Hexcel Corporation (NYSE: HXL):

See Table C for reconciliation of GAAP and non-GAAP operating income, net income, earnings per share and operating cash flow to free cash flow. Free cash flow is cash from operations less capital expenditures.

Hexcel Corporation (NYSE: HXL) today reported second quarter 2024 results including net sales of $500 million and adjusted diluted EPS of $0.60 per share.

CEO and President Tom Gentile said, “Our Hexcel team delivered a solid financial performance in the second quarter with strong overall revenue growth that drove continued recovery in margins. We are well-positioned and ready to support our customers’ rate increases and remain excited about the medium-term outlook and opportunity. In the near term, aircraft delivery levels and public comments by our customers on production plans warrant a more cautious stance, which we are reflecting in our revised 2024 guidance. We remain strongly positioned for growth with available plant capacity, and we continue employee training and operational optimization for the production ramp ahead. Reflecting our continued confidence in Hexcel’s future, we repurchased another $100 million of Hexcel common stock during the second quarter, bringing the total 2024 share repurchases to $200 million.”

Mr. Gentile continued, “Since joining Hexcel earlier this year, I have had the chance to visit more than half of our manufacturing sites, which has accelerated my learning about our products and capabilities. Hexcel’s broad portfolio of lightweight materials is helping current programs reduce carbon emissions and suppress noise, and our R&T team is advancing technologies that will help next generation products drive more efficient and sustainable aviation.”

Markets

Sales in the second quarter of 2024 were $500.4 million compared to $454.3 million in the second quarter of 2023.

Commercial Aerospace

• Commercial Aerospace sales of $320.7 million for the second quarter of 2024 increased 21.3% (21.6% in constant currency) compared to the second quarter of 2023. Both widebody and narrowbody sales increased by double digit percentages. Other Commercial Aerospace increased 15.4% for the second quarter of 2024 compared to the second quarter of 2023 with growth in business jets and regional jets.

Space & Defense

• Space & Defense sales of $138.9 million in the second quarter of 2024 increased 1.0% (1.4% in constant currency) for the quarter as compared to the second quarter of 2023. Military helicopters were strong globally including the CH-53K and Apache, partially offset by declining V-22 sales as the program winds down.

Industrial

• Total Industrial sales of $40.8 million in the second quarter of 2024 decreased 22.3% (21.8% in constant currency) compared to the second quarter of 2023. Growth in Automotive was more than offset by declines in other sub-markets. The focus will continue to be high end premium industrial segments that utilize carbon fiber.

Consolidated Operations

Gross margin for the second quarter of 2024 was 25.3% compared to 24.4% in the second quarter of 2023 as higher sales drove favorable cost leverage. As a percentage of sales, selling, general and administrative expenses for the second quarter of 2024 were 8.0% compared to 7.9% for the second quarter of 2023. R&T expenses as a percentage of sales were 2.9% in the second quarter of 2024 compared to 2.9% in Q2 2023. Adjusted operating income in the second quarter of 2024 was $72.0 million or 14.4% of sales, compared to $61.8 million, or 13.6% of sales in the second quarter of 2023. The impact of exchange rates on operating income as a percent of sales was favorable by approximately 40 basis points in the second quarter of 2024 compared to the second quarter of 2023.

Year-to-Date 2024 Results

Sales for the first six months of 2024 were $972.7 million compared to $912.0 million, a 6.7% increase from the same period in 2023.

Commercial Aerospace (64% of YTD sales)

• Commercial Aerospace sales of $620.0 million increased 13.0% (13.1% in constant currency) for the first six months of 2024 compared to the first six months of 2023 led by growth in widebodies. Other Commercial Aerospace increased 4.1% for the first six months of 2024 compared to the same period in 2023 reflecting growth in regional jets and turboprops.

Space & Defense (28% of YTD sales)

• Space & Defense sales of $278.0 million increased 5.4% (5.5% in constant currency) for the first six months of 2024 as compared to the first six months of 2023. Growth was led by F-35 and a number of military helicopter programs, both domestic and international, partially offset by significantly lower V-22 sales.

Industrial (8% of YTD sales)

• Total Industrial sales of $74.7 million in the first six months of 2024 decreased 24.9% (25.0% in constant currency) compared to the first six months of 2023 due to declines in all sub-markets.

Consolidated Operations

Gross margin for the first six months of 2024 was 25.2% compared to 26.2% in the prior year period. The first quarter of 2023 benefited from particularly favorable cost absorption and sales mix. As a percentage of sales, selling, general and administrative expenses for the first six months of 2024 were 9.1% compared to 9.5% for the first six months of 2023. R&T expenses as a percentage of sales were 3.1% in the first six months of 2024 compared to 3.0% in the first half of 2023. Adjusted operating income for the first six months of 2024 was $126.1 million or 13.0% of sales, compared to $124.8 million or 13.7% of sales in 2023. Other operating expense for the first six months of 2024 and 2023 included restructuring costs. The impact of exchange rates on operating income as a percent of sales was favorable by approximately 30 basis points in the first six months of 2024 compared to the first six months of 2023.

