Dana Incorporated

Welcome to Dana Incorporated's second quarter 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'll take questions from the telephone only. If you would like to ask a question during this time, press star, then 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.

Thanks, Regina, and good morning, everyone. Thank you for joining us today for our second quarter of 2021 earnings call. You'll find this morning's press release and presentation are posted on our investor website. Today's call is being recorded and supporting materials of the property of Data Incorporated. They may not be recorded, copied, or rebroadcast without our written consent. Also, allow me to remind you that today's presentation includes forward-looking statements about our expectations for data'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, are Jim Camsiscus, Chairman and Chief Executive Officer, and Jonathan Collins, Executive Vice President and Chief Financial Officer. Jim, will you start us off this morning?

Good morning, and thank you for joining us today. A quick review of our financial results for the quarter highlights significant improvements over last year's pandemic-impacted second quarter. In reverse of last year, When we were discussing shutdowns and lower sales, this year's second quarter we delivered a strong $2.2 billion in sales, representing a $1.1 billion improvement as our customers continue to see strong market demand and, in many cases, outpaced production as supply chain challenges continue to hamper their operations. Our adjusted EBITDA for the second quarter was $233 million, a $238 million improvement over last year. yet profit margin was again tempered by high raw material costs and supply chain challenges. Adjusted free cash flow was a slight use on the quarter, but was an improvement of $120 million over last year driven by higher earnings. Diluted adjusted earnings per share was 59 cents for the second quarter of 2021, an improvement of $1.28 per share compared to 2020. Moving to the key highlights on the upper right-hand side of the page, we'll provide you an update today on how we're managing through the key challenges facing the mobility industry. Additionally, we're excited to talk about a few new business wins, including electrification programs. Lastly, I'll highlight our recent announcement to further accelerate our commitment to reduce greenhouse gas emissions and our adoption of science-based targets. Please turn to page five and we'll begin our discussion with the ongoing supply chain challenges and how it's impacting the current cycle. We continue to actively manage through the challenging commodity and supply chain environment as we face four key issues. Higher raw material costs, semiconductor shortages impacting the production schedules of our customers, logistic constraints, and higher transportation costs, and of course, labor shortages related to COVID restrictions. These challenges are not specific to our company, but are impacting the entire mobility industry, which is seeing high demand, but production is being constrained, resulting in finished vehicle inventories for our OEM customers. First, high input costs for commodities such as steel, driven by high demand and limited supply, are inflating prices across all of our end markets. We're working to offset and recover these higher costs through our established mechanisms, but the inherent leg in those recoveries is creating a substantial margin headwind until the input costs stabilize and turn the other way. Jonathan will highlight the financial impacts in just a moment. Second is a semiconductor shortage that is leading to lower production volume at our OEM customers or reducing model availability, particularly in the light vehicle segment, but more recently in commercial vehicles as well. However, end customer demand remains strong, leading directly to finished vehicle inventory imbalance. Shipping delays and higher logistics costs continue to impact the industry and are driving higher input costs. We're seeing this around the world to varying degrees. Lastly, all three of the end markets are being affected by labor shortages, leading to production inefficiencies, plant downtime, and higher labor costs. We're taking the necessary actions to capitalize on this unique market dynamic of low inventory and high demand as a future opportunity for a stronger and longer-duration recovery as the input challenges subside. Moving to slide six, I'd like to talk to you about how we continue to successfully launch our new business backlog programs despite the challenges facing our industry. In North America, we're excited to be supplying our Spicer Smart Connect all-wheel drive system to a new compact pickup truck slated to go on sale next year. Vehicles with our disconnecting all-wheel drive systems are designed to transition to all-wheel drive automatically and seamlessly when the vehicle system predicts slipping. It not only enables impressive gains in performance and safety, but is also more fuel efficient and perfect for the growing market for small pickup trucks. Turning to slide seven, I want to talk about new partnership for us in the electric commercial vehicles. Dana announced the signing of a strategic