Q2 2024 Dana Inc Earnings Call

By 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 sign in as a guest there will be a question and answer period. After the Speakers' remarks, and we will take questions from the telephone only.

Speaker Change: 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. Barbera.

Craig Barber: Good morning, Thank you for joining us today for Dana.

Speaker Change: 24 earnings call. Today's presentation includes forward looking statements about our expectations for dana's future performance actual results could differ from what we discuss here today for more details about the factors that could affect future results. Please refer to our safe Harbor student found in our public filings and reports.

Timothy Cross: Before we proceed I invite you to visit our Investor website, where you'll find this morning's press release and presentation. As a reminder, 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 on the call. This morning, we have Jim King, whose gifts Dana Chairman and Chief Executive Officer, and Timothy Cross Senior Vice.

Speaker Change: International.

Speaker Change: So to get started I'll turn the call over to Jim.

Jim King: Good morning, and thank you for joining us today.

Speaker Change: Please turn with me to page four where I'll discuss the highlights for the second quarter of 2024.

Jim King: Starting on the left side I am pleased to report that Dana achieved sales of $2 7 billion in the second quarter, which is just about in line with the second quarter of last year.

Speaker Change: Adjusted EBITDA for the quarter was $244 million up over last year, driven by the strength of Dana's core business and end to end execution, but the global Dana team, who did an outstanding job implementing ongoing efficiency improvements across all aspects of the organization there.

Jim King: Their collective efforts have helped to offset the margin impact of inflation and spending on development of <unk> products as well as the slower than expected demand in EV and other markets we serve.

Jim King: Next to free cash flow was a strong $104 million down 30 million from this time last year. The difference only due to the timing of payments between the two periods.

Jim King: Moving to the upper right of the slide under the key highlights consistent with the past several quarters, a companywide efficiency improvements by the Dana team continued to drive incremental profit.

Jim King: As stated on the page Dana achieved an extremely strong 73% conversion rate on traditional organic sales in the first half of the year. This performance is well above our historical conversion and positions the company on a trajectory to achieve our full year targets.

Jim King: Moving to the center right of the slide we saw overall organic sales growth through the first half of the year as demand levels remained relatively stable across most of our end markets. As I mentioned, we are seeing some weakening demand in evs as well as some in our traditional IC product some programs, particularly in our off hire.

Jim King: <unk> end markets.

Jim King: Lastly, with ongoing efficiency improvements in our capital investment improvements Dana's financial outlook remains on track for the rest of the year.

Jim King: We're slightly adjusting our sales range, primarily due to the pullback in EV, we are maintaining our profit estimate while again, raising our forecast free cash flow outlook this quarter to approximately $100 million at the midpoint of the range.

Jim King: This is a 33% increase over our prior guidance.

Jim King: Tim will walk you through this and other financial details and updates later in the presentation.

Tim: Please turn with me to page slide for the outlook on the business environment for this future.

Jim King: Yeah.

Tim: As we stated last quarter Dana's overall business environment continues to improve compared to last year driven by a few key factors, which I will provide greater detail.

Speaker Change: Beginning on the left side of the slide we continue to see improved companywide efficiencies supported by greater stability and customer production.

Speaker Change: Which has resulted in lower production cost improved productivity and greater efficiency across all areas of the enterprise.

Speaker Change: Moving next to the supply chain net commodity are still expected to be a headwind to sales and profit for the remaining of the year. Those steel prices are projected to be mostly flat compared with 2023.

Speaker Change: As input input cost a decline, we see a reversal of commodity recoveries with customers driving our sales and margin headwinds.

Speaker Change: Lastly on the left hand side of the page and market demand is showing some pockets of weakness, but Dana continues to benefit from numerous refreshed conquest and new business that is rolling on this year, which is a contributor to our profitable growth.

Speaker Change: We also continue to benefit from market share gains in our commercial vehicle group that are partially offsetting the softening demand for commercial evs.

Speaker Change: Moving to the right of the page, let's take a look at our end market outlook, where we are seeing agriculture down compared with last year demand for construction and mining equipment should continue trending somewhat flat compared to 2023.

Speaker Change: Though we remain cautious on this market and we'll continue to monitor demand levels.

Speaker Change: We also see light vehicle full frame truck production volumes remaining relatively stable for key recently refreshed vehicle platforms.

Speaker Change: Whenever dealer inventory levels have risen over the quarter.

Speaker Change: After several years of growth, we're seeing in the market for heavy vehicles lower compared with last year, which is expected and there may be a slight softening in production in the back half of the year.

Speaker Change: Moving to the bottom of this line the key takeaway takeaways that we are witnessing across our industry show that cost inflation is somewhat moderating.

Speaker Change: Despite labor cost increasing globally.

Speaker Change: OEM production schedules continue to stabilize which provides a stable operating environment to achieve production efficiency improvements.

Speaker Change: Lastly, the light vehicle market overall is navigating a period of demand fluctuation per current EV programs.

Speaker Change: As we move through the second quarter, we saw demand for commercial ev's temper due to lower investments by fleets and operators as they work to integrate EV trucks into their vehicle portfolios.

Speaker Change: Given the continued investment in EV development by truck manufacturers and ongoing robust quoting activity for future models. We believe this is more of a balanced end market demand.

Speaker Change: We anticipate these nascent technologies, such as fully integrated E axles and hybrid systems will drive future adoption.

Speaker Change: Shifting gears on the next page as I, often do I will share. Some current examples with you of how balanced products and systems approach is enabling Dana to win new traditional hybrid and EV business across all of the markets we serve.

Speaker Change: Slide six is a great visual representation that illustrates dana's ability to deliver class leading solutions to a variety of applications for ICD hybrid and electric vehicle manufacturers across all mobility markets.

Speaker Change: To compartmentalize this better we've added three icons to the top of the page one for ICD.

Speaker Change: One for hybrid and one for E D.

Ways that we are witnessing across our industry show that cost inflation is somewhat moderating despite labor cost increasing globally.

Speaker Change: Beginning on the left of the page we start with in Ice's vehicle, we're excited to share that the all new tap ice's medium duty truck featuring Dana's front and rear axles is launching in Europe in the third quarter of this year. This is conquest business and will be one of our larger commercial vehicle programs in Europe.

Speaker Change: OEM production schedules continue to stabilize which provides a stable operating environment to achieve production efficiency improvements.

Speaker Change: Lastly, the light vehicle market overall is navigating a period of demand fluctuation for current EV programs as.

Speaker Change: Our class leading Spicer axles are specifically designed for medium and heavy duty markets. They provide a lightweight solution that helps to reduce installation and lifecycle cost, while improving pool fuel cost reliability and vehicle maneuverability.

Speaker Change: As we move through the second quarter, we saw demand for commercial Evs temper due to the lower investments by fleets and operators as they work to integrate EV trucks into their vehicle portfolios.

Speaker Change: Moving to the center of the page we are providing you with an example of a new hybrid vehicle application.

Speaker Change: Given the continued investment in EBIT development by truck manufacturers and ongoing robust quoting activity for future models. We believe this is more of a balanced end market demand.

Speaker Change: Dana will be supplying our spicer electric torque hubs and an engine generators for use on high hybrid boom lifts for multiple major off highway Oems.

Speaker Change: We anticipate these nascent technologies, such as fully integrated E axles and hybrid systems will drive future adoption.

Speaker Change: Today Scissor lifts in booms offer true hybrid operation to increase operating flexibility.

Speaker Change: Shifting gears on the next page as I, often do I will share. Some current examples with you our balanced products and systems approach is enabling Dana to win new traditional hybrid and EV business across all of the markets we serve.

Speaker Change: Hybrid models employ a combination of two different power sources are small diesel engine with a generator and a battery drive these units significantly increase rental flexibility and boost machine utilization by offering the same productive operation as a diesel rough terrain unit with the added benefit of offering extended.

Speaker Change: Slide six is a great visual representation that illustrates dana's ability to deliver class leading solutions to a variety of applications for ICD hybrid and electric vehicle manufacturers across all mobility markets.

Speaker Change: Operating intervals indoors and under battery power.

Speaker Change: In addition, they are cleaner inquirer performance creates new opportunities for use in work environments, where noise and emissions must be restricted such as some urban and residential spaces.

Speaker Change: To compartmentalize this better we've added three icons to the top of the page one for ICD.

