PHIN - Earnings call 4 2023

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Operator

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 Phinia Q4 2023 Earnings Conference Call. Please note that today's call is being recorded. [Operator Instructions] I will now turn the call over to Michael Heifler, Phinia Investor Relations.

conference. your begin may You

Michael Heifler

Thank you, joining We you morning, and good us. everyone. appreciate Brianna,

call this slide Our available were our materials conference issued Investor will referencing website, remarks. we on morning Relations including that a deck be in Phinia's are and

also webcast. We broadcasting call this via are

Joining us Chris Ericson, Brady Gropp, today are CEO; CFO.

first our we or full Please will year corporate comparing mind, in Today, part second keep were results, or and XXXX we results including of comparisons, results when discuss allocations expected to when we year-over-year half XXXX our stand-alone QX corporate BorgWarner. we and with make are pro half to XXXX. XXXX forecast actual for forma costs

are we forward-looking uncertainties. be making and call, based statements, this on will to expectations subject risks are During and which management's current

differ to statements And over SEC the our a results due described including pleasure materially filings. to factors, Actual these my to turn those it's from of variety in Brady. call with that, may

Brady Ericson

you for customers this who remain for our business update and Thank details. X been an supportive to Chris successful. employees highly delivering products quality far. I'd into public been Thanks, who've But customers record provide joining awarding at on us first, so independent me making on pace. of our XX,XXX also like numbers more our have it shortly to hand our over an new to those a let morning. to our thank some months get I'll journey first than and focused Mike. company all and thank more as like I'd then

investors. with considerable continue I call, our last spend our in mentioned customers, and employees I time As to

the the a aligned carbon to on to and positive carbon-free be and for partner The are we practical business strategy solutions for develop of feedback and for our commitment today focus with overwhelmingly appreciate and Customers come. our reliable to Phinia's They robust has its will solutions future. that been core them neutral decades combustion and tomorrow. products, about supportive for efforts

reinvested in further grow employees the Our excited lines to that our are product and our resources are business. and being operations profits and strengthen

supportive building deliver on shareholders' incentive Compensation to being are lines, compensation confidence. focus to has to performance shareholder Along we our strategy Finally, announcing financially believe separately solid and our align interest. that Continuing on our disciplined strategies our these financial shareholder total we will will returns. be that executing company's the team today best with investors are XXXX program leadership and our our approved key commitment of Committee

a our business based As Investor I've EV laser Day that company's of sharing managing and on incentive This adequate on earning cash we cash send since cash organization weighted EV will economic decisions capital. be the year, performance free program annual and last The the for message focus X are are flow. our and been flow. return generating through made free investment XXXX throughout achievement with value metrics, of equally a clear the lens on

that of long-term based be company. peer return relative to a company's shareholder solely XXXX the Our total will compared group incentive on equity

We have with this separate morning details. filed X-K more a

go XXXX ahead ended let's on we a Slide note. Now share to quarter highlights that the X. I'm to on pleased and strong jump fourth

expected. across us lines support regions win margin strategies. will EBITDA adjusted and less our all the for adjusted our the of in new end all to to at customers headwind and find provide Chris with incremental our along product later. range service revised strikes of than the from lower-than-expected I with currency efforts range We and challenged impact North to more above EBITDA for a in in business an perspective. products came great specifics allowed of Providing guidance Chris and and team efficiencies and and our their revenue America has top in continue

A a diesel system light new our a in heavy-duty OEM OEM, GDi global extension to revenue a medium-duty Vehicle conquest core win few business to fuel business an Phinia our revenue. won leading Phinia OEM, supply specializing achieved Phinia leading are supply systems vehicle and back fuel QX segment. retaining contract global a to technology a secured low-emission X. to the to to securing Commercial and in supply systems powertrain a diesel examples Slide in from on important segment hybrid expanding leading income and

want strong performance When time. Slide robust from long-term successful our In approximately quote won accomplished We a to were When strong our XXXX. rates. business, One future. in trying spin X. the the XXXX, to won of I over XX% lot move let's were activity on our And time. win total, the incumbent, conquest. over conquest is win we XX% securing XX% Now we business highlight In to had of performance. and wins we area the operational XXXX the in of we

to offset headwinds working and I'm market our pleased increase share to market objective Our very is results. with well

we aftermarket gains growth in these see industrial commercial to exposure With through our this organic businesses, continued decade vehicle, significant and and beyond.

