American Axle & Manufacturing Holdings, Inc.

Good morning. My name is Rocco, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the AAM's fourth quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press the star key, then the number one on your telephone keypad. If you would like to withdraw your question, Please press the star key, then the number two. As a reminder, today's call is being recorded. I would now like to turn the call over to Mr. David Lim, Head of Investor Relations. Please go ahead, Mr. Lim.

Thank you, and good morning. I'd like to welcome everyone who is joining us on AAM's fourth quarter earnings call. Earlier this morning, we released our fourth quarter of 2021 earnings announcement. You can access this announcement on the Investor Relations page of our website, www.aam.com. and through the PR Newswire services. You can also find supplemental sites for this conference call on the investor page of our website as well. To listen to a replay of this call, you can dial 1-877-344-7529, replay access code 732-3464. This replay will be available beginning at 1 p.m. today through February 18th. Before we begin, I'd like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements subject to risks and uncertainties which should not be predicted or quantified, and which may cause future activities and results of operations to differ materially from those discussed. For additional information, we ask that you refer to our filings with the Securities and Exchange Commission. Also, during this call, we may refer to certain non-GAAP financial measures, Information regarding these non-GAAP measures, as well as a reconciliation of these non-GAAP measures to GAAP financial information, is available on our website. With that, let me turn things over to AAM's Chairman and CEO, David Dowk.

