• Q1 2024 Sales: $1.61 billion

• Adjusted Earnings Per Share (EPS): $0.18

• Adjusted Free Cash Flow: Use of $21 million

• Adjusted EBITDA: $206 million, representing 12.8% of sales

• Gross Profit: $198.5 million

• Net Income: $20.5 million, or $0.17 per share

• Full-Year Sales Guidance: $6.05 billion to $6.35 billion

• Full-Year Adjusted EBITDA Guidance: $685 million to $750 million

• Full-Year Adjusted Free Cash Flow Guidance: $200 million to $240 million

• Warning! GuruFocus has detected 5 Warning Signs with AXL.

Release Date: May 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• American Axle & Mfg Holdings Inc (NYSE:AXL) reported a strong first quarter with sales increasing to $1.61 billion from $1.49 billion in the previous year.

• Adjusted EBITDA for the quarter was $206 million, demonstrating a significant improvement in profitability due to production stability and volume increases.

• The company announced new contracts with multiple luxury European OEMs to supply electric vehicle components, indicating growth in the electric vehicle sector.

• American Axle & Mfg Holdings Inc (NYSE:AXL) has achieved ISO 50001 certification at all manufacturing facilities and exceeded its US renewable and carbon-free energy goals, highlighting its commitment to sustainability.

• The company has a robust liquidity position with approximately $1.4 billion available, consisting of cash and borrowing capacity, which supports its financial stability and future growth initiatives.

Negative Points

• American Axle & Mfg Holdings Inc (NYSE:AXL) reported an adjusted free cash flow use of $21 million, indicating cash burn during the quarter.

• Despite improvements, certain operational challenges persist, particularly in the metal forming operations, requiring ongoing attention and resources.

• The company faces increased income tax expenses, driven by higher profitability and valuation allowances related to interest expense deductions in the US.

• R&D expenses are expected to remain high, averaging around $35 million to $40 million per quarter, as the company continues to develop its electrification platform.

• The company's net leverage ratio stands at 3.2 times, reflecting a significant level of debt relative to EBITDA, which could pose financial risks if not managed effectively.

Q & A Highlights

Q: What was the midpoint of your guidance for GM's full-size truck platform in terms of units? A: Christopher May, CFO, stated that the midpoint of their guidance remains consistent at approximately 1.4 million units for the GM full-size truck platform.

Q: Can you discuss the current status and future steps for improving the metal forming operations? A: David Dauch, CEO, mentioned that they have stabilized operations and are now focusing on rebuilding profitability. They have addressed labor scarcity issues and are enhancing worker skills through training, which is crucial for production efficiency.

Q: How do you see the R&D spend trending, and is there an opportunity to adjust this spend given the shifts in electrification plans? A: Christopher May explained that R&D spend is expected to be around $35 million to $40 million per quarter, consistent with previous forecasts. He anticipates that as their electrification platform technologies mature, R&D expenses will decrease in the midterm.

Q: What is the expected impact of new model transitions on your operations in the second half of the year? A: Christopher May noted that large transitions in key platforms could affect volumes in the latter half of the year. They are monitoring potential downtime and production adjustments from their clients, which could influence their performance.

Q: Given the extension of life for some platforms by OEMs, is there a possibility to structurally reduce CapEx? A: Christopher May responded that while they aim to maintain discipline in CapEx management, necessary investments must be made for next-generation products and electrification. However, once these products are launched, CapEx is expected to shift more towards maintenance rather than higher investments.

Q: What are the expectations regarding the restructuring actions and their financial impact? A: Christopher May indicated that the restructuring actions are expected to cost between $15 million to $25 million, which is included in their current year's guidance. These actions are aimed at optimizing the business and reducing the cost structure, with future benefits anticipated in terms of enhanced margin performance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.