Meritor, Inc.

Good day, and thank you for standing by. Welcome to the Q1 2022 Meritor, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Todd Chirillo, Senior Director of Investor Relations. Please go ahead.

Thank you, Gigi. Good morning, everyone, and welcome to Meritor's first quarter 2022 earnings call. On the call today, we have Chris Villavarayan, CEO and President, and Carl Anderson, Senior Vice President and Chief Financial Officer. The slides accompanying today's call are available at meritor.com. We'll refer to the slides in our discussion this morning. The content of this conference call, which we're recording, is the property of Meritor, Inc. It's protected by U.S. and international copyright law and may not be rebroadcast without the express written consent of Meritor. We consider your continued participation to be your consent to our recording. Our discussion may contain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Let me now refer you to slide two for a more complete disclosure of the risk that could affect our results. To the extent we refer to any non-GAAP measures in our call, you'll find the reconciliation of GAAP in the slides on our website. Now, I'll turn the call over to Chris.

Good morning. Carl and I look forward to walking you through an excellent first quarter. Before I begin, I want to thank the exceptional Meritor team for their hard work and dedication to our customers. Let's turn to slide three. Overall, we're pleased with our financial performance and are off to a good start for the year. We demonstrated our ability to manage the business well through a challenging set of factors. On higher sales driven by stronger demand in most of our end global markets, adjusted EBITDA margin in the quarter was 11.5% and adjusted earnings per share was 80 cents, an increase of more than 35% year over year. We're working closely with our customers and suppliers to offset historically high freight and material costs while managing supply chain constraint and a prolonged labor shortage. We're navigating these headwinds and are confident in our full-year outlook that we're reaffirming today. In December, we introduced aggressive M2025 targets, that include growing $500 million in revenue above market with one half coming from electrification, and expanding margins to 13% while generating $600 million in free cash flow. M2025 represents Meritor's fourth M plan. Our execution of these plans have transformed the company. Since the introduction of M2016, we have increased adjusted earnings per share by more than $2 through fiscal 2021 and expect to further increase EPS by almost an additional dollar this fiscal year. We have also expanded adjusted EBITDA margin by 350 basis points. We had a very successful first quarter in terms of finalizing new business awards, some of which we announced at Investor Day. Let me briefly recap the significance of these. We have an exclusive agreement with Thomas Built Bus for Meritorious Electric Powertrain with SOP planned for 2024. With the electric school bus market expected to be one of the fastest adopting segments, in large part due to the infrastructure bill, this agreement represents a meaningful near-term opportunity to accelerate our electrification journey and expand our long-term relationship with Daimler Trucks North America. We extended our multi-year agreement with PACCAR to supply electric powertrains and full electric solutions for Kenworth and Peterbilt tractors and refuse trucks. And we added three new prototype collaborations in the quarter with two different customers, two hydrogen fuel cell applications for Hexagon and a road sweeper platform for Lectra. This makes the fifth quarter in a row that we have announced new electrification wins. In our core business, we're excited to significantly increase our on-highway presence in China. With this five-year agreement, we will supply Daimler with rear axles for the Actros. We also have a new business win with one of our largest trailer customers. This is our first five-year agreement with Wabash and is valued at more than $150 million. You can see on slide four that Meritor is differentiating itself in the industry. We believe our growing number of electrification awards is the true measure of the value our customers place on our integration capabilities and electric powertrain. In fact, our electrification revenue forecast for fiscal 2022 has increased by more than 30% since December. Slide five brings into focus all our electrification programs announced today. I want to make three important points with this slide. First, half of our production programs are in the medium duty, with accelerated adoption rate expected in this segment We anticipate that volumes on these programs will grow faster than on the heavy side, which is all growth for us. Second, we're either exclusive or standard position on all these programs. And finally, we have eight production contracts, three with large OEMs and the remainder with promising startups. We look forward to helping more customers drive to a cleaner world. On slide six, I want to emphasize the importance of the work we're doing at our innovation complex in Escondido, California. With the technical expertise inherent in this operation, we can offer complete turnkey electric vehicle solutions. In addition to the electric powertrain, Meritor can provide the PCAS or power controls and accessory subsystem. Our acquisition of Transpower gave us a wealth of experience in vehicle controls that we have strengthened since taking ownership in 2020. We're proud to be production ready for our electric powertrain and the full electric system. We're confident in our capabilities and in the important role Meritor will play as commercial vehicles transform over the next decade. This is an incredibly exciting time for us. Now, I'll turn it over to Carl. Thanks, Chris, and good morning.