Speaker Change: One for hybrid and one for EV.

Speaker Change: This focus the focus on cleaner more efficient construction vehicles has become increasingly important for our customer for our customers and our hybrid solutions portfolio is leading the way and accelerating decelerating de carbonization across the off highway industry.

Speaker Change: Beginning on the left of the page we start with in Ice's vehicle, we're excited to share that the all new staff Ice's medium duty truck featuring Dana's front and rear axles is launching in Europe in the third quarter of this year. This is conquest business and will be one of our larger commercial vehicle programs in Europe.

Speaker Change: Completing the third part of our balanced portfolio on the far right of the page we're excited to share our new pure electric vehicle that Dana will be supplying our spicer EES 9000 R E axle for the Bolanger before light duty truck.

Speaker Change: Our class leading Spicer axles are specifically designed for medium and heavy duty markets. They provide a lightweight solution that helps to reduce installation and lifecycle cost, while improving pool fuel cost reliability and vehicle maneuverability.

Speaker Change: The Bolanger before is an all new all electric truck going into production. This year. While this vehicle may look similar to a larger heavy duty vehicle. This lighter duty truck as a gross vehicle weight rating of 15500 pounds, which is comparable to a passenger van or heavy duty pickup.

Speaker Change: Moving to the center of the page we are providing you with an example of a new hybrid vehicle application.

Speaker Change: Dana will be supplying our spicer electric torque hubs and an engine generators for use on hype hybrid boom lifts for multiple major off highway Oems.

Speaker Change: This vehicle will be unique in that it will be designed to be custom configured by fleets to fit their exact duty cycle needs, making the transition to electric as seamless as possible with minimal downtime.

Speaker Change: Day, Scissor lifts in booms offer true hybrid operation to increase operating flexibility.

Speaker Change: Hybrid models employ a combination of two different power sources.

Speaker Change: Our E. S 9000 R. E. Axel is based on our proven Spicer rear drive actual platforms engineered for medium duty truck and bus applications. We've engineered this E propulsion solutions solution with exceptional flexibility. So it can be incorporated into a wide spectrum of vehicles, reducing driveline complexity.

Speaker Change: Diesel engine with a generator and a battery drive these units significantly increase rental flexibility and boost machine utilization by offering the same productive operation as a diesel rough terrain unit with the added benefit of offering extended operating intervals indoors and under battery power.

Speaker Change: <unk>, we were the first to market with an original generation of the <unk> classification in North America more than 40 years ago.

Speaker Change: In addition, they are cleaner inquirer performance creates new opportunities for use in work environments, where noise and emissions must be restricted such as some urban and residential spaces.

Speaker Change: These three examples showcase the breadth of dana's highly efficient propulsion in energy management solutions that are being used across all mobility markets around the world. It.

Speaker Change: This focus on cleaner more efficient construction vehicles has become increasingly important for our customer for our customers and our hybrid solutions portfolio is leading the way and accelerating decelerating de carbonization across the off highway industry.

Speaker Change: It's not a stretch to say that our products can be found in nearly every type of vehicle that moves from light and medium trucks and Suvs to commercial vehicles agricultural machinery, such as tractors construction equipment golf carts and much more our full suite of Ice's hybrid and electric vehicle capabilities enables us to meet the propulsion needs of all of our.

Speaker Change: Completing the third part of our balanced portfolio on the far right of the page we're excited to share our new pure electric vehicle that Dana will be supplying our spicer EES 9000 R E axle for the Bolanger before light duty truck.

Speaker Change: <unk>, regardless of demand fluctuations in any particular market.

Speaker Change: With me to slide seven where I will update you regarding the drivers of our significant profit expansion. So far this year.

Speaker Change: The Bolanger before is an all new all electric truck going into production. This year. While this vehicle may look similar to a larger heavy duty vehicle. This lighter duty truck as a gross vehicle weight rating of 15500 pounds, which is comparable to our passenger van or heavy duty pickup.

Speaker Change: Beginning on the left side of the page Dana's end to end execution is a direct result of the efforts of our talented world class team of associates as one Dana we are successfully driving sustained profit expansion despite flat year over year sales driven by currency impacts lower commodity recoveries.

Speaker Change: This vehicle will be unique in that it will be designed to be custom configured by fleets to fit their exact duty cycle needs, making the transition to electric as seamless as possible with minimal downtime.

Speaker Change: As well as some pullback in demand for EV and other traditional markets we serve.

Speaker Change: Dana's core business priorities encompass sustained financial improvements and commercial effectiveness and growth, which are driven across the company through standardized processes and systems.

Speaker Change: Our E. S 9000 R. E. Axel is based on our proven Spicer rear drive axle platforms engineered for medium duty truck and bus applications.

Speaker Change: Our operating priorities center on operational excellence and execution that is laser focused on cost reduction and disciplined asset management, which is achieved by leveraging cross company synergies through our global centers of excellence to ensure that we run the business as efficiently as possible.

Speaker Change: Engineered this E propulsion solutions solution with exceptional flexibility. So it can be incorporated into a widespread from a vehicles, reducing driveline complexity.

Speaker Change: <unk>, we were the first to market with an original generation of the <unk> classification in North America more than 40 years ago.

Speaker Change: All of this is driving significant profit expansion as illustrated on the right.

Speaker Change: These three examples showcase the breadth of dana's highly efficient propulsion in energy management solutions that are being used across all mobility markets around the world. It's not a stretch to say that our products can be found in nearly every type of vehicle that moves from light and medium trucks and Suvs to commercial vehicles agricultural machinery.

Speaker Change: Side of the page.

Speaker Change: By way of example, as we finished up the first half of this year and you look back over the last few years and compare the first half of 2024 to 2022 and 2023, you can see adjusted EBITDA has increased by $135 million or 41%.

Speaker Change: Such as tractors construction equipment golf carts and much more our full suite of Ice's hybrid and electric vehicle capabilities enables us to meet the propulsion needs of all of our customers regardless of demand fluctuations in any particular market.

Speaker Change: This was only made possible because of the outstanding execution and collaboration of our global team.

Speaker Change: And finally, it is important to note that it goes beyond the outstanding execution, taking place across the company.

Speaker Change: But truly sustainer part is our ability to provide customers spanning all mobility markets with a balanced portfolio that is energy source agnostic.

Speaker Change: Turn with me to slide seven where I will update you regarding the drivers of our significant profit expansion. So far this year.

Speaker Change: What I mean by that is as we presented on the previous slide we can deliver class leading solutions that support internal combustion hybrid and EV manufacturers across all mobility markets. The result is our end to end business execution is successfully driving towards long term profit targets in a strong financial outlook. Thank you for your.

Speaker Change: Beginning on the left side of the page Dana's end to end execution is a direct result of the efforts of our talented world class team of associates.

Speaker Change: As one Dana we are successfully driving sustained profit expansion despite flat year over year sales driven by currency impacts lower commodity recoveries as well as some pullback in demand for EV and other traditional markets we serve.

Speaker Change: Time today, now I would like to turn it over to Tim who will walk you through the financials.

Tim: Thank you Jim and good morning, Please turn with me now to slide nine for a review of our second quarter and year to date results for 2024 beginning.

Speaker Change: Dana's core business priorities encompass sustained financial improvements and commercial effectiveness and growth, which are driven across the company through standardized processes and systems.

Tim: Beginning with the second quarter sales were $202 74 billion higher.

Speaker Change: Our operating priorities center on operational excellence and execution that is laser focused on cost reduction and disciplined asset management, which is achieved by leveraging cross company synergies through our global centers of excellence to ensure that we run the business as efficiently as possible.

Speaker Change: I'm, sorry, just $2 74 billion.

Tim: Slightly below last year's due to currency translation and lower commodity recoveries offsetting higher demand and backlog.

Speaker Change: Year to date sales were 5.4 dollars 7 billion, an increase of $81 million adjust.

Speaker Change: Adjusted EBITDA was $244 million in the second quarter for a profit margin of eight 9% a 10 basis points improvement.

Speaker Change: All of this is driving significant profit expansion as illustrated on the right.

Speaker Change: Right of the page.

Speaker Change: By way of example, as we finished up the first half of this year and you look back over the last few years and compare the first half of 2024 to 2022 and 2023, you can see adjusted EBITDA has increased by $135 million or 41%.

