American Axle & Manufacturing Holdings, Inc.

Good morning, everyone. My name is Jamie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the American Axle and Manufacturing First Quarter 2022 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 keypads. If you would like to withdraw your question, you may press the star key and then number two. As a reminder, today's conference call is being recorded. And at this time, I'd like to turn the floor 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 AEM's first quarter earnings call. Earlier this morning, we released our first quarter of 2022 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 slides 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 7397562. This replay will be available through May 13th. 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 cannot 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 first quarter of 2022. Joining me on the call today are Mike Cimani, AAM's President, and Chris May, AM's Vice President and Chief Financial Officer. I will review the highlights of our first quarter financial performance. Next, I will touch on some exciting news in the quarter, including our recent acquisition of Techfor, an important win with Geely, AM's PACE and PACE Pilot Award nominations for electrification technology, and the publication of our sustainability report. Lastly, I'll discuss our updated 2022 financial outlook 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's first quarter 2022 financial results were affected by rising input costs and the continuing global supply chain volatility. The unprecedented operating environment that started in 2020 continues into this year. That said, we remain focused on the qualities that differentiate AM, which are operating excellence, product quality, ensuring the continuity of supply to our customers, and generating profits and free cash flow. AM's first quarter sales were $1.4 billion. Sales were impacted by volatile production, but schedules did improve somewhat on a quarter-over-quarter basis. We believe the OEMs will continue to prioritize their light truck schedules which is good for AM. However, supply chain stabilization, namely semiconductors, may not occur until 2023. Inventory levels on key programs that we support remain low, and consumer demand for these products appears resilient. Simply, OEMs cannot build their respective large SUVs and trucks fast enough. AM suggested EBITDA in the first quarter of 2022 was $196 million, or 13.7% of sales. In the quarter, we were negatively impacted by rising input costs, supply chain constraints, and continued semiconductor disruptions. Material and utility inflation accounted for nearly 200 basis points of margin degradation in the quarter. These input cost headwinds will continue to be a challenge in this year. The operating teams are looking into cost structure improvements and value engineering initiatives. Additionally, we are also having ongoing discussion with our OEM customers on offsetting this inflation. So far, we have made some progress, and discussions have been constructive but are still ongoing. AM's earnings per share in the first quarter of 2022 was one penny per share. AM's adjusted EPS was 19 cents per share. Even with these challenges, AM continued to deliver positive free cash flow generation in the quarter. This is a compelling view of the strength of our operating model. AAM's first quarter of 2022 adjusted free cash flow was $54 million. Our capital allocation strategy is very straightforward. We continue to advance key strategic growth initiatives and strengthen the balance sheet. And we achieved both in the first quarter of 2022. Chris will provide additional information regarding the details of our financial results in a few minutes. Now let's talk about some recent key highlights, which you can see on slide four of our slide deck. We announced that AM entered into a definitive agreement to acquire the Tech4 Group for an enterprise value of 125 million euros. We are very excited about this acquisition, as it provides strong synergy potential, diversifies both our geographic and customer mix, and enhances our portfolio in electrification components. This is a nice, bolt-on acquisition for us, and we expect the deal to close in the second quarter. Additionally, we want a major program with Geely to supply independent front and rear drive axles for our premium vehicle. Our products will support both internal combustion as well as plug-in hybrid versions of this program. This win continues the theme of securing business for our traditional products while we pivot to electrification. From an electrification standpoint, Our P3 two-speed electric drive technology with two-speed architecture and a drive axle has been nominated as a finalist for the 2022 PACE Award. This electric drive is on multiple variants for a premium European luxury automaker that is based in Germany. We're happy to say we have started production on this drive unit, and we are receiving interest on this specific technology from other automakers at this time. And it's also been nominated as a PACE Pilot Award finalist for our next generation 3-in-1 wheel-end electric drive unit. This assembly fully integrates the motor, gearbox, and inverter into an elegant, compact, and power-dense design. This technology platform can be used in wheel-ends, EDUs, E-beam axles, and other applications across multiple vehicle segments. Our electric drive technology leadership and innovation are well represented with our PACE Award nominations as well as our past wins in these areas. This is also evident with our very constructive electrification dialogues with multiple global OEMs as manufacturers are focused on this very important transformation. Our state-of-the-art technology provides a formidable value proposition as OEMs have to balance various capital needs. It's our goal to be a key supplier and partner when it comes to electric drive units, sub-assemblies, and components. These are very exciting times for AM as the electrification opportunities continue to grow and now represent over 70% of AM's quoting activity. Finally, we're very happy to have earned the 2021 GM Overdrive Award. This is a great distinction as it is reserved for suppliers who display an outstanding achievement across GM's global purchasing and supply chain organization's key priorities. AEM was recognized for our performance in the launch excellence category. From an ESG perspective, we are also very pleased to announce that we recently published our 2021 sustainability report. Within this extensive report, we outline new goals and objectives for AEM. Our goals are to be net zero carbon emission by 2040, to purchase 100% renewable energy in the U.S. by 2025, and to achieve zero waste to landfill status for all facilities by 2035. These are ambitious goals, but AM desires to create a better tomorrow. Further, we also set our 2030 DEI demographic goals to increase the representation of women and minority team members at AM. We believe diversity drives creativity, which leads to long-term value creation. We are deeply committed to properly growing our business in a way that is both sustainable and socially responsible. Now let's talk about our guidance on slide seven of our slide deck. Given the challenges in the supply chain, the geopolitical uncertainty, and production schedule volatility, we have updated our 2022 financial outlook. AMA is now targeting sales of $5.6 to $5.8 billion, adjusted EBITDA of approximately $785 to $830 million, and adjusted free cash flow of approximately $300 to $350 million. From an end-market perspective, we now anticipate North American production at approximately 14.3 to 14.7 million units versus our prior outlook of 14.8 to 15.2 million units. Even during these uncertain times, operation in our business is running well in the areas that we can control, and we believe we are well positioned nicely as the production environment improves driven by strong demand and inventory replenishment. That said, our aim is on the future, and we will continue to focus on generating strong free cash flow for the business, strengthening our balance sheet, securing our traditional business, advancing our electrification product portfolio, and positioning AM to properly grow, especially in the area of electrification and mobility. That concludes my remarks. Let me now turn the call over to our Vice President and Chief Financial Officer, Chris May. Chris?