Howmet Aerospace(HWM) - 2025 Q2 - Quarterly Results

Financial Performance and Outlook This section details Howmet Aerospace's strong Q2 2025 financial results, strategic insights, segment performance, and updated full-year guidance Second Quarter 2025 Financial Highlights Howmet Aerospace achieved record Q2 2025 results with $2.05 billion revenue, 9% YoY growth, and significant profit margin expansion Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $2.05B | $1.88B | +9% | | Net Income | $407M | $266M | +53% | | Earnings Per Share (Diluted) | $1.00 | $0.65 | +54% | | Adjusted EBITDA* | $589M | $483M | +22% | | Adjusted EBITDA Margin* | 28.7% | 25.7% | +300 bps | | Adjusted EPS* | $0.91 | $0.67 | +36% | | Free Cash Flow | $344M | N/A | N/A | *Excluding special items - Revenue growth was driven by strong performance across key markets: Commercial Aerospace (+8%), Defense Aerospace (+21%), and Industrial and Other (+17%), which was partially offset by a 4% decline in the Commercial Transportation market[5] - The company generated $446 million in cash from operations and $344 million in free cash flow, marking the ninth consecutive quarter of positive free cash flow generation[3][9] Management Commentary and Strategic Actions Management highlighted strong Q2 performance, capital returns, and debt reduction, raising full-year guidance based on positive market outlook - The Board of Directors declared a 20% increase in the quarterly common stock dividend to $0.12 per share for Q3 2025[9][18] - The company repurchased $175 million of common stock in Q2 2025 and an additional $100 million in July, bringing year-to-date repurchases to $400 million[9][10][17] - Paid down $76 million of the USD Term Loan in Q2 2025, reducing annualized interest expense by approximately $4 million[9][19] - Management sees a healthy outlook driven by robust demand in commercial aerospace (engine spares, new aircraft), defense aerospace, and industrial gas turbines for data centers, while the commercial transportation market remains weak[11] Business Segment Performance All segments contributed to strong performance, with Engine Products leading growth and margin expansion, while Forged Wheels improved margins despite flat revenue Engine Products Engine Products revenue grew 13% to $1.1 billion, with Adjusted EBITDA up 20% and margin expanding to 33.0% driven by aerospace and industrial markets Engine Products Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $1.1B | +13% | | Segment Adjusted EBITDA | $349M | +20% | | Segment Adjusted EBITDA Margin | 33.0% | +170 bps | Fastening Systems Fastening Systems revenue increased 9% to $431 million, with Adjusted EBITDA up 25% and margin expanding to 29.2% due to aerospace growth and productivity Fastening Systems Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $431M | +9% | | Segment Adjusted EBITDA | $126M | +25% | | Segment Adjusted EBITDA Margin | 29.2% | +360 bps | Engineered Structures Engineered Structures revenue grew 5% to $290 million, with Adjusted EBITDA surging 55% to $62 million and margin expanding to 21.4% driven by defense aerospace Engineered Structures Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $290M | +5% | | Segment Adjusted EBITDA | $62M | +55% | | Segment Adjusted EBITDA Margin | 21.4% | +690 bps | Forged Wheels Forged Wheels revenue decreased 1% to $276 million, but Adjusted EBITDA increased 1% to $76 million, with margin improving to 27.5% due to cost reductions Forged Wheels Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $276M | -1% | | Segment Adjusted EBITDA | $76M | +1% | | Segment Adjusted EBITDA Margin | 27.5% | +50 bps | Full Year 2025 Guidance Howmet Aerospace raised its full-year 2025 guidance for revenue, Adjusted EBITDA, Adjusted EPS, and Free Cash Flow, reflecting strong performance and positive outlook Updated Full Year 2025 Guidance (Baseline) | Metric | New FY 2025 Guidance (Baseline) | Change from Prior Guidance | | :--- | :--- | :--- | | Revenue | $8.130B | +$100M | | Adj. EBITDA | $2.320B | +$70M | | Adj. EBITDA Margin | 28.5% | +50 bps | | Adj. Earnings per Share | $3.60 | +$0.20 | | Free Cash Flow | $1.225B | +$75M | Q3 2025 Guidance (Baseline) | Metric | Q3 2025 Guidance (Baseline) | | :--- | :--- | | Revenue | $2.030B | | Adj. EBITDA | $580M | | Adj. EBITDA Margin | 28.6% | | Adj. Earnings per Share | $0.90 | Consolidated Financial Statements (Unaudited) This section presents Howmet Aerospace's unaudited consolidated statements of operations, balance sheet, and cash flows for the reported periods Statement of Consolidated Operations The unaudited statement of operations shows Q2 2025 sales of $2.053 billion, operating income of $521 million, and net income of $407 million Q2 2025 Statement of Operations Highlights (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $2,053 | $1,880 | | Operating income | $521 | $398 | | Income before income taxes | $469 | $334 | | Net income | $407 | $266 | | Diluted EPS | $1.00 | $0.65 | Consolidated Balance Sheet As of June 30, 2025, the balance sheet shows total assets of $11.046 billion, total liabilities of $6.004 billion, and total equity of $5.042 billion Balance Sheet Highlights (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $545 | $564 | | Total current assets | $3,694 | $3,362 | | Total assets | $11,046 | $10,519 | | Long-term debt | $3,253 | $3,309 | | Total liabilities | $6,004 | $5,965 | | Total equity | $5,042 | $4,554 | Statement of Consolidated Cash Flows For the six months ended June 30, 2025, cash from operations was $699 million, with $506 million used in financing and $212 million in investing activities Cash Flow Highlights - Six Months Ended June 30 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Cash provided from operations | $699 | $574 | | Cash used for financing activities | ($506) | ($301) | | - Repurchases of common stock | ($300) | ($210) | | Cash used for investing activities | ($212) | ($129) | | - Capital expenditures | ($221) | ($137) | | Net change in cash | ($19) | $142 | Non-GAAP Financial Measures and Reconciliations This section provides reconciliations of non-GAAP financial measures, including Adjusted EBITDA, Free Cash Flow, Operational Tax Rate, and Adjusted Operating Income, to their GAAP equivalents Reconciliation of Net Income and Adjusted EBITDA This section reconciles Q2 2025 GAAP Net Income to Adjusted Net Income and GAAP Operating Income to Adjusted EBITDA, detailing adjustments for special items Q2 2025 Reconciliation of Net Income to Adjusted Net Income (in millions) | Line Item | Amount | | :--- | :--- | | Net income (GAAP) | $407 | | After-tax special items | ($36) | | Net income excluding Special items (Non-GAAP) | $371 | Q2 2025 Reconciliation to Adjusted EBITDA (in millions) | Line Item | Amount | | :--- | :--- | | Operating income (GAAP) | $521 | | Add: Depreciation & Amortization | $69 | | Add: Corporate Expense | $25 | | Total Segment Adjusted EBITDA | $613 | | Less: Special Items | ($1) | | Adjusted EBITDA excluding Special items (Non-GAAP) | $589 | Reconciliation of Free Cash Flow This section details the calculation of Free Cash Flow for Q2 2025, derived by subtracting capital expenditures from cash provided by operations Q2 2025 Free Cash Flow Calculation (in millions) | Line Item | Amount | | :--- | :--- | | Cash provided from operations | $446 | | Capital expenditures | ($102) | | Free cash flow (Non-GAAP) | $344 | Reconciliation of Operational Tax Rate This section reconciles the GAAP effective tax rate to the non-GAAP Operational Tax Rate for Q2 2025, adjusting for special tax items Q2 2025 Tax Rate Reconciliation | Metric | Rate | | :--- | :--- | | Effective tax rate, as reported (GAAP) | 13.2% | | Operational tax rate, as adjusted (Non-GAAP) | 20.7% | - Tax special items for Q2 2025 included benefits from U.S. accounting method changes ($17M), excess benefit for stock compensation ($13M), and R&D credits ($5M)[43] Reconciliation of Adjusted Operating Income This section reconciles GAAP Operating Income to Adjusted Operating Income for Q2 2025, detailing adjustments for special items and margin improvement Q2 2025 Adjusted Operating Income Reconciliation (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Operating income (GAAP) | $521 | $398 | | Add/Subtract: Special Items | ($1) | $16 | | Adjusted operating income (Non-GAAP) | $520 | $414 | | Adjusted operating income margin (Non-GAAP) | 25.3% | 22.0% |