Q1 2024 Dana Inc Earnings Call
Regina: Good morning, and welcome to Dana Incorporated's first quarter 2024 financial webcast and conference call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speaker's remarks and the Q&A session, will be recorded for replay purposes. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest. There will be a question and answer period after the speaker's remarks, and we will take questions from the telephone only.
Good morning, and welcome to Dana incorporated first quarter 'twenty 'twenty four financial webcast and conference call. My name is Regina and I will be your conference facilitator. Please be advised that our meeting today, both the Speakers' remarks, and Q&A session will be recorded for replay purposes for those participants who would like to access the call.
From the webcast. Please reference the U R. L on our website and find in as a guest.
Regina: Will be a question and answer period after the Speakers' remarks, and we will take questions from the telephone only to ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers limit themselves to one question at a time, if you would like to ask an additional question. Please return to the queue. At this time I would like to begin the presentation.
Regina: To ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers limit themselves to one question at a time. If you would like to ask an additional question, please return to the queue. At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.
Regina: By turning the call over to Dana's senior director of Investor Relations and corporate Communications Craig Barber. Please go ahead Mr. Barber.
Craig Barber: Thank you, Regina. Good morning, everyone, on the call. Thanks for joining us today for our first quarter 2024 earnings call. You'll find this morning's press release and presentation posted on our investor website. Today's call is being recorded, and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied, or rebroadcast without our written consent. Allow me to remind you that today's presentation includes forward-looking statements about our expectations for Dana's future performance.
Craig Barber: Thank you Regina and good morning, everyone on the call. Thanks for joining us today for our first quarter 2024 earnings call. You'll find this morning's press release and presentation are posted on our Investor website. Today's call is being recorded and the supporting materials are the property of Dana incorporated they may not be recorded copied or rebroadcast without our written consent.
Let me remind you that today's presentation includes forward looking statements about our expectations for dana's future performance actual results could differ from those suggested by our comments today additional information about the factors that could affect future results are summarized in our safe Harbor statement on their public filings, including our reports with the SEC.
Craig Barber: Actual results could differ from those suggested by our. Additional information about the factors that could affect future results is summarized in our Safe Harbor Statement, found in our public filings, including our reports to PSCC. On the call this morning are Jim Kamsickas, Chairman and Chief Executive Officer, and Timothy Kraus, Senior Vice President and Chief Financial Officer.
Craig Barber: On the call. This morning are Jim <unk>, Chairman, and Chief Executive Officer, and Timothy Crouse, Senior Vice President and Chief Financial Officer.
Jim.
James K. Kamsickas: Good morning, and thank you for joining us today. Please turn with me to page 4, where I will discuss the highlights from the first quarter of 2024. Starting on the left side, I'm pleased to report that Dana achieved strong sales in the first quarter of $2.7 billion, a $91 million increase over the prior year driven by higher customer demand, the roll-on of new business backlog, including traditional, ICE, hybrid, and EV programs, plus market share gains.
Jim: Good morning, and thank you for joining us today.
Jim: Please turn with me to page four where I will discuss the highlights from the first quarter of 2024.
Jim: Starting on the left side I'm pleased to report that Dana achieved strong sales in the first quarter of $2 $7 billion of $91 million increase over the prior year driven by higher customer demand.
Jim: The roll on of new business backlog, including traditional ICD hybrid and EV programs plus market share gains.
James K. Kamsickas: Adjusted EBITDA for the quarter was $223 million, of $19 million driven by the strength of Dana's core business and operating system execution, which is driven by the contributions of every person and resource in the company to achieve efficiency improvements across all aspects of the organization. Next, free cash flow, which is normally a use in the first quarter due to seasonality, was $172 million.
Jim: Adjusted EBITDA for the quarter was $223 million up $19 million driven by the strength of Dana's core business and operating system execution, which is driven by the contributions of every person and resourcing the company to achieve efficiency improvements across all aspects of the organization.
Jim: Next to free cash flow, which is normally a use in the first quarter due to seasonality was a use of $172 million, notably this was $118 million improvement over the prior year, which is reflective of multiple working capital improvements and lower capital expenditures.
James K. Kamsickas: Notably, this was a $118 million improvement over the prior year, which is reflective of multiple working capital improvements and lower capital expenditures. Moving to the upper right of the slide under the key highlights, consistent with the past several quarters, company-wide efficiency improvements again drove strong profit growth. As stated on the page, Dana achieved a 39% conversion rate on traditional organic sales in the first quarter.
Jim: Moving to the upper right of this slide under the key highlights consistent with the past several quarters company wide efficiency improvements again drove strong profit growth.
Jim: As stated on the page Dana achieved 39% conversion rate on traditional organic sales in the first quarter.
James K. Kamsickas: This performance is well above our historical conversion for the first quarter and positions the company on a strong trajectory to achieve our full-year targets. Achieving this level of progress is the result of a very cohesive and talented Dana team systematically driving continuous improvement and synergies across all functions, geographical regions, products, and end markets. Moving to the center right of the slide, demand levels remain relatively stable across most of our end markets.
Jim: This performance is well above our historical conversion for the first quarter and positions the company on a strong trajectory to achieve our full year targets.
Jim: This level of progress as a result of a very cohesive and talents Dana team systematically driving continuous improvement in synergies across all functions geographical regions products and end markets move.
Jim: Moving to the center right at the slide demand levels remain relatively stable across most of our end markets and the Dana team continues to methodically and consistently grow the business.
James K. Kamsickas: Lastly, with efficiency improvements on track, mobility markets remaining relatively stable, and stronger working capital performance, our financial outlook remains on target and has led us to raise our full-year free cash flow outlook to $75 million at the midpoint of the range, a 50% increase over our prior guidance. Tim will walk you through this and all other financial details and updates later in the presentation. Please turn with me to page five for the outlook on the business and environment for this year.
Jim: Lastly, with efficiency improvements on track mobility markets remaining relatively stable and stronger working capital performance, our financial outlook remains on target and has led to us let us to raise our full year free cash flow outlook to $75 million at the midpoint of the range of 50% increase.
Jim: Over our prior guidance, Tim will walk you through this and all other financial details and updates later in the presentation.
Jim: Please turn with me to page five for the outlook on the business environment for this year.
Jim: As we stated we anticipate dana's overall business environment to continue improving due to first.
James K. Kamsickas: As we stated, we anticipate Dana's overall business environment to continue improving due to, first, the further stabilization of customer production schedules as their supply chains continue to normalize. Second, Dana's continued execution of cross-company efficiency actions. And third, the continued launch of new and refreshed programs that are coming online, which drive profitable growth. Beginning on the left side of the slide, greater stability in customer production has resulted in lower production costs, improved productivity, and greater efficiency across all areas of the enterprise.
Jim: Further stabilization of the customer production schedules as their supply chains continue to normalize second Dana's continued execution of cross company efficiency actions and third the continued launch of new and refreshed programs that are coming online, which drive profitable growth.
Jim: Beginning on the left side on slide greater stability and customer production has resulted in lower production cost improved productivity and greater efficiency across all areas of the enterprise.
James K. Kamsickas: Moving to the supply chain, net commodities are still expected to be a headwind to sales and profit for the remainder of the year. Steel prices have declined from the peak and are projected to be mostly flat compared with 2023.
Jim: Moving to supply chain net commodities are still expected to be a headwind to sales and profit for the remaining of the year steel prices have declined from the peak and are projected to mostly flat compared with 2023.
