Dana Incorporated

Good morning and welcome to Dana Incorporated's third quarter 2020 financial webcast and conference call. My name is Regina and I will be your conference facilitator. Please be advised that our meeting today, both the speaker's remarks and Q&A session, will be recorded for replay purposes. There will be a question and answer period after the speaker's remarks and we will take questions from the telephone only. If you would like to ask a question during this time, press star and the number one on your telephone keypad. To ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers limit themselves to one question at a time. If you would like to ask an additional question, please return to the queue. At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Strategic Planning, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Regina, and good morning, everyone, on the call. Thank you for joining us today for our third quarter earnings call. You'll find this morning's press release and presentation are now posted on our investor website. Today's call is being recorded and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied, or rebroadcast without our written consent. Allow me to remind you that today's presentation includes forward-looking statements about our expectation for Dana's future performance. Actual results could differ from those suggested by our comments today. Additional information about the factors that could affect future results are summarized in our safe harbor statement found in our public filings, including our reports with the SEC. On the call this morning as usual, Jim Kamsiscus, Chairman and Chief Executive Officer, and Jonathan Collins, Executive Vice President and Chief Financial Officer. Jim will start us off this morning. Jim?

Good morning and thank you for joining us today. When we spoke with you last quarter, we were just beginning to come out of our global lockdown in response to the COVID-19 pandemic. I cannot be more proud of how the Dana family successfully navigated the shutdown and restart of our operations around the world. driving strong sequential improvement in our quarterly results. Throughout this challenging time, we have not wavered from ensuring the safety of our people while we meet the needs of our customers. During the third quarter, our customers accelerated production to meet growing demand, particularly in the light truck market, driving sales for the quarter to nearly $2 billion. While sales this quarter were down compared with last year due to the COVID-19 related customer demand impact early in the quarter, Sales rebounded sharply to finish nearly $1 billion higher than the second quarter. Adjusted pre-cash flow for the quarter was $261 million, driven by improved working capital efficiency. Adjusted EBITDA in the third quarter was $201 million, or 10.1% margin. The Dana team did a tremendous job adjusting from a slow start to a dead sprint in production in the quarter, achieving financial results better than we had expected. These results were only possible due to the continuation of numerous cost mitigation efforts deployed during the pandemic shutdown, as well as the incredible cross-company teamwork required to restart not only our operations, but in support of our supplier partners around the world. These efforts led to diluted adjusted earnings per share of 37 cents, which was a sizable $1.06 increase from the second quarter. Moving to the key highlights in the upper right hand side of the page, we will provide our perspectives on the end markets in these dynamic times. Although the global COVID-19 pandemic continues to adversely impact our industry, we remain positive on the end market outlook as most markets continue to rebound around the world. Also, during the quarter, we are pleased to announce exciting new electric vehicle business that Dana has been awarded. Of course, winning and delivering e-propulsion programs is only possible if a company has the technical capabilities to successfully execute and deliver on customer requirements and commitments. Therefore, consistent with Dana's very decisive and methodical approach of organically and inorganically accumulating the critical skills and experienced personnel required to successfully supply e-powertrains, we are excited to share more details regarding this very important new investment our acquisition of a substantial stake in Pianola LLC, a leader in electric vehicle software development. Finally, over the past years, you have witnessed our intense commitment to sustainability by developing clean and efficient products through our efforts in electrification. Later in the presentation, I will expand upon and illustrate other key areas of Dana's sustainability plan that you may or may not be aware of. Please turn to page five, as I'd like to provide you an update on our end market conditions. As we see our markets recovering, the bright spot for us has been the light vehicle market, and in particular, full-frame truck demand has been better than expected. Inventories on some of our key vehicles remain low, indicating that most of what is being produced is being sold. We have seen the fastest recovery in North America and China. Moving to the center slide, The heavy vehicle market are also seeing pockets of strength. We began this year with softer expectations in both the medium and heavy-duty commercial truck segments. And obviously, the pandemic slowdown or shutdown has adversely impacted them as well. But as production resumed in the third quarter, we saw strengthening in Class 8 trucks, medium-duty demand in North America. Demand in Brazil and India, while showing signs of improvement, remained comparatively soft. Lastly, our off-highway markets, we have seen continued improvement in agriculture and market, while the construction markets remain stable. Specifically, markets in Asia continue to be stronger than expected, driven by China, where recovery began earlier in the year. As markets around the world continue to recover, we remain intensely focused on partnering with our customers to navigate these challenging times, all while remaining diligent about safety, quality, and cost discipline. Turn with me now to slide six, where I will provide details about an exciting new electrification program wind that is launching next year. All around the world, we are seeing global governments continue to push for cleaner emissions and improved fuel economy across all mobility sectors, including construction, agriculture, mining, and material handling industries that Dana has supported for nearly a hundred years. To date, many major port authorities have aligned with the International Maritime Organization's standards of reducing admissions by at least 50%. But it goes even further, as many of these ports are targeting aggressive initiatives to reduce admissions. Across Asia, Europe, and North America, major ports are committed to zero admissions over the next few decades. For example, the two largest ports in California are required to be zero admission by 2035. In Europe, the Port of Valencia is aiming to zero emissions by 2030. Antwerp is committed to a 50% reduction in emissions. And Oslo is committed to an 85% reduction in CO2 by 2030. Ports across Asia are also adopting similar regulations, with Singapore committed to cut greenhouse