Thank you, David, and good morning, everyone. Thank you for joining us today to discuss AAM's financial results for the fourth quarter and full year of 2021. Joining me on the call today are Mike Smati, AAM's President, and Chris May, AM's Vice President and Chief Financial Officer. To begin my comments today, I'll review the highlights of our fourth quarter and full year 2021 financial performance. Next, I'll cover how we are pivoting to electrification while securing our core business. Lastly, I'll discuss our 2022 financial outlook and our three-year new business backlog before turning things over to Chris. After Chris covers the details of our financial results, we will open up the call for any questions that you may have. So let's begin. AM delivered solid operating results and cash flow performance in the fourth quarter and full year 2021, despite market dynamics and continuing challenges with the global supply chain. Fortunately, our team did an outstanding job managing the areas under their control. AM's fourth quarter 2021 sales were $1.24 billion, And for the full year of 2021, AM sales were approximately $5.2 billion. In 2021, we experienced volume recovery from the impact of the 2020 global pandemic, but semiconductor supply shortages impacted AM by over $600 million. From a profitability perspective, AM's adjusted EBITDA in the fourth quarter of 2021 was $164.6 million, or 13.3% of sales. For the full year of 2021, AMT's adjusted EBITDA was $833.3 million, or 16.2% of sales. In 2021, we were negatively impacted by supply chain disruptions, namely semiconductors, and we received very little forewarning to changes in production schedules, which disrupted our operations and cost structure. However, I'm proud to say the AMT managed through these obstacles and delivered strong EBITDA margins and conversion for the full year. AM's adjusted earnings per share in the fourth quarter of 2021 was a loss of $0.09 per share. For the full year of 2021, AM's adjusted EPS was $0.93 per share compared to $0.14 per share in 2020. AM continued to deliver strong free cash flow generation in 2021. AM's adjusted free cash flow in the fourth quarter of 2021 was $43.6 million. And for the full year of 2021, AM's adjusted free cash flow was $423 million. This is a record adjusted free cash flow performance for AM, and I'm extremely proud of my team. Our goal has been to strengthen the balance sheet, and last year we delivered. We reduced our gross debt by approximately $350 million and a turn of leverage. We will continue to work to improve our balance sheet strength going forward. Chris will provide additional information regarding the details of our financial results in just a few minutes. Let me talk about some key highlights for 2021 and the start of 2022, which you can see on slides four and five of our slide deck. We secured an agreement with REE on electric drive units. We were named the sole supplier of front and rear pickup axles for GM's Oshawa truck plant. We won two new PACE awards for our partnership and innovation for our electric driveline technology. We secured neo-differential business for their electric vehicles. We were selected to supply track-right differentials for the new GM Hummer EV program. We were supplying PTUs for the all-new Ford Bronco Sport and Maverick programs. We secured a traditional core axle business to fund our electrification future. We were selected as a GM Overdrive Award winner and received multiple other customer awards for our performance. And we advanced our environmental sustainability and DEI initiatives And just most recently here, in the beginning of the year, AM was recognized as one of America's best large employers and top five in the automotive category. Now let's talk about the first pillar of our two-pronged strategy, which is securing the core, which is fundamental to our transformation to electrification. And earlier today, we announced that AM has secured multiple next-generation full-size truck axle programs with global OEM customers with lifetime sales valued at greater than $10 billion. These replacement business awards are key developments as we leverage the cash flow generation to bring the future faster with our electrification technologies. And on the electrification front, we continue to make significant progress with our 3-in-1 electric drive technology. Recently, we displayed our electric drive technology at CES. The power density and compactness of our proprietary design was very well received. The technology platform can accommodate the electric propulsion needs across all light vehicle segments from small cars to light commercial applications. The flexibility and modularity provide legacy and startup OEMs with many options from components, gearboxes, motors, power electronics, to full systems and E-beam axles. Our design was recently given the Altair Enlighten Award, the automotive industry's only award dedicated to light weighting and sustainability. Again, something we're very proud of. That said, 2022 is an exciting year with multiple electrification launches on top of us, including our high-performance e-drive system for a premium luxury European OEM. This system will be applied across multiple vehicle variants. proof that our technology is not only state-of-the-art but meets the high standards of this iconic manufacturer. We will also be launching multiple electric propulsion components with several global OEMs this year. In addition, we recently announced our investment in Autotech Ventures, which is an early-stage venture capital firm. This firm invests globally in mobility startups, and AM is leveraging the relationship with Autotech to identify new opportunities with companies aimed at electrification and mobility. The pivot to electrification is well underway, and we embrace this change to make the environment more sustainable. Our engineering teams continue to develop game-changing electric mobility solutions, and AM is well-positioned to support our customers with cutting-edge technology and a strong value proposition. And on the ESG front, I'm also very happy to share that AM was named to Newsweek's List of America's Most Responsible Companies. We look forward to building on the positive momentum in 2022 as we advance our environmental sustainability and DEI initiatives. Be on the lookout for our new sustainability report in April of this year. At AM, we believe in a strong ESG foundation and commitment are critical in running the business for long-term success. Before I turn it over to Chris, let me cover AM's three-year new business backlog and our 2022 financial full-year outlook, which we included in our press release earlier this morning. AIM expects our gross new business backlog covering three-year period of 2022 through 2024 to be approximately $700 million. We expect the launch cadence of this backlog to be $175 million in 2022, $325 million in 2023, and $200 million in 2024. And as usual, our backlog factors in the impact of updated customer launch timing and our latest customer volume expectations and does not include the replacement business, only new and incremental business. You can also see the backlog breakdown in slide six, with about 55% of this new business backlog relates to global light trucks, including crossover vehicles, and most importantly, 35% stems from electrification. This is more than double than the 15% last year that we had. Our approach to electrification, from selling components and subsystems to full electric drive units, is gaining traction in our book of business. Currently, AM is quoted on approximately $1.5 billion of revenue, with two-thirds of the quotes coming from electrification-based programs. Now let me turn to our financial outlook, which you can see on slide seven. And AM is targeting sales in the range of $5.6 to $5.9 billion, adjusted EVA of approximately $800 to $875 million, adjusted free cash flow of approximately $300 to $375 million, and that assumes our capital spending in the range of 3.5% to 4% of sales. From a launch standpoint, we have 25 launches here in 2022, which should drive growth over the next several years. And from an end market perspective, we forecast production at approximately 14.8 to 15.2 million units for our primary North American market. This represents about a 14 to 17% increase over last year's performance. Going forward, an improving production environment stemming from strong demand and inventory replenishment will set up AM nicely for the future. In summary, 2021 was an unprecedented year filled with numerous challenges, but AM delivered solid financial results. In 2022 and beyond, we will continue to focus on securing our core business, generating strong free cash flow, strengthening our balance sheet, advancing our electrification portfolio, and positioning AM for profitable growth. I'm very excited about what lies ahead for AM. That concludes my remarks. Let me now turn the call over to our Vice President and Chief Financial Officer, Chris May.