Howmet Aerospace Inc.

Good morning, ladies and gentlemen, and welcome to the Howman Aerospace First Quarter 2022 Results Conference Call. My name is Eli, and I will be your operator for today. As a reminder, today's conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Paul Luther, Vice President of Investor Relations. Please proceed, sir.

Thank you, Eli. Good morning and welcome to the HowMet Aerospace first quarter 2022 results conference call. I'm joined by John Plant, Executive Chairman and Chief Executive Officer, and Ken Giacobi, Executive Vice President and Chief Financial Officer. After comments by John and Ken, we will have a question and answer session. I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the company's actual results to differ materially from these projections listed in today's presentation and earnings press release and in our most recent SEC filings. In addition, we've included some non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release and in the appendix in today's presentation. I would also like to point out that starting this quarter, we're moving our segment profitability measure from segment operating profit to segment adjusted EBITDA. We will use this measure to assess the segment's performance going forward. We will continue to provide depreciation and amortization by segment, giving investors the ability to continue to calculate segment operating profit. EBITDA for previous period segment profitability are included for comparison purposes. You can find these numbers in our earnings press release and on slides 19 and 20 in today's presentation deck. With that, I'd like to turn the call over to John.

Thanks, PT. Good morning, everyone, and welcome. Please move to slide number four. The first quarter was another strong quarter for Hamad. Revenue was above the high end of guidance, and profit was near the high end of guidance, which provided a very healthy start to the year. As expected, revenue was a little higher than the fourth quarter of 21, with higher sales to commercial aerospace due to narrow body programs. These were partially offset by sales to the Boeing 787 platform and inventory takeout for structures on the F-35 program. Revenue played out as expected, and the good news is that we now have a new Boeing Skyline production plan for the 787. The other good news is the improved outlook for COVID with large reductions in cases and deaths in the Western world. This has led to reduced testing for international travel, which is an important precursor to the pickup in wide-body commercial aerospace programs. The tragic Russian invasion of Ukraine has led to further increases in commodity inflation, notably for oil and materials. The effects of this will be outlined in my guidance comments. Moving to specific numbers, revenue for the quarter was $1.3 billion, an increase of 10% year over year, which included additional material pass-through of approximately $40 million. Clearly, this pass-through is excellent. However, it does unfavorably reflect in the EBITDA margin percentage by 70 basis points year over year. Without this effect, Q1 EBITDA margin was 23.4%, which was well ahead of Q1 of 2021. On a sequential basis, we also had an EBITDA margin improvement of 10 basis points, adjusting for material pass-through. Adjusted EBITDA was strong at $300 million and earnings per share of 31 cents, both of which were ahead of the midpoint of guidance. Free cash flow in the first quarter was essentially breakeven and resulted in cash on hand of $522 million after buying back $175 million of shares in the quarter. This buyback included an additional $75 million over and above the January buyback of $100 million noted in our February earnings call. The average diluted share count improved to 425 million in Q1, with an exit rate of 423 million shares. Lastly, we reduced pension and OPEB liabilities by approximately 200 million year-over-year, and reduced cash contributions by approximately 60%. I'll now pass the call commentary over to Ken to detail the market dynamics and provide commentary on segment performance.