Q3 2023 Dana Incorporated Earnings Call
Okay.
Good morning, and welcome to Dana incorporated third quarter, 2023 financial webcast and conference call.
My name is Chris and I'll be your conference facilitator.
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At this time I'd like to begin the presentation by turning the call over to Dana as senior director of Investor Relations and strategic planning Craig Barber. Please go ahead Mr. Barbara.
Thank you, Chris and good morning, everyone on the call. Thanks for joining us for our third quarter 2023 years.
You'll find this morning's press release and presentation are now posted on our best website. This call is being recorded supporting materials are the property Corporation and may not be recorded copied or rebroadcast without our consent.
Factors that could affect future results are summarized in our safe Harbor statement found in our public filings, including our <unk>.
On the call. This morning are Jim <unk>, Chairman, and Chief Executive Officer, and Timothy Crouse, Senior Vice President and Chief Financial Officer.
Pleasure to turn the call over to Jim.
Good morning, and thank you for joining US today first please turn with me to page four where I will discuss our highlights for the third quarter of 2023.
Starting on the left side, we were pleased to report that Dana achieved robust third quarter sales growth of $2 $7 billion $134 million increase over the same period last year driven by continued strong customer demand.
The rollout of our new business backlog across all our end markets, including a D programs and our ongoing cost recovery efforts adjusted.
Adjusted EBITDA for the quarter was 242 million up $50 million or 150 basis points over the third quarter of last year, driven by our strong operational execution and improved efficiency. This is a tremendous accomplishment given the uncertainty the light vehicle market faced in the quarter.
Free cash flow was a use of 5 million for the quarter, which is reflective of the higher seasonal working capital requirements to support our aggressive launch schedule. This year lastly.
Lastly, our results adjusted earnings per share for the year were 30 <unk> and.
An improvement of <unk> <unk> per share Dana.
Dana continues to execute well across our operations. Despite the impact of the UAW strike on our light vehicle North America business late in the quarter.
The structural profitability improvements of the business are very much the product of the entire Dana team progressively overcoming the 2020 to 2022 onrush COVID-19 related costs that we had endured over the past few years.
As you've witnessed throughout the first three quarters of the year, we have systematically implemented the core tenant of our enterprise strategy that is what we referred to as leveraged the core.
What this means is that we have driven standardization and transformational change across the entire organization, while achieving countless improvements across the business, we are especially realizing exceptional operational efficiency and customer satisfaction, while simultaneously launching a company record number of new programs throughout the year.
Moving to the right side of the slide I'll provide you an update on the current operating environment as well as the impact of the UAW strike, which is affecting some of our key North America light vehicle programs.
I will discuss the end market trends are what are wide ranging business around the world.
Finally, I will provide an update on a few of the key high profile launches that are now underway.
When completed.
Please turn with me to page five where I will walk you through an update on our operating environment.
As we shared with you last quarter, we are seeing the overall operating environment improving as we go through the second half of 2023.
Beginning with supply chain and currency impacts on the left side of the slide steel prices are moderating compared with 2022, and we expect commodities to be a profit tailwind for the rest of the year.
Commodity recoveries or Lubbock leveling out as a result of lower input prices requiring fewer recoveries. This dynamics should continue to be a tailwind for the margin this year.
As you can imagine we've had many questions about the resiliency of the broader supply base and we continue to closely monitor the health of our downstream suppliers needless to say the longer the UAW strike continues the greater financial stress there will be across the tier two through tier four supply base.
We're very focused on ensuring that not only are we working collaboratively through these challenging times, but that production restarts are in place and actionable once the trade three customer facilities are back online and manufacturing vehicles again.
Finally for this section foreign currencies has translated to the U S dollar, particularly in euro have become a slight headwind as the relative strength of the dollar has strengthened.
Moving to the center of the slide cost inflation is moderating and pricing actions continue to mute the impact of inflation.
We stated last quarter, we do not expect to completely offset inflation as we close the year, but we are moving in a positive direction.