James K. Kamsickas: As input costs decline, we see a reversal of commodity recoveries with customers driving the headwind. Dana has a number of refreshed conquest and new business roll-ons throughout 2024, which is a contributor to driving profitable growth. This growth is well balanced across mobility markets and includes market share gains in our commercial group, which of course requires short-term launch costs but, importantly, is partially offsetting lower industry volumes in that segment. Overall, we're experiencing lower launch costs in 2024 as the company has returned to a much more normalized number of new program launches this year compared with the unprecedented quantity and complexity of launches the team very successfully executed throughout 2023. Moving to the right of the page, let's take a look at our end market outlook. We expect agriculture to be down compared with last year, and we're seeing some further softening in the market.
Jim: As input costs decline, we see reversal commodity recoveries with customers driving the headwind.
Jim: Dana has a number of refreshed conquest and new business roll on throughout 2024, which was a contributor to driving profitable growth. This growth is well balanced across mobility markets includes market share gains in our commercial group, which of course requires short term launch costs, but importantly are partially offsetting lower <unk>.
Jim: <unk> volumes in that segment.
Jim: Overall, we're experiencing lower launch costs in 2024 as the company has returned to a much more normalized number of new program launches this year compared with the unprecedented quantity and complexity of launches the team very successfully executed throughout 2023.
Jim: Moving to the right of the page, let's take a look at our end market outlook, we expect agriculture to be down compared with last year and we're seeing some further softening in the market.
Jim: Demand for construction and mining equipment should continue trending somewhat flat compared with last year. Those were watching these end markets closely as orders can shift rapid.
James K. Kamsickas: Demand for construction and mining equipment should continue to trend somewhat flat compared to last year. However, those who are watching these end markets closely, as orders can shift rapidly. We continue to see light vehicle full frame production normalize and volumes trending up by low single-digit percentages as customer demand remains stable for the key recently refreshed vehicle platforms in production. However, after several years of growth, we still anticipate the market for heavy vehicles to be lower compared to last year, although we are seeing a slight improvement in third-party production estimates. Moving to the bottom of the slide, the key takeaways that we are seeing across our industry show cost inflation moderating despite labor costs increasing globally.
James K. Kamsickas: We continue to see light vehicle full frame production normalized and volumes trending up by low single digit percentages as customer demand remains stable for the key recently refreshed vehicle platforms in production.
Jim: After several years of growth, we still anticipate the market for heavy vehicles to be lower compared with last year. Although we are seeing a slight improvement in third party production estimates.
James K. Kamsickas: Moving to the bottom of the slide the key takeaways that we are seeing across our injuries industry show cost inflation moderating despite labor cost increasing globally.
Jim: OEM production schedules continue to stabilize which is driving overall improvements in production efficiency.
James K. Kamsickas: Lastly, while the light vehicle market overall is certainly navigating a period of electric vehicle demand fluctuation for current EV programs overall dana's only marginally impacted because one most of the recent EV volume pullback is on passenger cars, which of course, Dana largely does not participate as we are principally.
James K. Kamsickas: Lastly, while the light vehicle market overall is certainly navigating a period of electric vehicle demand fluctuation for current EV programs, overall, Dana is only marginally impacted because, first, most of the recent EV volume pullback is on passenger cars, which of course, Dana largely does not participate as we are principally a light truck, commercial vehicle, and off-highway mobility supplier.
James K. Kamsickas: Light truck commercial vehicle and off highway mobility supplier.
James K. Kamsickas: Our product processes and equipment design activities over the past several years positioned R E mechanical electrodynamic components and ether mill assets to be quite flexible across vehicle types and mobility markets, thus, enabling dana to flex and optimize our human and equipment capital if production timing and or volume changes.
James K. Kamsickas: 2. Our product, processes, and equipment design activities over the past several years have positioned our e-mechanical, electrodynamic components, and e-thermal assets to be quite flexible across vehicle types and mobility markets, thus enabling Dana to flex and optimize our human and equipment capital if production timing and or volume changes occur. 3.
James K. Kamsickas: Sure.
James K. Kamsickas: Three the majority of our announced light vehicle EV programs did not launch for another few years, allowing Dana to adjust capital equipment spending if appropriate.
Jim: As you know repositioning and transforming Dana was from a purely mechanical company to an energy source agnostic business was incredibly challenging but strategically critical, especially when doing so simultaneously with the COVID-19 crisis. However, today, we can clearly see that it was worth it as Dana cannot only flex as spread its resources across numerous vehicles.
James K. Kamsickas: The majority of our announced light vehicle EV programs do not launch for another few years, allowing Dana to adjust capital equipment spending if appropriate. As you know, repositioning and transforming Dana from a purely mechanical company to an energy source agnostic business was incredibly challenging, but strategically critical, especially when doing so simultaneously with the COVID crisis. However, today, we can clearly see that it was all worth it, as Dana cannot only flex and spread its resources across numerous vehicle architectures, but we have also increased our content per vehicle potential from three to five times based on the vehicle configuration.
James K. Kamsickas: <unk> architectures, but we have also increased our content per vehicle potential from three to five times based on the vehicle configuration.
James K. Kamsickas: What this means in the short term is that we expect <unk> sales to be approximately $1 billion. This year.
James K. Kamsickas: And we are already generating positive contribution margins and remain on target to achieve positive EBITDA margins next year.
James K. Kamsickas: Let's turn to slide six where I will share some exciting.
James K. Kamsickas: News regarding the major industry award for Dana.
James K. Kamsickas: We're very excited to share with you that Dana was awarded the night.
James K. Kamsickas: It was awarded our ninth automotive news pace award at the 29th annual pace ceremony held just last night in Detroit, Michigan.
James K. Kamsickas: What this means in the short term is that we expect EV sales to be approximately one billion dollars this year, and we are already generating positive contribution margins and remain on target to achieve positive EBITDA margins next year. Now, let's turn to slide six, where I will share some exciting news regarding a major industry award for Dana. We're very excited to share with you that Dana was awarded the 9th, Automotive News Pace Award at the 29th Annual Pace Ceremony held just last night in Detroit, Michigan.
James K. Kamsickas: Dana once again took home our industry's most coveted technology and product Innovation award for our.
James K. Kamsickas: Actual mechanical infinitely variable transmission system, which is a multi mode driveline system solution that incorporates the Dana power split transmission with the integrated high voltage motors and controllers with preparatory proprietary software that manages the entire drivetrain. The system also includes smart lubrication.
James K. Kamsickas: And actuation driven by Danish low voltage motor inverter.
James K. Kamsickas: This first of a kind solution differs from the traditional transmissions in that it can operate in and automatically shift between engine engine only hybrid and battery only modes.
James K. Kamsickas: Dana once again took home our industry's most coveted technology and product innovation award for our electromechanical infinitely variable transmission system, which is a multi-mode driveline system solution that incorporates the Dana PowerSplit transmission with integrated high-voltage motors and controller with proprietary software that manages the entire drivetrain. The system also includes smart lubrication and actuation driven by Dana's low voltage motor and inverter. This first-of-a-kind solution differs from traditional transmissions in that it can operate in and automatically shift between engine, engine-only, hybrid, and battery-only modes.
James K. Kamsickas: It provides many real world benefits for vocational vehicles like lower fuel usage noise and admissions, but offers safety and redundancy of a hybrid vehicle to ensure consistent power. This is of ultimate importance in an emergency vehicle to.
James K. Kamsickas: To achieve this we work closely with our customer in this case Oshkosh to curate the multimode power split solution.