gas emissions by 50% by 2050. and China committed to peak carbon dioxide emissions before 2030 on its way towards carbon neutrality. As global logistics continue to push heavily towards zero-emission vehicles to meet the global regulations, Dana Electrified Technology is well-positioned to help our customers meet their sustainability goals. This quarter, we're excited to announce an all-new electric wheel drive system launching in 2021, that is suited for the large port container material handlers. This Dana-designed all-electric solution replaces the diesel engine and traditional driveline by leveraging our core capabilities and innovation acquired through the strategic acquisitions of Fairfield, Ravini, and TM4, combined into an all-new Spicer electrified e-pub drive. In addition, we are providing software integration by leveraging the electrification competencies we've gained through our recent acquisitions of Nedressa, Rational Motion, and as communicated in my opening remarks, Pianova. The bottom line, Dana can provide a full line of advanced technologies that deliver class-leading performance in the ever-increasing regulations across mobility markets from small interior access equipment, such as scissorless, to port container handlers, while at the same time, we will be able to increase our content per vehicle by four times in a growth segment and further expanding our portfolio of sustainable products. Turning to slide seven, I want to highlight some of the exciting things one of Dana's customers has been doing in the electric mobility space. As many of you are aware, Lion Electric is a leader in the development and manufacturing of all electric architectures from Class V through Class A trucks, full-size school buses and minibuses. In early 2019, Lion chose Dana as their preferred supplier for traditional and electric componentry on its all-electric urban Class 8 vehicle, the Lion 8. Lion Electric stated that it had chosen to partner with Dana because of our unmatched proficiency and proven e-propulsion systems, stating our capabilities will be a strong addition to the development of their all-electric truck platform. Fast forward to September of this year, and Lion Electric announced it will deliver battery electric trucks to Amazon with the first being delivered later this year. Amazon plans to use these trucks in the middle-mile trucking operations. The truck has a range of up to 250 miles and features Dana's TM4 direct drive system coupled with Spicer driveline systems. Additional Lion electric vehicles include a zero-admission waste disposal truck featuring Dana Z powertrain, vehicle controller, and onboard charger. Our relationship with Lion Electric began in 2016 when they introduced the Lion Type C school bus, North America's first all-electric, zero-admission school bus, and powered by a complete Dana drive system. With hundreds on the road, Lion electric buses have proved themselves in harsh, cold climate conditions with millions of miles driven. Our collaboration with Lion Electric and all of our electric vehicle customers further solidifies Dana's position as an industry leader in e-propulsion. Moving to slide eight, I'd like to talk about the recent addition of software engineering capabilities to our product portfolio. Earlier today, Dana announced that it had acquired a 49% stake in Pianova. a leading developer of custom embedded software solutions and electronics control units for the light vehicle, commercial vehicle, and off-highway markets. This acquisition will enable Dana to further enhance our software and controls offerings for customers, which are critically important for the management of the complete e-propulsion system. With more than 25 years of systems, control units, software, and electronics design expertise, Pianova's team of software engineers leverages experience to provide proven, flexible solutions to meet the growing demand for software in the e-mobility market and beyond. When combined with Dana's complete systems capabilities for e-propulsion, we will be able to further enhance the efficiency of the entire system while adhering to the highest functional safety requirements. As I talked about on slide six, our customers are increasingly required acquiring advanced software and control solutions that are capable of managing complete e-propulsion system as well as the telematics and ancillary control systems of today's vehicles. For example, PiAnova's electronic control units, or ECUs, and software platform will be used on an upcoming medium-duty electric vehicle program that we will be launching in the new year. This investment will further our capabilities in electric powertrain software And we're excited to be partnering with Pianova as we look for further opportunities to develop capabilities and solutions that will enable these systems. Turning to slide nine, I'd like to talk in more detail about Dana's commitment to sustainability. If you turn on the news or read the paper, it's hard to miss the increased focus on sustainability. There is a growing movement across industries and our personal lives to be even more responsible stewards of the world around us. Combine this with an ever-increasing global regulations intended to drive down emissions, it becomes very clear that clean energy sources such as electric, hydrogen fuel cell, and natural gas will continue playing an important and increasing role in our day-to-day lives. Over the last five years, our enterprise strategy has been focused on being a leader in electrification with class leading portfolio of technologies that enable all vehicles, no matter their power source. As these trends continue to quickly evolve, Dana is prepared for them. Our industry has a unique opportunity to lead by example in how we not only design, but also how we manufacture our products that will have a positive impact on the environment. That is why I publicly announced last week that Dana is committed to reducing our total annual greenhouse gas emissions by at least 50% before the end of 2035. This will result in a reduction of more than 300,000 metric tons of greenhouse gas emissions annually. While this is an aggressive target, it is a very important one. To achieve this, we have developed a roadmap focusing on three core areas. The first is reducing our energy consumption and increasing the efficiency of our processes. Over the past five years, we have completed more than 400 projects to take direct aim at reducing our emissions generation, and we have many other projects in progress. Dana is currently utilizing solar arrays at several locations globally and will be implementing the further use of renewable energy, such as wind or solar, to make use of clean energy sources that will further reduce our greenhouse gas emissions. Lastly, as we look at reaching our target, we will be exploring the use of renewable energy credits purchased on the open market. These credits represent proof that energy was generated from a renewable source and sent to the grid. Dana has a long history of developing advanced technologies that address current industry needs and potential future challenges. We not only believe it's good business, but it's the right thing to do. Thank you for your time today. Now I'd like to turn it over to Jonathan to walk you through our financial results for the quarter.