Speaker Change: Year to date, adjusted EBITDA was $467 million that is $20 million higher than the previous year for a profit margin of eight 5% 20 basis points better than last year profit improvement. This year is primarily due to better efficiencies across the company aided by more stable customer order patterns.

Speaker Change: This was only made possible because of the outstanding execution and collaboration of our global team.

Speaker Change: Net income attributable Dana was $16 million for the second quarter about $14 million lower than last year, primarily due to restructuring actions.

Speaker Change: And finally, it is important to note that it goes beyond the outstanding execution, taking place across the company.

Speaker Change: Full year net income was $19 million compared to net income of $58 million last year. The difference is primarily due to the planned divestiture of our noncore hydraulics business from within our off Highway segment that we discussed last quarter. This business is classified as held for sale and a $29 million loss was recognized in the first quarter to adjust.

Speaker Change: But truly sustainer part is our ability to provide customers spanning all mobility markets with a balanced portfolio that is energy source agnostic.

Speaker Change: What I mean by that is as we presented on the previous slide we can deliver class leading solutions that support internal combustion hybrid and EV manufacturers across all mobility markets. The result is our end to end business execution is successfully driving towards long term profit targets in a strong financial outlook. Thank you for your.

Speaker Change: The carrying value of the net assets.

Speaker Change: It's a fair value less estimated selling costs. This transaction also triggered a $7 million tax valuation allowance in Europe.

Speaker Change: Time today now I would like to turn it over Tim who will walk you through the financials.

Speaker Change: And finally operating cash flow was $215 million for the quarter and $113 million for the full year operating cash flow was $27 million higher this year than the year prior and the year to date period for 2023. Please turn with me now to slide 10 for the driver of the sales and profit change.

Tim: Thank you Jim and good morning, Please turn with me now to slide nine for a review of our second quarter and year to date results for 2024 beginning.

Tim: Beginning with the second quarter sales were $202 74 billion higher.

Tim: I'm, sorry, just $2 74 billion.

Tim: Slightly below last year's due to currency translation and lower commodity recoveries offsetting higher demand and backlog.

Speaker Change: For the second quarter of 2024.

Speaker Change: Beginning on the left traditional or organic sales were $19 million higher driven by increased demand for newly refreshed vehicle programs market share gains in commercial vehicle, partly offset by lower demand in off highway end markets adjusted.

Speaker Change: Year to date sales were five $4 7 billion, an increase of $81 million adjust.

Speaker Change: Adjusted EBITDA was $244 million in the second quarter for a profit margin of eight 9% a 10 basis points improvement.

Speaker Change: Adjusted EBITDA on our <unk>.

Speaker Change: <unk> sales.

Speaker Change: Year to date, adjusted EBITDA was $467 million that is $20 million higher than the previous year for a profit margin of eight 5% 20 basis points better than last year profit improvement. This year is primarily due to better efficiencies across the company aided by more stable customer order patterns.

Speaker Change: $40 million. This very strong incremental margin was due to our improved cost efficiencies across the entire company, which generated 150 basis point margin improvement.

Speaker Change: <unk> organic sales growth was $11 million driven primarily by an increase in sales of battery cooling and hybrid vehicle products offset by lower demand in our commercial vehicle and off highway segments.

Speaker Change: Net income attributable Dana was $16 million for the second quarter about $14 million lower than last year, primarily due to restructuring actions.

Speaker Change: Adjusted EBITDA was $19 million lower than 80 basis point margin headwind continued engineering investment for EV programs drove the lower profit offsetting the positive contribution from higher sales.

Speaker Change: Full year net income was $19 million compared to net income of $58 million last year. The difference is primarily due to the planned divestiture of our noncore hydraulics business from within our off Highway segment that we discussed last quarter. This business is classified as held for sale and a $29 million loss was recognized in the first quarter to adjust.

Speaker Change: Foreign currency translation decreased sales by $22 million, primarily driven by the lower value of the euro and the Brazilian real.

Speaker Change: Compared to the U S dollar.

Speaker Change: Profit was lower by $3 million with no margin impact finally, due to falling commodity prices commodity cost recovery in the second quarter was $16 million lower than last year.

Speaker Change: The carrying value of the net assets.

Speaker Change: It's a fair value less estimated selling costs. This transaction also triggered a $7 million tax valuation allowance in Europe.

Speaker Change: 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 a profit being lower by $17 million, a 60 basis point decrement to margin.

Speaker Change: And finally operating cash flow was $215 million for the quarter and $113 million for the full year operating cash flow was $27 million higher this year than the year prior and the year to date period for 2023. Please turn with me now to slide 10 for the driver of the sales and profit change.

Speaker Change: Next I'll turn to slide 11 for the details of our first quarter free cash flow.

Speaker Change: For the second quarter of 2024.

Speaker Change: Free cash flow was $104 million in the second quarter, which was $30 million lower than last year's second quarter.

Speaker Change: Beginning on the left traditional or organic sales were $19 million higher driven by increased demand for newly refreshed vehicle programs market share gains in commercial vehicle, partly offset by lower demand in off highway end markets adjusted.

Speaker Change: Lower net interest due to timing of interest payments, mostly offset higher taxes, driven by payment timing and regional mix.

Speaker Change: Working capital requirements were $38 million higher than last year, primarily due to the timing of various payments.

Speaker Change: Adjusted EBITDA owner.

Speaker Change: Panic sales.

Speaker Change: $40 million. This very strong incremental margin was due to our improved cost efficiencies across the entire company, which generated 150 basis point margin improvement.

Speaker Change: Finally capital spending to support new business backlog was $11 million lower than last year, driven by a more normalized launch cadence this year and the timing of investment for future EV programs.

Speaker Change: <unk> organic sales growth was $11 million driven primarily by an increase in sales of battery cooling and hybrid vehicle products offset by lower demand in our commercial vehicle and off highway segments.

Speaker Change: Please turn with me now to slide 12 for our upgraded guidance for 2024.

Speaker Change: We continue to expect all of our financial guidance measures to be improved compared to last year. However, there are a few updates to our outlook first we are trimming our sales outlook for this year due to lower and lower end of our previous range to about seven or $10 7 billion at the midpoint of the updated range.

Speaker Change: Adjusted EBITDA was $19 million lower than 80 basis point margin headwind continued engineering investment for EV programs drove the lower profit offsetting the positive contribution from higher sales.

Speaker Change: Foreign currency translation decreased sales by $22 million, primarily driven by the lower value of the euro and the Brazilian real.

Speaker Change: Primarily due to slower growth in demand for electric vehicles second we are maintaining our profit guidance of $925 million at the midpoint of the range. This is about $80 million higher than last year. Our implied profit margin has increased by 10 basis points at the midpoint of the eight three to eight.

Speaker Change: Compared to the U S dollar.

Speaker Change: Profit was lower by $3 million with no margin impact finally, due to falling commodity prices commodity cost recovery in the second quarter was $16 million lower than last year.

Speaker Change: 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 a profit being lower by $17 million.

Speaker Change: 8% range. This revised margin is a 60 basis points improvement over last year.

Speaker Change: Third.

Speaker Change: We are again this quarter, increasing our guidance for full year free cash flow by $25 million to a $100 million for the full year were $125 million higher than last year.

Speaker Change: A 60 basis point decrement to margin.

Speaker Change: Next I'll turn to slide 11 for the details of our first quarter free cash flow.

Speaker Change: Free cash flow was $104 million in the second quarter, which was $30 million lower than last year's second quarter.

Speaker Change: Our GAAP earnings per share guidance remains unchanged at <unk> 60 per share and finally, we are reinstating our guidance for diluted adjusted EPS to provide a comparable measure to prior periods, primarily due to the strategic actions. This year, we expect diluted adjusted EPS to be in the range of 82.

Speaker Change: Lower net interest due to timing of interest payments.

Speaker Change: Mostly offset higher taxes, driven by payment timing and regional mix.

Speaker Change: Working capital requirements were $38 million higher than last year, primarily due to the timing of various payments.

Speaker Change: $1 30 or $1 five at the midpoint.

Speaker Change: Finally capital spending to support new business backlog was $11 million lower than last year, driven by a more normalized launch cadence this year and the timing of investment for future EV programs. Please.

