AAM Reports Third Quarter 2023 Financial Results
Published on November 3, 2023
DETROIT, November 3, 2023 -- American Axle & Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) today reported its financial results for the third quarter 2023.
Third Quarter 2023 Results
- Sales of $1.55 billion
- Net loss of $(17.4) million, or (1.1)% of sales
- Adjusted EBITDA of $156.8 million, or 10.1% of sales
- Diluted loss per share of $(0.15); Adjusted loss per share of $(0.11)
- Net cash provided by operating activities of $178.3 million; Adjusted free cash flow of $135.8 million
“AAM's third quarter financial performance reflected greater than anticipated downtime at key customers, operational inefficiencies and the UAW work stoppage,” said AAM’s Chairman and Chief Executive Officer, David C. Dauch. “Despite these challenges, AAM generated strong free cash flow during the quarter and continues to focus on cementing its leadership in electric propulsion technology for future profitable growth.”
AAM's sales in the third quarter of 2023 were $1.55 billion as compared to $1.54 billion in the third quarter of 2022. Sales for the third quarter of 2023 were favorably impacted by volume and mix. The UAW work stoppage impacted sales by approximately $15 million in the quarter.
AAM's net loss in the third quarter of 2023 was $(17.4) million, or $(0.15) per share, as compared to net income of $26.5 million, or $0.22 per share in the third quarter of 2022.
Adjusted loss per share in the third quarter of 2023 was $(0.11) compared to Adjusted earnings per share of $0.27 in the third quarter of 2022. Higher product warranty expense impacted adjusted EPS by approximately $0.09 in the third quarter of 2023. The UAW work stoppage impacted adjusted EPS by approximately $0.03 in the quarter.
In the third quarter of 2023, Adjusted EBITDA was $156.8 million, or 10.1% of sales, as compared to $198.4 million, or 12.9% of sales, in the third quarter of 2022. Adjusted EBITDA for the third quarter of 2023 was negatively impacted by the aforementioned higher product warranty expense of approximately $13 million. The UAW work stoppage had an impact of approximately $4 million.
AAM's net cash provided by operating activities for the third quarter of 2023 was $178.3 million as compared to $85.2 million for the third quarter of 2022.
AAM's Adjusted free cash flow for the third quarter of 2023 was $135.8 million as compared to $45.8 million for the third quarter of 2022.
AAM's 2023 Updated Financial Outlook
AAM's updated full year 2023 financial targets are now as follows:
- AAM is targeting sales in the range of $6.0 - $6.1 billion.
- AAM is targeting Adjusted EBITDA in the range of $660 - $685 million.
- Outlook assumes production begins to resume during the first week of November from the UAW work stoppage and an estimated work stoppage impact of $70 - $100 million in sales and $25 - $40 million in adjusted EBITDA.
- AAM is targeting Adjusted free cash flow in the range of $200 - $215 million; this target assumes capital spending of approximately 3.0% - 3.5% of sales.
These updated 2023 targets are based on the following:
- The current macro operating environment.
- AAM's production estimates of key programs that we support.
Third Quarter 2023 Conference Call Information
A conference call to review AAM's third quarter results is scheduled today at 10:00 a.m. ET. Interested participants may listen to the live conference call by logging onto AAM's investor web site at http://investor.aam.com or calling (877) 883-0383 from the United States or (412) 902-6506 from outside the United States with access code 5049794. A replay will be available one hour after the call is complete until November 10, 2023 by dialing (877) 344-7529 from the United States or (412) 317-0088 from outside the United States. When prompted, callers should enter replay access code 5629227.
Non-GAAP Financial Information
In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (GAAP) included within this press release, AAM has provided certain information, which includes non-GAAP financial measures such as Adjusted EBITDA, Adjusted earnings per share and Adjusted free cash flow. Such information is reconciled to its closest GAAP measure in accordance with Securities and Exchange Commission rules and is included in the attached supplemental data.
Certain of the forward-looking financial measures included in this earnings release are provided on a non-GAAP basis. A reconciliation of non-GAAP forward-looking financial measures to the most directly comparable forward-looking financial measures calculated and presented in accordance with GAAP has been provided. The amounts in these reconciliations are based on our current estimates and actual results may differ materially from these forward-looking estimates for many reasons, including potential event driven transactional and other non-core operating items and their related effects in any future period, the magnitude of which may be significant.
Management believes that these non-GAAP financial measures are useful to management, investors, and banking institutions in their analysis of the Company's business and operating performance. Management also uses this information for operational planning and decision-making purposes.
Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, non-GAAP financial measures as presented by AAM may not be comparable to similarly titled measures reported by other companies.
Definition of Non-GAAP Financial Measures
AAM defines Adjusted earnings (loss) per share to be diluted earnings (loss) per share excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, loss on sale of business, pension settlements, unrealized gains or losses on equity securities and non-recurring items, including the tax effect thereon.
AAM defines EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, loss on sale of business, pension settlements, unrealized gains or losses on equity securities and non-recurring items.
AAM defines free cash flow to be net cash provided by operating activities less capital expenditures net of proceeds from the sale of property, plant and equipment. Adjusted free cash flow is defined as free cash flow excluding the impact of cash payments for restructuring and acquisition-related costs, and cash payments related to the Malvern fire, including payments for capital expenditures, net of recoveries.
As a leading global Tier 1 Automotive and Mobility Supplier, AAM (NYSE: AXL) designs, engineers and manufactures Driveline and Metal Forming technologies to support electric, hybrid and internal combustion vehicles. Headquartered in Detroit, with over 80 facilities in 18 countries, AAM is bringing the future faster for a safer and more sustainable tomorrow. To learn more, visit aam.com.
In this earnings release, we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 and relate to trends and events that may affect our future financial position and operating results. The terms such as “will,” “may,” “could,” “would,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “project,” "target," and similar words or expressions, as well as statements in future tense, are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and may differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: global economic conditions, including the impact of inflation, recession or recessionary concerns, or slower growth in the markets in which we operate; reduced purchases of our products by General Motors Company (GM), Stellantis N.V. (Stellantis), Ford Motor Company (Ford) or other customers; our ability to respond to changes in technology, increased competition or pricing pressures; our ability to develop and produce new products that reflect market demand; lower-than-anticipated market acceptance of new or existing products; our ability to attract new customers and programs for new products; reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by GM, Stellantis and Ford); risks inherent in our global operations (including tariffs and the potential consequences thereof to us, our suppliers, and our customers and their suppliers, adverse changes in trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), compliance with customs and trade regulations, immigration policies, political stability or geopolitical conflicts, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations); supply shortages, such as the semiconductor shortage that the automotive industry has recently experienced and the availability of natural gas or other fuel and utility sources in certain regions, labor shortages, including increased labor costs, or price increases in raw material and/or freight, utilities or other operating supplies for us or our customers as a result of pandemic or epidemic illness such as COVID-19, geopolitical conflicts, natural disasters or otherwise; a significant disruption in operations at one or more of our key manufacturing facilities; negative or unexpected tax consequences; risks related to a failure of our information technology systems and networks, including cloud-based applications, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber attacks and other similar disruptions; our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid or minimize work stoppages; cost or availability of financing for working capital, capital expenditures, research and development (R&D) or other general corporate purposes including acquisitions, as well as our ability to comply with financial covenants; our customers' and suppliers' availability of financing for working capital, capital expenditures, R&D or other general corporate purposes; an impairment of our goodwill, other intangible assets, or long-lived assets if our business or market conditions indicate that the carrying values of those assets exceed their fair values; liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions on our customers; our ability or our customers' and suppliers' ability to successfully launch new product programs on a timely basis; risks of environmental issues, including impacts of climate-related events, that could result in unforeseen issues or costs at our facilities, or risks of noncompliance with environmental laws and regulations, including reputational damage; our ability to maintain satisfactory labor relations and avoid work stoppages; our ability to consummate and successfully integrate acquisitions and joint ventures; our ability to achieve the level of cost reductions required to sustain global cost competitiveness or our ability to recover certain cost increases from our customers; our ability to realize the expected revenues from our new and incremental business backlog; price volatility in, or reduced availability of, fuel; our ability to protect our intellectual property and successfully defend against assertions made against us; adverse changes in laws, government regulations or market conditions affecting our products or our customers' products; our ability or our customers' and suppliers' ability to comply with regulatory requirements and the potential costs of such compliance; changes in liabilities arising from pension and other postretirement benefit obligations; our ability to attract and retain qualified personnel in key positions and functions; and other unanticipated events and conditions that may hinder our ability to compete. It is not possible to foresee or identify all such factors and we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement.
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For more information:
David H. Lim
Head of Investor Relations
Christopher M. Son
Vice President, Marketing & Communications
Or visit the AAM website at www.aam.com.