James K. Kamsickas: In addition to the vehicles already in service <unk> recently presented their peers boltrope.
James K. Kamsickas: Chuck.
James K. Kamsickas: Together with our system at the fire Department instructors conference or FDIC and Indianapolis earlier. This month and it was received with great interest more than 36000 and fire and rescue professionals, representing 67 different countries attended the event.
James K. Kamsickas: It provides many real-world benefits for vocational vehicles like lower fuel usage, noise, and emissions but offers the safety and redundancy of a hybrid vehicle to ensure consistent power. This is of ultimate importance in an emergency vehicle.
James K. Kamsickas: Cash has also announced recently announced that the Paris Laborde J Airport.
James K. Kamsickas: To achieve this, we work closely with our customer, in this case Oshkosh, to create the multi-mode power split solution. In addition to the vehicles already in service, Oshkosh recently presented their Pierce Voltra, trucked together with our system, at the Fire Department Instructors Conference, or FDIC, in Indianapolis earlier this month, and it was received with great interest. More than 36,000 fire and rescue professionals representing 67 different countries attended the
James K. Kamsickas: We will be receiving units with our system expanding the market into Europe.
James K. Kamsickas: The exciting thing about dana's <unk> system as a whole system approach that can be rep can be replicated across numerous different product lines that mobility markets and it's another example of <unk> ability to collaborate with our customers to meet their unique and specific needs regardless of powertrain configuration illustrating why are complete.
James K. Kamsickas: In house capability is a significant.
James K. Kamsickas: Differentiator for Dana.
James K. Kamsickas: Oshkosh has also announced, recently announced, that the Paris-Laboratoire Airport will be receiving units with our system, expanding the market into Europe. The exciting thing about Dana's EMIB system is it is a whole system approach that can be replicated across numerous different product lines and mobility markets. And it's another example of Dana's ability to collaborate with our customers to meet their unique and specific needs, regardless of powertrain configuration, illustrating why our complete in-house capability is a significant Differentiator for Dana.
James K. Kamsickas: Let's move to the next slide where I can talk about a variety of recognitions that illustrate dienes ethical foundation customer focus and technical expertise.
James K. Kamsickas: As with most years, we'd like to provide you an update on industry and customer awards. We present this information because of significant interconnection and value creation that occurs by operating the company with the highest level of ethical standards, maintaining an intense commitment to customer satisfaction and ensuring that accompanying continuously.
James K. Kamsickas: Innovates and provides differentiating product technology for customers.
James K. Kamsickas: Dana will not operate our company any other way.
James K. Kamsickas: Let's move to the next slide, where I can talk about a variety of recognitions that illustrate Dana's ethical foundation, customer focus, and technical expertise. As with most years, we'd like to provide you an update on industry and customer rewards. We present this information because of the significant interconnection and value creation that occurs by operating a company with the highest level of ethical standards, maintaining an intense commitment to customer satisfaction, and ensuring that a company continuously innovates and provides differentiating product technology for customers. Dana will not operate our company any other way.
James K. Kamsickas: I would like to take a few minutes to communicate some representative examples in each of these areas of importance and which Dana has been recognized over the past 12 months.
James K. Kamsickas: First in the area of ethics and integrity Dana was again recognized as one of the world's most ethical companies by Ethisphere.
James K. Kamsickas: We're one of only a 136 companies spanning 20 countries in 44 industries to be recognized we're also honored to be able to have been recognized by Newsweek as one of America's most responsible companies.
James K. Kamsickas: Second in the area of customer satisfaction as you can see from the numerous customer logos on the page. We're honored to have received customer recognition across all mobility markets geographical regions and for many of our OEM customers, but does it change up. This year. We've also included recognition from non OEM customers such as supplier of the year award from ideal at least.
James K. Kamsickas: I would like to take a few minutes to communicate some representative examples in each of these areas of importance for which DANIS has been recognized over the past 12 months. First, in the area of ethics and integrity, Dana was again recognized as one of the world's most ethical companies by Eposphere. We are one of only 136 companies spanning 20 countries and 44 industries to be recognized. We're also honored to have been recognized by Newsweek as one of America's most responsible companies.
James K. Kamsickas: <unk> incorporated one of North America's Premier full service commercial truck leasing rental and maintenance companies. Additionally, we earned a supplier partnership award from fleet Pride incorporated which is America's largest independent distributor of aftermarket heavy duty parts and services.
James K. Kamsickas: We are also very fortunate that our customers recognize our commitment and for that reason continue to select Dana as a preferred supplier partner.
James K. Kamsickas: Third in the area of technology and innovation. In addition to the Pace Award I just announce Dana was honored with the heavy duty trucking magazine 2023 top 20 products award for its Spicer electrified zero eight E axles, our full suite of single in tandem equals our destiny design for full scale adoption of both battery electric.
James K. Kamsickas: Second, in the area of customer satisfaction, as you can see from the numerous customer logos on this page, we're honored to have received customer recognition across all mobility markets, geographical regions, and from many of our OEM customers. But as a changeup this year, we've also included recognition from non-OEM customers, such as the Supplier of the Year Award from Ideal Lease Incorporated, one of North America's premier full-service commercial truck leasing, rental, and maintenance companies.
James K. Kamsickas: And hydrogen fuel cell applications across a wide variety of class seven and eight vehicles.
James K. Kamsickas: There's a lot to be proud of here what was most gratifying is how all the women and men of Dana are so amazingly committed to running the company the right way. Thank.
James K. Kamsickas: Thank you for your time today, I would like to turn it over to Tim who will walk you through the financials. Thank.
Speaker Change: Thank you Jim and good morning, Please turn to slide nine for a review of our first quarter results sales were $2 $7 billion $91 million higher than last year, driven by strong end market demand for renewed vehicle programs and market share gains in commercial vehicle adjusted EBITDA was $223 million for a profit margin.
James K. Kamsickas: Additionally, we earned a Supplier Partnership Award from Fleet Pride Incorporated, which is America's largest independent distributor of aftermarket heavy-duty parts and services. We are also very fortunate that our customers recognize our commitment and, for that reason, continue to select Dana as a preferred supplier partner. Third, in the area of technology and innovation, in addition to the PACE award I just announced, Dana was honored with Heavy Duty Trucking Magazine's 2023 Top 20 Products Award for its Spicer Electrified Zero-Eight e-Axles.
James K. Kamsickas: Eight 2%.
James K. Kamsickas: $19 million and 50 basis points better than the previous year, primarily due to improved efficiencies aided by more stable customer order patterns and cost improvements across the entire company.
James K. Kamsickas: Net income attributable to Dana was $3 million in the first quarter of 2024, compared with $28 million last year. The difference is entirely due to the previously announced divestiture of our noncore hydraulics business from within our off Highway segment. This business is classified as held for sale and a $29 million loss was recognized to adjust the carrying value.
James K. Kamsickas: Our full suite of single and tandem e-axles are designed for full-scale adoption of both battery electric and hydrogen fuel cell applications across a wide variety of Class 7 and 8 vehicles. There's a lot to be proud of here.
James K. Kamsickas: <unk> of net assets to fair value less estimated cost to sell this.
James K. Kamsickas: This transaction also triggered a $7 million tax valuation allowance in Europe.
James K. Kamsickas: What was most gratifying was how all the women and men of Dana are so amazingly committed to running the company the right way. Thank you for your time today. I'd like to turn it over to Tim, who will walk you through the financials. Thank you, Jim, and good morning. Please turn to slide 9 for a review of our first quarter results. Sales were $2.7 billion, $91 million higher than last year, driven by strong in-market demand for renewed vehicle programs and market share gains in commercial vehicles.
