Dana Incorporated

Good morning and welcome to Dana Incorporated's Business Update 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 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, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Regina. Good morning, everyone. Thank you for joining us today for Dana Incorporated's January Business Update Call. As a reminder, we will be hosting our 2024 Q4 full-year earnings call on February 20th. We wish you a release with the date and time and details shortly. Today's presentation includes forward-looking statements about our expectations for Dayton's future performance. Actual results could differ from what we discussed today. For more details about the factors that could affect future results, please refer to our Safe Harbor Statement found in our public filings and reports with the SEC. Before we proceed, I'll remind you to visit our investor website where you will find this morning's press release and presentation. As always, today's call is being recorded, and the supporting materials of the property of Dana Incorporated may not be recorded, copied, or rebroadcast without our written consent. On the call this morning is Bruce McDonald, Dana Chairman and Chief Executive Officer, and Timothy Krause, Senior Vice President and Chief Financial Officer. Now let's get started, and I'll turn the call over to Bruce.

Okay, thank you, Craig, and good morning, everyone, and thanks for joining us here on our business update call. In November, we announced that we were going to proceed with the sale of our off-highway business, and we also announced a major cost reduction initiative with the intent of having new Dana margin fee in line with where Dana is today for 2026. So that was kind of our original goal. I'm going to really spend most of my time today with Tim and I talking about the cost reduction side of things, but I will spend just a brief minute here on what's happening in terms of off highway. And obviously, you know, we're well into a process, and so I can't really get into a lot of specifics. But we do have a very robust process going on right now. We have several strategic buyers going through management presentations, site visits, plant tours, things like that. We feel really good in terms of where we're at. We're encouraged with the values that we've seen so far, and we remain hopeful that we'll be able to come out with an announcement on a transaction around the time of our Q1 earnings. With regards to the cost reduction initiatives, I'm really pleased with the progress that the team's made, and in particular, the speed at which we're going to start to see the numbers flow through our P&L. You'll even see we had some benefits in in the fourth quarter here and Tim will kind of get into it for run rate and phasing and things like that. I think before I get into the details of of of of the cost side of things here, I think it's kind of it'd be worthwhile to go through the strategic context and and and what's changed from a year ago. So if you think about. We're in by the way, we're on slide four. If you think about the where we were a year ago, obviously we're focusing on three businesses off highway as well as commercial and light vehicle, those three markets. Right now we've got to reassess that and focus on two end markets being commercial and light vehicle. In terms of electrification, we had an extremely robust outlook and growth aspirations for that business. You know, just stepping back, I would say that Dana with the full support of our board, positioned itself to be electrification in the leader in all of our markets. And if you sort of were to size the opportunity that we had in front of us this time last year, it was looking at like a $4 or $5 billion growth opportunity over the next five years. Obviously, things have changed since then. Over the last six months, we've seen significant deterioration in the timing and the volume projections And with the new administration here in the United States, it's likely we'll see further deterioration in the end markets. And this requires us to reassess our strategy as it relates to EV. And I think I'll just do a little double click on that. So what it means for us is, and I'll be very granular here, is First of all, our battery cooling business, we're fully committed to that. This is a business that is profitable today and is capable of delivering a creative double digit EBITDA margins. So we're going to invest and grow that business. Where we currently have ICE business, we're committed to being our partner, a partner to our customers, and we want to be technology agnostic. So we will invest in EV electrification alongside of our customers to make sure we are their partner of choice. For all other currently awarded programs, we are in active negotiations regarding pricing, engineering, and CapEx recoveries. And for all programs that we are pursuing, we've adopted a much more stringent approach to going after this incremental business opportunities, where we're no longer willing to risk our capital and ER&D upfront. So we're looking basically on opportunistic new business that we fully funded by our customers. So the bottom line on this one is it generates significant ER&D savings, which are in our numbers here, and also will make us less capital intensive effective immediately. Third, we had an infrastructure in place to support our growth aspirations and business profile. And with the sale of our off-highway business, we now need to focus on right-sizing our corporate structure The CNR announcement here, we're talking about we're going to take our power technology segment and split that into two pieces. We'll put the aftermarket part of that business into commercial vehicle, and that way we can run all of our aftermarket operations under the leadership of Brian Poor in that business. And secondly, the rest of power technology will fold into our light vehicle business under Byron Foster. Turning to slide five, I just want to talk more about new Dana financial commitments. You'll see here we're upping our cost reduction targets from two to 300 million. Tim will walk you through the details in his later slide, and I don't want to steal a lot of thunder here on that one. But what I would just remind people is we're talking about $300 million of run rate savings that will be in our 2026 number. 12 months or I guess 11 months from now, that's the run rate saving that we're focusing on. In terms of margins, we previously talked about margins in the 8.5% range for 2026, basically showing you a range here of 2025 new data margins of 8.1 to 8.6. And we see 2026 with the impact of our cost reduction actions, our margins for new data being in the 9.5 to 10.5. uh range uh you also see you make a comment here in terms of stranded costs associated with the sale of the off-highway business obviously the natural question is can we take some of these costs out in the guidance that we've provided here today we're assuming no uh which i say would be a would be a conservative assumption um we just really can't go after that that cost bucket until we have a little bit more clarity on who the buyer of the business is, what TSA support requirements are going to need, and when the sale is going to happen. So stay tuned on that one. I would expect us to chip away at that in future updates. And then lastly, just in terms of the balance sheet, Now, the sale of our off-highway business is a once-in-a-lifetime opportunity for us to transform our financial profile and strengthen our balance sheet, as well as return significant capital to our shareholders. We expect to have new data with a net leverage ratio of about one times and a free cash flow of a percent of sales, about 4%, through the cycle. So, obviously, in the Good years will do better than that, and in down years will do worse. Before turning it over to Tim, I just want to make sure everybody understands how excited I am with the progress that our teams made, and I really have to thank the team here at Dana in helping us to get to this point. So Tim, with that, I'll turn it over to you.