Dana Incorporated

Good morning and welcome to Dana Incorporated's first quarter financial webcast and conference call. My name is Rain 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, 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 to limit themselves to one question at a time. If you would like to ask a question, please return to the queue. At this time, I would like to begin the presentation by turning the call over to Dean and Senior Director of Investor Relations and Strategic Planning, Craig Barber. Please go ahead.

Thank you, Rainn. Good morning, everyone on the call. Thank you for joining us for our 2022 first 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. I'd like to remind you today that the presentation includes forward-looking statements about our expectations 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 are Jim Camaciscus, Chairman and Chief Executive Officer, and Timothy Krause, Senior Vice President and Chief Financial Officer. Jim will start us off this morning with a little bit different, but we'll flip back to our cover page there, Christy. Jim, take it away.

Good morning, and thank you for joining us today. Before we begin this morning, I'd like to draw attention to the front cover of our presentation where we recognize that 100 years ago this month, Dana, then known as Spicer Manufacturing Company, was listed on the New York Stock Exchange as a publicly traded company. When we joined the New York Stock Exchange on April 19, 1922, we had approximately 1,000 employees and two facilities, primarily making automotive universal joints, which were invented and patented by our company's founder, Clarence Spicer. At that time, our sales were about $4.5 million. Today, the Dana family is 40,000 strong. spread across 139 facilities in 31 countries, with more than 10,000 patents granted and sales nearing $10 billion. You may find it interesting that only 27 other companies currently listed on the New York Stock Exchange have a longer tenure. The company has always persevered through our longstanding commitment to providing industry-leading product engineering and innovation via our Spicer-branded suite of mechanical products and systems. A century later, Dana continues to technologically differentiate not only in mechanical solutions, but now also through our full suite of Spicer electrified, electrodynamic, and e-propulsion systems across all mobility markets. Moving on to slide four. And our update for the quarter, Dana has significantly higher sales in the first quarter, totaling about $2.5 billion, a $217 million increase over last year, representing strong customer demand in our heavy vehicle markets and the recovery of some commodity costs. This strong sales performance is set against a backdrop of some of the most challenging market conditions any of us have experienced in our professional careers, including major global supply chain disruptions, severe input cost inflation, and erratic customer production schedules that are impacting the entire mobility industry. Our profit conversion on higher sales was tempered by these increased input costs and operational inefficiencies driven by erratic customer demand. As is normally the case in our business, free cash flow was a use in the quarter. And as we discussed in our last call, we have higher working capital requirements driven by higher sales, short notice supply chain disruptions, and elevated capital investment in support of our significant new business backlog and launches. And finally, diluted adjusted earnings per share were $0.16 per share. Tim will walk you through the details of our financial performance in greater detail later in the presentation. Moving to the right side of the page, some of the key areas we will discuss today include the impact of rising cost inflation and volatile customer demand patterns. We will also highlight that despite operating within this challenging environment, Dana continues to be recognized across industry for outstanding innovation, quality, and commitment to customer satisfaction. We are also excited to share several new business awards and how we are leveraging our EV capabilities to positively impact the lives of people in developing markets. please turn to page 5, where I will provide an update on the market conditions. The first quarter saw ongoing commodity price increases, record cost inflation, and global supply chain constraints that continue to disrupt our customers' production patterns, negatively impact our operational efficiency, and drive up on-hand inventories. It's unclear if the supply chain will see some stabilization later this year. However, we do expect commodity prices and cost inflation to continue to rise. When our customer supply chains do recover, we expect improvements in OEM production across all of our end markets, resulting in higher sales. Let's walk through each of our markets, beginning in the light vehicle on the left of the page. And market demand remains strong as vehicle inventories continue to be low as a result of disruptions in the OEM production due to ongoing supply chain constraints. As the year progresses, we anticipate that the global auto production output will increase somewhat through the balance of the year. This bodes well for Dana as we have been preparing for significant quantity of launches of refreshed OEM vehicles such as the JLR Range Rover, Range Rover Sport, Toyota Sequoia in Tacoma, and the Ford Super Duty, just