We are also seeing sequential improvement in customer production volatility prior to the strike late in the quarter.
In the third quarter and for the remainder of the year. We continue to successfully launch new business, well systematically driving operational efficiency improvements through our integrated lean manufacturing processes and business systems moving.
Moving to the right of the page like everyone. In the industry are North America light vehicle business has been impacted by the UAW strike for Dana we have been largely affected by two of our key customers and as of today less than 10% of our Dana as many plants have been significantly affected.
The Dana team has done an outstanding job rapidly responding to the uncertainty of this volatile situation by idling and flexing operations as needed to mitigate the cost impact as.
As a result of the strike, we saw $65 million lower sales in the third quarter.
With the expansion of strike earlier this month, we expect to see $185 million in the lower sales in the month of October.
While the UAW labor disputes remain volatile, we expect benefits from operational improvements and commodity costs as we close out the year.
Let's turn to page six where I will talk about the global end market trends, we are seeing across our light vehicle commercial vehicle and off highway markets.
As we've already stated this morning light vehicle production in North America is being impacted by the UAW strike, which has affected some of dana's largest and most prominent light truck programs, including Ford Super duty Ranger and Bronco as well as the Jeep Wrangler and Gladiator prior to the labor disruption production volatility levels hedged.
It was an inventory levels of key programs had shown some improvement but remain below historical levels demand in Europe is slightly higher due to the strong back log of orders and restocking of inventories while Asia production is expected to be flat.
Moving to the center of the slide in the commercial vehicle segment, we expect the overall North America class eight medium duty truck markets to finish the year on a high note with the full year production expected to be around 7% for the year compared with 2022.
In Europe, the heavy truck production outlook remains strong with production up 15%.
Meanwhile, there has been a significant downturn in South America truck and bus market at around 30% due to the overall economic slowdown.
Truck and bus bus market in India will be up slightly.
For the off highway market on the far right of the slide we anticipate infrastructure spending to support continued strong demand for construction equipment.
Global Agriculture equipment production is weakening a bit due to the farming commodity price increase or price decreasing while demand for mining machinery remained stable as has been the case for most of the year.
By region North America is expected to remain stronger for the construction and agriculture equipment, well Europe shows some weakness throughout the end of the year Asia will be slower with China demand offset offsetting any growth expected in India.
Overall as we finished out the year, we see continued strong demand in our heavy vehicle markets, providing balance to the overall business.
Please turn to slide seven where I'll provide an update on some of dana's key launch programs.
When we began the year I outlined Dana is extremely aggressive launch cadence for 2023, which has required significant capital investment and includes over 120 program spanning both traditional and.
And E D across all markets globally, including some very large and complex programs. We anticipate next year to be a more normalized cadence with several key launches across all segments.
Today I am pleased to report that more than 70% of these programs are successfully completed an industrialized, including the Ford Super duty and Ranger as well as the Jeep Wrangler program.
Once the UAW strike concludes we anticipate these programs to be back up and running quickly as he remains some of the most sought after vehicles in the market.
I won't walk you through.
On to slide I will draw your attention to a few notable programs that are on track to launch in the next several months, including the conquest business of Defense 700 series tractor compact construction equipment with John Deere, and GE, Gladiator and Toyota Tacoma pickup trucks.
All these launches spanning across all markets and regions are significant but it's important to note that we have successfully completed or are near completing four of our largest programs. The Ford Super duty the global Ranger, the Jeep Wrangler and the Toyota Tacoma.
Together these accounted for more than $2 billion in sales per year.
Thank you for your time today now I'd like to turn it over to Tim who will walk you through the financials.
Thank you Jim Good morning, Please turn to slide nine for a look at Dana as third quarter 2023 results.
Sales were $2.67 billion $134 million increase over last year, primarily driven by strong demand across all our segments recoveries of cost inflation and favorable favorable currency translation, partially offset by lower demand due to the UAW strike.
Adjusted EBITDA was $242 million for a margin of nine 1% an increase of $50 million and 150 basis points over last year's third quarter.
