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 Third Quarter 2023 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 and then the number one on your telephone keypads. If you would like to withdraw your questions, you may press star and two. As a reminder, today's conference call is being recorded. At this time, I'd like to turn the floor over to Mr. David Lim, Head of Investor Relations. Please go ahead, Mr. Lim.

Great. Thank you, and good morning from Detroit. I'd like to welcome everyone who is joining us on AEM's third quarter earnings call. Earlier this morning, we released our third quarter of 2023 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 562-7000. This replay will be available through November 10th. Before we begin, I would 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, 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 AM's Chairman and CEO, David Dowek.

Thank you, David, and good morning, everyone. Thanks for joining us today to discuss AM's financial results for the third quarter of 2023. With me on the call today is Chris May, our Executive Vice President and Chief Financial Officer. To begin my comments, I'll review the highlights of our third quarter financial performance. I will then provide deeper insights into our operating performance issues and what we are doing to bring AM back to our traditional standards. And then next, I'll touch on significant business development news in the quarter as we continue to make excellent strides in winning both electrification and ICE programs. Our strong product portfolio of both verticals allows us to fully support OEM driveline needs across multiple platforms and technologies. After Chris covers the details of our financial results, we'll open up the call for any questions that you all may have. So let's begin. AM's third quarter of 2023 sales were $1.55 billion. AM sales were negatively impacted by continued customer production volatility stemming from supply chain challenges, including lack of labor availability and delivery constraints within the supply base. From AM's perspective, the customer production volatility in the third quarter was significantly greater versus the second quarter. This was further exacerbated by the UAW work stoppage that began in the middle of September. From a profitability perspective, AM's adjusted EBITDA in the third quarter was 157 million, or 10.1% of sales. The margin performance reflects the negative impact of customer and production volatility, including the UAW work stoppage, elevated input costs, continued operational challenges at certain AM plants that are having an outside influence on profitability, and a warranty charge in the quarter associated with a casting component. Compounding our matters in the third quarter, Economic recoveries have not reached final resolution in part because of the distraction of the UAW work stoppage with our top three customers. But discussions are very active in the fourth quarter. Taken as a whole, this performance is not up to AM standards, and Chris will provide more details about our financial performance in a few moments. AM's adjusted earnings per share in the third quarter of 2023 was a loss of 11 cents per share. AM generated a strong positive cash flow in the quarter. AM's adjusted free cash flow was very strong at nearly $136 million in the third quarter compared to $46 million last year. On slide four of our presentation deck, we have outlined headwinds that we have faced all year. A few stem from the current operating environment and others are AM internal. This is very disappointing for me and my management team as we pride ourselves on our operational excellence and our performance execution. As we mentioned earlier this year, we continue to experience operational challenges at several of our plants, especially in the metal forming business unit. We are driving for the resolution of a majority of these issues as we exit 2023 and the remainder shortly thereafter. Internally, the combination of labor availability, plant throughput challenges, and capacity constraints were major contributors to the cost headwinds this quarter. Additional resources have certainly been dispatched to address these operational issues. On a brighter note, our team has been doing a marvelous job securing new business with our innovative products and new customers. So looking at Pace Live of our presentation deck, the e-beam momentum continues for our company here at AM. You may recall in the first quarter we announced a significant e-beam actual award with Stellantis. That was followed up in the second quarter with additional award from an undisclosed Asian OEM for the China market. Today we're very happy to announce two additional e-beam awards. one from Skywell Auto, supporting an electric band program with a 2-in-1 E-beam axle in China. This program is slated to launch in 2024. The other win is with Mahindra in India. AM will supply E-beam axles for Mahindra's 2.5-ton light electric truck scheduled for launch in 2025. Furthermore, we continue to win programs with our ICE business. AM will provide PTUs and RDMs for multiple Jetour, which is a brand of Chery, vehicle programs beginning in 2024. In addition, AM will also supply independent front axles for a number of FAW plug-in hybrid programs in China beginning in 2025. Today's announcements reinforce AM's broad EV and ICE product portfolio, our capabilities, our technology, and our approach to the market. From a recognition standpoint, we are also very excited to share that AM has been named a 2023 Automotive News Pace Pilot Award finalist for our innovative electric beam axle with a high-speed motor and integrated inverter. Our technology can be scaled to cover Class 1 trucks and vans through Class 6 commercial vehicles. Since 2020, AM has received five Automotive News Pace and Pace Pilot Awards, demonstrating the company's innovation, leadership, and electrification. To conclude my opening remarks, let's talk about our updated guidance, and please refer to slide six of our presentation deck. AM is now targeting sales of $6 billion to $6.1 billion, adjusted EVA of approximately $660 to $685 million, adjusted free cash flow of approximately $200 to $215 million, and according to S&P, 2023 North American production approximates 15.2 million units. However, as you all know, our sales performance is more dependent on production of certain significant platforms with specific customers. Related to the UAW work stoppage, our guidance assumes the resumption of production by the first week of November and an overall work stoppage impact of approximately $70 to $100 million in sales and $25 to $40 million in adjusted EBITDA. I assure you that AM's management team continues to work with a strong resolve to navigate these dynamic and challenging times. In addition, AM will continue to drive our efforts towards securing our legacy business, generating strong free cash flow, strengthening our balance sheet, advancing our electrification portfolio, and positioning AM for profitable growth. Let me now turn the call over to our Executive Vice President and Chief Financial Officer, Chris May. Chris?