BorgWarner Inc.

After today's presentation, there will be an opportunity to ask questions. If you would like to ask a question during this time, simply press star 1 on your telephone. If you would like to withdraw your question, press star 2. 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, Wyatt. Good morning, everyone. Thank you for joining us today. We issued our earnings release earlier this morning. It's posted on our website, BorgWarner.com, both on the homepage and on our investor relations homepage. With regard to our investor relations calendar, we will be attending multiple conferences between now and our next earnings release. Please see the events section of our IRR page for our 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'll highlight certain non-GAAP measures in order to provide a clearer picture of how the core business performed for comparison purposes with 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 incremental margin performance. Our incremental margin performance is defined as the organic change in our adjusted operating income divided by the organic change in sales. Lastly, we refer to our growth compared to our market. When you hear us say market, That means the change in light and commercial vehicle production waited for our geographic exposure. Please note that we've posted today's 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 Joe.

Thank you, Pat, and good morning, everyone. I'm pleased to share our results for the first quarter of 2025. and provide an overall company update starting on slide five. I wish to begin by thanking our employees, our customers, and suppliers for all of their trust and efforts. With just over $3.5 billion, our organic sales were relatively flat despite a decline in market production. Our sales outgrowth in the quarter was strong at 3.7%. which was primarily driven by a 47% increase in light vehicle e-product sales. This growth was well ahead of the 25% increase in global hybrid and BEV production in the quarter, which we believe further validates our product leadership position and leading edge technology that our customers demand to solve the world's mobility needs. We continue to secure multiple new product awards for both foundational and e-products across our portfolio. I'm pleased to announce a wide array of new business awards that I expect will support our focus on long-term profitable growth. Our adjusted operating margin performance was strong in the first quarter, coming in at 10%. This strong underlying operational performance was once again driven by e-products growth and our focus on cost controls across our business. Next, we made two important portfolio decisions in the quarter that will drive focus and competitiveness of our product portfolio. It's important that we continuously review our portfolio to ensure we stay focused on products that we can scale and achieve BorgWarner's 15% ROIC threshold. With that in mind, we made the difficult decision to exit our charging business. Ultimately, we did not see this business creating shareholder value within our planning horizon. Additionally, we began capacity consolidation actions within our North American battery systems business during the quarter. This was done to adjust our cost structure to current market dynamics and create a more competitive business. As I reflect back on my first 90 days as CEO, I couldn't be more excited about the future of BorgWarner. I continue to believe that we have the right product portfolio, leadership, and focus on operational performance to drive profitable growth and significant shareholder value for years to come. I'm very pleased with our first quarter results, the momentum behind our continued product awards, and the strength of our portfolio that we can continue to build upon. Let's look at some new product awards on slide six, which I continue to believe are a strong indicator of our future profitable growth. First, BorgWarner has secured a hybrid e-motor award with a major North American OEM. Our 400-volt S-Wine e-motor will be used on a series of hybrid full-size trucks and SUVs. as well as a performance vehicle application. This business is expected to launch in 2028. We are so excited and looking forward to deepening our relationship with this OEM. Second, BorgWarner has secured a high voltage coolant heater award in North America with a global OEM for their plug-in hybrid electric vehicle platforms. The award includes PHEV applications spanning midsize pickup trucks, SUVs, and minivans. This business is expected to launch in 2027. Next, BorgWarner is extending four programs for exhaust gas recirculation components, including valves, coolers, and complete modules with a major North American OEM. BorgWarner's EGR systems are used on several of the automaker's passenger and light commercial vehicle platforms. Production of these components is expected to continue through the end of 2029. And finally, BorgWarner has secured two dual-clutch transmission awards in China, including a seven-year extension with a German OEM in China and a new award with a prominent transmission manufacturer with production expected to start at the end of 2025. We believe these awards further validate the strength of our product portfolio and the need for our technology across combustion, hybrid, and BEV platforms. Now let's turn to slide seven. and review our decision to exit our charging business. We actively assess our portfolio to position it to grow above industry production. As part of our ongoing assessment, we reached the difficult decision to exit our charging business based on our analysis of the current market and midterm financial outlook for this business. Unfortunately, the charging market is not growing as anticipated in both North America and Europe. The market also remains highly competitive and disaggregated. This backdrop is causing challenges in achieving scale and our ROIC thresholds. As a result, we believe our charging business is unlikely to create shareholder value in the near to midterm. Therefore, we have made the difficult decision to cease global charging operations. To achieve this, we will shut down or sell five locations across three regions. These actions are expected to be completed during the second quarter of the year. We expect this will create a more focused portfolio and eliminate approximately $30 million of annualized operating losses. Compared to our previous 2025 guidance, the exit of our charging business is approximately a $30 million headwind to sales, but a $15 million increase to operating income. While the decision to exit charging was not easy, we believe that it will further strengthen our product portfolio and position BorgWarner to continue to grow profitably. Now let's turn to slide eight and discuss capacity consolidation actions that we are undertaking within our battery systems business. While we remain pleased with the technological and competitive positioning of our battery systems business, we do see lower demand in North America than we had expected at the beginning of the year. Therefore, it was critical for us to right-size our North American battery system capacity to current market dynamics with consolidation actions that started late in the first quarter. These actions include shifting all battery production from our Hazel Park and Warren, Michigan locations to our Seneca, South Carolina plant. We estimate cumulative cash costs of these actions to be approximately $10 million that will extend through 2026. These actions are expected to result in annual cost savings of approximately $20 million by 2026. After these actions, all our North American battery capacity will be consolidated into our Seneca plant. which is one of our largest facilities in North America. The intention of this restructuring is to improve the near-term earnings of this business, but also position the business for long-term success. To summarize, the key takeaways from today are the following. First, BorgWarner's first quarter results were strong. Sales performance once again outperformed industry production, supported by a 47% increase in our light vehicle e-products business across the world. Our adjusted operating margin expanded 60 basis points, despite a 20 basis point headwind from tariffs, reflecting our continued focus on cost controls and turning sales growth into income. Second, We secured multiple new business awards in the quarter across our entire portfolio, which we believe further demonstrates our focus on product leadership across combustion, hybrid, and BEV architectures. And finally, we took meaningful steps to manage our cost structure and create a more focused portfolio in response to changing market dynamics. While we acknowledge that we are operating in a challenging and uncertain environment, I'm confident in our team and their ability to effectively manage through another uncertain production environment. We have the right portfolio, a decentralized operating model, and the financial strength to deliver our revised guidance and drive long-term profitable growth. With that, I'll turn the call over to Craig.