Our profit improvement was driven by lower net manufacturing costs beneficial mix and better operating efficiencies, resulting from strong operational execution.
Net income attributable to Dana was $19 million compared with a loss of $88 million last year. The net loss last year was due to a noncash goodwill impairment charge.
Diluted adjusted earnings per share was <unk> 30, a M.
<unk> improvement over the third quarter of last year.
Lastly, free cash flow was a use of $5 million down $82 million from last year, driven primarily by higher working capital requirements to support our program launch cadence and higher capital spending.
Please turn with me now to slide 10 for a closer look at the drivers of sales and profit change for the third quarter of 2023.
Beginning on the left.
Traditional organic sales growth of $20 million was driven by higher demand and improved pricing, partially offset by the impact of the UAW strike on our light vehicle business adjusted EBITDA on higher sales was $35 million, which improved margins by 130 basis points.
Cost inflation was partially offset by customer recoveries in the quarter, resulting in net inflation headwinds of about $14 million.
Improved operational execution beneficial mix and fewer inefficiencies driven by less volatile customer production patterns was the primary driver of profit improvement in the quarter.
The organic sales was $81 million higher than last year, and adjusted EBITDA was $12 million higher improving overall margins by 20 basis points.
Margin contribution on the higher EV sales and the deferral of engineering investment drove higher EV organic profit.
Foreign currency translation increased sales by about $42 million as the dollar weakened in value against several foreign currencies, primarily the euro however, due to regional mix and profit was up only $2 million for a slight negative margin impact of 10 basis points.
Finally, due to falling commodity prices commodity cost recoveries in the third quarter was $9 million lower than last year, but due to those same lower prices. There was a net profit benefit of $1 million. This resulted in a 10 basis points margin benefit.
Next I'll turn to slide 11 for details of free cash flow for the third quarter.
Free cash flow was a use of $5 million in the third quarter higher profit. This quarter was offset by increased working capital requirements that were $115 million higher than last year.
This was primarily driven by higher inventory requirements to support increased sales and support the large number of program launches.
Capital spending was $23 million higher than last year to support our backlog of new business.
Please turn with me now to slide 12 for an update of our guidance for 2023, we.
We have modified our guidance to account for the uncertainty surrounding the duration and scope of the UAW strike.
And as our base case scenario, we are assuming that the strike remains at its current scale and is resolved by the end of October under this assumption we are maintaining our prior sales and profit ranges. The strike were to stretch to the ended the year, we anticipated with lower sales by $500 million and adjusted EBITDA by $90 million.
Allow me to walk you through this chart looking at the sales guidance range in the middle of the page beginning at the upper end of the range on the right side of the scale you will see that we expect sales to be $10 $7 billion, assuming the strike ends at the end of October. This is in line with our prior outlook as higher sales in our off highway markets are expected to.
Offset the strike impact in light vehicles.
Adjusted EBITDA is expected to be about $850 million in our base case scenario as cost saving actions and lower incentive compensation offset the strike impact on profit.
Profit margin is expected to be approximately seven 5% to 8% within the range of our prior guidance.
Free cash flow is expected to be a use of approximately $20 million in the base case scenario higher inventory and lower sales due to the strikes are causing an increase in working capital. We do expect this dynamic to reduce or reverse once the strike is concluded and we were able to utilize the inventory that is both on the plant floor or in transit.
We also expect further cash flow impacts from additional supplier relief and restructuring actions.
Diluted adjusted EPS remains unchanged at approximately <unk> 80 per share and our base case scenario.
The resilience of our business to weather. These external disruptions is a testament to the enterprise strategy and the ability of the team to perform in these difficult times.
I'll now turn the call back over to Chris for your questions.
Thank you if you would like to ask a question. Please press Star then one on your telephone keypad.
Our first question is from Noah Kaye with Oppenheimer. Your line is open.
Okay.
Hey, Thanks for taking the questions and appreciate the range of scenarios provided I actually want to pick up on one of 10 last comments.
