PHINIA Inc.

Good morning. My name is Brianna and I will be your conference operator today. At this time, I'd like to welcome everyone to the FINIA Q4 2023 earnings conference call. Please note that today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, simply press star one again. I will now turn the call over to Michael Heifler, Finia Investor Relations. You may begin your conference.

Thank you, Brianna, and good morning, everyone. We appreciate you joining us. Our conference call materials were issued this morning and are available on Finia's Investor Relations website, including a slide deck that we will be referencing in our remarks. We are also broadcasting this call via webcast. Joining us today are Brady Erickson, CEO, Chris Kropp, CFO. Today, we will discuss our Q4 and full year 2023 results and forecasts for 2024. Please keep in mind, when we make year-over-year or second half 2023 to first half 2023 comparisons, we are comparing our standalone results, including actual or expected corporate costs to pro forma results with corporate allocations when we were part of BoardWarner. During this call, we will be making forward-looking statements which are based on management's current expectations and are subject to risks and uncertainties. Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings. And with that, it's my pleasure to turn the call over to Brady.

Thanks, Mike. Thank you all for joining this morning. I'd like to thank our more than 13,000 employees who remain focused on delivering quality products to our customers and making our first six months as an independent public company successful. I'd also like to thank our customers who've been highly supportive and have been awarding us new business at a record pace. I'll get into some of those numbers shortly and then hand it over to Chris for more details. But first, let me provide an update on our journey so far. As I mentioned in our last call, I continue to spend considerable time with our customers, employees, and investors. The feedback has been overwhelmingly supportive and positive about Finian's focus on its core business and strategy for the future. Customers appreciate our commitment to combustion products and that we will be a reliable partner for them for decades to come. They are aligned with our efforts to develop robust, practical solutions for today and the carbon neutral and carbon free solutions of tomorrow. Our employees are excited that the profits and resources are being reinvested in our product lines and operations to further strengthen and grow our business. Finally, our investors are supportive of our strategy, commitment to being financially disciplined, and our focus on total shareholder returns. Continuing to deliver solid financial performance, and executing on our strategies will be key to building shareholder confidence. Along these lines, we are separately announcing today that our compensation committee has approved the company's 2024 incentive compensation program that we believe will best align our leadership team with shareholders' interest. As I've been sharing since our investor day last year, we are managing the business with a laser focus on generating economic value, or EV, and free cash flow. The 2024 annual cash incentive will be based on the company's achievement of two equally weighted performance metrics, EV and free cash flow. This program sends a clear message throughout our organization that investment decisions are made through the lens of earning an adequate return on capital. Our 2024 long-term equity incentive will be solely based on the company's relative total shareholder returns compared to that of a peer group company. We have filed a separate 8K this morning with more details. Now let's go ahead and jump to the fourth quarter highlights on slide four. I'm pleased to share that we ended 2023 on a strong note. Chris and I challenged the team to find incremental efficiencies and with their efforts, along with lower than expected impact from the strikes in North America and less of a currency headwind than expected, We came in at the top end of our revenue range and above our revised guidance range for an adjusted EBITDA and adjusted EBITDA margin perspective. Chris will provide more specifics later. Providing great products and service for our customers has allowed us to continue to win new business across all product lines and in all regions in support of our strategies. A few examples from Q4 on slide five. Finia secured a new conquest business to supply a GDI fuel system to a leading OEM, specializing in hybrid and low emission powertrain technology in the light vehicle segment. Finia won a contract extension to supply heavy duty diesel fuel systems to a leading global OEM, securing revenue in our core commercial vehicle segment. And Finia achieved an important business win to supply medium duty diesel systems to a leading global OEM, retaining and expanding our incumbent revenue. Now let's move to slide six. We accomplished a lot in 2023, from the successful spin to strong operational performance. One area I want to highlight is our performance on securing our long-term future. In 2023, we had robust quote activity and strong win rates. When we were the incumbent, we won over 90% of the time. When trying to win conquest business, we won over 60% of the time. In total, approximately 40% of our business wins in 2023 were conquest. Our objective to increase market share to offset market headwinds is working well, and I'm very pleased with our results. With these gains in our significant exposure to commercial vehicle, industrial, and aftermarket businesses, we see continued organic growth through this decade and beyond. Finally, since becoming independent, we returned $47 million to our shareholders via dividends and share repurchases. Now looking to 2024, we see the momentum continuing. Regarding the transition from our former parent, we now believe we are several months ahead of our original timeline, and we expect that we will be exiting all material transitional service agreements, or TSAs, by the end of summer. We're also planning to exit all contract manufacturing agreements or CMAs with our former parent by the end of Q2 in a stepped and managed fashion. We will also be launching several key new technologies that will help our customers improve efficiency and reduce the CO2 output of their engines. We've also made progress on our corporate costs and are now confident that we will achieve our original target of 80 million per year or 20 million per quarter as we are nearly fully staffed and most of the service and support contracts have been finalized. Our constant drive for efficiency and improvement across all areas of our business, operations, supply chain, engineering, corporate, and even opportunistically refinancing our debt on more favorable terms is what will allow us to continue to return capital to our shareholders and drive long-term shareholder value. As you can see on slide seven and eight, our focus remains on growing our CB industrial and aftermarket business while optimizing our light vehicle OE business. We remain aligned and confident in achieving our 2030 revenue target of $5 billion with greater than 70% of our revenues coming from CB industrial and OES independent aftermarket channels. On slide nine, We will execute on our strategies in a very disciplined manner in order to maximize shareholder returns by utilizing our ROIC-based investment analysis. In other words, efficient and profitable growth, not just growth. Capital return to our shareholders will continue to be a key part of our plan to maximize shareholder value. And finally, maintaining our strong balance sheet and liquidity ensures we'll be a consistent and reliable company for all of our stakeholders. This leads us to my last slide on page 10. Given our strategies and execution thus far, we remain confident we will be able to deliver an average organic growth rate through the decade in the 2% to 4% range. We plan to do this in a disciplined way by maintaining strong margins and cash flow, all while maintaining appropriate leverage. We believe our business is resilient with about a third of our revenue coming from the OES and independent aftermarket channel, which generally performs well even in poor economic conditions. Our commercial industrial business, making up nearly a quarter of our sales, provides a stable growing opportunity. And in the light vehicle segment, we see our increasing market share and higher market penetration rates of GDI, especially in hybrids, supporting our position that our light vehicle business has staying power. With that, I'd like to pass it over to Chris to dive deeper into Q4 and full year 2023 results and our 2024 guide.