EBITDA | $580M | $460M | - Total Segment Adjusted EBITDA is a non-GAAP measure used by management to assess operating performance and ability to meet financial obligations, excluding special items[32] Free Cash Flow Reconciliation This reconciliation details the calculation of Free Cash Flow, a non-GAAP measure, by subtracting capital expenditures from cash provided by operations, indicating the cash available after maintaining and expanding the asset base Free Cash Flow Reconciliation (Q1 2025 vs. Q1 2024) | Metric | 1Q25 | 1Q24 | | :-------------------------- | :----- | :----- | | Cash provided from operations | $253M | $177M | | Capital expenditures | $(119)M | $(82)M | | Free cash flow | $134M | $95M | - Free cash flow increased by $39 million year-over-year, from $95 million in Q1 2024 to $134 million in Q1 2025[34] - Free cash flow does not represent residual cash flow for discretionary expenditures as mandatory debt service is not deducted[35] Net Income and EPS Excluding Special Items Reconciliation This reconciliation adjusts GAAP Net Income and Diluted EPS by excluding the impact of special items, such as restructuring credits, plant fire reimbursements, and discrete tax items, to provide a clearer view of underlying operating performance Net Income and EPS Excluding Special Items Reconciliation (Q1 2025 vs. Q1 2024) | Metric | 1Q25 | 1Q24 | | :------------------------------------ | :----- | :----- | | Net income | $344M | $243M | | Diluted earnings per share ("EPS") | $0.84 | $0.59 | | Total: After-tax special items | $7M | $(5)M | | Net income excluding Special items | $351M | $238M | | Diluted EPS excluding Special items | $0.86 | $0.57 | - Special items in Q1 2025 included restructuring and other credits ($(4) million), costs associated with closures, supply chain disruptions, and other items ($1 million), and discrete and other tax special items ($9 million)[36][37] Operational Tax Rate Reconciliation This reconciliation presents the operational tax rate by adjusting the GAAP effective tax rate for the impact of special items, offering a more normalized view of the company's tax burden on its core operations Operational Tax Rate Reconciliation (Q1 2025) | Metric | Effective tax rate, as reported | Special items | Operational tax rate, as adjusted | | :-------------------------- | :------------------------------ | :------------ | :-------------------------------- | | Income before income taxes | $446M | $(3)M | $443M | | Provision for income taxes | $102M | $(10)M | $92M | | Tax rate | 22.9% | - | 20.8% | - Pre-tax special items for Q1 2025 included restructuring and other credits ($(4) million), partially offset by costs associated with closures, supply chain disruptions, and other items ($1 million)[39] - Discrete tax items for Q1 2025 included a net charge related to the expiration of a tax holiday in China ($6 million), a charge for a tax reserve established in Germany ($2 million), and a net charge for other small items ($1 million)[40] Adjusted EBITDA and Margin Reconciliation This reconciliation provides Adjusted EBITDA and Adjusted EBITDA margin by adding back income taxes, interest, other expenses, restructuring credits, and depreciation/amortization to net income, and further adjusting for special items, to show core operational profitability Adjusted EBITDA and Margin Reconciliation (Q1 2025 vs. Q1 2024) | Metric | 1Q25 | 1Q24 | | :------------------------------------ | :----- | :----- | | Sales | $1,942M | $1,824M | | Operating income | $494M | $369M | | Adjusted EBITDA | $559M | $436M | | Adjusted EBITDA excluding Special items | $560M | $437M | | Adjusted EBITDA margin excluding Special items | 28.8% | 24.0% | | Incremental operating income margin | 106% | - | | Incremental margin | 104% | - | - Adjusted EBITDA excluding Special items increased by $123 million year-over-year, from $437 million in Q1 2024 to $560 million in Q1 2025[41] - The incremental operating income margin was 106%, and the incremental margin (Adjusted EBITDA excluding Special items) was 104% year-over-year[41] Adjusted Operating Income and Margin Reconciliation This reconciliation adjusts GAAP Operating Income and Operating Income Margin by excluding special items, such as restructuring credits and costs associated with disruptions, to provide a clearer perspective on the company's core operational profitability Adjusted Operating Income and Margin Reconciliation (Q1 2025 vs. Q1 2024) | Metric | 1Q25 | 1Q24 | | :------------------------------------ | :----- | :----- | | Sales | $1,942M | $1,824M | | Operating income | $494M | $369M | | Operating income margin | 25.4% | 20.2% | | Adjusted operating income excluding Special items | $491M | $370M | | Adjusted operating income margin excluding Special items | 25.3% | 20.3% | - Adjusted operating income excluding Special items increased by $121 million year-over-year, from $370 million in Q1 2024 to $491 million in Q1 2025[42] - Adjusted operating income margin excluding Special items improved by 500 basis points year-over-year, reaching 25.3% in Q1 2025[42]