Tim: On slide nine you will see the $29 million above EBIT and the $7 million is on the income tax line.
Tim: The combined impact of the transaction was a loss of 25 per share. The sale is expected to close during the second quarter of 2024.
Tim: And finally operating cash flow was a use as normally is the case in the first quarter of $102 million.
Tim: This was an improvement of $68 million over the first quarter last year due to lower working capital requirements. Please turn with me now to slide 10 for the drivers of the sale and sales and profit change.
Tim: Again on the left traditional organic sales were $75 million higher driven by increased demand for newly refreshed vehicle programs and market share gains in our commercial vehicle segment, partially offset by lower demand in agriculture end market of our off highway segment.
James K. Kamsickas: Adjusted EBITDA was $223 million for a profit margin of 8.2%, $19 million and 50 basis points better than the previous year, primarily due to improved efficiencies aided by more stable customer order patterns and cost improvements across the entire company. Net income attributable to Dana was $3 million in the first quarter of 2024, compared with $28 million last year. The difference is entirely due to the previously announced divestiture of our non-core hydraulics business from within our off-highway segment.
James K. Kamsickas: Incremental adjusted EBITDA on organic sales growth was $29 million. This strong conversion was due primarily to our improved cost efficiencies across the entire company and yielded approximately 90 basis points benefit to margin.
James K. Kamsickas: The organic sales growth was $23 million driven by increased sales.
James K. Kamsickas: Our battery cooling products.
James K. Kamsickas: Adjusted EBITDA was $4 million lower.
James K. Kamsickas: This business is classified as held for sale, and a $29 million loss was recognized to adjust the carrying value of net assets to fair value, less estimated costs to sell. This transaction also triggered a $7 million tax valuation allowance in Europe.
James K. Kamsickas: For a 20 basis points margin headwind higher engineering and related program investment for EV platforms drove the lower profit offsetting the positive contribution margin of the higher sales.
James K. Kamsickas: Foreign currency translation had minimal impact as it increased sales by $3 million and lowered profit by $1 million with no margin impact.
Timothy R. Kraus: On slide 9, you will see the $29 million above EBIT, and the $7 million is on the income tax line. The combined impact of the transaction was a loss of 25 cents per share. The sale is expected to close during the second quarter of 2024.
Timothy R. Kraus: Finally, due to falling commodity prices commodity cost recovery.
Timothy R. Kraus: In the first quarter was $10 million lower than last year.
Timothy R. Kraus: The profit benefit of the lower commodity prices was offset by the timing of cost mechanisms within the commodity recovery agreements with our customers, resulting in profit being lower by $5 million for a 20 basis points decrement margin.
Timothy R. Kraus: And finally, operating cash flow was a use, as normally is the case, in the first quarter of $102 million. This was an improvement of $68 million over the first quarter last year due to lower working capital requirements. Please turn with me now to slide 10 for the drivers of the sales and profit chain.
Timothy R. Kraus: I will now turn to slide 11 for the details of the first quarter free cash flow.
Timothy R. Kraus: Free cash flow was a use of $172 million in the first quarter, which is $118 million better than the first quarter of 2023.
Timothy R. Kraus: Higher profit of $19 million, partially offset by the increase in net interest compared to the first quarter of last year due to higher rates and the timing of interest payments driven by last year's refinancing actions cash flow from working capital requirements were $82 million improved from last year as remained focus on working capital efficiency, especially inventory and receivable.
Timothy R. Kraus: Again, on the left, traditional and organic sales were $75 million higher, driven by increased demand for newly refreshed vehicle programs and market share gains in our commercial vehicle segment, partially offset by lower demand in agriculture and the market for our off-highway vehicles. Incremental adjusted EBITDA on organic sales growth was $29 million. This strong conversion was due primarily to our improved cost efficiencies across the entire company and yielded approximately 90 basis points of benefit to margin. E. V. Organic's sales growth was $23 million, driven by increased sales of a battery cooling product.
Timothy R. Kraus: <unk> management fee.
Timothy R. Kraus: Finally capital spending to support new business backlog was $50 million lower than last year, driven by a more normalized loss launch cadence this quarter.
Speaker Change: Please turn with me now to slide 12 for an update updated guidance for 2024.
Timothy R. Kraus: We are affirming our sales and profit outlook for this year and we are increasing our expectations for free cash flow.
Timothy R. Kraus: We expect 2024 sales to be approximately $10 $9 billion at the midpoint of our guidance range, an increase of $345 million over 2023.
Timothy R. Kraus: Adjusted EBITDA was $4 million lower for a 20 basis points margin headway. Higher engineering and related program investment for EV platforms drove the lower profit, offsetting the positive contribution margin of the higher sales. Foreign currency translation had minimal impact as it increased sales by $3 million and lowered profit by $1 million with no margin.
Timothy R. Kraus: Adjusted EBITDA is expected to be about $925 million at the midpoint of our guidance range, which is up $80 million from last year.
Timothy R. Kraus: Profit margin is expected to be approximately eight two to eight 7% a 50 basis point improvement at the midpoint of that range.
Timothy R. Kraus: Finally, due to falling commodity prices, commodity cost recovery in the first quarter was $10 million lower than last. However, the profit benefit of the lower commodity prices was offset by the timing of cost mechanisms within the commodity recovery agreements with our customers, resulting in profit being lower by $5 million for a 20 basis points decline to March. I will now turn to slide 11 for the details of the first quarter free cash flow.
Timothy R. Kraus: Building on the strong first quarter results, we now expect free cash flow to be approximately $75 million at the midpoint of the revised range, which is a $25 million increase over our prior outlook and a $100 million increased compared to last year. The increased outlook is driven by improved working capital efficiency.
Timothy R. Kraus: Our GAAP EPS guidance remains unchanged at <unk> 60 per share note that our full year guidance already included the impact of the pending divestiture.
Timothy R. Kraus: Please turn with me now to slide 13, where I'll highlight the drivers of the full year expected sales and profit changes from last year.
Timothy R. Kraus: Free cash flow was a use of $172 million in the first quarter, which is $118 million better than the first quarter of 2023. Higher profit of $19 million, partially offset by the increase in net interest compared to the first quarter of last year due to higher rates and the timing of interest payments driven by last year's refinancing. Cash flow from working capital requirements was $82 million, an improvement from last year, as we remain focused on working capital efficiency, especially inventory and receivables management.
Timothy R. Kraus: Before we begin you will note that we have added a divestiture item to the full year walk to detail. The business that has that is held for sale and would have previously been shown under traditional organic as I mentioned previously the transaction was included in our original guidance in February. So there is no change to our total sales for profit outlook.
Timothy R. Kraus: Beginning with organic growth for 2024, we now expect about $270 million and additional sales from traditional products through new business moderate market growth growth and market share gains.
Timothy R. Kraus: Finally, capital spending to support new business backlog was $50 million lower than last year, driven by a more normalized launch cadence this quarter. Please turn with me now to slide 12 for updated guidance for 2024.
Timothy R. Kraus: Adjusted EBITDA increase on traditional organic sales growth is expected to be approximately $140 million. The higher profit margin increase of about 110 basis points as a continuation of the improved efficiency and cost saving actions that we began last year the.