Can you speak to what Youre doing to support the health of your suppliers.
Amid all going on for the last.
Several weeks how.
How that has impacted cash conversion expectations.
For <unk>.
<unk>.
And.
What you would call out in terms of <unk>.
Potentially.
That improving as we get into 2024.
Sure the impacts on suppliers that are are both related to the specific UAW actions.
As well as actions that have happened.
<unk>, we have one particular supplier that's been of particular concern and we've been providing.
Significant support to that supplier. So we expect to continue to have some of that into the fourth quarter.
And then we will obviously do what we need to to make sure that as we go through the restart we're able to.
Support the supply base.
And make sure we can deliver for our customers.
And just.
Didn't catch it.
Can possibly quantify that or dimension the impact that it's having on cash flow.
So the impact is.
In Q4 should should we don't expect it to be.
Significant but it's difficult to dimension to this point is we don't know what the restart is going to be.
Okay. So the free cash flow conversion.
The headwinds are largely around.
The inventory build that.
<unk> been happening.
When.
Based off of the news flow that we've seen.
It sounds like.
Boy workers for Super duty.
And other programs that are important to you are being asked to return.
And so that may be a fairly near term event.
Can you just talk about your capacity to ramp back up at some of these programs.
Okay.
Your state of revenue and what you expect will happen as those programs started back up again.
Hey, good morning, Thanks for joining thanks for the question. This is Jim I think the best way maybe to think about it is that's the audiences.
Almost like the Covid shutdown time frame I mean, any sophisticated manufacturing company had a playbook to kind of wind it down and also had wanted to wind it up as part of it it's kind of the whole chain.
Part of it's the whole supply base and what we're doing there ensuring make sure that <unk> says the raw material has the labor availability, so on and so forth internal operations are very much within our in our control and making sure. There that we have inventory in place we have softened safe launch quality programs in place because you may have some new.
<unk> operators that have to move around to different jobs or whatever the case may be but from our standpoint from our line of sight, our ability to come up will be.
Should be it should not be a difficulty we brand this play before.
So I hope that answers your question, but you know as soon as they're ready. We're just hopeful still that said, we all understand that it's still a tentative agreement so hopefully.
We're moving and we're producing product back to where we were a few weeks back.
Yeah. That's helpful. Thanks, Jim last question from me you know, there's there's some mixed message out of the light vehicle industry around the pace of EV investments, but of course, the majority of your programs.
To date have been in CV and off highway can you speak to the pace of EV investment.
And RFP activity that Youre seeing currently in those markets.
And your expectations for future awards activity.
Related to electrification.
Yeah again, thanks for the question the way I would think about it as it almost starts with.
We have a I would say very equal balance in terms of it depending on if you'd put it on a revenue level of electrification wins across all of the end markets that we participate maybe we can dimension it differently or better in the future, but really good balance across all the end markets. So the way we've designed the company most important part when we put <unk>.
<unk> in house Electrodynamic capability across the company. It was not with one end market I E like vehicle centric or it wasn't like one geographical market like North America centric. It was to basically be able to scale our products, our processes and our human capital across all of their respective end Mark.
So.
What am I getting at here, yeah, well, we can see that there may be some push out in some geographical markets or maybe some push out in some end markets light vehicle commercial vehicle whatever that is and how we've designed the company. We skipped we scale our products is basically high torque truck related products truck and large vehicle products. So he is.
As the volume comes on we're able to flex with that and only go up the curve on our spending is that come so not too worried about that that's just how it works or light vehicle products Workover and our commercial vehicle commercial vehicle products Workover in off highway is what I'm basically getting at so in the punch line relative to new wins and saw so forth not here to announce any.
Anything we sprinkled the infield as I like to say throughout the course of the year at the beginning of next year in February we will give you that standard back backlog update and some new updates for you.
Okay looking forward to it thank you.
Thank you.
The next question is from Colin Langan with Wells Fargo. Your line is open.
Oh, great. Thanks for taking my questions.
I appreciate the guidance.
