American Axle & Manufacturing (AXL) - 2025 Q2 - Quarterly Results

Executive Summary AAM reported strong Q2 2025 results with significant net income and Adjusted EBITDA margin growth, updating full-year targets Second Quarter 2025 Financial Highlights American Axle & Manufacturing (AAM) reported Q2 2025 financial results, showing year-over-year growth in net income and Adjusted EBITDA margin despite decreased sales | Metric | Q2 2025 ($ million) | Q2 2024 ($ million) | YoY Change | YoY % Change | | :-------------------------------- | :------------------ | :------------------ | :--------- | :----------- | | Sales | $1,540 | $1,630 | -$90 | -5.5% | | Net Income | $39.3 | $18.2 | +$21.1 | +115.9% | | Net Income (% of sales) | 2.6% | 1.1% | +1.5 pp | - | | Adjusted EBITDA | $202.2 | $208.4 | -$6.2 | -3.0% | | Adjusted EBITDA (% of sales) | 13.2% | 12.8% | +0.4 pp | - | | Diluted EPS | $0.32 | $0.15 | +$0.17 | +113.3% | | Adjusted EPS | $0.21 | $0.19 | +$0.02 | +10.5% | | Net Cash Provided by Operating Activities | $91.9 | $142.8 | -$50.9 | -35.6% | | Adjusted Free Cash Flow | $48.7 | $97.9 | -$49.2 | -50.3% | - AAM posted year-over-year Adjusted EBITDA margin growth in the second quarter driven by productivity and cost controls[4] CEO Commentary David C Dauch, AAM's Chairman and CEO, highlighted Q2 2025 Adjusted EBITDA margin growth and excitement for the Dowlais combination - AAM's Chairman and CEO, David C Dauch, stated that the company posted year-over-year Adjusted EBITDA margin growth in Q2 2025, driven by productivity and cost controls[4] - The company is excited about its upcoming combination with Dowlais, having passed a critical milestone with shareholder approval, moving closer to forming a premier global driveline and metal forming auto supplier[4] Financial Outlook AAM updated its full-year 2025 targets for sales, Adjusted EBITDA, and free cash flow, based on key production assumptions Full Year 2025 Targets AAM updated its full-year 2025 financial targets, showing an increase in the lower end of ranges for sales, Adjusted EBITDA, and Adjusted free cash flow | Metric | Updated 2025 Target Range | Prior 2025 Target Range | Change (Lower End) | | :-------------------- | :------------------------ | :---------------------- | :----------------- | | Sales | $5.75 - $5.95 billion | $5.65 - $5.95 billion | +$0.10 billion | | Adjusted EBITDA | $695 - $745 million | $665 - $745 million | +$30 million | | Adjusted Free Cash Flow | $175 - $215 million | $165 - $215 million | +$10 million | - The Adjusted free cash flow target assumes capital spending of approximately 5% of sales[16] Key Assumptions for 2025 Outlook The 2025 financial targets are based on specific assumptions, including North American light vehicle production estimates and exclusions for the Dowlais combination - North American light vehicle production is estimated to be 14.6 - 15.1 million units[16] - The outlook reflects AAM on a stand-alone pre-combination basis only, excluding costs and expenses associated with the announced combination with Dowlais[16] - Assumptions include no changes to USMCA and mitigation of a majority of incremental tariff costs[16] Non-GAAP Financial Measures This section defines and explains AAM's non-GAAP financial measures, including Adjusted EBITDA, EPS, and free cash flow Explanation and Usefulness AAM provides non-GAAP financial measures to supplement GAAP results, useful for analyzing performance and decision-making - Non-GAAP financial measures are useful to management, investors, and banking institutions for analyzing AAM's business and operating performance, and for operational planning and decision-making[11] - Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure and may not be comparable to similarly titled measures reported by other companies[12] Definitions of Key Non-GAAP Measures The report defines key non-GAAP financial measures, outlining adjustments made to GAAP figures for Adjusted EPS, EBITDA, Adjusted EBITDA, and Adjusted free cash flow - Adjusted earnings per share excludes restructuring and acquisition-related costs, debt refinancing and redemption costs, gains/losses on the Dowlais business combination derivative, gains/losses on equity securities, pension charges, impairment charges, and non-recurring items, including tax effects[13] - Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation, and amortization) excluding similar items as Adjusted EPS, such as restructuring and acquisition-related costs, debt refinancing costs, and gains/losses on the Dowlais