Timothy R. Kraus: We are affirming our sales and profit outlook for this year, and we are increasing our expectations for free cash flow. We expect 2024 sales to be approximately $10.9 billion at the midpoint of our guidance range, an increase of $345 million over 2023. Adjusted EBITDA is expected to be about $925 million at the midpoint of our guidance range, which is up $80 million from last year. Profit margin is expected to be approximately 8.2 to 8.7 percent, a 50 basis point improvement at the midpoint of that range.
Timothy R. Kraus: The anticipated increase in the stability and predictability in our customer order patterns and our more efficient operations are allowing us to convert our higher traditional organic sales at better than typical contribution margins.
Timothy R. Kraus: We expect about $240 million of incremental EV product sales. This year for a total anticipated <unk> sales of about $1 billion. The EV business contribute contributes positive profit. However, we expect the change in <unk> adjusted EBITDA to be a headwind of about $20 million this year.
Timothy R. Kraus: The continued investment in engineering and associated costs for new EV programs.
Timothy R. Kraus: Our divestiture is expected to close in the second quarter and were lower sales by $55 million in profit by $5 million.
Timothy R. Kraus: Building on the strong first quarter results, we now expect free cash flow to be approximately $75 million at the midpoint of the revised range, which is a $25 million increase over our prior outlook and a $100 million increase compared to last year. The increased outlook is driven by improved working capital efficiency. Our GAAP EPS guidance remains unchanged at $0.60 per share.
Timothy R. Kraus: Foreign currency translation on sales is expected to be a headwind of approximately $50 million.
Timothy R. Kraus: With a profit impact of about $5 million slightly more modest than previously expected.
Timothy R. Kraus: Finally, our commodity outlook is expected to be a headwind to sales of about $60 million due to lower recoveries driven by falling steel and other commodity prices, we expect a $30 million profit headwind due to the true up in pricing governed by our two way commodity recovery mechanisms with our customers.
Timothy R. Kraus: Note that our full year guidance already included the impact of the pending divestiture. Please turn with me now to slide 13, where I'll highlight the drivers of the full year expected sales and profit changes from last year. Before we begin, you will note that we have added a vestiger item to the full year walk to detail the business that is that is held for sale and would have previously been shown under traditional organic.
Timothy R. Kraus: Lastly, please turn with me to slide 14 for our outlook on free cash flow for 2024.
Timothy R. Kraus: We anticipate full year 2020 for free cash flow to now be about $75 million at the midpoint of the guidance range.
Timothy R. Kraus: We expect about an 80 million.
Timothy R. Kraus: $1 of from an increased profit on higher sales.
Timothy R. Kraus: As I mentioned previously, the transaction was included in our original guidance in February, so there is no change to our total sales for profit outlook. Beginning with organic growth for 2024, we now expect about $270 million in additional sales from traditional products through new business, moderate market growth, and market share gains. Adjusted EBITDA increase on traditional organic sales growth is expected to be approximately $140 million. The higher profit and margin increase of about 110 basis points is a continuation of the improved efficiency and cost-saving actions that we began last year.
Timothy R. Kraus: Net interest will be about a $35 million headwind due to higher interest rates and payment timing due to the refinancing that occurred in 2023.
Timothy R. Kraus: Working capital is now expected to be lower use of about $50 million, which is the driver of our $25 million improvement over our prior guidance and $35 million better than last year.
Timothy R. Kraus: And capital spending to support our sales growth in technology is expected to be about $450 million. This year, which is $50 million lower than last year as we flex spending to match customer program timing.
Timothy R. Kraus: Thank you for joining us today I will now turn the call back over to Regina and we will take questions.
Timothy R. Kraus: At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad. Our first question will come from the line of Colin Langan with Wells Fargo. Please go ahead.
Timothy R. Kraus: The anticipated increase in the stability and predictability in our customer order patterns and our more efficient operations are allowing us to convert our higher traditional organic sales at better than typical contribution margins. We expect about $240 million of incremental EV product sales this year for a total anticipated EV sales of about $1 billion. The EV business contributes positive profit.
Speaker Change: Hello, Thanks for taking my question can you just a quick clarify the 25 cent drag from divestitures and earnings.
Timothy R. Kraus: That was actually contemplated in the original guidance of 64.
Timothy R. Kraus: Hey, Collin this is Tim Yeah. It was we didn't call it out specifically because we hadn't announced if you remember that the timing was a little wonky in the first quarter, we ended up.
Timothy R. Kraus: However, we expect the change in EV adjusted EBITDA to be a headwind of about $20 million this year due to the continued investment in engineering and associated costs for new EV programs. Our divestiture is expected to close in the second quarter, and we'll lower sales by $55 million and profit by $5 million. Foreign currency translation on sales is expected to be a headwind of approximately $50 million, with a profit impact of about $5 million, slightly more modest than previously expected.
Timothy R. Kraus: <unk> at the following day was in the queue. We filed late in the day, but we didnt want to muddy the waters in the first quarter, but we did included in the in both the work, but as I mentioned it was in the traditional organic column and.
Timothy R. Kraus: And it was included in the EPS guide that we gave.
Speaker Change: Got it.
Timothy R. Kraus: Think of this year's numbers that I know youre not giving adjusted.
Timothy R. Kraus: That's a very onetime in nature for the non repeated.
Timothy R. Kraus: Your guidance for the year and more like 85, correct. So later, okay sure I am clear.
Speaker Change: Okay. Thanks.
Timothy R. Kraus: Just as a follow up the the off highway margins held up very good.
Timothy R. Kraus: I look at the work order.
Timothy R. Kraus: Organic sales were down 46 million, but the organic EBIT impact was positive $6 million.
Timothy R. Kraus: Finally, our commodity outlook is expected to be a headwind to sales of about $60 million due to lower recoveries driven by falling steel and other commodity prices. We expect a $30 million profit headwind due to the true up in pricing governed by our two-way commodity recovery mechanisms with our customers. Lastly, please turn with me to slide 14 for our outlook on free cash flow for 2024. We anticipate full year 2024 free cash flow to now be about $75 million at the midpoint of the guidance range.
Speaker Change: What's really driving that one Howard the lower sales.
Timothy R. Kraus: How sustainable is this and how should we think about it trending through the year considering it.
Timothy R. Kraus: Most of those end markets are going to be flat to slightly down for the rest of the year.
Speaker Change: Yeah. So so it's it's two drivers one is mix. So we're we're losing.
Timothy R. Kraus: Our AG sales and gaining.
Timothy R. Kraus: So that mix and is typically our lowest margin.
Timothy R. Kraus: Sector within that segment.
Timothy R. Kraus: The other is really the teams did a great job on flexing cost and taking cost out of the.
Timothy R. Kraus: Out of the plants in and out of the Bu two.
Timothy R. Kraus: To adjust to the lower sales environment.
Speaker Change: Got it alright, thanks for taking my questions.
Speaker Change: Thank you.
Timothy R. Kraus: Your next question comes from the line of Noah Kaye with Oppenheimer. Please go ahead.
Speaker Change: Hi, this is <unk>.
Speaker Change: Thanks for taking a question.
Timothy R. Kraus: First could you discuss the moving parts around the traditional core outlook.
Timothy R. Kraus: We expect about $80 million from an increased profit on higher sales. However, net interest will be about a $35 million headwind due to higher interest rates and payment timing due to the refinancing that occurred in 2023. Working capital is now expected to be lower by about $50 million, which is the driver of our $25 million improvement over our prior guidance and $35 million better than last year. Capital spending to support our sales growth and technology is expected to be about $450 million this year, which is $50 million lower than last year as we flex spending to match customer program timing. Thank you for joining us today. I will now turn the call back over to Regina, and we'll take questions.