Speaker Change: Note that with this measure we are adjusting only one time items and amortization of intangible assets in line with our adjusted EBITDA measure.

Speaker Change: Please turn with me now to slide 13, where I will highlight the drivers of the full year expected sales and profit changes compared to last year.

Speaker Change: Please turn with me now to slide 12 for our upgraded guidance for 2024.

Speaker Change: We continued.

Speaker Change: To expect all of our financial guidance measures to be improved compared to last year.

Speaker Change: Beginning with organic growth for 2024, we now expect about $230 million in additional sales from traditional products through new business moderate market growth and market share gains. This was slightly lower than our previous outlook due to continued weakness in our heavy vehicle markets.

Speaker Change: There are a few updates to our outlook first we are trimming our sales outlook for this year due to lower and lower end of our previous range to about seven or $10 7 billion at the midpoint of the updated range, primarily due to slower growth in demand for electric vehicles.

Speaker Change: Adjusted EBITDA increase on traditional organic sales expected to be approximately $145 million. The higher profit margin increase of about 120 basis points as a continuation of the companywide efficiencies and cost savings actions.

Speaker Change: We are maintaining our profit guidance of $925 million at the midpoint of the range. This is about $80 million higher than last year.

Speaker Change: Our implied profit margin has increased by 10 basis points at the midpoint of the eight 3% to eight 8% range. This revised margin is a 60 basis points improvement over last year.

Speaker Change: As I mentioned, we are lowering our incremental sales expectation for EV products. This year due to the industry wide slowdown in demand.

Speaker Change: Now expect about $65 million in incremental <unk> sales. The EDI business continues to contribute positive profit and we have reduced our engineering and other expenses and are maintaining our expected <unk> adjusted EBITDA to be about $20 million headwind.

Speaker Change: Third.

Speaker Change: We are again this quarter, increasing our guidance for full year free cash flow by $25 million to a $100 million for the full year or $125 million higher than last year.

Speaker Change: Our GAAP earnings per share guidance remains unchanged at <unk> 60 per share and finally, we are reinstating our guidance for diluted adjusted EPS to provide a comparable measure to prior periods, primarily due to the strategic actions. This year, we expect diluted adjusted EPS to be in the range of 82.

Speaker Change: The divestiture is expected to close in the second half of this year and were lower sales by $40 million with no profit impact.

Speaker Change: Foreign currency translation on sales is expected to be slightly more modest headwind of approximately $45 million.

Speaker Change: With a profit impact of $5 million.

Speaker Change: Finally, our commodity outlook is expected to be a headwind to sales of about $65 million due to lower recoveries driven by falling steel and other commodity prices.

Speaker Change: A $1 30 or $1 five at the midpoint.

Speaker Change: Note that with this measure we are adjusting only one time items and amortization of intangible assets in line with our adjusted EBITDA measure.

Speaker Change: We expect a $40 million profit headwind due to the true up of pricing governed by our two way commodity recovery mechanisms with our customers.

Speaker Change: Please turn with me now to slide 13, where I will highlight the drivers of the full year expected sales and profit changes compared to last year.

Speaker Change: Lastly, please turn with me to slide 14 for our outlook on free cash flow for 2024.

Speaker Change: Beginning with organic growth for 2024, we now expect about $230 million and additional sales from traditional products through new business moderate market growth and market share gains. This is slightly lower than our previous outlook due to continued weakness in our heavy vehicle markets.

Speaker Change: We anticipate full year free cash flow to now be about $100 million at the midpoint of the guidance range. This is a $25 million improvement over our prior outlook given driven by lower capital spending we expect about $80 million of higher free cash flow from increased profit.

Speaker Change: Adjusted EBITDA increase on traditional organic sales expected to be approximately $145 million. The higher profit margin increase of about 120 basis points as a continuation of the companywide efficiencies and cost savings actions.

Speaker Change: On higher sales.

Speaker Change: Net interest will be about $35 million higher due to higher interest rates and payment timing due to the refinancing that occurred in 2023.

Speaker Change: Working capital is expected to be a use of about $50 million or <unk> $35 million better than last year and capital spending to support our sales growth in technology is expected to be about $425 million. This year, which is $75 million lower than last year as we flex spending to match customer program timing.

Speaker Change: As I mentioned, we are lowering our incremental sales expectation for EV products. This year due to the industry wide slowdown in demand.

Speaker Change: We now expect about $65 million in incremental <unk> sales. The EDI business continues to contribute positive profit and we have reduced our engineering and other expenses and are maintaining our expected <unk> adjusted EBITDA to be about $20 million headwind.

Speaker Change: Thank you for joining us today I will now turn the call back over to Regina and we will take your questions.

Regina: At this time I would like to remind everyone in order to ask a question press star one on your telephone keypad. Our first question will come from the line of Colin Langan with Wells Fargo. Please go ahead.

Speaker Change: The divestiture is expected to close in the second half of this year and were lower sales by $40 million with no profit impact.

Speaker Change: Foreign currency translation on sales is expected to be slightly more modest headwind of approximately $45 million.

Colin Langan: Oh, great. Thanks for taking my questions.

Speaker Change: When I look at the lower sales guidance too.

Speaker Change: With a profit impact of $5 million.

Speaker Change: $200 million at the midpoint almost all of it at 175 I think is from Evs.

Speaker Change: Finally, our commodity outlook is expected to be a headwind to sales of about $65 million due to lower recoveries driven by falling steel and other commodity prices.

Speaker Change: One what are you seeing on Evs.

Speaker Change: <unk>.

Speaker Change: The recent S&P forecast had some pretty big cuts in the second half of the year just some of your larger customers.

Speaker Change: We expect a $40 million profit headwind due to the true up of pricing governed by our two way commodity recovery mechanisms with our customers.

Speaker Change: Are there any baked into your outlook why kind of expect a little bit of a head from some of those reductions outlined why hasnt that impacted you.

Speaker Change: Lastly, please turn with me to slide 14 for our outlook on free cash flow for 2024.

Speaker Change: Hey, Collin this is Tim yeah, So we had already been expecting.

Speaker Change: We anticipate full year free cash flow to now be about $100 million at the midpoint of the guidance range. This is a $25 million improvement over our prior outlook given driven by lower capital spending we expect about $80 million of higher free cash flow from increased profit.

Tim: Some of that slowdown in the back half of the year and had already had already built that in.

Tim: Two.

Speaker Change: Our original forecast so that's already in there and then there is some mix change in there as well.

Speaker Change: And on the EV side.

Speaker Change: On higher sales.

Speaker Change: I'm getting pushed into next year, I mean any color there.

Speaker Change: Net interest will be about $35 million higher due to higher interest rates and payment timing due to the refinancing that occurred in 2023.

Speaker Change: So.

Speaker Change: Yes, so I think we're seeing.

Speaker Change: Lower volumes.

Speaker Change: Working capital is expected to be a use of about $50 million or <unk> $35 million better than last year and capital spending to support our sales growth in technology is expected to be about $425 million. This year, which is $75 million lower than last year as we flex spending to match customer program timing.

Speaker Change: Across.

Speaker Change: Much of it obviously a lot of it coming out of the CD space.

Speaker Change: A little bit elsewhere, but we do think that.

Speaker Change: That some of that.

Speaker Change: We will start to return, but in the EV space. It's it's not really program specific as much as it is customer specific so as.

Speaker Change: Thank you for joining us today I'll now turn the call back over to Regina and we will take your questions.

Speaker Change: As we see the.

Speaker Change: The customers start to rebalance to demand I think we'll see some of that flatten out.

Regina: At this time I would like to remind everyone in order to ask a question press star one on your telephone keypad. Our first question will come from the line of Colin Langan with Wells Fargo. Please go ahead.

Speaker Change: Got it.

Speaker Change: The sort of imply first half to second half based on the midpoint of your new guidance.

Speaker Change: It implies.

Colin M. Langan: Oh, great. Thanks for taking my questions.

Speaker Change: Higher margins on it looks like lower sales first half second half.

Speaker Change: When I look at the lower sales guidance too.

Speaker Change: $200 million at the midpoint almost all of it at 175 I think is from Evs.

Speaker Change: What kind of gets the margins I, usually have that way so what gets margins higher in the second half even if sales are up.

Speaker Change: One what are you seeing on EPS.