agreement with Switch Mobility, which is an Ashok Leyland subsidiary focused on manufacturing electrified commercial vehicles. The agreement positions us as their primary supplier of electric drivetrain systems, including e-axles, gearboxes, motors, inverters, software, and controls for light commercial vehicles and buses in India and Europe. Like commercial vehicles continue to present significant opportunities, they lead the commercial vehicle segment shift to fully electrified platforms. We are very excited about the partnership, and it will enable us to have direct positive impact on the delivery of sustainable urban e-mobility. Please turn to page 8. Continuing on the transition to electrified vehicles, slide 8 highlights an exciting collaboration with Pierce Manufacturing and Oshkosh Airport Products on their new revolutionary Volterra platform of electric vehicles. When the first vehicle rolled off the assembly line, they will feature an electric drivetrain with two Dana TM4 motors coupled with a Dana manufactured electromechanical infinitely variable transmission pictured here in exploded view. The Volterra platform platform of electric vehicles is engineered to channel mechanical power and battery power to maximize driving and pumping performance while helping reduce fuel consumption. Depending on the usage and mission profile, the fuel savings could be significant. The Volterra platform of electric vehicles not only reduces emissions and EV mode, but more importantly, are designed to help save lives. Every second matters when responding to an airport emergency, and the new Stryker Volterra ARFF is capable of achieving 28% improved acceleration when fully loaded with the new EV technology. As an added benefit, the Stryker Volterra vehicle results in zero admissions driving during entry and exit of the fire station in EV mode so that there's no longer a need for expensive ventilation systems within the station. During the next several months, the Stryker Volterra performance hybrid will be showcased at airports across the United States, allowing firefighters to experience firsthand the revolutionary Volterra technology. At Pierce Manufacturing, the first Pierce Volterra zero-admissions pumper was placed in service in June of 2021 with the City of Madison, Wisconsin Fire Department, making it the first electric fire truck in service in North America. The Volterra pumper is serving frontline duty at Station 8, the City of Madison's busiest fire station. To date, the City of Madison has responded to over 500 active emergency calls with this new electric pumper. This collaboration with Pierce Manufacturing and Oshkosh Airport Products enables Dana to expand our presence in the specialty vocational vehicle market, while also opening doors to leverage these capabilities across other markets as well. Let's turn to slide 9, where I will share details on another new EV business win for us. This success is in our Power Technologies group. Several electrified lifestyle and sport trucks have recently been announced. Earlier this year, we highlighted our battery cooling technology with the Global Light Vehicle OEM and mentioned that there would be more announcements coming. To that, we're pleased to be showcasing our capabilities by supplying our advanced battery cooling technology. Unfortunately, we can't yet mention the name of the OEM. Our extensive range of long thermotech battery cooling products sets the industry standard for innovation. The award-winning customer-designed cooling system custom-designed cooling solutions feature lightweight aluminum construction, resulting in ultra-clean products that stabilize the battery temperature and enable faster charging. Turning to my final slide, at Dana, we believe that leading the way in sustainability directly aligns with our leadership in vehicle electrification and is critical to supporting our customers as they work to achieve their sustainability goals. That passion is reflected in our desire to advance our emissions reduction targets by developing new zero-admission technologies, delivering innovative products, and driving operational efficiencies around the globe. That is why, earlier this month, we announced plans to reduce our annual Scope 1 and 2 greenhouse gas emissions by at least 50% by the year 2030, which is a five-year pull ahead of our original target of 2035 that was announced last fall. To help accomplish this aggressive goal, we signed a commitment letter with the Science-Based Target Initiative, or SBTI, which aligns resources and incorporates best practices to accelerate emissions reductions. This partnership between the Carbon Disclosure Project, the United Nations Global Compact, the World Resource Institute, and the World Wide Fund for Nature focuses on partnering with companies to guide emissions reductions initiatives using science-based targets. As we continue our sustainability journey, collaborating with organizations like SPTI will support us as we establish ambitious targets and identify key areas where we can further drive sustainability across our operations and our products that enable zero-admissions mobility. Thank you for your time today. Now I'd like to hand it over to Jonathan to walk you through our financials.