Hexcel(HXL) - 2025 Q2 - Quarterly Results

Hexcel Q2 2025 Earnings Report Financial Highlights Hexcel's Q2 2025 results reflect a year-over-year decline in sales and EPS, while maintaining full-year guidance Q2 & YTD 2025 Financial Performance Summary (vs. 2024) | (In millions, except per share data) | Q2 2025 | Q2 2024 | % Change | YTD 2025 | YTD 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $489.9 | $500.4 | (2.1)% | $946.4 | $972.7 | (2.7)% | | Operating Income (GAAP) | $30.0 | $71.8 | (58.2)% | $74.2 | $124.7 | (40.5)% | | Net Income (GAAP) | $13.5 | $50.0 | (73.0)% | $42.4 | $86.5 | (51.0)% | | Diluted EPS (GAAP) | $0.17 | $0.60 | (71.7)% | $0.52 | $1.03 | (49.5)% | | Adjusted Operating Income | $54.2 | $72.0 | (24.7)% | $99.5 | $126.1 | (21.1)% | | Adjusted Diluted EPS | $0.50 | $0.60 | (16.7)% | $0.87 | $1.04 | (16.3)% | - The company returned $64 million to stockholders in Q2 2025 through a combination of share repurchases and dividends[5] - Full-year 2025 guidance remains unchanged[5] Management Commentary Management attributes Q2 performance to A350 program softness offset by defense growth, while actively streamlining operations - Sales performance was impacted by softness in the Airbus A350 program, attributed to production rate decreases and supply chain destocking[4] - The Defense, Space & Other market provided robust, high single-digit growth over Q2 2024[4] - Strategic operational streamlining includes the closure of the Welkenraedt, Belgium facility, a strategic review of the Neumarkt, Austria facility, and the divestiture of the US additive printing business[6] - The company executed $50 million in share repurchases during the second quarter, having repurchased nearly 6% of outstanding shares since the start of 2024[6] Market Performance Analysis Commercial Aerospace sales declined while the Defense, Space & Other market saw strong growth in Q2 2025 - Beginning in Q1 2025, the company reports sales under two markets: Commercial Aerospace and a combined Defense, Space & Other market[7] Commercial Aerospace Commercial Aerospace Sales Performance | Period | Sales (in millions) | YoY Change | YoY Change (Constant Currency) | | :--- | :--- | :--- | :--- | | Q2 2025 | $293.1 | (8.6)% | (8.9)% | | YTD 2025 | $573.2 | (7.5)% | (7.7)% | - Sales decreased year-over-year for all four major programs: Airbus A350, A320neo, Boeing 787, and 737 MAX[8] - Other Commercial Aerospace sales, which excludes the four major programs, increased by 5.1% in Q2 and 6.0% YTD compared to the prior year[8][13] Defense, Space & Other Defense, Space & Other Sales Performance | Period | Sales (in millions) | YoY Change | YoY Change (Constant Currency) | | :--- | :--- | :--- | :--- | | Q2 2025 | $196.8 | 9.5% | 7.6% | | YTD 2025 | $373.2 | 5.8% | 5.2% | - Growth in Q2 was driven by the Sikorsky CH-53K helicopter, two international fighter programs, and various space programs including launchers, rocket motors, and satellites[9] Consolidated Operations Review Q2 gross margin declined due to lower sales and inventory efforts, with operating income impacted by a significant restructuring charge Key Operational Metrics Comparison (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Gross Margin | 22.8% | 25.3% | | SG&A as % of Sales | 8.8% | 8.0% | | R&T as % of Sales | 2.9% | 2.9% | | Adjusted Operating Margin | 11.1% | 14.4% | - Q2 operating income included restructuring charges of $24.2 million related to the closure of the Welkenraedt, Belgium facility[10] - For the first six months of 2025, total restructuring charges amounted to $25.3 million, which also included the divestiture of the Hartford, Connecticut business[15] Cash Flow, Capital Allocation, and Guidance The company experienced