Speaker Change: <unk>.

Speaker Change: The recent S&P forecast had some pretty big cuts in the second half of the year just some of your larger customers.

Speaker Change: Yes. So if you just if you just look at the high were down about 250 million half to half and only losing about about $10 million of that in in EBITDA.

Speaker Change: That already baked into your outlook why kind of expected a little bit of a head from some of those reductions outlined why hasnt that impacted you.

Speaker Change: That would normally convert if you just think about it it's something around 50 that 40 difference 20 of it is is is really around the EV. So youll see that if you look at the.

Speaker Change: Hey, Collin this is Tim yeah, So we had already been expecting.

Tim: Some of that slowdown in the back half of the year and had already had already built that in.

Speaker Change: Two.

Speaker Change: Our original forecast so that's already in there and then there is some mix change in there as well.

Speaker Change: The difference in <unk>. So we are flexing a lot of those costs from first half to second half on the EV. The balances is really additional improvement on on the cost structure and the efficiencies.

Speaker Change: And on the EV side.

Speaker Change: I'm getting pushed into next year.

Speaker Change: Color there alone.

Speaker Change: So.

Speaker Change: Cross the company. So if you think about it.

Speaker Change: Yes, so I think we're seeing.

Speaker Change: Think about our last year's second half, we showed our ability to to really drive efficiencies when we lost those sales.

Speaker Change: Lower volumes.

Speaker Change: Across.

Speaker Change: Much of it obviously a lot of it coming out of the CD space.

Speaker Change: And had something around $50 million in the back half of last year that were really efficiency improvements. So.

Speaker Change: A little bit elsewhere, but we do think that.

Speaker Change: That some of that.

Speaker Change: We feel good about being able to deliver all continue to be able to deliver our commitment on the 925, even despite the lower sales.

Speaker Change: We will start to return, but in the EV space.

Speaker Change: It's not really program specific as much as it is customer specific so as.

Speaker Change: Got it thanks for the color.

Speaker Change: As we see the.

Speaker Change: Yes.

Speaker Change: The customers start to rebalance to demand I think we'll see some of that flatten out.

Speaker Change: Our next question comes from the line of Tom Narayan with RBC. Please go ahead.

Speaker Change: Got it.

Speaker Change: Yes.

Tom Narayan: Hi, yes, thanks for taking the questions.

Speaker Change: The sort of imply first half to second half based on the midpoint of your new guidance.

Speaker Change: One.

Speaker Change: Last week there were.

Speaker Change: It implies.

Speaker Change: Two two Oems with the Atlantis and forward.

Speaker Change: Higher margins on it looks like lower sales first half second half.

Speaker Change: With pretty elevated dealer inventory levels, one of them the lantus actually called out.

Speaker Change: What kind of gets the margins I, usually have that way so what gets margins higher in the second half even if sales are R&R.

Speaker Change: Recently, how theyre going to cut like 100000 units of production.

Speaker Change: I think in each two alone.

Speaker Change: I know you just mentioned that you would already been incorporating a lot of this.

Speaker Change: Yes. So if you just if you just look at the high were down about 250 million half to half and only losing about about $10 million of that in in EBITDA.

Speaker Change: In your.

Speaker Change: In your guidance, but it seems like a moving target just as early as recently as last week I was just curious like.

Speaker Change: That would normally convert if you just think about it it's something around 50 that 40 difference 20 of it is is is really around the EV. So youll see that if you look at the.

Speaker Change: It seems like the.

Speaker Change: OEM customers I know both of them are customers of yours.

Speaker Change: Using production cuts as a way to deal with this inventory situation too to what extent are you.

Speaker Change: The difference in <unk>. So we are flexing a lot of those costs from first half to second half on the EV. The balances is really additional.

Speaker Change: Concerned about this not just in <unk>.

Speaker Change: Four, but perhaps even prospectively into into 2025.

Speaker Change: Improvement on on the cost structure and the efficiencies.

Speaker Change: Yes, so I'm not going to give any color on 25, as it's still quite a ways away. When we look at the back half of the year right. Yes, we had some of this in there as I mentioned before we also have mix, obviously between segments and even between programs and then obviously, we're we're very light truck focused and usually very obviously very.

Speaker Change: Across the company. So if you think about you.

Speaker Change: Think about our last year's second half, we showed our ability to to really drive efficiencies when we lost those sales.

Speaker Change: Had something around $50 million in the back half of last year that were really efficiency improvements. So we.

Speaker Change: Program focused on <unk>.

Speaker Change: So.

Speaker Change: We feel good about being able to deliver all continue to be able to deliver our commitment on the 925, even despite the lower sales.

Speaker Change: We think where we have the.

Speaker Change: The forecast now is.

Speaker Change: Is in line with with what we're hearing from the customers, but obviously as they continue to adjust we'll we'll make those those changes as needed.

Speaker Change: Got it thanks for the color.

Speaker Change: Yep.

Speaker Change: Our next question comes from the line of Tom Narayan with RBC. Please go ahead.

Speaker Change: Okay, and then if I could just squeeze in one.

Speaker Change: Yes.

Tom Narayan: Hi, Thanks for taking the questions.

Speaker Change: In your prepared comments, you mentioned share gains in commercial vehicle offsetting market decline. So just curious as to maybe where this is happening the share gains.

Speaker Change: One.

Speaker Change: Last week there were.

Speaker Change: Two two Oems similar to Atlanta and Florida.

Speaker Change: With pretty elevated dealer inventory levels, one of them the lantus actually called out.

Speaker Change: In particular, thank you.

Speaker Change: Okay.

Speaker Change: Good morning. Thanks for the question. Thanks for attending this Jim just Theres no long winded answer to it is it's across the world. Its global we're just continuing to execute.

Speaker Change: Illicitly, how theyre going to cut like 100000 units of production.

Speaker Change: I think in H two alone.

Speaker Change: I know you just mentioned that you had already been incorporating a lot of this.

Speaker Change: On cost quality deliver you name it and Fortunately.

Speaker Change: In your.

Speaker Change: We stated that our customers are recognizing and supporting us.

Speaker Change: In your guidance, but it seems like a moving target just as early as recently as last week I was just curious like.

Speaker Change: Okay. Thank you.

Speaker Change: Yes.

Speaker Change: Our next question comes from the line of Dan Levy with Barclays. Please go ahead.

Speaker Change: It seems like the.

Speaker Change: OEM customers I know both of them are customers of yours.

Speaker Change: Are using production cuts as a way to deal with this inventory situation to to what extent are you.

Dan Levy: Hi, good morning, Thanks for taking the question.

Dan Levy: I wanted to start with.

Speaker Change: <unk>.

Speaker Change: Concerned about this not just in <unk>.

Speaker Change: Light vehicle I think this is the best margin that you've put up.

Speaker Change: Four, but perhaps even prospectively into into 2025.

Speaker Change: And something like the last three years.

Speaker Change: And obviously, we see a pretty pretty good EBITDA.

Speaker Change: Yes, so I'm not going to give any color on 25, as it's still quite a ways away. When we look at the back half of the year right. Yes, we had some of this in there as I mentioned before we also have mix, obviously between segments and even between programs and then obviously, we're we're very light truck focused and usually very obviously very.

Speaker Change: Sort of modest revenue increase so maybe you can just give us a sense of the underlying dynamics in.

Speaker Change: The LCD <unk>.

Speaker Change: Margins how much of this is just inflation unwind and then.

Speaker Change: Maybe you can give us a flavor for what the trajectory is.

Speaker Change: Pro brand focused on the <unk> side so.

Speaker Change: We think where we have.

Speaker Change: This was once an 11%, 12% EBITDA margin business.

Speaker Change: The forecast now is.

Speaker Change: Recognize maybe it doesn't go back up to that level, given some of the inflation dynamics, but maybe you can give us a sense of sort of where this business is going forward because it still seems like even with these production adjustments.

Speaker Change: Is in line with with what we're hearing from the customers, but obviously as they continue to adjust we'll we'll make those those changes as needed.

Speaker Change: The core volumes on these platforms is still quite robust super duty just added capacity. So maybe you can give us a sense of the trajectory there. Please.

Speaker Change: Okay, and then if I can just squeeze in one.

Speaker Change: Your prepared comments, you mentioned share gains in commercial vehicle offsetting market declines just curious as to maybe where this is happening the share gains.