derivative[14] - Adjusted free cash flow is defined as free cash flow (net cash provided by operating activities less capital expenditures net of proceeds from asset sales and government grants) excluding cash payments for restructuring and acquisition-related costs[15] Company Information This section covers AAM's business, risk factors, profit forecasts, and investor and media contact information Company Description American Axle & Manufacturing (AAM) is a leading 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, designing, engineering, and manufacturing Driveline and Metal Forming technologies[17] - The company supports electric, hybrid, and internal combustion vehicles and has over 75 facilities in 15 countries, with its headquarters in Detroit[17] Forward-Looking Statements and Risk Factors The report includes forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially - Statements concerning expectations, beliefs, plans, objectives, goals, strategies, and future events or performance are forward-looking and not guarantees of future results[18] - Important factors that could cause differences include global economic conditions (inflation, recession), reduced purchases by major customers (GM, Stellantis, Ford), ability to respond to technology changes, increased competition, supply shortages, labor costs, and risks related to the transition to hybrid and electric vehicles[18] Profit Forecasts and Directors' Confirmation The updated FY25 Adjusted EBITDA and Adjusted free cash flow targets constitute profit forecasts, confirmed by AAM's directors as valid and properly compiled - The FY25 Updated Profit Forecast for Adjusted EBITDA and Adjusted free cash flow is considered a profit forecast under Rule 28.1(a) of the UK Takeover Code[19] - AAM directors confirmed that the FY25 Updated Profit Forecast is valid, properly compiled based on stated assumptions, and consistent with AAM's accounting policies[21] Investor and Media Contacts Contact information for investor relations and media inquiries is provided for stakeholders seeking further information - Investor Contact: David H. Lim, Head of Investor Relations, (313) 758-2006, david.lim@aam.com[22] - Media Contact: Christopher M. Son, Vice President, Marketing & Communications, (313) 758-4814, chris.son@aam.com[22] Condensed Consolidated Financial Statements This section presents AAM's condensed statements of income, balance sheets, and cash flows for the reported periods Statements of Income The condensed consolidated statements of income present AAM's financial performance for the three and six months ended June 30, 2025, and 2024 | Metric | Three Months Ended June 30, 2025 ($ million) | Three Months Ended June 30, 2024 ($ million) | Six Months Ended June 30, 2025 ($ million) | Six Months Ended June 30, 2024 ($ million) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net sales | $1,536.2 | $1,632.3 | $2,947.5 | $3,239.2 | | Gross profit | $200.7 | $217.3 | $374.6 | $415.8 | | Operating income | $55.0 | $86.5 | $97.7 | $163.5 | | Income before income taxes | $67.4 | $35.4 | $88.5 | $71.8 | | Net income | $39.3 | $18.2 | $46.4 | $38.7 | | Diluted earnings per share | $0.32 | $0.15 | $0.38 | $0.32 | Balance Sheets The condensed consolidated balance sheets provide a snapshot of AAM's financial position as of June 30, 2025, compared to December 31, 2024 | Metric | June 30, 2025 ($ million) | December 31, 2024 ($ million) | | :-------------------------------- | :------------------------ | :-------------------------- | | Total current assets | $2,171.9 | $1,914.8 | | Total assets | $5,273.6 | $5,059.9 | | Total current liabilities | $1,227.4 | $1,175.2 | | Long-term debt, net | $2,599.8 | $2,576.9 | | Total liabilities | $4,600.6 | $4,497.1 | | Total stockholders' equity | $673.0 | $562.8 | Statements of Cash Flows The condensed consolidated statements of cash flows illustrate the sources and uses of cash for operating, investing, and financing activities | Metric | Three Months Ended June 30, 2025 ($ million) | Three Months Ended June 30, 2024 ($ million) | Six Months Ended June 30, 2025 ($ million) | Six Months Ended June 30, 2024 ($ million) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $91.9 | $142.8 | $147.8 | $160.6 | | Net cash used in investing activities | ($58.4) | ($46.7) | ($98.6) | ($94.9) | | Net cash used in financing activities | ($6.0) | ($42.5) | ($30.0) | ($58.5) | | Net increase in cash and cash equivalents | $37.3 | $50.1 | $33.6 | $0.0 | | Cash and cash equivalents at end of period | $586.5 | $519.9 | $586.5 | $519.9 | Supplemental Financial Data This section provides detailed reconciliations for non-GAAP financial measures and segment performance data EBITDA and Adjusted EBITDA Reconciliation This section reconciles net income to EBITDA and Adjusted EBITDA, detailing adjustments for non-recurring and non-operating items | Metric | Three Months Ended June 30, 2025 ($ million) | Three Months Ended June 30, 2024 ($ million) | Six Months Ended June 30, 2025 ($ million) | Six Months Ended June 30, 2024 ($ million) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net income | $39.3 | $18.2 | $46.4 | $38.7 | | EBITDA | $224.0 | $202.9 | $400.2 | $406.1 | | Restructuring and acquisition-related costs | $16.5 | $5.0 | $36.2 | $7.5 | | Gain on Business Combination Derivative | ($46.3) | — | ($68.2) | — | | Impairment charge | $8.0 | — | $8.0 | — | | Adjusted EBITDA | $202.2 | $208.4 | $379.5 | $414.0 | Adjusted Earnings Per Share Reconciliation This reconciliation details adjustments from diluted earnings per share to Adjusted earnings per share, providing a clearer view of core operating performance | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Diluted earnings per share | $0.32 | $0.15 | $0.38 | $0.32 | | Restructuring and acquisition-related costs | $0.13 | $0.04 | $0.29 | $0.06 | | Impairment charge | $0.06 | — | $0.06 | — | | Gain on Business Combination Derivative | ($0.37) | — | ($0.55) | — | | Tax effect of adjustments | $0.07 | — | $0.09 | — | | Adjusted earnings per share | $0.21 | $0.19 | $0.30 | $0.38 | Free Cash Flow and Adjusted Free Cash Flow Reconciliation This section reconciles net cash provided by operating activities to free cash flow and Adjusted free cash flow, illustrating cash generated for debt repayment and capital returns | Metric | Three Months Ended June 30, 2025 ($ million) | Three Months Ended June 30, 2024 ($ million) | Six Months Ended June 30, 2025 ($ million) | Six Months Ended June 30, 2024 ($ million) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $91.9 | $142.8 | $147.8 | $160.6 | | Less: Capital expenditures net of proceeds from asset sales and government grants | ($52.9) | ($46.6) | ($121.6) | ($91.5) | | Free cash flow | $39.0 | $96.2 | $26.2 | $69.1 | | Cash payments for restructuring and acquisition-related costs | $9.7 | $1.7 | $18.6 | $7.4 | | Adjusted free cash flow | $48.7 | $97.9 | $44.8 | $76.5 | Segment Financial Information AAM's segment financial information provides a breakdown of sales and Adjusted EBITDA for its Driveline and Metal Forming segments | Segment | Three Months Ended June 30, 2025 ($ million) | Three Months Ended June 30, 2024 ($ million) | Six Months Ended June 30, 2025 ($ million) | Six Months Ended June 30, 2024 ($ million) | | :-------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Segment Sales: | | | | | | Driveline | $1,082.1 | $1,124.5 | $2,039.9 | $2,230.9 | | Metal Forming | $598.4 | $653.1 | $1,174.2 | $1,297.2 | | Total Sales | $1,680.5 | $1,777.6 | $3,214.1 | $3,528.1 | | Net External Sales | $1,536.2 | $1,632.3 | $2,947.5 | $3,239.2 | | Segment Adjusted EBITDA: | | | | | | Driveline | $148.9 | $151.8 | $274.2 | $309.2 | | Metal Forming | $53.3 | $56.6 | $105.3 | $104.8 | | Total Segment Adjusted EBITDA | $202.2 | $208.4 | $379.5 | $414.0 | Full Year 2025 Targeted Adjusted EBITDA and Free Cash Flow Reconciliation This section reconciles AAM's full-year 2025 targeted net income to Adjusted EBITDA and net cash provided by operating activities to Adjusted free cash flow | Metric | Low End ($ million) | High End ($ million) | | :------------------------------------ | :----------------- | :------------------ | | Targeted Adjusted EBITDA: | | | | Net income | $5 | $15 | | Interest expense | $170 | $180 | | Income tax expense | $10 | $40 | | Depreciation and amortization | $460 | $460 | | Full year 2025 targeted EBITDA | $645 | $695 | | Restructuring-related costs | $35 | $35 | | Dowlais acquisition-related costs | $65 | $65 | | Other, principally Business Combination Derivative | ($50) | ($50) | | Full year 2025 targeted Adjusted EBITDA | $695 | $745 | | Targeted Adjusted Free Cash Flow: | | | | Net cash provided by operating activities | $375 | $415 | | Capital expenditures net of proceeds from asset sales | ($290) | ($290) | | Full year 2025 targeted Free Cash Flow | $85 | $125 | | Cash payments for restructuring-related costs | $25 | $25 | | Cash payments for Dowlais acquisition-related costs | $65 | $65 | | Full year 2025 targeted Adjusted Free Cash Flow | $175 | $215 |