to name a few. Moving to the middle of the slide, the heavy vehicle markets are also experiencing similarly high demand, with fewer OEM production disruptions than we are experiencing in light vehicle. In commercial vehicle, Dana is not only well positioned to support pent-up current demand, but we're also intensely preparing for previously announced new business growth. In North America, we're expecting volume improvement combined with significant medium-duty EV launch activity at our customers. Globally, demand remains strong for electric drive systems, especially for transit buses in Asia, and we expect EV demand to continue Moving to the far right, market demand in off-highway remains strong as backlogs have reached pre-pandemic levels and finished vehicle inventory for construction and agriculture equipment are at the lowest levels in the past several years. Additionally, we have seen minimal customer disruption as a result of the conflict in Ukraine. While all end markets are poised to see market growth simultaneously this year, we expect inflation and commodity costs to continue to increase during the period of volatile demand. Turning to slide six, I'd like to share with you how Dana's passion for customer satisfaction continues to be noticed across our industry. During these challenging times, it's especially important to remain focused on our customers, which in turn help to drive our success. To this point, I'm pleased to share with you that Dana earned major customer recognition across all three of our end markets in the first quarter. Starting on the left side of the page, Dana was named an Overdrive Award winner as part of GM's 30th Annual Supplier of the Year Awards. Marking the fifth consecutive year, we have been honored as a top GM supplier. This year, we're recognized for our leadership in advanced battery cooling technology, which is extremely critical for EV performance and reliability. This award is reserved for suppliers who display outstanding achievement across the global purchasing and supply chain organization's key priorities, including sustainability, innovation, relationships, total enterprise cost, launch excellence, and safety. To be a recipient once again of this prestigious award, while persevering through one of the most challenging years that history has ever faced, is a testament of our team's resilience and commitment to pursuing sustainability and innovation. Moving to the middle of the page, Dana was also recognized by PACCAR with their coveted North America Supplier Performance Management Achiever Award for 2021, with numerous Dana facilities receiving the 10 Parts Per Million Quality Award. Considering the ongoing disruptions and uncertainty facing our industry, these awards truly highlight the tremendous focus and dedication our team has delivering quality products no matter the business environment in which we are operating. Lastly, Dana was honored for the fifth consecutive year by John Deere for Supplier Excellence, Best Quality, Innovation, and Best Process Alignment. The Best Process Alignment Award is a result of all Dana functions engaging with the customer to create value and improve customer satisfaction throughout the entire product cycle. Dana's passion for customer centricity is core to who we are and how we run the business. Being recognized by some of our most important customers is a true honor, and it further illustrates the commitment we have to providing our customers the world-class innovation, quality, and customer service. Turning to slide seven, I'm excited to share how Dana secured a leading position across the Automotive News PACE and PACE Pilot award programs. Earlier this year, we announced that Dana leads this year's Automotive News PACE and PACE Pilot Awards program with five innovative electrification technologies being named as finalists. The PACE Awards represents the highest level of recognition in our industry. These prestigious awards distinguish suppliers for their game-changing technologies that deliver superior innovation, technological advancement, and business performance. For this year, Dana was named a PACE finalist for our complete e-propulsion and e-power systems, Dana TM4 high-performance inverters, and metallic bipolar plates for fuel cell stacks. In addition, our electric rigid beam axle and composite battery enclosure with integrated thermal management were both selected as finalists for the PACE pilot award. which recognizes pre-commercial, post-pilot animations in automotive or future mobility space, including products, processes, software, and IT systems. Over the last decade, Dana has won three PACE Awards, two Partnership Awards, and has been named finalist 12 times. Whether it's individual components, fully integrated systems, or complete vehicle e-propulsion, we are leveraging our expertise in design, engineering, manufacturing, and integration to meet electrification needs of our customers across all mobility segments. Slide 8 highlights the depth of our industry-leading driveline solutions, as well as a steadfast commitment to partner with our customers to meet their unique vehicle platform needs. We're very excited to share with you that Dana Spicer driveline technologies, including our drive axles, front steer axles, and drive shafts, are featured on the Work Truck Magazine 2022 Medium Duty Truck of the Year winner, the Ford F650 and 750. And our award-winning technology was also featured on all five