BorgWarner Inc.

Good morning. My name is Nick and I will be your conference specialist. At this time, I would like to welcome everyone to the BorgWarner 2026 Second Quarter Results Conference Call. All participants will be in a 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 1 on your telephone. 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, Nick. Good morning, everyone, and thank you for joining us today. We issued our earnings release earlier this morning. It's posted on our website for Warner.com. both on our homepage and on our investor relations homepage. With regard to our investor relations calendar, we will be attending investor conferences between now and 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. In addition, during today's presentation, we'll highlight certain non-GAAP measures in order to provide a clearer picture of how the core business was formed and for comparison purposes with prior periods. 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'll 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'll also refer to our growth compared to our market. When you hear us say market, that means the change in life vehicle production weighted for our geographic exposure. Please note that we've posted today's earnings call presentation to the IRM 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 second quarter of 2026 and provide an overall company update starting on slide five. I want to begin by thanking our employees, customers, and suppliers for all of their trust, efforts, and continued support. In the quarter, we achieved sales of over $3.6 billion. Excluding the decline in our battery energy system segment, our organic net sales were up modestly year over year, outperforming the decline in market production, primarily due to strong North American transfer case volumes. Our adjusted operating margin, adjusted earnings per share, and Cashflow Performance was strong in the quarter. The company continued to operate at a very high level and delivered 100 basis points of adjusted margin expansion and 17% of earnings per share growth in a relatively flat year over year sales environment. This outstanding result was once again driven by our focus on cost controls across our business. I'm excited to report that our strong award activity continued into the second quarter. Today, I'll highlight seven new business awards across our foundational and e-products portfolios. These wins represent only a portion of the awards secured during the quarter, but I believe they underscore the strength of our technology-focused portfolio, our deep customer relationships, and the global demand for our efficient, power-trained technologies around the globe. Equally exciting is the progress we've made in the quarter in taking meaningful steps in our product readiness across our data center and other industrial markets portfolio. I will share a detailed update in a few moments. Lastly, we remain focused on efficient deployment of capital to drive shareholder value in the quarter. We returned approximately $134 million to shareholders through share repurchases and payment of a cash dividend. Additionally, our Board of Directors approved a $1 billion increase to our current share repurchase authorization, increasing our authorization to $1.35 billion, or approximately 10% of BoardWarner's market cap. These actions demonstrate our confidence in the long-term cash generating ability of our business and our focus on driving shareholder value through a balanced capital allocation approach. As I look back on the second quarter and the first half of 2026, I'm very proud of our team and our results. Once again, we executed at a very high level. which I believe puts the company in strong position to achieve our full year sales, margin, EPS, and free cash flow guidance. Our strong first half performance has also allowed the company to increase our second half 2026 industrial R&D investment to accelerate our product readiness. We are doing this while delivering on our full year 2026 financial commitments. Turning to slide six, I'd like to highlight seven recent product awards that demonstrate both the competitiveness of our technology and our ability to support our customers' powertrain needs in key markets. Let's start with our foundational product awards. First, Fort Warner has been awarded a new E-Turbo program with a major European OEM, for an advanced hybrid passenger car application. Further strengthening BoardWarner's leading position in electrified boosting technologies. Production is scheduled to begin in 2029. I believe BoardWarner's eTurbo innovation and leadership remains a core technology underpinning the industrial power generation product line, leveraging our automotive scale to disrupt the data center market. Second, VolkWarner has secured new business with a Chinese OEM to supply our torque out-of-demand transfer case with mechanical locks for a newly developed full-size SUV in China. We have built a 20-year relationship with this customer, and we're proud to continue supplying our all-wheel drive technology for their newest SUV, Start of production is planned for the fourth quarter of 2026. Third, Fort Warner continues to expand its variable cam timing business with new program awards in Europe and China. These programs include a program life extension and significant volume increase for a leading European premium OEM's V6 engine family and a conquest win for a major Chinese OEM's 1.5-liter turbocharged gasoline engine family, replacing the previous incumbent supplier. These awards underscore the long-term competitiveness of our VCT portfolio across both hybrid and combustion engines. Switching now to our recent e-product awards. First, BoardWarner has secured a new integrated drive module award with a global OEM. This IDM features BoardWarner's latest 3-in-1 integrated coaxial drive system, combining an advanced e-motor, gearbox, and fully integrated Gen 4 inverter in a compact, high-performance package. I believe this award reflects BoardWarner's continued commitment to delivering advanced electrified drive solutions through the strength of our global technology portfolio and localized capabilities. Production is expected to