American Axle & Manufacturing Holdings Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joseph Spak - UBS - Analyst : Hey, team. Chris. I just want to sort of just talk a little bit about second half here. Net inflation performance, I think $24 million year-to-date. But in thinking about second half, how should we think about that driving the EBITDA? Because you mentioned recovery negotiations are underway. I don't know if you could give us some indications for what we could expect there. But then also on a year-over-year basis, I think you had some warranty issues last year that shouldn't repeat, and also the inefficiencies which have seemingly gotten better. But on the other hand, you just sort of indicated it's a pretty heavy launch schedule, which might weigh on performance a little bit. So what are you guys embedding, I guess, for performance in the back half?

Question: Joseph Spak - UBS - Analyst : That's helpful. One quick follow-up there. I think before you indicated like the midpoint of your guide assumed roughly $1.4 million on the T1. Is that still sort of the going assumption or has that changed at all?

Question: Joseph Spak - UBS - Analyst : Okay. And just one more quick one. The e-beam contract that was canceled, any update there? I know you were trying to get some recoveries. How are negotiations for that going?

Question: Joseph Spak - UBS - Analyst : Okay. Thank you.

Question: Tom Narayan - RBC Capital Markets - Analyst : Thanks for taking my question. The first one is on the 2024 guidance. So if my math is right, you're raising I think the EBITDA by $12.5 million at the midpoint, but the cash from operations is going down by $16 million. Just curious what's driving that. My sense is probably working capital. You talked about those new launches in H2, but I would think some of those launches maybe were already known about. Just trying to understand what has changed since the last time I guess you gave the guidance in this regard on potentially working capital, and then I have a follow-up. Thanks.

Question: Tom Narayan - RBC Capital Markets - Analyst : Got it. And then my second one, one thing we've noticed this earnings season is that some Tier one suppliers, and OEMs for that matter, have talked about something similar to what you're saying, the R&D coming down, et cetera, and they've decided to increase capital returns to shareholders in the form of share buybacks given the depressed market values of their equity. In some cases, we've even seen companies lever up to do buybacks. I know you have that slide that shows a 3 times leverage and $1.5 billion of liquidity in your priorities to reduce debt, but just curious, as you look at where your stock is trading and potentially pushing investments out, what is your appetite to potentially doing more on the share buybacks? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2024 / 2:00PM, AXL.N - Q2 2024 American Axle & Manufacturing Holdings Inc Earnings Call

Question: Tom Narayan - RBC Capital Markets - Analyst : Got it. Thank you.

Question: Dan Levy - Barclays PLC - Analyst : Hi. Good morning. Thank you for taking the questions. I wanted to just follow up on that last question from Tom, and more specifically on the leverage ratio. So I believe you're right now at 3 times. Maybe you can give us a sense of just given the current business dynamics and how you're thinking of free cash and the current EBITDA profile, what is a reasonable timeframe to expect to get down to 2 times leverage, which then unlocks a greater set of capital allocation opportunities?

Question: Dan Levy - Barclays PLC - Analyst : And is there additional opportunities to flex CapEx down or opportunities on the working capital side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2024 / 2:00PM, AXL.N - Q2 2024 American Axle & Manufacturing Holdings Inc Earnings Call

Question: Dan Levy - Barclays PLC - Analyst : Great. Thank you. And then maybe a follow-up. David, more of a strategic question. Understandably, there was a large bidding pipeline and you were trying to expand your portfolio of opportunities. And obviously, that's changed, as you noted in your remarks, and the bidding pipeline has certainly shifted. The question is, what is the forward opportunity on bidding, and what are the aspirations for Axle to diversify beyond the core North America truck exposure, which has consistently been your core exposure? Or is the strategy shifting a bit to say, okay, given where we are right now, this is an exposure we're very happy with, and we're happy to flex down some of the spend and stay where we are right now?

Question: Dan Levy - Barclays PLC - Analyst : That's very helpful. Thank you.

Question: Itay Michaeli - Citi - Analyst : Great. Thanks. Good morning, everyone. Just a couple of follow-ups. Could you maybe just quantify the top line impact from the second half launches you talked about?

Question: Itay Michaeli - Citi - Analyst : That's helpful. Thank you. And then just maybe, thinking beyond 2024, how should we think about the effective and cash tax rate for the company? And then also, if you just maybe give us a bit of help on the second half kind of outlook for SG&A.

Question: Itay Michaeli - Citi - Analyst : Perfect. That's all very helpful. Thank you.

Question: Jake Scholl - BNP Paribas - Analyst : Hey, guys. I just wanted to dig in a little bit on profitability. So obviously, the first half has performed pretty well at that 12.8% level, and there's pretty big fall off in the second half. And I know in the second half, you're dealing with a combination of lower industry volumes and RAM and Delta changeovers. So as we look beyond this year, are there any structural reasons why the business can't operate in that 12.5% to 13% range? Thank you.

Question: Jake Scholl - BNP Paribas - Analyst : Thank you. And then as the EV -- you know, as the overall EV market slows down a little bit, how should we think about the profitability of your EV business? I know you have also the Mercedes-AMG in addition to some of the EV programs, but how should we think about that?

Question: John Murphy - Bank of America Securities - Analyst : Good morning, guys. Through your commentary, I mean, you have the Mercedes-AMG EV program you mentioned, the van program later in the decade, and there's some other comments. It's kind of an indication that the bidding is going, fairly well to grow the backlog over time. But we're also seeing this extension of ICE programs, right -- when I think -- when you look at your backlog, you'll net out or roll off programs that you're exiting or be wound down over time. But some of those may be actually extended. So it just seems like the backlog from a growth basis is getting better and potentially from a net roll-off will get better as some of these ICE programs get extended. How do you think about the backlog potential as we grind into the end of the year and into next year, that it could potentially be significantly higher than it was, at the start of the year?

Question: John Murphy - Bank of America Securities - Analyst : Yes. But are you getting actual clarity on that at this point or is that kind of a little bit of a guessing game, in conjunction with your partners? Are you actually seeing that directly, in the next in current schedules and program changeovers?

Question: John Murphy - Bank of America Securities - Analyst : Okay, great. Yeah, just one comment on the cap allocation stuff. I think paying down debt can be very accretive to the equity over time. So, you know, keep that up. Thanks, guys.