Howmet Aerospace Inc.

Good morning, and welcome to the Helmet Aerospace fourth quarter and full year 2022 earnings conference call. All participants will be in a listen-only mode today, and should you need any assistance during the call, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded today. I would now like to turn the conference over to Paul Luther, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Joe. Good morning and welcome to the HowMet Aerospace fourth quarter and full year 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 today's presentation, references to EBITDA and EPS mean adjusted EBITDA excluding special items and adjusted EPS excluding special items. These measures are among the non-GAAP financial measures that we've included 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. With that, I'd like to turn the call over to John.

Thanks, P.T., and welcome, everybody, to the HAM at Q4 earnings call. Let's start by dealing with the headline numbers on slide four. For the fourth quarter, revenue accelerated as we exited the year, and it was above the high end of the guide at $1.51 billion, up 18% year on year. Commercial aerospace continues to be strong and was up 29% in the quarter. EBITDA was $336 million at the high end of the guide. Revenue in EBITDA continued to improve sequentially for the sixth consecutive quarter. The strong operating EBITDA was mitigated by a couple of below-the-line items that Ken will cover in his commentary. Earnings per share was at guidance at $0.38, which benefited from the strong EBITDA and the Q4 tax rate, which mitigated the below-the-line items. For the year, despite the choppy backcloth, year-over-year revenue was up 14% and EBITDA was up 12%. which drove a healthy earnings per share growth of 39%. Moving to the balance sheet and cash flow, free cash flow was within the guided range at 540 million, and as commented on the previous earnings call, included an inventory build for commercial aerospace to help smooth production out as we move between years. Despite the inventory build, free cash flow conversion continues to be strong at 91%. Liquidity is healthy. with year-end cash balance on hand of $792 million, and this was after share buybacks, bond repurchases, and dividends. In the quarter, an additional $65 million of common stock was repurchased, and the full-year repurchase of common stock was $400 million. The December 22 fully diluted share count exit rate was 418 million shares. which is an improvement of approximately 80 million shares since the start of 2019. This was accomplished while reducing net debt over the last four years as well. There was also some minor repurchases of bonds in Q4, taking the full year repurchases to 69 million. The bond repurchase program continued into the first quarter of 2023, and by the end of January, An additional $26 million of bonds were repurchased at a small discount to par. This continues our plan of reducing interest costs year on year. And going into 2023, it will be lower than 2022. And this is despite the global rising interest rate costs. And hence, we set ourselves up for a fundamentally different approach to most companies where interest costs will be lower for the coming year. We've improved how much leverage ratio which now stands at 2.6 times net debt to EBITDA compared to our long-term target of just under two terms. All of Hermit's debt is unsecured and at fixed rates. Hermit's $1 billion revolver is undrawn. At the top level, we were pleased with the year. We exceeded the initial EPS guide for the year again, and in the case of 2022, we faced an extremely choppy backslash of below-billed expectations of both aircraft and engines compared to initial expectations. Furthermore, the extraordinary uptick inflation was overcome despite its margin impact, and all of this talks to the performance and resiliency of HEMET. Ken will now detail the 2022 performance, and then I'll cover the outlook after that.