Regina: The guidance it looks like stronger organic sales, but slightly lower incrementals could you just give us some color on the drivers.
Regina: Yeah. So so some of it is that we pulled out the.
Regina: The divestiture out of it and then the rest is really just driving that driving difference in mix that's coming through that line.
Regina: Got it and then I guess for my follow up could you discuss overall demand trends for the EV programs Youre on and how you are.
Regina: We're expecting commercial EV sales to ramp through the balance of the year.
Regina: Sure. So you know obviously, we're continuing to watch this there they are pretty much in line with with where we had them, which is why youre not seeing.
Regina: A large change in our outlook.
Regina: Obviously, there is there is some softness in in EV demand and we're seeing that.
Regina: Across the end markets.
Regina: But again, we had some of this baked into our plan. So right now we're on track for the year.
Regina: At this time, I'd like to remind everyone that in order to ask a question, press star followed by the number one on your telephone keypad. Our first question will come from the line of Colin Langan with Wells Fargo. Please go ahead.
Regina: Thanks.
Regina: Your next question will come from the line of James Picariello with BNP Paribas. Please go ahead.
Colin M. Langan: Hey, good morning, everybody.
Colin M. Langan: Just wanted to ask on the commercial vehicle segment.
Colin M. Langan: Thanks for taking my question. Can you just quickly clarify the $0.25 drag from divestitures in earnings that was actually contemplated in the original guidance of $0.60?
Colin M. Langan: And what your expectation or what your visibility is into the remainder of the year.
Speaker Change: Here on North America truck production.
Colin M. Langan: And what's the influence so youre ramping volumes.
Timothy R. Kraus: Hey, Colin, this is Tim. Yeah, it was We didn't call it out specifically because we hadn't announced it. If you remember that the timing was a little wonky in the first quarter; we ended up announcing it the following day in the queue we filed late in the day. But we didn't want to muddy the waters in the first quarter. But we did include it in both the walks, but, as I mentioned, it was in the traditional organic column. And, and it was included in the EPS guide that we created.
Colin M. Langan: Volumes.
Timothy R. Kraus: On the profitability for that segment. Thanks.
Colin: Sure. So so CV North American volumes, so our class five to class seven we're seeing $2 45 to $2 55 for the year and on on the heavy duty side on the class eight 300 to 310, so it's still pretty healthy overall.
Timothy R. Kraus: And then in terms of Evs. So we continue to see sales obviously in that segment down a little bit as a as customers react to show the changing landscape in end customer demand patterns, but we're adjusting to it and <unk> and continued to deliver the products.
Colin M. Langan: Got it. So when I think of this year's numbers, and I know you're not keeping it adjusted, I mean, this is very unique in nature. So the non-Thank you. The off-highway margins held up very well, and if I look at the walk, organic sales were down $46 million, but the organic EBITDA impact was positive $6 million. What's really driving that, what are the lower sales, how sustainable is this, and how should we think about it trending through the year considering...
Colin M. Langan: That our customers need and to deliver what they need for their customers.
Speaker Change: Got it and then just on light vehicle.
Timothy R. Kraus: Yeah, so, so it's got two drivers. One is a mix.
Timothy R. Kraus: So we're losing more ag sales and gaining others. And so that mix of ag is typically our lowest margin sector within that segment. And the other is that the teams did a great job of flexing costs and taking costs out of the plants and out of the BU to adjust to the lower sales environment.
Timothy R. Kraus: What.
Speaker Change: What's your view on that.
Timothy R. Kraus: The handful of key programs there.
Dana: Dana is on.
Timothy R. Kraus: In terms of the build schedules for this year and how inventory levels at.
Timothy R. Kraus: Dealers are trending for those key programs.
Timothy R. Kraus: It's just your high level color on the light vehicle segment.
Timothy R. Kraus: Hey, Good morning, James This is Jim.
Speaker Change: I don't have a lot to add that you probably don't already know given some of the OEM announcements over the last week or so but from a high level standpoint, remember that most of our programs as I mentioned in my prepared remarks, most of our driveline stuff is going to be more in the out years for basically full frame. Some comes later, but as it relates to our programs what Mary Barra.
Colin M. Langan: Got it. All right. Thanks for taking my questions.
Regina: Your next question comes from the line of Noah Kaye with Oppenheimer. Please go ahead.
Lydia: Hi, this is Lydia from NOAA. Thanks for taking our question. First, could you discuss the moving parts around the traditional core outlook versus prior guidance? It looks like stronger organic sales, but slightly lower incrementals.
Speaker Change: Out with last week in terms of I would argue pretty pretty bullish on how things are going over there we see that coming through as you know we're the supplier of the Altium battery cooling so on and so forth I think volumes taken other programs such as the Fort lightening up pretty consistent with what they've been communicating at Ford, So I'd say right down the middle of the fairway to use.
Lydia: Could you just give us some color on the drivers? Okay. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
Lydia: The golf analogy to what you've seen or heard coming from Williams.
Timothy R. Kraus: Yeah, some of it is that we pulled out the divestiture out of it, and then the rest is really just the driving difference in mix that's coming through that line.
Lydia: Just how about on the ice on the ice side.
Timothy R. Kraus: Vehicle eyesight again real estate I would say stable.
Lydia: Got it. And then, I guess for my follow-up, could you discuss overall demand trends for the EV programs you're on and how you're expecting commercial EV sales to ramp up through the balance of the year? Sure.
Timothy R. Kraus: I wish I had a better one for you, but it's really just stable we've seen I think we've all seen there's different we use obviously the days on a days on hand calculations like many people do and there's been some ebbs and flows on that but from our production outlook as it relates to material leases coming in so on and so forth, we see a pretty stable outlook.
Timothy R. Kraus: Sure. So, you know, obviously, we're continuing to watch this.
Timothy R. Kraus: They're pretty much in line with where we had them, which is why you're not seeing a large change in our outlook. Obviously, there is some softness in EV demand, and we're seeing that across the end markets. But again, we had some of this baked into our plan. So right now, we're on track for the year.
Speaker Change: Thanks, Jeff.
Timothy R. Kraus: Your next question comes from the line of Joseph Spak with UBS. Please go ahead.
Speaker Change: Thanks, Good morning, everyone.
Speaker Change: I just want to make sure.
Timothy R. Kraus: And if I could call on his question I understand the moving pieces versus sort of just how you bucket things I guess prior so before the divestiture was in the guidance, but it wasn't breaking out. So so then if we just look at sales now if we sort of add to add dressers back into <unk> organic.
Regina: Your next question will come from the line of James Picariello with BNP Paribas. Please go ahead.
James Albert Picariello: Hi. Good morning, everybody. I just want to ask about the commercial vehicle segment, what your expectations or what your visibility is for the remainder of the year, specifically around North America truck production, and what the influence of your ramping EV volumes might have on the profitability for that segment.
James Albert Picariello: You get to $2 15 versus 240 prior so organic is lower than the rest of the business. But then the convert you do the same thing on EBITDA. The conversion is actually higher so I guess I just wanted to say in.
James Albert Picariello: The conversion, that's that's performance or or some segment mix related.
