Dana Incorporated

Good morning and welcome to Dana Incorporated's first quarter 2024 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. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest. There will be a question and answer period after the speaker's remarks. and we will take questions from the telephone only. 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 Corporate Communications, Fred Barber. Please go ahead, Mr. Barber.

Thank you, Regina. Good morning, everyone, on the call. Thanks for joining us today for our first quarter 2024 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 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 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 Kamsiskas, Chairman and Chief Executive Officer, and Timothy Krause, Senior Vice President and Chief Financial Officer.

Jim. Good morning, and thank you for joining us today. Please turn with me to page four, where I will discuss the highlights from the first quarter of 2024. Starting on the left side, I'm pleased to report that Dana achieved strong sales in the first quarter of $2.7 billion, a $91 million increase over the prior year driven by higher customer demand, the roll-on of new business backlog, including traditional, ICE, hybrid, and EV programs, plus market share gains. Adjusted EBITDA for the quarter was $223 million, of $19 million driven by the strength of Dana's core business and operating system execution, which is driven by the contributions of every person and resource in the company to achieve efficiency improvements across all aspects of the organization. Next, free cash flow, which is normally a use in the first quarter due to seasonality, was a use of $172 million. Notably, this was a $118 million improvement over the prior year, which is reflective of multiple working capital improvements and lower capital expenditures. Moving to the upper right of the slide under the key highlights, consistent with the past several quarters, company-wide efficiency improvements again drove strong profit growth. As stated on the page, Dana achieved a 39% conversion rate on traditional organic sales in the first quarter. This performance is well above our historical conversion for the first quarter and positions the company on a strong trajectory to achieve our full-year targets. Achieving this level of progress is the result of a very cohesive and talented Dana team systematically driving continuous improvement and synergies across all functions, geographical regions, products, and end markets. Moving to the center right of the slide, demand levels remain relatively stable across most of our end markets, and the Dana team continues to methodically and consistently grow the business. Lastly, with efficiency improvements on track, mobility markets remaining relatively stable, and stronger working capital performance, our financial outlook remains on target and has led us to raise our full-year free cash flow outlook to $75 million at the midpoint of the range, a 50% increase over our prior guidance. Tim will walk you through this and all other financial details and updates later in the presentation. Please turn with me to page five for the outlook on the business and environment for this year. As we stated, we anticipate Dana's overall business environment to continue improving due to, first, the further stabilization of the customer production schedules as their supply chains continue to normalize. Second, Dana's continued execution of cross-company efficiency actions. And third, the continued launch of new and refreshed programs that are coming online which drive profitable growth. Beginning on the left side of the slide, greater stability in customer production has resulted in lower production cost, improved productivity, and greater efficiency across all areas of the enterprise. Moving to supply chain, net commodities are still expected to be a headwind to sales and profit for the remaining of the year. Steel prices have declined from the peak and are projected to mostly flat compared with 2023. As input costs decline, we see reversal of commodity recoveries with customers driving the headwind Dana has a number of refreshed, conquest, and new business rolling up to 2024, which is a contributor to driving profitable growth. This growth is well-balanced across mobility markets, includes market share gains in our commercial group, which of course requires short-term launch costs, but importantly, are partially offsetting lower industry volumes in that segment. Overall, we're experiencing lower launch costs in 2024 as the company has returned to a much more normalized number of New program launches this year, compared with the unprecedented quantity and complexity of launches the team very successfully executed throughout 2023. Moving to the right of the page, let's take a look at our end market outlook. We expect agriculture to be down compared with last year, and we're seeing some further softening in the market. Demand for construction and mining equipment should continue trending somewhat flat compared with last year, though as we're watching these end markets closely, as orders can shift rapidly. We continue to see light vehicle full-frame production normalize and volumes trending up by low single-digit percentages as customer demand remains stable for the key recently refreshed vehicle platforms in production. After several years of growth, we still anticipate the market for heavy vehicles to be lower compared to last year, although we are seeing a slight improvement in third-party production estimates. Moving to the bottom of the slide, the key takeaways that we are seeing across our industry show cost inflation moderating despite labor costs increasing globally. OEM production schedules continue to stabilize, which is driving overall improvements in production efficiency. Lastly, while the light vehicle market overall is certainly navigating a period of electric vehicle demand fluctuation for current EV programs, overall, Dana is only marginally impacted because One, most of the recent EV volume pullback is on the passenger cars, which, of course, Dana largely does not participate, as we are