BorgWarner Inc.

Good morning. My name is Michael, and I will be your conference specialist. At this time, I would like to welcome everyone to the BorgWarner 2025 fourth quarter and full year result conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by a zero. 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 one on your telephone. If you would like to withdraw your question, press star two. 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, Michael. Good morning, everyone, and thank you for joining us today. We issued our earnings release earlier this morning. It's posted on our website, BorgWarner.com, both on our homepage and our investor relations homepage. With regard to our upcoming investor relations calendar, we will be attending multiple investor conferences now in our next earnings release. Please see the events section of our IR page 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'll highlight certain non-GAAP measures in order to provide a clearer picture of how the core business performed and 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 any net M&A. We will also refer to our incremental margin performance. Our incremental margin is defined as the organic change in our adjusted operating income divided by the organic change in our sales. We will also refer to our growth versus our market. When you hear us say market, that means the change in light vehicle production weighted 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. We are pleased to share our results for 2025 and provide a company update starting on slide five. I wish to begin by thanking our employees, our customers, and our suppliers for all of their trust and efforts during the past year and for their continued support. In 2025, we delivered approximately $14.3 billion in net sales, which was up approximately $200 million year over year. This increase was supported by a 23% increase in our light vehicle e-product sales, which demonstrated the strong demand for our hybrid and BEV products. Despite challenges in our battery business, we delivered modest organic growth. Excluding the decline in our battery and charging system segment, our organic sales were up approximately 1.6% year over year, led by outgrowth across both our foundational and light vehicle key product portfolios. Despite modest sales growth, we significantly improved our overall financial profile by increasing the earnings power of BoardWarner. We expanded our adjusted operating margin by 60 basis points, despite a 20 basis point net tariff headwind. We achieved 14% EPS growth year over year and generated more than $1.2 billion in free cash flow. Additionally, we returned over 50% of our free cash flow to shareholders through a balanced capital allocation approach. In my view, our 2025 financial performance was outstanding and positions us for continued momentum into 2026. Looking to the drivers of our future performance, we finished the year by securing our record number of new product awards across our foundational and e-product portfolios. All of our business units contributed to our record wins, and I expect a robust pipeline of further opportunities at 2026 and beyond. Additionally, I am truly excited to share with you a new product that will serve as a power generation solution for the data center market and other microgrid applications. As many of you know, the demand for onsite power generation is growing significantly. We believe this product could open up an additional avenue of significant profitable growth outside of our core automotive markets. I will provide more detail on this exciting news in a few minutes. Looking back on our 2025 performance, I'm very proud of our team and our results. As Craig will detail, We believe we remain well-positioned to continue to expand margins, grow adjusted EPS, and generate strong free cash flow in 2026. We expect to do this while also investing in our business to support our focus on long-term profitable growth. Now, let's look at some new light vehicle product awards on slide six. First, BorgWarner has secured a conquest award with a major European OEM to supply a variable turbine geometry turbocharger for one of their hybrid electric vehicle platforms. This business win positions BorgWarner as part of the supply base that will power this OEM's first hybrid electric offering in North America. We are proud to extend our long-lasting relationship with this OEM. Next, OrgWarner has secured a contract with a major North American OEM to provide an 800-volt secondary IDM and a generator module incorporating a dual inverter. These products will be integrated into a series of the automaker's range-extended electric vehicle trucks and large-frame SUV models. I believe this award showcases our product breadth in the electrified propulsion space. Next, BorgWarner has secured an award with a premium European OEM to supply an IDM supporting a hybrid range extended powertrain architecture. The IDM features BorgWarner's innovative single motor and integrated drive module. By enabling a single electric motor to perform both power generation and driving functions within a very compact package, the solution provides greater flexibility in vehicle platform design, system integration, and performance optimization. Next, Fort Warner's battery management system has been selected for an expanded program with a global OEM. The system will support additional B-segment and C-segment passenger cars as well as light commercial vehicles for battery electric and plug-in hybrid electric vehicle applications. Finally, BorgWarner has secured a new electric cross-differential program with a leading Chinese OEM. This EXD solution is designed for a 48-volt system and is integrated with the customer's electrical and electronic architecture. This program represents BorgWarner's first 48-volt EXE application and expands the company's torque management capabilities for electrified vehicles. Next, on slide 7, I'm extremely excited to share the details of a new product for the data