Timothy R. Kraus: Sure. So, CV North American volumes, so Class 5 to Class 7, we're seeing $245 to $255 for the year. And on the heavy-duty side, on Class 8, 300 to $310. So, still pretty healthy overall. And then, you know, in terms of EV, we continue to see, you know, sales, obviously, in that segment down a little bit as customers react to sort of the changing landscape and customer demand patterns, but we're adjusting to it and continuing to deliver the products that our customers need and to deliver what they need for their customers.
Timothy R. Kraus: Actors that are driving that.
Tim: Hey, Joe It's Tim.
Timothy R. Kraus: Both so obviously, there's some mix in there that's the easiest one to think about as an AG with AG being further down right, where we're picking it up and then.
Speaker Change: It is between segments as well, but but yes.
Timothy R. Kraus: Theres also performance in there as we continue to to drive the efficiencies and and performance.
Timothy R. Kraus: Across the company.
Timothy R. Kraus: Okay, and the lower the lower organic is what you mentioned earlier about some softening in AG.
Speaker Change: Yeah, that's a big chunk of it.
Timothy R. Kraus: Okay.
Timothy R. Kraus: And.
Speaker Change: Sorry, just to clarify you that youre assuming this is.
James Albert Picariello: Got it. And then just on light vehicles. You know, what's your view on the handful of key programs that Dana is on in terms of the build schedules for this year and how inventory levels at dealers are trending for those key programs? Just your high-level color on the light vehicle segment.
Timothy R. Kraus: Hey.
James Albert Picariello: <unk> quarter closing, so that $55 million top line impact is a back half number effectively.
Speaker Change: Correct, Yeah, it's back half okay. Okay.
James Albert Picariello: Just on power technologies in the quarter.
James Albert Picariello: Revenue and EBITDA both look.
James Albert Picariello: A bit stronger than we thought it looks like in your work with EV driven so is.
James K. Kamsickas: Good morning, James. This is Jim.
James Albert Picariello: And I think as you or maybe you were just alluding to that so I think the one area, where you do have some light vehicle EV exposure. So can you just talk about how you expect that to progress through the year.
James K. Kamsickas: I don't have a lot to add that you probably don't already know, given some of the OEM announcements over the last week or so. But from a high-level standpoint, remember that most of our programs, as I mentioned in my prepared remarks, most of our driveline stuff is going to be more in the later years because, basically, the full-frame stuff comes later. But as it relates to our programs, you know, what Mary Barra came out with last week in terms of, I would argue, being pretty, pretty bullish on how things are going over there.
Speaker Change: Sure So you're talking about on the on the investment side or just on the current production side.
James K. Kamsickas: Well I guess I guess, just the EV business with empower attack both on our revenue.
James K. Kamsickas: <unk> basis.
Speaker Change: Yeah, So we see it continuing to to.
James K. Kamsickas: To be stable to up.
James K. Kamsickas: Ours is.
James K. Kamsickas: Our biggest program is the is the bad three so.
James K. Kamsickas: The encouraging remarks from from GM, They had a good fourth or first quarter around.
James K. Kamsickas: We see that coming through; as you know, we're the supplier of the OTM battery cooling, so on and so forth. I think volumes, taking other programs, such as the Ford Lightning, are pretty consistent with what they've been communicating at Ford. So I would say put right down the middle of the fairway, to use a golf analogy, to what you've seen or heard coming from the OTM.
James K. Kamsickas: E D in battery production. So that's obviously reflected when you look at the power Tech work on EV, we continue to see.
James K. Kamsickas: Our better than last year. So so up on in terms of volume and we think that they'll convert through on the bottom line.
James K. Kamsickas: Just how about on the ice, on the ice side? I would say stable. I wish I had a better word for you, but it's really just stable. We've seen, I think we've all seen, there's different, we use obviously the days on hand calculations like many people do, and there's been some ebbs and flows on that, but from our production outlook as it relates to material releases coming in, so on and so forth, we see a pretty stable outlook.
James K. Kamsickas: And just because you are providing to the pack and obviously they've had some some challenges on that pack.
James K. Kamsickas: Really a lot of automakers has is that a longer.
James K. Kamsickas: Lead time.
James K. Kamsickas: <unk> revenue for you versus like if we're looking at production of heavy vehicles or.
James K. Kamsickas: Or how should.
James K. Kamsickas: We sort of relative to maybe some other products in that in that business.
James K. Kamsickas: Really good question this is Jim.
Regina: Your next question comes from the line of Joseph Spak with UBS; please go ahead.
James K. Kamsickas: Good morning. This is Jim that's a really good question.
Joseph Robert Spak: Thanks. Good morning, everyone.
Joseph Robert Spak: No the lead times aren't any longer I would.
Joseph Robert Spak: I just want to make sure, you know, back to Colin's question, I sense the moving pieces versus sort of just how you bucketed things prior. So prior to the divestiture, it was in the guidance, but it wasn't breaking out. So, so then if we just look at sales now, you know, if we sort of add divestitures back into traditional organic, you get to 215 versus 240 prior. So organic is lower and the rest of the business, but then the. If you do the same thing on EBITDA, the conversion is actually higher. So I guess I just want to understand the conversion, that's performance or some segment mix related factors that are driving that.
Joseph Robert Spak: Call. It is it is very much precision stamping and precision fluid management and fluids fluid engineering SaaS side of it but it doesn't extend the lead times. So very good question, it's not tied to the battery life.
Joseph Robert Spak: <unk> associated with so to further Tim's point, though we did in that construct or are the way. We've designed engineered the product and therefore also established our processes and equipment. They are quite flexible for not just the battery cooling that we.
Joseph Robert Spak: Tend to talk about them all such of this but also our electronics cooling. So just for the full audience to consider there is more to that business youre mentioning electrification. So I'll talk about that but if you think about all of this electrification cooling that's required with IGT teas and other things associated with the burners, so on and so forth. So we're flexing the capital and like Tim said I think we've put into the <unk>.
Timothy R. Kraus: Hey Joe, it's Tim. It's both. So obviously, there's some mix in there. The easiest one to think about is agriculture, right? With agriculture being further down, right? We're picking it up. And then it is between segments as well. But yeah, there's also performance in there as we continue to drive the efficiencies and performance across the company.
Timothy R. Kraus: <unk>, we feel like it's relatively stable from an outlet this year.
Speaker Change: Okay. Thanks for the color.
Joseph Robert Spak: Okay, and the lower, the lower organic is what you mentioned earlier about some softening and adding. Yeah, that's a big chunk of, Okay, and sorry, just to clarify that you're assuming this is a second quarter closing. So that $55 million top line impact is a back half number effect. Correct. Yeah, it's a back half. Okay. Okay.
Speaker Change: Thank you.
Joseph Robert Spak: Our final question will come from the line of Dan Levy with Barclays. Please go ahead.
Joseph Robert Spak: Hi, Trevor young on for Dan today, Thanks for taking the questions.
Joseph Robert Spak: First I guess I wanted to ask just a little bit more clarity on what you mean here and what's going on with the true ups around commodities.
Joseph Robert Spak: Yes.
Joseph Robert Spak: Conceptually, it's a little confusing to me that the lower lower steel prices are leading to a bigger commodities tailwind I get that it would reduce recoveries, but just.
Joseph Robert Spak: Just on power technologies in the quarter, you know, I think revenue and EBITDA both looked a little bit stronger than we thought. It looks like in your walk, it was EV driven. So, you know, and I think as you're maybe we're just alluding to, that's I think the one area where you do have some light vehicle EV exposure. So can you just talk about how you expect that to progress through the year?
Joseph Robert Spak: <unk>.
Joseph Robert Spak: In general is that the contracts that you are in that are holding your steel prices higher than spot rates would imply or is there anything else going on there.