And any color on the low end can you clarify whether that's with Ford strike ending or is that just assuming what was happening a couple of days ago continue to the end of the year.
And any color on sort of the.
Sales drag you know.
Just Jim and flatter how much like per week or something that we should be kind of estimating there is a good sort of guidepost.
Sure Hey, Colin Thanks for the question. So are our low end assumes that that Ford the Ford would be out through the end of the year.
Based on that.
What they were currently down.
Before the announcement of the tentative agreement so it's a the fully down scenario.
And if you want to think about it right. The the way that kind of dimension that I think we're not going to give specifics, but about half of that that change is probably bored.
The balances is everything else.
And any color on like a weekly pace of of the balanced at this point I'm imports over so is it going to be.
Oh, Wow 15, I mean, I think you can probably you can work through it if you think about the low and the high end if it's about a half million dollars half of its board you can sort of figure out how you you dimension.
Okay alright. Thanks.
Of course, it always thought some of it depends on the restart too in terms of board. So how quickly they come up and which plants come up when.
Yeah, no that makes sense.
If I look at the guidance and I look at the high end and I think about what's implied in Q4.
It does imply and I feel like I'm nitpicking, because it looks like pretty good guidance given all the strike issue, but if I go quarter over quarter sales actually fill at the high end look pretty flat.
But EBIT falls off a bit.
Almost $80 million or so.
Hi, and what would drive that what is their seasonal issues is that just sort of abnormal sort of drag from the strike.
Why the big margin drop into Q4.
So our armed our Q4 margins are generally.
Lower I mean, we just have a lot of a down production days in the fourth quarter. When you think about between.
The Christmas shutdown and Thanksgiving here in the states just makes that the absorption on the fixed cost a little bit harder when you think about it so it's definitely see seasonality.
<unk>.
As you kind of go through that.
Yeah, It's inflations are.
On a net basis has moderated.
A little bit, but nothing significant we're seeing.
A little bit lower overall EEV investment you're starting to you saw that sort of in the quarter.
We call out some of its deferral, but where we are as we as we start to ramp. These these programs, we're getting much more efficient and better as we as we time and bring on resources getting them up to speed and getting them really productive faster. So there's some efficiency built into that as well.
Great Alright, thanks for taking my questions.
Sure.
The next question is from Dan Levy with Barclays. Your line is open.
Hi, good morning, Thank you.
Just wanted to follow up on.
Colin line of questions, but maybe slightly different approach just if I'm looking at.
Youre, saying the upper end of your guide is equal to the midpoint of your prior guide, but that has within that $250 million of revenue impact.
At a 20% decrementals that $6 million EBITDA that you are still holding the guide so specifically what is.
Better at least at the upper end of your guide and is offsetting the UAW headwinds that you've incurred so far as it can be saying inflation and sort of the neutral somewhat moderated.
<unk>.
So it's a it's a couple of things.
One we continue to.
To deliver in <unk>.
And get the operational efficiencies.
Into the business you saw that in Q2 and the accelerated into Q3. So when you when you think about both from an operating and cost performance perspective.
We're seeing that flow through the business. We're also continuing to see good.
Good work from our commercial recoveries perspective.
Margin improvement and then the work that the teams continue to do.
On managed spend so all of those really core things that drive increased.
Conversion, we're seeing come through the business.
And then like I said, while inflation is.
As net neutral or maybe a little better.
We're also but.
Really that's that's the big driver as to why we're not seeing or able to cover some of the downside from the from the strike.
Right. Okay. Thank you and then just as far as and I recognize you'll give a.
Guide on 'twenty four.
On the <unk> call, but just conceptually as we're looking into.
Next year.
Is it fair to say that there's more runway on flowing through these business efficiencies, maybe some inflation unwind starting 10 are those.
Third tailwind to consider into 2024.
Yeah, I mean, obviously, we'll give we'll give guidance we'll update guidance.
In February and March.
All of those those factors pretty closely obviously as we get through the restart and we are we get a better.