center market and other microgrid applications. BorgWarner has signed a master supply agreement with TurboCell, which is a subsidiary of data center infrastructure developer Endeavor. Under this agreement, BorgWarner will supply a highly modular turbine generator system. This exciting new technology leverages many of BorgWarner's core competencies, including our world-class turbocharging, thermal management, power electronics, advanced software controls, and high-speed rotating electric capabilities. It also leverages our deep manufacturing footprint. As many of you know, the power generation market is expected to grow significantly over the next decade. We expect roughly a mid-teens annual growth in demand for onsite power generation through 2035. This is where we expect our turbine generator system to be a transformative solution for the data center market as we believe our product addresses the growing demand for alternatives to traditional on-site power generation. Within the U.S., we expect our turbine generator system to help support the acceleration of the power and energy solutions needed to strengthen our grid. For those of you unfamiliar with Endeavor, let me provide some background. Endeavor provides turnkey facility solutions to data center and microgrid customers. The company has 25 years of experience in the data center market and operates multiple facilities both in the United States and Europe. Ford Warner has worked with Endeavor and their turbocell subsidiary, for more than three years to bring this turbine generator system to market. Throughout this time, we found them to be a thoughtful partner that supports our vision of a clean, energy efficient world. I look forward to all we can accomplish together as we bring an innovative, lower emissions, power generation platform to the data center market. From a financial perspective, We expect production of the turbine generator system to begin to ramp up in 2027, with sales expected to be more than $300 million during the first year of production. Now, let's turn to slide eight and discuss some of the advantages of the turbine generator system compared to existing power generation solutions. As you can see by the image on the left side of the slide, the turbine generator system leverages many of our foundational and e-product capabilities, and we believe the breadth of our capabilities is a competitive advantage that will be difficult to replicate. We believe the turbine generator system offers unmatched adaptability for diverse applications, including backup and primary power, advanced controls, and quick transient response to manage power and grid peaks. Based on our analysis, we also believe the turbine generator system provides a lower emission solution relative to other options. Importantly, it also allows for flexible fuel types, including natural gas, propane, diesel, and hydrogen giving additional options to the end user. BorgWarner expects to leverage our robust automotive supply base and world-class manufacturing capabilities to maximize vertical integration, allowing us to control approximately 65% of the content. I am excited to update you throughout the year as we move closer to the start of production in 2027. I believe the development of the turbine generator system and securing the turbocell supply agreement is a powerful representation of the BoardWarner team proactively identifying and seizing opportunities that fit our growth criteria, and I anticipate future opportunities for other industrial applications for BoardWarner products over time. Congratulations to our entire BoardWarner team. To summarize, the takeaways from today are the following. Board Warner ended 2025 with strong results. We delivered $14.3 billion in net sales, a 10.7% adjusted operating margin, which was up 60 basis points compared to 2024. We also grew our full year free cash flow to $1.2 billion, an increase of approximately 66% compared to last year. We secured a record level of new business by leveraging growth across our foundational and e-product offerings, which we believe demonstrate our focus on product leadership. And we announced the signing of a master supply agreement with TurboCell for our turbine generator system. which expands our product reach into new and growing data center and other microgrid markets. We expect this transformational and innovative system will further support our focus on long-term profitable growth by addressing the growing need for a superior power generation solution. As I reflect on my first 12 months as CEO, I'm so proud of our continued progress on three key factors I believe will drive long-term shareholder value. First, we delivered strong financial performance, as evidenced by our 2025 results. Additionally, we expect another year of further operator margin improvement and EPS growth in 2026, despite declining markets and lower battery sales. Second, we secured record new business wins across our foundational and e-product portfolios, which we expect will support our ability to deliver long-term profitable growth. The 30 awards that we have announced over the past four quarters give me great confidence in our strategy. Our business units are embracing the challenge to find additional growth opportunities through new product developments like our turbine generator system and our EXD solution. And in 2026, we expect to launch new products like our innovative battery cooling plates. And third, we remain focused on delivering incremental shareholder value through our free cash flow generation. As Craig will highlight, we returned over 50% of our free cash flow to shareholders over the course of 2025. And we continue to prudently explore accretive, inorganic opportunities to grow our capabilities. By continuing to focus on these priorities in 2026 and beyond, I believe we are well positioned to continue growing the earnings power of BoardWarner, which we believe will drive long-term value for our shareholders for years to come. With that, I will turn the call over to Craig.