principally a light truck, commercial vehicle, and off-highway mobility supplier. Two, our product, processes, and equipment design activities over the past several years have positioned our e-mechanical, electrodynamic components, and e-thermal assets to be quite flexible across vehicle types and mobility markets, thus enabling Dana to flex and optimize our human and equipment capital if production timing and or volume changes occur. Three, the majority of our announced light vehicle EV programs do not launch for another few years, allowing Dana to adjust capital equipment spending if appropriate. As you know, repositioning and transforming Dana from a purely mechanical company to an energy source agnostic business was incredibly challenging but strategically critical. especially when doing so simultaneously with the COVID crisis. However, today we can clearly see that it was all worth it, as Dana cannot only flex and spread its resources across numerous vehicle architectures, but we have also increased our content per vehicle potential from three to five times based on the vehicle configuration. What this means in the short term is that we expect EV sales to be approximately $1 billion this year, And we're already generating positive contribution margins and remain on target to achieve positive EBITDA margins next year. Let's turn to slide six, where I will share some exciting news regarding the major industry award for Dana. We're very excited to share with you that Dana was awarded our ninth Automotive News PACE award at the 29th annual PACE ceremony held just last night in Detroit, Michigan. Dana once again took home our industry's most coveted technology and product innovation award for our electromechanical infinitely variable transmission system, which is a multi-mold driveline system solution that incorporates the Dana power split transmission with the integrated high voltage motors and controller with proprietary software that manages the entire drivetrain. The system also includes smart lubrication and actuation driven by Dana's low voltage motor and inverter. This first-of-a-kind solution differs from the traditional transmissions in that it can operate in and automatically shift between engine, engine-only, hybrid, and battery-only modes. It provides many real-world benefits for vocational vehicles like lower fuel usage, noise, and emissions but offers the safety and redundancy of a hybrid vehicle to ensure consistent power. This is of ultimate importance in an emergency vehicle. To achieve this, we work closely with our customer, in this case Oshkosh, to create the multi-mode power split solution. In addition to the vehicles already in service, Oshkosh recently presented their Pierce Voltra truck together with our system at the Fire Department Instructors Conference, or FDIC, in Indianapolis earlier this month, and it was received with great interest. More than 36,000 fire and rescue professionals representing 67 different countries attended the event. Oshkosh has also announced, recently announced, that the Paris-Le Bourget Airport will be receiving units with our system, expanding the market into Europe. The exciting thing about Dana's EMIBG system is it is a whole system approach that can be replicated across numerous different product lines and mobility markets. And it's another example of Dana's ability to collaborate with our customers to meet their unique and specific needs, regardless of power train configuration, illustrating why our complete in-house capability is a significant differentiator for Dana. Let's move to the next slide, where I can talk about a variety of recognitions that illustrate Dana's ethical foundation, customer focus, and technical expertise. As with most years, we'd like to provide you an update on industry and customer awards. We present this information because of significant interconnection and value creation that occurs by operating the company with the highest level of ethical standards, maintaining an intense commitment to customer satisfaction, and ensuring that a company continuously innovates and provides differentiating product technology for customers. Dana will not operate our company any other way. I would like to take a few minutes to communicate some representative examples in each of these areas of importance in which Dana has been recognized over the past 12 months. First, in the area of ethics and integrity, Dana was again recognized as one of the world's most ethical companies by Episphere. We are one of only 136 companies spanning 20 countries and 44 industries to be recognized. We're also honored to have been recognized by Newsweek as one of America's most responsible companies. In the area of customer satisfaction, as you can see from the numerous customer logos on the page, we're honored to receive customer recognition across all mobility markets, geographical regions, and from many of our OEM customers. But as a change-up this year, we've also included recognition from non-OEM customers, such as Supplier of the Year Award from Ideal Lease Incorporated, one of North America's premier full-service commercial truck leasing, rental, and maintenance companies. Additionally, we earned a Supplier Partnership Award from from Fleet Pride Incorporated, which is America's largest independent distributor of aftermarket heavy-duty parts and services. We are also very fortunate that our customers recognize our commitment and, for that reason, continue to select Dana as a preferred supplier partner. Third, in the area of technology and innovation, in addition to the base award I just announced, Dana was honored with the Heavy-Duty Trucking Magazine's 2023 Top 20 Products Award for its Spicer Electrified 08E axles. Our full suite of single and tandem vehicles are designed for full-scale adoption of both battery electric and hydrogen fuel cell applications across a wide variety of Class 7 and 8 vehicles. There's a lot to be proud of here. What was most gratifying is how all the women and men of Dana are so amazingly committed to running the company the right way. Thank you for your time today. I'd like to turn it over to Tim, who will walk you through the financials.