negative free cash flow in H1 2025 but continued its capital return program and reaffirmed full-year guidance Cash Flow Summary (First Six Months) | (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $(5.2) | $37.2 | | Capital expenditures | $(41.4) | $(51.6) | | Free Cash Flow | $(46.6) | $(14.4) | - The company repurchased $100.9 million of its common stock in the first six months of 2025, with the remaining authorization under the share repurchase program at approximately $134 million[18] - The Board of Directors declared a quarterly dividend of $0.17 per share[18] Full Year 2025 Guidance (Unchanged) | Metric | Guidance | | :--- | :--- | | Sales | $1.88 billion to $1.95 billion | | Adjusted diluted EPS | $1.85 to $2.05 | | Free cash flow | Approximately $190 million | | Capital expenditures | Less than $90 million | | Effective tax rate | 21.0% (excluding discrete items) | Financial Statements This section presents Hexcel's unaudited condensed consolidated Statements of Operations, Balance Sheets, and Statements of Cash Flows Condensed Consolidated Statements of Operations Q2 2025 Statement of Operations Highlights (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $489.9 | $500.4 | | Gross margin | $111.5 | $126.6 | | Operating income | $30.0 | $71.8 | | Net income | $13.5 | $50.0 | Condensed Consolidated Balance Sheets Balance Sheet Highlights (in millions) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $77.2 | $125.4 | | Inventories, net | $375.4 | $356.2 | | Total assets | $2,843.3 | $2,725.6 | | Long-term debt | $827.7 | $700.6 | | Total stockholders' equity | $1,553.9 | $1,527.9 | Condensed Consolidated Statements of Cash Flows Cash Flow Highlights - Six Months Ended June 30 (in millions) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(5.2) | $37.2 | | Net cash used for investing activities | $(42.5) | $(51.6) | | Net cash used for financing activities | $(4.1) | $(136.0) | | Net decrease in cash and cash equivalents | $(48.2) | $(151.6) | Supplemental Financial Information This section provides supplementary data on net sales by market, segment performance, non-GAAP reconciliations, and debt schedules Table A: Net Sales by Market Q2 2025 Net Sales by Market (in millions) | Market | 2025 Sales | 2024 Sales | % Change | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Commercial Aerospace | $293.1 | $320.7 | (8.6)% | (8.9)% | | Defense, Space & Other | $196.8 | $179.7 | 9.5% | 7.6% | | Consolidated Total | $489.9 | $500.4 | (2.1)% | (2.9)% | Table B: Segment Information Q2 2025 Segment Performance (in millions) | Segment | Net Sales to External Customers | Operating Income (Loss) | Operating Margin | | :--- | :--- | :--- | :--- | | Composite Materials | $393.2 | $58.3 | 14.1% | | Engineered Products | $96.7 | $(13.6) | (14.0)% | - The Engineered Products segment reported an operating loss of $13.6 million, which includes a $24.2 million restructuring charge[31] Table C: GAAP to Non-GAAP Reconciliation Q2 2025 GAAP to Non-GAAP Reconciliation (in millions, except EPS) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Operating Income | $30.0 | $24.2 | $54.2 | | Net Income | $13.5 | $26.9 | $40.4 | | Diluted EPS | $0.17 | $0.33 | $0.50 | - Adjustments for Q2 2025 primarily consist of a $24.2 million pre-tax restructuring charge for the Welkenraedt facility closure, a $0.9 million gain on a pension settlement, and a related $3.4 million tax charge[33][34] Table D: Schedule of Total Debt Total Debt, Net of Cash (in millions) | Date | Total Debt | Cash & Equivalents | Total Debt, Net of Cash | | :--- | :--- | :--- | :--- | | June 30, 2025 | $827.7 | $77.2 | $750.5 | | Dec 31, 2024 | $700.7 | $125.4 | $575.3 | | June 30, 2024 | $795.0 | $75.4 | $719.6 |