we independent, and $XX via million returned our to share shareholders repurchases. dividends becoming since Finally,

Now looking the see momentum to XXXX, we continuing.

that ahead summer. expect and from agreements end TSAs material all parent, we the our will of we the Regarding we or exiting our of transition now line, are former original we months by service be believe transitional several time

We're CMAs, of fashion. to all stepped planning end by managed a also with and parent QX manufacturing the in contract our exit or former agreements

per progress corporate We've most new help now original improve or We are we fully quarter of we on of year technologies nearly and also output service key and million our COX and will efficiency finalized. contracts customers per as staffed, million be launching our will their are reduce support the achieve $XX costs also been target $XX that that several our made confident and will the have of engines.

us terms opportunistically continue drive return to refinancing our our shareholders constant chain, even value. areas debt of and and drive improvement supply allow our operations, corporate efficiency favorable for Our to on capital and all long-term shareholder will what more to across business: engineering, is

while our industrial CV and remains you and aftermarket X light As our growing on OE can business optimizing see vehicle X, Slide business. our on focus

We channels. with OES our target greater billion remain our coming achieving industrial and of aftermarket revenues independent and confident than XX% XXXX revenue aligned CV, of in from $X

Slide ROIC-based On efficient growth we growth. our profitable a other will execute shareholder on words, in X, analysis. strategies manner by maximize in our to In just and order not disciplined utilizing very returns investment

and will shareholders our liquidity, to sheet And ensures This of our maximize company stakeholders. all for Page a key and our part strong plan slide consistent us to be will my leads last value. be return balance Capital maintaining it our shareholder to of continue to XX. finally, on reliable a

to and Given decade deliver confident average execution rate we through will the be an we remain our the strategies able organic in X% to growth thus X% far, range.

margins while OES We in coming our way channel, flow, generally by plan We strong independent and appropriate which maintaining and conditions. to in X/X all is economic cash even disciplined performs a of from believe about leverage. our business maintaining revenue aftermarket the this do poor resilient with well

especially supporting and stable, power. sales, has that hybrids, Our in nearly a our of market we GDi, higher see share penetration growing market our Vehicle our of X/X segment, And staying light commercial position our in business rates up Light industrial vehicle opportunity. increasing making the provides business

to and and year it that, pass like over dive results Chris XXXX I'd guide. XXXX deeper into QX full to With our to

Chris Gropp

Thanks, a I Brady, want also our their positive XXXX extraordinary in and their this to for efforts work good morning, note. hard on team thank and everyone. out year closing

parent, please which keep will phasing and and results X operational outlook, payables from we them continue quarters items to them work in our Also, are As we and with on to discuss rapidly TSAs close the be take there next the our continue with out. receivables related former to for we sheet and mind to to CMAs expect out. balance spin it and

generated QX adjusted total sales, in year ago. $XXX XXXX, up we versus a slightly In million

into of basis Our respectively. per an operating and XX were $X.XX. reasons. decrease basis operating than and adjusted were earned of points, $XX year-over-year an adjusted following adjusted EBITDA $XXX income going XX.X% points million We resulting results quarter earnings the of meaningfully a EBITDA, XX.X%, expected XX in million margin in the and adjusted share adjusted of better what we margin These for

revenue anticipated. We had from lower American headwind the cost only million impact North the we the was and control somewhat in softened strong recoveries strikes our $X in by commercial the reduced The had than quarter. quarter, from as less dollar a and currencies which

XX which can you revenue, Page available on made the find website. bridge on deck me our we of Let now our

performance the softness Our affected our in continued business China. by CV in was sales in quarter

positive from China, $XX FX in due mix customer lower just pass-through a $XX mentioned. in inflation We of million, and quarter. a sales was the favorable Volume million mostly million saw sales to headwind as I tailwind pricing and was of $XX CV

the volume business teams their As downside well only approximately with we conversion. move managed Slide to as XX% mix million $X a or impact XX,

additional had supplier by help inflationary our results, improve million suppliers. from savings to costs $XX also offset of We

our all result. from $XX From full additional the segments Volume for in under QX recovered supply due costs mix. efficiencies million from a in year. good Slides inflationary and prior supplier sales drove from recovered As customers of mix quarter, We XX% the a our and a was the we just reminder reported overall business summarize and of our solid the on light page performance XX XX% core over upside base. XX standpoint, conversion inflation to customers a bridge, of margins. recovery from

as segment QX rebounded X strong back were Europe QX months strengthen segment at margins first price. exceeding of operating adjusted XX cost margins aftermarket points XX.X%, from our sales and in our by on performance the depressed basis controls, healthy in