Feel for how the customers are going to run and are and what the outlook for production's going to be.
I think it'll be we'll have a clearer picture of.
What what some of the the the impacts will be for 24.
Okay. Thank you.
Follow up I, just wanted to ask Jim about.
The strategy on eds.
The question that came up.
Earlier, two thirds of your last backlog update with EV. So presumably there is.
A fair amount.
And that you had on.
These programs and I recognize you'll give us an update on where the backlog is.
But.
To what extent do you have the ability to moderate your spend on easy or is it that you have programs that are in place. This is spend thats occurring regardless, even if there is risk that the programs may not materialize. So maybe you could give a sense of you know we're hearing from automakers that are that are pulling back on.
How are you thinking about your spend in light of this pullback.
Yeah. That's a that's a really good question, but a very broad question. So I hope I can get to a point here to its clear what the first thing I'd start with.
Any supplier we're at the tail on the dog, but following the dog in a good way from from the standpoint, if they push out their spend that means theyre pushing out their programs that pushes out there timing, which pushes out our spend so that's that's kind of the first kind of high level way I would think about it. The second thing I would tell you is just that and it's hard to articulate and maybe even illustrated.
But when we think about the way we set we set our company up let's take motors earned burgers, we set them up not to be a program specific products. They are very much so and obviously they have some exclusivity in specific.
To them by the customer, but the core of our products that actually goes through the mechanicals as well as all of those are scalable up the curve. So we implemented where we install the capacity human capacity equipment capacity, it's essentially all flexible and modular and we're able to kind of pull that in so long story short is.
Volumes on programs or pulled in let's say for the sake of discussion slower we just have to spend a little bit lesser depending on the volume pull through and so on and so forth, but we still need the products I mean, none of US on this call are at all in denial that electrification is still coming at a very fast rate whatever it was last year, 1% of the North American market. This year, 7% of the North America.
Et cetera, we all know the stats. So there is going to be plenty of pull through market, maybe not as fast in north Americas, Europe, or maybe not in past few Europe is in China, but the markets are going to be there our products, our global products, where we will be able to scale up as the customer pull through has come through and as the end markets come through.
Great. Thank you.
The next question is from Joe Spak with UBS. Your line is open.
Thanks, everyone. Good morning.
Maybe at a sort of follow up on a couple of themes already already here in I guess.
Jim I will just follow on your most recent comment so you know understand.
We'll have to wait to hear about the backlog, but and that you can sort of push investment to better.
Time, what your customers are doing.
You did notice that in the quarter you did some of that and I think that sort of helped some of that EV profitability. So how should we think about this in relation to you know your existing target to hit our breakeven in 2025, because if the volume is lower but you also sort of pulling back does that still net out to be able to hit that.
Target or does that change the trajectory of it at all.
Hey, Joe It's Tim Yeah.
Yeah, you know obviously, we're it's pretty dynamic so we're we continue to.
As Jim mentioned, a lot a lot of the investments fungible, So we're making it in and where we can.
Pushing around or defer it or become more efficient with it we're doing so in terms of 2025, I think based on our where we're at today in the current run rate of programs.
That's probably still where we see.
The EV business in 25, obviously.
It is pretty dynamic so we'll give an update on that in February as we are we continue to see that the market develop in what new business.
Is able to be to be secured between now and then.
Okay.
And then just you know going back to <unk>.
The performance in the quarter and you know some of the early thinking for 'twenty for like obviously and sort of as you noted.
Like there is there does appear to be good sort of underlying execution and in this quarter and I think that could you know once we get past the strike issues could give some confidence for people and into next year, but you know candidly.
Business is really hard to forecast like even if we look at slide 14 in the second Dawkes like you know if you look at segments like Lv D and commercial vehicle that you see the like the flow through on traditional organics greater than then the sales team. So can you just give a little bit more texture as to sort of what's going on beneath the surface in those segments like maybe what.
Our true volume incremental decremental margins in and then what what else is what what is the hard work that you've done that's been causing that conversion to be greater than what's sustainable into into 'twenty four.