Speaker Change: That I'm missing.
Speaker Change: Yeah. So there's two things you got to remember when you think about how the commodity mechanisms where typically we're only we're only covered for 75%. So on the way up we tend to get hit on the way down we tend to recover some of that and then there's a lag in that so you know as.
Joseph Robert Spak: Sure, so are you talking about on the investment side or just on the current production side?
Joseph Robert Spak: Well, I guess just the EV business within PowerTech, both on a revenue and bid-down basis.
Timothy R. Kraus: Yeah, so we see it continuing to be stable to up. You know, ours is, our biggest program is the BEV-3. So, you know, the encouraging remarks from GM, they had a good fourth or first quarter around EV and battery production. So that's obviously reflected when you look at the power tech walk on EVs. We continue to see better than last year, so up in terms of volume, and we think that'll convert through on the bottom.
Timothy R. Kraus: As we see commodity prices come down we tend to have.
Timothy R. Kraus: You tend to be three to six months difference between when we have to give that back to the customers. So you're seeing a combination of the two which is why we're having higher give backs right now on the top line, but you're not seeing all of that flow through on the bottom line. So it's a combination of just the timing of it and then the fact that we're only giving back 75% of those lower commodity costs.
Joseph Robert Spak: And just because you're providing to the PAC, and obviously they've had some challenges with that PAC, and I guess really a lot of automakers have, is that a longer lead time shipment and revenue for you versus, say, if we're looking at production of EV vehicles? Or how should it, especially sort of relative to maybe some other products in that business.
Speaker Change: Okay Alright.
Speaker Change: That's helpful. Thank you and then as a follow up.
Joseph Robert Spak: Your Capex guide for $450 million in the year assumes a $50 million year over year decline.
Joseph Robert Spak: It looks like you've fully realize this and <unk>.
Joseph Robert Spak: So I guess I'm just curious what why we shouldnt expect the capex spend declines and <unk> that you noted to be related to lower launch costs, why we shouldnt expect that to continue throughout the year or at least to some extent.
James K. Kamsickas: Very good question. This is Jim. That's good. Good morning. This is Jim.
James K. Kamsickas: That's a really good question. No, the lead times aren't any longer. I would call it very much precision stamping and precision fluid management and fluid engineering, that side of it, but it doesn't extend the lead time.
Speaker Change: Yeah, I mean, so it's it's obviously a lot of it has taught us timing both on what we spent last year relative to the to the programs, but but also how the program timing and payment schedule versus this year.
James K. Kamsickas: So, very good question. It's not tied to the battery like we're all associated with. So, to further Tim's point, though, you know, in that construct, the way we've designed engineered the product and, therefore also established our processes and equipment, they're quite flexible for not just the battery cooling that we tend to talk about in all such of this but also our electronics cooling. So, just for the full audience to consider, there's more to that business.
James K. Kamsickas: I wouldn't read too much into the full 50 being already realized because theres a lot of timing elements in there from from quarter to quarter. So.
James K. Kamsickas: Okay. Appreciate it so we're still we're still comfortable with the $4 50 for the full year.
Speaker Change: Got it thanks.
James K. Kamsickas: Yes.
James K. Kamsickas: Okay.
James K. Kamsickas: Craig's point Ami says go ahead and wrap it up so I'll wrap it up very briefly today first of all as I always do thank you very much for your time and attendance.
James K. Kamsickas: You're mentioning electrification, so I'll talk about that. But if you think about all of the electrification cooling that's required with IGBTs and other things associated with inverters, so on and so forth. So, we're flexing the capital, and like Tim said, and I think we've flipped into the numbers, we feel like it's relatively stable from an outlook this year. Okay.
James K. Kamsickas: Time.
James K. Kamsickas: I would say that to use a sports analogy sports analogy. It's a four quarter game. We just got through the first quarter I think the collective team of Dana did an excellent job getting off to a fast start or at least a good start and that doesn't happen by accident. It happens by having really strong business in operating systems that allow your systems to run your business and then you go.
Joseph Robert Spak: Okay, thanks for the color.
Regina: Our final question will come from the line of Dan Levy with Barclays. Please go ahead.
Dan Meir Levy: Execute and you heard.
Dan Meir Levy: As you heard me recently and many other time say, it's all about companywide efficiencies.
Dan Meir Levy: Hi, Trevor Young on for Dan today. Thanks for taking the question. First, I guess I wanted just a little bit more clarity on what you mean here with the and what's going on with the true ups around commodities. I guess just conceptually, it's a little confusing to me that the lower steel prices are leading to a bigger commodity tail, and I get that it would reduce recoveries, but just in general, are it the contracts that you're in that are holding your steel prices higher than spot rates would imply Thanks. Yeah, so there's that.
Dan Meir Levy: Continued.
Dan Meir Levy: Benefits from customers running more stable schedules, having differentiating technology and a focus on your customer and continues to execute on that and that leads to the.
Speaker Change: Ladies and gentlemen that does conclude today's call. Thank you all for joining.
Speaker Change: You may now disconnect.
Timothy R. Kraus: Yeah, so there are two things you've got to remember when you think about how the commodity mechanisms work. Typically, we're only covered for 75%. So on the way up, we tend to get hit. On the way down, we tend to recover some of that. And then there's a lag in that. So as we see commodity prices come down, we tend to be three to six months behind when we have to give that back to the customers.
Timothy R. Kraus: [music].
Timothy R. Kraus: So you're seeing a combination of the two, which is why we're having higher givebacks right now on the top line, but you're not seeing all of that flow through on the bottom line. So it's a combination of just the timing of it and then the fact that we're only giving back 75% of those lower quantity costs.
Dan Meir Levy: Okay, all right, that's helpful. Thank you. And then, as a follow-up, you...
Timothy R. Kraus: Your CapEx guide for $450 million for the year assumes a $50 million year-over-year decline. It looks like you fully realized this in one shot. So I guess I was curious why we shouldn't expect the CapEx spend declines in one metric that you noted to be related to lower launch costs, or why we shouldn't expect that to continue throughout the year, or at least to some extent. I mean, obviously, a lot of it is timing both on what we spent last year relative to the programs, but also how the program timing and payment schedule works this year. I wouldn't read too much into the full 50 being already realized because there are a lot of timing elements in there from quarter to quarter.
Timothy R. Kraus: Okay.
Dan Meir Levy: Okay, I appreciate it. We're still comfortable. We're still comfortable with the 450 for the, Got it, thanks. Okay, Craig's pointing at me, so let's go ahead and wrap it up. So I'll wrap it up.
Dan Meir Levy: [music].
Timothy R. Kraus: Okay. Craig's pointing at me, says go ahead and wrap it up. So I'll wrap it up very briefly today. First of all, as I always do, thank you very much for your time and attendance and the privilege of your time. I would say that, to use a sports analogy, this is a four-quarter game. We just got through the first quarter.
James K. Kamsickas: I think the collective team at Dana did an excellent job getting off to a fast start, or at least a good start. And that doesn't happen by accident. It happens by having really strong business and operating systems that you allow your systems to run your business. And then you go execute, and as you have heard me recently and many other times say, it's all about company-wide efficiencies, continued benefits from customers running more stable schedules, having differentiating technology, and a focus on your customers.
James K. Kamsickas: Yes.
Regina: Ladies and gentlemen, that does conclude today's call. Thank you all for joining. You may now disconnect.
Regina: [music].
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Unnamed: [music].