QX to to performance China. inflationary customers. on our Fuel cost basis And a partially, CV margins, segment supplier our year-over-year somewhat lower strong due Looking on at contracted level, from due recoveries while XX.X%, a sales at Systems in

some we we strong have progress, the and/or we'll making are supplier see front, mentioned, benefit settlements. On as XXXX in from resourcing and

a same recovered operating experienced points million. non-commodity XX.X%, mix. at by inflationary Our down XX as weaker weak we costs still prior $XX and margin pricing actions, period year the a coming basis in in were from business adjusted aftermarket ago coming well at not QX controlled costs recovered were from Corporate

$XX expect was approximately corporate in forward. costs million. to million quarterly from QX cash operations going $XX continue We

flow million. of free we quarter, $XX adjusted cash the During generated

I'm inventory QX. focusing of the team overall the end for by on inventory We efficiency. from $XX particularly million proud of reduced

to institutionalize the an we We continue further to production complete capital improve forward going working exit opportunity our inventory realignment. programs, and optimization as see CMAs

liquidity. to turning Next,

net and to cash availability, year than a million of $XXX with of revolver $XXX of foundation liquidity and $XXX our leverage execute us and committed run financial liquidity ended in and strong We We more strategy. total than have business million are to committed EBITDA. our less the Xx ample million giving

I digits in OE perspective, insights look industry-wide assumptions by to share let's up to are expected down guidance North Slide on other digits in at on global mid-single Now CV slightly. single will single to performance, are a XXXX side, Global XXXX. and CV expected flat production XX. volumes high digits. low the our starting and expected market into expected Europe, mid- are to decline be markets From be declining with volumes America to engine while our LV

Our the coming good beyond. in for the has XXXX year stage set performance and

in We grow operational drive with parent our and and former our as and XXXX to aftermarket efficiencies generation expect continue sales. agreements strong cash exit earnings we

to let's Now move XX. Slide

to by and billion of our headwinds up to environment. For market expect billion, growing $X.XX the XXXX, share X% X% $X.X OE being and in market aftermarket gains down Market resilient on offset side. a we are sales difficult adjusted

EBITDA adjusted margins EBITDA adjusted XX.X%. to of to $XXX of million $XXX We million expect XX.X% and

$X.XX revenue. comparisons, related a year-over-year would and of million point for $XX $XXX EBITDA in of rather starting to we XXXX carve-out in This the gives XXXX EBITDA million corporate For million a assume XX.X% accounting. $XX costs than us margin. billion

adjusted reduction Europe. in free we In cash and Phinia $XXX growth cost aftermarket flow. to to million offset $XXX North volumes inflationary XXXX, million expects CV to resolution of issues pressure and expect in generate America lower troubled supplier

rate tax we XX% this between as expected Our to the at or work couple continue to XX% next over reducing is of to below to adjusted XX% be on years.

to to Q&A now want that, message And our call. shareholder strong our on move financial of discipline reiterate and focus I with closing, returns. In regarding the we'll Brady's portion generating

Brady Ericson

up our queue please? you can Brianna, questions,

Operator

first [Operator from BNP Jake with Scholl comes Instructions] question Your Paribas.

Thomas Scholl

the great on Congratulations quarter.

a in dig the First, I on want flow. just cash to little bit

So think will pretty I agree a that's think number. everyone healthy that -- I

So about can a you priorities bit your year. allocation talk for little capital the

net You're already leverage at that target. sub Xx

the bracket, expectations? buyback And we help charges in separation-related that just your you So then quantify how can guide? that should us embedded are

Brady Ericson

locations of net to other on that's us I we guess Obviously, of in capital position and capital our a the as we the we we see key to in QX, maintain apply want at we organic and continue shares stock side to to and lot we're look continued like, driving to to element shareholder going accelerate give purchase that, additional continue on repurchases that inorganic as continue going and did our value. in debt We're a repurchase things. as opportunistically also opportunities. to program, to we a allocation free to first opportunities

at can allocations. of any for we where ROIC And so those optimize we'll capital look

Thomas Scholl

the And second?

Chris Gropp

cash. Was

Brady Ericson

The second, Jake, was around?