Cash and other

• Net cash provided by operating activities in the first six months of 2024 was $37.2 million, compared to $30.1 million for the first six months of 2023. Working capital was a cash use of $118.3 million for the first six months of 2024 and a use of $113.9 million for the comparable period in 2023. Capital expenditures on a cash basis were $51.6 million for the first six months of 2024. For the first six months of 2023, capital expenditures on a cash basis were $74.8 million, including approximately $38 million for the purchase of the land and building at the Hexcel Amesbury, Massachusetts facility. Free cash flow was ($14.4) million in the first six months of 2024 compared to ($44.7) million in the first six months of 2023. Free cash flow is defined as cash generated from operating activities less cash paid for capital expenditures. Capital expenditures on an accrual basis were $41.1 million and $70.5 million for the first six months of 2024 and 2023, respectively.
• The Company used $101.1 million to repurchase shares of its common stock during the second quarter of 2024 and $201.8 million during the first six months of 2024. The aggregate remaining authorization under the share repurchase program as of June 30, 2024, was $285.3 million.
• As announced today, the Board of Directors declared a quarterly dividend of $0.15 per share payable to stockholders of record as of August 2, 2024, with a payment date of August 9, 2024.

2024 Guidance

• Sales of $1.90 billion to $1.98 billion (previously $1.925 billion to $2.025 billion)
• Adjusted diluted earnings per share of $2.02 to $2.18 (previously $2.10 - $2.30)
• Free cash flow of around $200 million (previously greater than $200 million)
• Capital expenditures less than $100 million (unchanged)
• Effective tax rate of 22.0%. (unchanged)

Market-Specific Sales Outlook

• Commercial Aerospace: Up low double-digits to mid-teens (previously up mid-teens)
• Space & Defense: Up mid-single digits (no change)
• Industrial: Down low double-digits (previously up low to mid-single digits)

Hexcel will host a conference call at 10:00 a.m. ET, on July 18, 2024 to discuss second quarter 2024 results. The live webcast will be available on the Investor Relations section of the Hexcel website via the following link: https://events.q4inc.com/attendee/579495300 The event can also be accessed by dialing +1 (646) 307-1963. The conference ID is 2360739. Replays of the call will be available on the website.

About Hexcel

Hexcel Corporation is a global leader in advanced lightweight composites technology. We propel the future of flight, energy generation, transportation, and recreation through excellence in providing innovative high-performance material solutions that are lighter, stronger and tougher, helping to create a better world for us all. Our broad and unrivaled product range includes carbon fiber, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, resins, engineered core and composite structures for use in commercial aerospace, space and defense, and industrial applications.

Disclaimer on Forward Looking Statements

This news release contains statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the estimates and expectations based on aircraft production rates provided by Airbus, Boeing and others, and the revenues we may generate from an aircraft model or program; expectations with regard to the impact of regulatory activity related to the Boeing 737 MAX or Boeing 787 on our revenues; expectations with regard to raw material cost and availability; expectations of composite content on new commercial aircraft programs and our share of those requirements; expectations regarding revenues from space and defense applications, including whether certain programs might be curtailed or discontinued; expectations regarding sales for industrial applications; expectations regarding cash generation, working capital trends, and inventory levels; expectations as to the level of capital expenditures, capacity, including the timing of completion of capacity expansions, and qualification of new products; expectations regarding our ability to improve or maintain margins; expectations regarding our ability to attract, motivate, and retain the workforce necessary to execute our business strategy; projections regarding our tax rate; expectations with regard to the continued impact of macroeconomic factors or geopolitical issues or conflicts; expectations regarding our strategic initiatives, including, our sustainability goals; expectations with regard to the effectiveness of cybersecurity measures; expectations regarding the outcome of legal matters or the impact of changes in laws or regulations; and our expectations of financial results for 2024 and beyond. Actual results may differ materially from the results anticipated in the forward looking statements due to a variety of factors, including but not limited to the extent of the impact of macroeconomic factors or geopolitical issues or conflicts; reductions in sales to any significant customers, particularly Airbus or Boeing, including related to regulatory activity or public scrutiny impacting the Boeing 737 MAX or the Boeing 787; our ability to effectively adjust production and inventory levels to align with customer demand; our ability to effectively motivate, retain and hire the necessary workforce; the availability and cost of raw materials, including the impact of supply disruptions and inflation; our ability to successfully implement or realize our strategic initiatives, including our sustainability goals and any restructuring or alignment activities in which we may engage; changes in sales mix; changes in current pricing due to cost levels; changes in aerospace delivery rates; changes in government defense procurement budgets; timely new product development or introduction; our ability to install, staff and qualify necessary capacity or complete capacity expansions to meet customer demand; cybersecurity-related risks, including the potential impact of breaches or intrusions; currency exchange rate fluctuations; changes in political, social and economic conditions, including the effect of change in global trade policies, such as sanctions; work stoppages or other labor disruptions; our ability to successfully complete any strategic acquisitions, investments or dispositions; compliance with environmental, health, safety and other related laws and regulations, including those related to climate change; the effects of natural disasters or other severe weather events, which may be worsened by the impact of climate change, and other severe catastrophic events, including any public health crisis; and the unexpected outcome of legal matters or impact of changes in laws or regulations. Additional risk factors are described in our filings with the Securities and Exchange Commission. We do not undertake an obligation to update our forward-looking statements to reflect future events.