BorgWarner Inc.

good morning my name is sharon and i will be your conference facilitator at this time i would like to welcome everyone to the borg warner 2021 first quarter results 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 star 1 on your telephone keypad if you would like to withdraw your question press the pound key if you are using a speakerphone please pick up the handset before asking your question I would now like to turn the call over to Patrick Nolan, Vice President of Investor Relations. Mr. Nolan, you may begin your conference.

Thank you, Sharon. Good morning, everyone, and thank you for joining us today. We issued our earnings release earlier this morning. It's posted on our website, foregoiner.com, on our homepage, and on our Investor Relations homepage. With regard to our Investor Relations calendar, we will be attending multiple conferences now on our next earnings release. please see the events section of our Investor Relations homepage for a full list. Before we begin, I need to inform you that during this call, we may make forward-looking statements which involve risks and uncertainties as detailed in our 10-K. Our actual results may differ significantly from the matters discussed today. During today's presentation, we will highlight certain non-GAAP measures in order to provide a clearer picture of how the core business performs and for comparison purposes to prior periods. When you hear us say on a comparable basis, that means excluding the impact of FX, net M&A, and other non-comparable items. When you hear us say adjusted, that means excluding non-comparable items. When you hear us say organic, that means excluding the impact of FX and net M&A. We will also refer to our market. When you hear us say market, that means the change in light and commercial vehicle production waited for our geographic exposure. Our outgrowth is defined as our organic revenue change versus the market. Please note that we posted an earnings call presentation to the IR page of our website. We encourage you to follow along with these slides during our discussion. With that, I'm happy to turn the call over to Fred.

Thank you, Pat, and good day to everyone. We're very pleased to share our results today for the first quarter of 2021 and provide an overall company update starting on slide five. I'm very proud of our strong start of the year, despite the component supply headwinds. With just over $4 billion in sales, our first quarter revenue increased over 18% organically. This compares to a market being up less than 13%. so our outgrowth was about 570 basis points for the quarter, which was ahead of our expectation and our guidance for the year. We saw strong outgrowth in North America and Europe. Our earnings per share increased year over year due to the impact of our higher revenue. Our incremental margin performance was in line with our expectations. We delivered strong free cash flow of 147 million for the quarter, a good start towards our full year guidance. We also secured additional new business awards for electrified vehicles, which I'll speak about in a moment. And finally, during the quarter, we announced our planned acquisition of ACASOL. The key strategic elements of the ACASOL acquisitions are detailed on slide six. Based on the last couple of years of experience we have in this space, We're believers in the prospect of EV battery systems and are very familiar with the industry players. As a leader in this space, Acasol had been on our radar for a long time as a potential partner. We're confident that Acasol is an excellent strategic fit for BorgWarner, and we are really excited about adding their capabilities to our portfolio. In particular, we're attracted to Acasol's following strengths. flexible battery technology across multiple cell architectures, proven technology and products with established manufacturing facilities already in serial production today, strong older backlog of about $2.4 billion, primarily from leading OEMs, and a focus on bus, CV, and off-highway applications. We're extremely excited and expect to complete the transaction during the second quarter. Next, I would like to highlight a significant new program win for electric vehicles on slide seven. BorgWarner's integrated drive module, or as we call it, our IDM, was selected by a major non-Chinese Asian OEM for its upcoming global S-segment electric vehicle production, planned to start in mid-2023. This is a significant program for the company as it is our first IDM award combining BorgWarner's and legacy Delphi Technologies portfolio. It is a validation of the potential we saw in bringing our two companies together. I want to thank the team's intense efforts to get to such a significant booking only seven months after the close of the Delphi transaction. And there is more to come. This IDM features our electric motor, our gearbox, and our integrated power electronics. It operates at 400 volts and has exceptional peak power of 135 kilowatts. The IDM weight and space are reduced by integrating our gearbox, our 400-volt silicon inverter, and our motor. This results in a maximized power density and functionality. The IDM also offers a scalable and modular inverter design, making it easily adaptable to customer requirements. This is an important step for the company with a great partner. Next, on slide eight, let me summarize our new strategy called Project Charging Forward that we unveiled at our investor day in late March. With successful execution of this strategy, We expect to deliver over 25% of our revenue from electric vehicles by 2025 and approximately 45% by 2030. That compares to under 3% of revenue today. Project Charging Forward has three pillars. One, we plan to profitably scale ELVs through our continued integration of Delphi and our ability to capture synergies. The new IDM win is a great example. We will also pursue other organic and inorganic actions. Two, we intend to expand more aggressively into eCVs. We will do that by leveraging our strong intimacy with CV customers as well as our position in ELVs. We're building out a go-to-market product portfolio and operation capabilities organically and inorganically. Our ACASOL acquisition is a key part of this expansion. And three, we plan to optimize our combustion portfolio, reducing our exposure by disposing parts of the portfolio that we believe are lower growth, that don't have a path to product leadership, or that are not expected to deliver strong margins. We believe we can fund the EV growth underlying project charging forward primarily from the capital generated by our existing operations. This is not a sudden change in the company's direction. It is a logical extension to what we've been building since 2015. We're excited about the acceleration of the market towards electrification, and about the momentum that we are building with our customers. I want to take a moment to thank all the BorgWarner employees who are working very hard to both manage the present and accelerate the future of the company towards BEVs. Next, on slide nine, I'm proud to announce that BorgWarner achieved the Great Place to Work certified status for the second consecutive year. Great Place to Work is the global authority on workplace culture. This certification validates BorgWarner's positive work environment. I've said before that the BorgWarner secret sauce starts with our people. To lead, develop, and attract the best talents. We strive to be an employer of choice where we operate around the world. We cultivate a workplace environment that is collaborative, transparent, inclusive, and that promotes continuous learning and excellence. So let me summarize our first quarter results and our outlook. The first quarter was a good start to the year. particularly considering the supply challenges currently impacting the industry. We delivered strong top-line growth, and we believe we're tracking well towards our full-year margin and free cash flow objectives. Our first quarter performance has led us to increase our full-year revenue and adjusted earnings per share guidance, despite a lower industry production outlook, as Kevin will detail. As we look beyond 2021, I'm extremely excited about our long-term positioning. We are continuing to take significant steps that we believe will help us to secure our profitable growth well into the future. We are winning in line with our expectations in the electric world, both from a component standpoint, like inverters and e-heaters, for example, and also from a latest generation system standpoint with our IDMs. We're focusing on a disciplined, inorganic investment approach, like the plan acquisition of Acasol, which adds great technology to our portfolio while supplementing our growth profile. With that, I'll turn the call over to you, Kevin.