Yeah, I mean, obviously, they're all they're all pretty different but hopefully if you look at if you look at light vehicle and yet.
Just for the for the for the strike in the quarter.
The the improvements still pretty dramatic.
Even still than that that's really being driven.
Bye.
First of all 22 was obviously a pretty difficult comparison, even in the third quarter. We continue to see pretty volatile demand that that improvement is really allowing a lot of.
The important improvements on the plant floor to be able to show through that's going to continue obviously you know as you get into 'twenty for the comparison to 23 isn't isn't the same isn't going to be as dramatic, but certainly we will continue to see.
Those those improvements so I don't think you can assume that the the improvement.
Operationally is going to be you know sequentially greater or continue but you know.
The fact is that the when the customer starts to run better.
All the things we've done across the business to really drive communization and efficiency and and really a lot of the waste is really starting to show through so do I think theres some more of that in 'twenty for sure I think we will continue to be able to do that I'm sure will meet a lot of other challenges in 'twenty four as well.
So we'll have to see how it all nets out, but that's a big driver really across all the segments. I mean do you think about commercial I'll use that one right sales are down but that's a.
<unk> sort of two markets right Brazil's down quite.
Quite considerably and what Youre seeing is sort of the sales offset that you have in North America and a lot of really strong efforts from a from a commercial perspective to really improve margins in that business. So it's a it's a mixed bag when you look at the different the.
The different segments and I agree, it's sometimes hard to sort of parse out but each has its own story and I think the the teams are doing a great job to really drive the improvements that need to be whether it's plant floor or commercial or manage spend in autos.
I appreciate that.
Tim maybe just to sort of like zero in on an L. D. D. Then like if we.
Traditional <unk> was up 15 million sales if we just you know.
Broad strokes assume 20% incremental margin flow through on that then you know that would suggest what somebody like almost 20 million plus like not from volume. So how much of that is <unk>.
Cover us versus some of the work you've done.
On your own to sort of help help get you there.
A big the biggest single chunk of that is really operational for it to be.
Very honest right okay.
It is right.
Strike was the last two weeks in the quarter. So there is a lot of a very strong operational improvements.
The customer prior to the strike ran extremely well and in some of our largest programs and where we were able to test.
To see the flow through of all the work that's been done to get the plants to run where they need to run.
Okay. Thank you.
Yes.
The next question is from James Picariello with BNP Paribas. Your line is open.
Hey.
Hey, everyone.
Just on off highway.
The third quarter took a step down but I think.
Quite to a handful of years and say that yes.
Seasonally that.
That.
Consistent for the third quarter just curious.
What what Youre seeing there in terms of AG.
AG construction mining and should we expect.
Is there going to be a seasonal pick up in the fourth quarter, just kind of an overview on the.
The key puts and takes on that on off highway. Thanks.
Yeah.
You know I don't I don't think you can.
We're not seeing a real uptick from them from a fourth quarter perspective in in there right now.
The we've been we've done a really nice job, we did a really nice job of going and getting a lot of recoveries from the customers.
And we've done a really nice job of.
Trying to keep as much of that margin as we can we know that we're going to have to give some of this back and we started to see a little bit of that in the third quarter.
That probably continues a bit more into the fourth I mean, the end markets all remain.
Remain good and strong and we're continuing to deliver into them.
But I think some of that's being.
Some of the pricing, we had gotten and now that we don't we're seeing some of the pullback in inflation, we're going to have to to get a little bit of that back and that's going to pressure on both the top line and EBITDA margin as we run into the fourth quarter.
Got it and then.
Just on the commodity front.
Yeah, as we think about next year.
Looking at current spot pricing.
What would what would be kind of the setup the positioning on commodities would that be an additional or could that be an additional tailwind.
For you into next year.
Yeah, I mean, I'm not going to comment on next year. We're obviously working through that now and we'll have to make a we'll make some decisions about where we think commodities will be and how that will flow through I I don't expect it to be material, one way or the other but but I don't think we're ready to give an indication of.