Speaker Change: Yes, so obviously, we're pleased with the.

Speaker Change: In particular.

Speaker Change: With the where we're at in terms of the trajectory to move the light vehicle margins back to where they really need to be I think.

Speaker Change: Okay.

Speaker Change: Good morning, and thanks for the question. Thanks for attending this Jim.

Speaker Change: There is no long winded answer to it is it's across the world. Its global we're just continuing to execute.

Speaker Change: Obviously, the customer running better helps with efficiency, but also.

Speaker Change: On cost quality delivery you name it.

Speaker Change: The the drive within the organization on an across the board efficiencies, so whether it be direct material cost conversion cost within the plants or really just the general cost structure from a fixed perspective in the business is really getting reflected but that those plants continue to run better and better data.

Speaker Change: Wally.

Wally: So that our customers are recognizing and supporting us.

Wally: Okay. Thank you.

Wally: Yes.

Speaker Change: Our next question comes from the line of Dan Levy with Barclays. Please go ahead.

Dan Meir Levy: Hi, good morning, Thanks for taking the question.

Speaker Change: And day out and we see that continuing.

Dan Meir Levy: Wanted to start with.

Speaker Change: <unk>.

Speaker Change: You mentioned inflation inflation is still with us.

Speaker Change: Light vehicle I think this is the best margin that you've put up.

Speaker Change: Albeit it's slowed down so we.

Speaker Change: Something like the last three years.

Speaker Change: We had less less the half to to offset or or try to go get from that from the customers. So thats certainly a benefit versus what we had over the last few years.

Speaker Change: And obviously, we see a pretty pretty good EBITDA on.

Speaker Change: A modest revenue increase so maybe you can just give us a sense of the underlying dynamics.

Speaker Change: On your last question, yes, we need to get these margins and are working to get these margins.

Speaker Change: In.

Speaker Change: The LCD <unk>.

Speaker Change: Margins how much of this is just inflation unwind and then.

Speaker Change: Back closer to where they are I mean will they be back there.

Speaker Change: Maybe you can give us.

Speaker Change: We'll have to continue to push but certainly our view is this business.

Speaker Change: Flavor for just what the trajectory is this was once an 11% to 12% EBITDA margin business.

Speaker Change: Can be and will be.

Speaker Change: Recognize maybe it doesn't go back up to that level, given some of the inflation dynamics, but maybe you can give us a sense of sort of where this business is going forward because it still seems like even with these production adjustments.

Speaker Change: Double digit profit generator and be able to return have the acceptable returns for the capital we've invested.

Speaker Change: Just on the inflation is there can you contextualize how much may be low hanging fruit is there that can still come out of the system or how much of the sort of production inefficiencies, which dragged the margin in the past how much more improvement you could see on that front.

Speaker Change: The core volumes on these platforms is still quite robust super duty just added capacity. So maybe you can give us a sense of the trajectory there. Please.

Speaker Change: Yes. So obviously, we are pleased with the.

Speaker Change: With the where we're at in terms of the trajectory to move the light vehicle margins back to where they really need to be I think.

Speaker Change: Yes, no I think there is.

Speaker Change: I want to get into specifics of how we run the plants, but but certainly we think there is there is additional amounts in both of those to be able to go get in.

Speaker Change: Obviously, the customer running better helps with efficiency, but also.

Speaker Change: Look we.

Speaker Change: The idea.

Speaker Change: The the drive within the organization on across the board efficiencies, so whether it be direct material cost conversion cost within the plants or really just the general cost structure from a fixed perspective, and the business is really getting reflected but that those plants continue to run better and better data.

Speaker Change: Taking cost out of the plants, that's part of the DNA.

Speaker Change: We're really just flexing that that muscle that we have now that we've got better better production scheduling and thats, what youre seeing flow through.

Speaker Change: Great. Thank you.

Speaker Change: As a follow up Jim I'm wondering if you could just give us an update on the EV strategy and I know this is a question that's come up on past calls but.

Speaker Change: Day out and we see that continuing.

Speaker Change: You mentioned inflation inflation is still with us.

Speaker Change: This is such a fluid environment and we're seeing automakers continuing to change plan modified launch scheduled obviously on the light vehicle side, but even on the commercial side as well. It seems like there are some shifts there. So maybe you can just give us a sense of how if at all.

Speaker Change: Albeit it's slowed down so we.

Speaker Change: We have less less the half to to offset or or try to go get from that from the customers. So thats certainly a benefit versus what we had over the last few years.

Speaker Change: On your last question, yes, we need to get these margins and are working to get these margins.

Speaker Change: The strategy on EV is.

Speaker Change: Back closer to where they are I mean will they be back there.

Speaker Change: <unk> modified or is it still continuing to stay the path continuing to maintain the investment.

Speaker Change: We'll have to continue to push but certainly our view is this business.

Speaker Change: Dan Thanks for the question, that's a lot to unpack, but I'll do my best.

Speaker Change: Can be and will be.

Speaker Change: Double digit profit generator and be able to return have them offset the more returns for the capital we've invested.

Speaker Change: We're all challenged with it right in terms of figuring that out not the strategy. So much about what's going on but I guess to get some momentum around the answer would be.

Speaker Change: Just on the inflation is there can you contextualize how much may be low hanging fruit is there that can still come out of the system or how much of the sort of production inefficiencies, which drag to margins in the past how much more improvement you can see on that front.

Speaker Change: Everyone is I would say pushing out and reducing down.

Speaker Change: In some form or fashion on EV for all the reasons, we know infrastructure to whatever it might be.

Speaker Change: As it relates to as it relates to us the best thing I can do for you is to paint a visual we've created a very unique strategy at Dana.

Speaker Change: Yes, no I think there's I don't want to get into specifics of how we run the plants, but but certainly we think there is there is additional amounts in both of those to be able to go get in.

Speaker Change: From the very beginning we've been very rigid with it and that is you take the example of the Bolinger win that we announced today and you look at the components here and there you have originally been.

Speaker Change: Look we.

Speaker Change: The idea of taking cost out of the plants, that's part of the DNA.

Speaker Change: Actual you have a motor you have in <unk> software.

Speaker Change: Within that you get the thermal management that supports it from our power technologies business.

Speaker Change: And we're really just flexing that that muscle that we have now that we've got better better production scheduling and thats, what youre seeing flow through.

Speaker Change: So on and so forth that all of that at a minimum on a human capital level fungible.

Speaker Change: Great. Thank you.

Speaker Change: At a maximum and many times the capital assets themselves and the plants is fungible across business units et cetera, et cetera, and so for us our strategy doesn't need to change because that product those products I should say can go up and down the river falls into off highway commercial vehicle light vehicle at different.

Speaker Change: As a follow up Jim I'm wondering if you could just give us an update on the EV strategy and I know this is a question thats come up on past calls but.

Speaker Change: This is such a fluid environment and we're seeing automakers continuing to change plan modified launch scheduled obviously on the light vehicle side, but even on the commercial side as well. It seems like there are some shifts there. So maybe you can just give us a sense of how if at all.

Speaker Change: Diameters at different pork at different things so that.

Speaker Change: We don't have to change our strategy, because one market or whatever the case may be may have more delay more pullback whatever it might be so we're position if it was different if this pullback and change what happened four years ago three years ago, I mean, you'd have to think about an abrupt change, but there is I can't see a world personally speak.

Speaker Change: Strategy on EV.

Speaker Change: Being modified or is it still continuing to stay the path continuing to maintain the investment.

Speaker Change: Dan Thanks for the question, that's a lot to unpack, but I'll do my best.

Speaker Change: <unk> I can't see a world that customers that start with light vehicle to take an example that there are people are going to consumers are going to go into dealerships and not expect to have the optionality around buying an EV or hybrid or internal combustion engine for anytime in the near future. The same thing goes for commercial vehicle. If you think about the most important.

Speaker Change: I think we're all challenged with it right in terms of figuring that out not the strategy. So much about what's going on.

Speaker Change: Just to get some momentum around the answer would be.

Speaker Change: Everyone is I would say pushing out and reducing down some.

Speaker Change: In some form or fashion on EV for all the reasons, we know infrastructure to whatever it might be.

Speaker Change: Probably the most important end market relative to total cost of ownership.