begin in 2027. Second, FordWarner has secured a major extension of two high volume, high voltage inverter programs with a major European OEM. These awards cover updated inverter designs for both plug-in hybrid and 800-volt battery electric vehicle applications, building on a trusted partnership in power electronics. I believe that extending several high-volume programs at the same time confirms BoardWarner's leading position in power electronics and the strength of our technology, in-house expertise, and customer focus, evolving our inverters, Generation by generation, together with our customers, for both hybrid and fully electric applications, is how we build trusted, long-term partnerships with the world's leading OEMs. Production is expected to begin in 2029. Importantly, all the e-product awards I just highlighted include BorgWarner's inverter technology. and it speaks to the world-class technology leadership and scale 4Warner has at high-powered inverters. This expertise has been developed over decades of engineering effort and represent our product leadership in this area. Our automotive inverter competence is another great example of a world-class technology that 4Warner can use as we continue to advance our product readiness to capture additional growth vectors outside of our core automotive markets. As I would discuss in a moment, the world is in need for more power, and our highly efficient inverter is a solution that solves this growing problem. Next, on slide seven, I would like to discuss the acceleration of our product readiness across our data center and other industrial markets portfolio. Let's discuss with an update on our turbine generator launch progress. I'm very pleased with the advancements that we've made over the past quarter. First, I'm excited to share that our testing has confirmed that we have achieved carb level emission standards. I view this as an important milestone as we continue to expect our turbine generator to provide a lower emission solution Our UR-L compliance process continues to progress well. UL component certification is expected to start in September, and our component-level evidence books have already been submitted. Construction of the final assembly plan is quickly moving forward, with the footprint largely complete. We expect our capital equipment installation to begin in the third quarter. And overall, I'm excited and pleased with the team's progress, which will position us well to meet the strong interest that we continue to see from end customers, including multiple hyperscalers. Burning next to our battery energy storage system. Our energy storage solutions are intended to support A range of use cases in data center environments. We continue to position our battery energy storage solutions to support data center AI and mechanical loads. Our product scope spans the entire energy power time requirement spectrum, offering high energy long duration and or high power short duration solutions. We are working to widen our portfolio, which includes DC blocks, uninterruptible power supplies, high power racks, and controls. Our solutions are modular, scalable, and cell chemistry independent. Customer validation and UL compliance is advancing, and we expect to be production ready in 2027. Our quoting activity for our battery energy storage systems continues, and I look forward to providing you with additional updates later this year. Turning to our microgrid inverter offerings, initial customer feedback has been extremely positive. We believe that we have the right value proposition, including U.S. manufacturing and supply chain. Our automotive supply chain is increasingly being viewed as a differentiator, and our decades-long experience in highly engineered, high-voltage, power vents, and liquid-cooled power electronics is recognized and confirmed by potential customers. Four customers now have BoardWarner samples, and discussions with other potential customers are underway. With feedback already received, We are quickly moving to develop Gen 2 designs. While we continue to see the move toward 800 volts supporting our entry into this market, we have now begun to develop a high-power portfolio, spanning applications ranging from 400 volts to 1500 volts, as we see potential for volumes across this spectrum. I look forward to progressing toward customer quoting later this year. To summarize, I believe there are three key takeaways from today's call. First, 4Warner's second quarter results were outstanding. Our sales remained strong at over $3.6 billion. Our adjusted operating margin expanded 100 basis points, and adjusted EPS grew by 17% to the second quarter of 2025. Additionally, we increased our full-year adjusted EPS guidance, reflecting our continued focus on growing the earnings power of the company. Second, we announced seven new business awards across our portfolio in the quarter, which we believe further demonstrates our focus on product leadership and the need for highly engineered solutions across combustion, hybrid, and Bev Architectures. Third, we further improved our product readiness across our data center and other industrial markets portfolio. We see strong customer demand and are confident that our mechanical and electronic core competencies will enable us to successfully capture growth outside of our core automotive market. This confidence and our strong first half 2026 performance has allowed us to increase our second half industrial R&D spending to further accelerate our industrial product readiness. And finally, we took meaningful steps to return capital to shareholders during the second quarter with approximately $134 million returned through our cash dividend and share repurchases. Additionally, The $1 billion increase to our share repurchase authorization and $1.35 billion total authorization demonstrates our commitment to following a disciplined approach of consistently returning cash to shareholders to create value. Overall, I believe our year-to-date results illustrate the strength of our team, our product portfolio, and the long-term earnings power of our business. I'm excited to continue our positive momentum into the second half of 2026. With that, I will turn the call over to Craig.