What we think the commodity impacts going to be yet for next year.
Alright, thanks, guys.
Yep.
The last question is from Winnie Dong with Deutsche Bank. Your line is open.
Hi, Thank you so much and the call because the touch upon several times already but I was just wondering how much of the E. V. That luck is actually four mm for light vehicles and are you hearing any of your customers talking about it.
A slow down potentially because we've been hearing that from sort of like the broader market.
And then can you also maybe dimension for us what you're seeing in Kansas.
All the end markets given the.
Diversification factor.
Good morning.
In overview I'd say, maybe Tim you have a few words to Ed as well talk to you.
I would just say this the overall slowdown in the programs in terms of the timing and volumes and so on so forth largely speaking theyre in there where we thought they would be at this point, maybe a little bit of pull back and push out but not nothing too dramatic you got to remember again, it's we're not a light vehicle company and I know you know that alone we're in bus market obviously there.
A lot of large pool for zero emissions in school bus markets in much motherhood, so not a not a big pullback in as it relates to the other markets. If it's going to be slower than let's now use light vehicle as an example in call. It the truck business, if they're not manufacturing electric trucks, they're gonna be manufacturing internal combustion engine trucks and that's good for our business as well. So we're just.
Barry I've said it from the very beginning when we talked about our enterprise strategy in 16, and then in 18 as well we set up the company to be energy source agnostic, we're ready, but no matter what it is and we just were able to flex on the fly to whichever that maybe Tim. So don't know if you have anything to add yeah. Just on your on your specific question on an.
E on Lv in the backlog it it's pretty minor in terms of what's actually in the backlog for light vehicle EV, mostly because our EBITDA as we as we've mentioned is really the last of our segments, our major segments to to electrify.
Commercial vehicle was.
Was the first so.
The programs, we have run they tend to have a longer run rate in development and so they tend to fall outside of the current Lv backlog.
The current three year backlog.
Okay. Thank you.
So.
And then maybe asked.
Another way just because we are thinking about it sort of late 2020 for them from a modeling standpoint.
Do you think like Q3 or like yesterday at Q3 is a better way to students.
A good base to start thinking about 2024, if there's any sort of.
Seasonality factors when you need to consider thanks.
Yeah, I mean, I mean, there is obviously seasonality, we talked a little bit about how fourth quarter tends to be a little lower so you know our second and third quarters tend to be our best quarters.
Historically.
I think that that continues.
But as I mentioned earlier, we'll give an update on 24.
In February and we can have a discussion about it then but I don't I don't have anything specific on modeling for 24 at this point.
Okay. Thank you so much.
Sure.
Okay, well with that this is Jim I just a quick couple of closing comments for US always do to thank you very much for your time and attention and we appreciate it very very much second half the tale of the tape is from my view anyway is steady sequential financial progress really.
Across all of our business units, there's a little bit of seasonality as it relates to off highway as more European based in Q3 can be a little bit can be a little bit slower and some things can happen there in Q3, but again, great numbers and great progress across all the business units for sure rolling up to where we're at today outstanding launch performance it could be easily under.
Estimated because theres not everybody's in the day to day business like maybe I and the others are what does it take the launch of 120 programs across one company. When it go from you've got to win the program you've got a finance the program you've got to launch the program you've got a mature great quality thats remarkable and Theres no impact you can see it in the scoreboard doesn't lie no splash in the financials of any.
Mass of premium freight massive labor massive this massive that instead, nothing but improvement there. So I really want to thank the entire Dana team as well as our customers as we work through these challenges together major launches, yes, but think about the UAW impact. This it's like Covid, all over again, and it's sort of seamless.
It's going to have some impact on everyone's financials as it relates to the Q4 numbers, but as it relates to running the business and ensuring that the end consumer gets great products. We're in great shape together. So thank you very much again for your time and attention. We look forward to talking to you next year.
This concludes today's conference call. Thank you for participating you may now disconnect.
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