Speaker Change: As it relates to as it relates to us the best thing I could do for you is to paint a visual we've created a very unique strategy at Dana.

Speaker Change: If youre, an OEM I'm not here to speak on behalf of them. They speak to me I'm, a I'm kind of relaying. It you don't give people the optionality and a total cost of ownership depending on the vehicle choice.

Speaker Change: From the very beginning we have been very Richard with it and that is you take the example of the Bolanger win that we announced today and you look at the components here and there you have originally beam axle you have motor you have an inverter you have the software.

Speaker Change: Things, good things happen or bad things happen to good people. So you're always going to have those type of scenarios. We're just using our capital both human and equipment capital to support all of our customers will get a good return on capital is blind it doesn't matter if the TV capital S ICD capital or hybrid.

Speaker Change: Controls within the thermal management that supports it from our power technologies business.

Speaker Change: And so forth that all of that at a minimum on a human capital levels fungible.

Speaker Change: You deploy the capital you make a return on investment the company grow as you continue to continue to expand margin I hope thats not too much of an answer but that's how we're thinking about it.

Speaker Change: At a maximum many times the capital assets themselves and the plants is fungible across business units et cetera, et cetera, and so for us our strategy doesn't need to change because that product those products I should say can go up and down the river falls into off highway and commercial vehicle light vehicle at different die.

Speaker Change: Great. Thank you.

Speaker Change: Our next question comes from the line of Joe Spak with UBS. Please go ahead.

Joe Spak: Thanks, Good morning, everyone.

Joe Spak: I wanted to sort of get back to the guidance and maybe thinking about it.

Speaker Change: Amateurs at different torque at different things so that.

Speaker Change: A little bit differently.

Joe Spak: So if we look at the sales level on traditional organic I mean, you did bring that down a little bit for the year and I know you sort of spoke to some tougher end markets but.

Speaker Change: We don't have to change our strategy, because one market or whatever the case may be may have more delay more pullback whatever it might be so we're position if it was different if this pullback in change would've happened four years ago three years ago, I mean, you'd have to think about.

Speaker Change: If you look at still assumes like over $135 million positive in the second half, which is like 60% of that total gain youre looking for.

Speaker Change: <unk> changed but there is I can't see a world personally speaking I can't see a world that customers that start with light vehicle to take an example that there are people are going to consumers are going to go into dealerships and not expect to have the optionality around buying an EV or hybrid or internal combustion engine for anytime in the near future the same thing.

Speaker Change: And we know some of those end markets are tougher and some of the key platforms look to be maybe down half over half. So can you just help us understand what's really driving that and maybe even some indication by by segment if possible.

Speaker Change: Yes.

Speaker Change: Those for commercial vehicle, if you think about the most important probably the most important end market relative to total cost of ownership if youre, an OEM I'm not here to speak on behalf of them. They speak to me I'm, a I'm kind of relaying. It you don't give people the optionality and a total cost of ownership depending on the vehicle choice.

Speaker Change: I think the don't forget our second half last year, especially in light vehicle was was significantly impacted by the UAW strike. So we're going to get that volume back.

Speaker Change: We can.

Speaker Change: Talk about sort of where the customers are on on our production plans, but we.

Speaker Change: Things, good things happen or bad things happen to good people. So you're always going to have those type of scenarios. We're just using our capital both human and equipment capital to support all of our customers will get a good return on capital is blind it doesn't matter if the TV capital S. ICD capital or hybrid you just you deploy the capital you can make a return on investment the company grow.

Speaker Change: Our largest programs were all impacted significantly by that strike and that's back. We also had some launches last year that.

Speaker Change: In the back half that that should be a better run rate. So those are obviously all helping we also have parts of the business that that are.

Speaker Change: As you continue to continue to expand margin I hope thats not too much of an answer but that's how we're thinking about it.

Speaker Change: That are outside of North America that from a mix perspective that continue to support the sales growth.

Speaker Change: Great. Thank you.

Speaker Change: Then of course, we've got some.

Speaker Change: Our next question comes from the line of Joe Spak with UBS. Please go ahead.

Speaker Change: Some headwinds.

Speaker Change: Starting to peek through on on on the off highway side, but.

Joseph Robert Spak: Thanks, Good morning, everyone.

Speaker Change: Thats generally why we.

Joseph Robert Spak: I wanted to sort of get back to the guidance and maybe think about it.

Speaker Change: We still are able to see that that growth from an from an ice perspective.

Speaker Change: A little bit differently.

Speaker Change: In the back half of the year.

Joseph Robert Spak: So if we look at the sales level on traditional organic I mean, you did bring that down a little bit for the year and I know you sort of spoke to some tougher end markets but.

Speaker Change: Okay, and then I guess similarly, just on the on the.

Speaker Change: The margin side or the cost side, I guess right like the 73% conversion on traditional.

Speaker Change: If you look at still assumes like over $135 million of positive in the second half, which is like 60% of that total gain youre looking for.

Speaker Change: Our growth in the first half.

Speaker Change: I mean, the guidance does imply that steps down to something in the mid <unk> in the back half, but obviously still still really strong.

Speaker Change: And we know some of those end markets are tougher and some of the key platforms look to be maybe down half over half. So can you just help us understand what's really driving that and maybe even some indication by segment if possible.

Speaker Change: But I'm just wondering I know you talked about sort of.

Speaker Change: Prudent investment capital efficiency, but.

Speaker Change: Is there more that can be done do you think within your organization as we think beyond the back half like how should we.

Speaker Change: Yeah.

Speaker Change: I think the don't forget our second half last year, especially in light vehicle was was significantly impacted by the UAW strike. So we're going to get that volume back.

Speaker Change: Like do we return to sort of more normal contribution margins I guess beyond some of the.

Speaker Change: The comps that are impacting the.

Speaker Change: The figures this year.

Speaker Change: We can.

Speaker Change: Hey, Joe Good morning. This is Jim just let me kind of dive into that one bank to try to get their appropriate question can more be done absolutely more can be done.

Speaker Change: Talk about sort of where the customers are on on our production plans, but we.

Speaker Change: Our largest programs were all impacted significantly by that strike and Thats back. We also had some launches last year that.

Speaker Change: Manufacturing of your work your Salt is all about sustaining an improved sustained improved build processes and systems that give you a platform to build off of.

Speaker Change: In the back half that that should be a better run rate. So those are obviously all helping we also have parts of the business that that are.

Speaker Change: It's what we've been doing here, we've taken a kind of a long view to build a just an incredible company. So first of all on AR.

Speaker Change: Whats your kind of what you within your controls we fully expect to continue to improve on all of the drivers that we referred to as <unk>.

Speaker Change: That are outside of North America that from a mix perspective that continue to support the sales growth.

Speaker Change: Cross company efficiencies. In addition to remind you and the overall profitability of the business to.

Speaker Change: Then of course, we've got some.

Speaker Change: Some headwinds.

Speaker Change: Starting to peek through on on on the off highway side, but.

Speaker Change: The business you know it as well as I do relative to fixed contracts and Scott every especially light vehicle, but all all suppliers got hit with fixed contracts that you have to deal with et cetera et cetera. As those continue to build out we are still in many many cases supplier of choice and we're going to continue to.

Speaker Change: Thats generally why we.

Speaker Change: We still are able to see that that growth from them from a nice perspective.

Speaker Change: In the back half of the year.

Speaker Change: Okay.

Speaker Change: And then I guess similarly, just on the on the.

Speaker Change: The margin side or the cost side, I guess right like the 73% conversion on traditional.

Speaker Change: Reap the benefit of getting new role on program. So in terms of the trajectory. That's the way you think that's the way I think about it as just sustain and improve both on new growth profitable growth utilizing existing capital you have we don't have to go build out a platform electrification.

Speaker Change: Our growth in the first half.

Speaker Change: I mean, the guidance does imply that steps down to something in the mid fifties in the back half, but obviously still still really strong.

Speaker Change: So, but I'm, just wondering and I know you talked about sort of.

Speaker Change: Like we would have had to over the years not to say there is not some but it's more of an ambient capital level like the companies ran for decades, and we just continue to gain margin off of that moving forward and more importantly cash flow.

Speaker Change: Prudent investment capital efficiency, but.

Speaker Change: Is there more that can be done do you think within the organization as we think beyond the back half how should we.

