Howmet Aerospace Inc.

Good morning and welcome to the HALMET Aerospace second quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, 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 your touch-tone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Paul Lusser, Vice President, Investor Relations. Please go ahead.

Thank you, Kate. Good morning and welcome to the HowMet Aerospace second quarter 2023 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, BT, and good morning, everyone. Q2 was another strong quarter for HOMAP. Revenues were up 18% year-over-year and 3% sequentially. albeit Q2 is traditionally a stronger quarter seasonally than Q1 due to more effective production and sales days. Commercial aerospace increased by 23% year over year and continues to be the highlight of the quarter and reflects some of the schedule increases for the anticipated Boeing 737 build rates, which are slated to increase very soon. Defense sales were also strong at plus 17%. EBITDA was up 16% year-over-year and up sequentially. Earnings per share increased to $0.44 per share and exceeded the high end of guidance. This was an increase of 26% year-over-year. The cash balance was a healthy $536 million and free cash flow was strong at $188 million, which started at consecutive quarters of cash generation. $100 million of cash flow was used to buy back shares at an average price of $45 per share. Net debt to EBITDA further improved to 2.5 times leverage, and all bond debt is at a fixed rate, which provides predictable interest rate expenses into the future. HMF has negligible exposure to floating interest rates. Regarding our revolver, we amended and extended our $1 billion undrawn credit facility to 2028, while realizing lower fees and a more favorable net debt to EBITDA governance. Lastly, another notable item was the commercial settlement of Lehman claim, $40 million, which is $25 million less than previously reserved, with a cash settlement to be paid in July 2023 and a further settlement in July 2024. This litigation was the most significant of all residual claims for HOMET, namely RemainCo, and dates back to 2008. Before turning it over to Ken, I want to cover three additional items. Firstly, in Q2, Hermet was impacted by approximately five days of production stoppage at that wheels plant in Hungary due to a nine-day strike at Arconic Corporation, which is now resolved. The interruption of supplies of aluminum billet had an unfavorable effect of about $5 million to profitability. for which a claim has been lodged with Arconic under the terms of the supply agreement, and we expect to gain resolution shortly. Additionally, Hamet is assessing its significant reliance upon this source of supply. Secondly, while segment commentaries, including the finance portion of our call, let me address structures. The margin rate fell back for the first time in several quarters. The profit miss was essentially the result of adding costs for production rate increases, which we did not achieve. The costs of additional people, furnace preparation, and other rolling mill facilities preparation were unrecovered due to the production rate increases not being achieved. The main issue was bottlenecks in production at one plant. The backlog did increase since there was not a demand issue. Naturally, our plan is to achieve production rate increases and burn down the increased backlog as we move into the second half. This reduced production combined with F-35 bulk and inventory burned down was also not helpful, but it was in aggregate not material in the context of the Hamet overall results, which were again up, as I commented earlier. Finally, the Paris Airshow was held in June with the largest significant orders ever at an airshow for commercial aircraft, which adds to the backlog of orders to be fulfilled once production rates are able to be further increased. The show was very successful for Hamet, with a combination of production meetings with both customers and investors, all reflecting the huge optimism for both the industry generally and for Hamet in particular. I'll now turn the call over to Ken, who will provide further market and segment commentary.