of this year's finalists. In fact, Dana has provided the complete driveline on 13 of the 15 winning vehicles beginning in 2008. The Truck of the Year winner is chosen by the real-life professional fleet managers who are asked to select the truck that best fits their fleet requirements as it relates to durability, quality, servicing, maintenance, and lifestyle cost. It's a tremendous honor to be able to partner with our customers as they provide vehicles to the marketplace that impact real people who are running businesses and providing services. Turning to slide nine, I'll provide you an update regarding an exciting new electrification win for Dana in our light vehicle segment. Dana has been at the forefront of developing and manufacturing electrified vehicle powertrains for some of the world's most recognized brands in the heavy vehicle markets. If you recall, last fall at our Capital Markets Day, we shared with you how electrification adoption is rapidly accelerating in the light vehicle segment and that there are a number of new programs that Dana is working on with major customers. Today, I'm pleased to announce that Dana has been selected as the electrification partner for a major light vehicle OEM for multiple all-new EV programs. While we're not able to name the customer at this point, I can share with you that it is a significant multi-year relationship, which we expect to be worth over a billion dollars in sales for us. The first models are slated for production in the next few years and will include our integrated complete e-propulsion systems providing greater than three times the vehicle content versus your traditional ICE drivelines. Consistent with our commercial vehicle and off-highway customers, our light vehicle customers recognize and are capitalizing on Dana's complete in-house e-propulsion capability, including but not limited to inverters, e-thermal, software, motors, controls, and, of course, e-mechanical capabilities to differentiate their vehicles in the future. Moving to slide number 10. Speaking of electrification, off-highway is one of the fastest-growing segments in the mobility industry. And, as you would expect, Dana is at the forefront, partnering with our customers to meet their unique electrification needs in construction, underground mining, material handling, and agricultural applications. Again, during our Investor Day in September, we outlined the new opportunities that are emerging and showcased how we are working with new and existing customers to further penetrate this market. As slide 9 highlights, we continue to build on that momentum by winning new EB programs with a number of important customers, including Arcimoto, Hyster Yale, JCB, Polaris, Gagne, Takichi, and Toro, among others, to provide our advanced electrified solutions for a broad range of applications. This includes mini excavators, boom lifts, port equipment, electric loaders, access equipment, motor support, and recreational vehicles, and lawn and turf equipment. As we continue to see the expansion in our addressable markets, we are able to support a wide range of vehicles by leveraging our capabilities across many different applications to achieve maximum efficiency, productivity, and performance for each vehicle. A great example are mini excavators, which are rapidly transitioning to electric power. This is one of the fastest growing segments in the construction market with a five-year growth rate of about 30%. It's a market that Dana did not historically participate in, but our multi-market mobility capabilities and scale are positioning us to secure several new business wins for electric versions of this equipment. Whether we're providing electric drive systems or low-voltage motors and inverters, the key takeaway is that we are working in lockstep with our customers to ensure that we are on the forefront of the transformational EV growth in these new markets, and the result is increased content per vehicle for Dana. Turn with me now to slide 11, where I'd like to illustrate how electrification is not only about protecting the environment, but it's about impacting people's ways of life. Sustainability directly aligns with our leadership in vehicle electrification and is critical to supporting our customers as they work to achieve their goals. But sustainability is more than just efficiency and protecting the environment. It's about helping people to live better lives. That is why I'm so excited to be sharing with you that Dana is leading efforts to provide the e-powertrain for the world's first flat-pack utility vehicle destined for emerging markets in Africa from Ox Delivers, a U.K.-based zero-admissions smart logistics company. To support these efforts, we've been able to leverage current capabilities and designs to supply the Ox truck with our electric motor, inverter, e-gearbox, and software, which are engineered to tackle the toughest terrain. The systems will be shipped as a flat pack and assembled in the destination country, providing efficiency and ease of use for Ox and helping to advance prosperous trade in rural emerging markets while driving sustainability. We are proud to be partnering with Ox on this important initiative. It illustrates how Dana's guiding vision towards zero-admissions future is focused on what is most important, people. Thank you for your time today. Now I'd like to turn it over to Dana's CFO, Tim Krause, who will walk us through the financials. Please go ahead, Tim.