Speaker Change: Okay.

Speaker Change: One quick one just can you confirm that you'd be able to support super duty production in Ontario.

Speaker Change: Like do we return to sort of more normal contribution margins I guess beyond some of the.

Speaker Change: The comps that are impacting the.

Speaker Change: We will always support production for our customers for sure and so the answer is yes, okay. Thank you.

Speaker Change: The figures this year.

Speaker Change: Hey, Joe Good morning. This is Jim just let me kind of dive into that one bank to try to get their question can more be done more can be done.

Speaker Change: Yes.

Speaker Change #105: Our next question comes from the line of James Picariello with BNP Paribas. Please go ahead.

Speaker Change: Manufacturing with your work yourself is all about sustained and improved sustained improved build processes and systems that give you a platform to build off of.

Speaker Change: Hey, guys. This is Jake on for James first.

Jake: I was hoping you can give some update on the hydro Quebec or put.

Speaker Change #106: Just some color on the timing and impact.

Speaker Change: What we've been doing here, we've taken a kind of a long view to build a just an incredible company. So first of all on AR.

Speaker Change #100: But the cash payment to hydro, Quebec could be thank you.

Speaker Change: Whats your kind of what you were within your controls we fully expect to continue to improve on all of the drivers that we referred to as <unk>.

Jake: Sure.

Tim: This is Tim.

Tim: Sure I mean, obviously, we're in we're in the process today.

Speaker Change: Cross company efficiencies. In addition to remind you on the overall profitability of the business to this the business you know it as well as I do relative to fixed contracts and Scott every especially light vehicle, but all all suppliers got hit with fixed contracts that you have to deal with et cetera et cetera, as those continue to build out we are still and many more.

Tim: The contract the shareholders' agreement has a specific process that.

Tim: Debt.

Tim: We're working through.

Tim: In terms of timing I think certainly it will continue to take some time.

Jake: We will update as.

Jake: As we as we know more but certainly it's going to be late late this year.

Speaker Change: The cases supplier of choice and we're going to continue.

Speaker Change: The benefit of getting new rollout program. So in terms of the trajectory. That's the way you think that's the way I think about it it's just sustain and improve both on new growth profitable growth utilize the existing capital you have we don't have to go build out a platform electrification capital like we would have had to over the years not to say there is not some but it's more of an ambient.

Jake: Or early next.

Jake: In terms of of our view I, we had the disclosure out there.

Speaker Change: For some time in terms of what we believe that our view of the value of the put is and Thats currently in there it's somewhere in the neighborhood of.

Speaker Change: Capital level like the companies ran for decades, and we just continue to gain margin off of that moving forward and more importantly cash flow.

Speaker Change:

Speaker Change: 200, which is what we currently have it on the books for and we Havent, we havent changed that view since we started down this project.

Speaker Change: Okay.

Speaker Change: Process. Although we are we are early in the process with.

Speaker Change #100: A quick one just can you confirm that you'd be able to support super duty production in Ontario.

Speaker Change: With hydro Quebec.

Speaker Change: Great. Thanks, Tim.

Speaker Change #102: Then could you guys just give us.

Speaker Change: We will always support production for our customers for sure and so the answer is yes, okay. Thank you.

Speaker Change #107: Outlook on the off highway market AG.

Speaker Change: AG, especially appears to be material to turn it over to the negative so what's your assumption there. Thank you.

Speaker Change: Our next question comes from the line of James Picariello with BNP Paribas. Please go ahead.

Speaker Change: Yes, so youre correct, we still see AG.

Speaker Change: Hey, guys. This is Jake on for James.

Speaker Change: AG being down obviously farm incomes down you can see you have heard the news coming out of out of John Deere, which is one of our larger.

Speaker Change: <unk>.

Jake: I was hoping you can give some update on the hydro, Quebec <unk>, just some color on the timing of impact and.

Speaker Change: What the cash payment to hydro, Quebec could be thank you.

Speaker Change: Customers, especially in AG.

Speaker Change: So yes, we continue to monitor that obviously.

Speaker Change: Sure.

Speaker Change: Tim.

Speaker Change: We have we don't play in every AG market. So.

Speaker Change: Sure I mean, obviously, we're in we're in the process today.

Speaker Change: They are all reacting a bit differently, but but our current view, which is a down AG market is built into the to the rest of the year forecast.

Speaker Change: <unk>.

Speaker Change: No.

Speaker Change #102: Contract the shareholders' agreement has a specific process to that.

Speaker Change: We're working through.

Speaker Change: In terms of timing I think certainly it will continue to take some time.

Speaker Change: Thank you.

Speaker Change: We will update as.

Speaker Change: Okay.

Speaker Change: As we as we know more but certainly.

Speaker Change: Just some concluding comments. This is Jim again first of all as I always like to do thank you very much for your time and attendance today and privilege of your time.

Speaker Change: Going to be late late this year.

Speaker Change: Or early next.

Speaker Change: In terms of of our view I, we had the disclosure out there.

Speaker Change #104: Not a lot that we would at the questions kind of surrounded it well today, but I would just say personalizing. It a little bit. This is my 30 over 35 years in the business almost 18 as the CEO one thing that has never changed.

Speaker Change: For some time in terms of what we believe that our view of the value of the put is in that's currently in there it's somewhere in the neighborhood.

Speaker Change: As is theirs to when there are no shortcuts shortcuts for mobility suppliers, you have to execute on cost quality delivery technology, and innovation operational excellence and customer satisfaction never changes right. No. One would have imagined the destruction that would've occurred that occurred coming out of the COVID-19 years and hyperinflation and it's just it's just the clock you can't speed up in <unk>.

Speaker Change:

Speaker Change: Of 200, which is what we currently have it on the books for and we Havent, we havent changed that view since we started down this project.

Speaker Change: Process. Although we are we are early in the process with.

Speaker Change: With hydro Quebec.

Speaker Change: Great. Thanks, Tim.

Speaker Change: And then could you guys just give us an outlook on the off highway market.

Speaker Change #103: We are getting the company back to where it was as you can see obviously through a 73% conversion on incremental sales or the methodical incremental sales on various platforms across end markets across across propulsion systems company is running at extremely high level and continuing to prove every day.

Speaker Change: Especially appears to be material to turn it over to the negative so what's your assumption there. Thank you.

Speaker Change: Yes.

Speaker Change: Correct.

Speaker Change: We still see AG AG.

Speaker Change #101: AG being down obviously farm incomes down you can see you have heard the news coming out of out of John Deere, which is one of our larger.

Speaker Change: In the long haul the markets will definitely support the small caps the money's going to come back our direction, because we're just going to continue to perform not just us but the rest of the supply base. Thanks again for your time and attention calculator.

Speaker Change: Customers, especially in AG. So.

Speaker Change: So yes, we continue to monitor that obviously we.

Speaker Change #101: Thank you all for joining today's call you may now disconnect.

Speaker Change: We have.

Speaker Change: Playing every AG market so.

Speaker Change: They are all reacting a bit differently, but but our current view, which is a down AG market is built into the to the rest of the year forecast.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Just some concluding comments. This is Jim again first of all as I always like to do thank you very much for your time and attendance today and privilege of your time.

Speaker Change: Not a lot that we would at the questions kind of surrounded it well today, but I would just say on personalizing. It a little bit. This is my 30 over 35 years in the business almost 18 as the CEO one thing that has never changed.

Speaker Change: That is is there as to when there are no shortcuts shortcuts for mobility suppliers, you have to execute on cost quality delivery technology, and innovation operational excellence and customer satisfaction never changes right. No. One would have imagined the destruction that would've occurred that occurred coming out of the COVID-19 years and hyperinflation and it's just it's just the clock you can't speed up in <unk>.

Speaker Change: As of getting the company back to where it was as you can see obviously through a 73% conversion on incremental sales or the methodical incremental sales on.

Speaker Change: <unk> platforms across end markets across across propulsion systems company is running at extremely high level and continuing to prove every day.

Speaker Change: In the long haul the markets will definitely support the small caps the money's going to come back our direction, because we're just going to continue to form not just us, but the rest of the supply base. Thanks again for your time and attention calculator.

Speaker Change: Thank you all for joining today's call you may now disconnect.

Speaker Change: Okay.

Speaker Change: Yeah.