Thomas Scholl

just charges of was guidance. separation-related around the the So part the second flow that cash in free

Chris Gropp

are mainly TSAs The IT done. they're will QX. helping for thing only they're into The basically exit. us thing go -- us of are IT bridge which charges, remaining only The majority carrying that BorgWarner the On related. is is separation over for

anything replace charges. really, we're us, going our carrying own they're with So for that to IT

So just it's to other replacement. be really there's no going --

Brady Ericson

Yes. It's in numbers. basically -- it's our

the so, our a their we're our up confident which from clouds those away think and a $XX signed know be, in that guidance. as quite kind cost again, and why transition creating we've transitions as million so we with clones corporate we it week and maybe the current going our to that's are is or to lot where And costs of our costs I of servers, of servers in guide. new we're overall where we happened included contracts generally, few in actually had in last and --

Chris Gropp

rate So way, other them and cost. we're paying Whatever said of just we replace another it's same costs. at replacement for IT services the generally

Thomas Scholl

you points pretty And you previously, gain. X when you've XXXX, to share we've from GDi of conquest Perfect. about seen talked stay targets, flat about revenue And for your wins said then to guys XXXX XXXX need year. strong market this that

the you you. just about next guys the update an of on in over few second Thank how decade. share you provide the can both So gain years and are half thinking

Brady Ericson

Yes.

launching plug-in remain I think next hybrids lot happening in to that's win. kind programs, share whether hit as Getting a very be think going into market increase. that as confident in closer general, get and specific XXXX There's being can hybrid I kind rate years We're to we'll we And are of gains. quoting able continuing volumes we in to to strong. still convey the our to more still numbers. those of continue growth

our But at this point, we're still very targets. confident XXXX in

programs will programs. just most mentioned, X the I awarded a say, in, a later, are As as some and some know, long bit bit faster, now little launch of they're length little you roughly that years

the feeling on And very our so GDi we're side. positioning confident in

Operator

Your next Murphy with comes question America. Bank from of John

John Murphy

far a of or look maybe to as back to shift a GDi that shift wanted you the line sputtering back a and a a gains is push on Brady, a hybrids emissions towards be as side powertrain there years your up next higher and or just hybrids I and exposure share obviously, as segment plug-in and pretty follow material on there's EVs I might over there's as at fuel questioning lower mean, are the the this, hybrids. few towards and economy. obviously

XXXX you your So targets. you your at your outlook sort in in are penetration of generally look encompassed your in hybrid what as forecast,

And some early of here? potential are signs upside you seeing

Brady Ericson

content if than around obviously, a on GDi for per PFI application. good hyper stick is And higher hybrids GDi penetration significantly Yes. on rates higher I non-hybrids. us. a mean, thing than vehicle generally obviously, is that's obviously on longer, the

put stay and going of have are think, wins see position positive the good very penetration I I are are, now, kind in a hybrids. they to that hybrids in and if where think lot of us we a continued we

keep going really on penetration an people We're on hybrids. were rates are -- to this I continue view the to of think where strength surprised eye year

on consumers people good what really XXXX. a in be to going solution think in to rates hybrid XXXX, a that consumers difficult they markets many them think now. are think significant solution world always of amount and penetration benefit, buying -- get are and COX think realizing general, why But for reduction because be a in of I I right lot I think the a hybrid is the is going to it's Which a predict for So are lot we many I environment.

rate, And so forecasts, higher we'll a do penetration that. those hybrids benefit I have from think I as people update and think

John Murphy

second 'XX a the seems making Yes, ahead of is we're bit potential seem good plan. talking in is much How savings there outlook? like Is about the does cost progress because little And just $XX then rationalization in And It any that you're Okay. a million it included on outlook? upside question. executing of like targets. included what's that. 'XX and that you're of

Brady Ericson

Yes. I costs at the as and mean corporate costs includes all all the employees we're again well. compensation stock also right for our on of line overall corporate

$XX been right last with of we're And line think in million I ], right -- I think, couple now, so we've and [ that. it's running the quarters,

I caused think, of we'll well year. some supply obviously, continue headwinds to that areas this as so operational in as drive And other other some our chain improvements

so is team now really and together. And position in the good think coming we're a right we

Chris Gropp

baked in. clear, be our to XXXX plan, is it just And in is it all

John Murphy

cash potential in you. down time And on to to that getting that so and your frame are a flow your amount mean similar forward? by XX% last outlook. that taxes the cash understand That's 'XX to down Got from or helpful. rate tax XX% just impact grinding on going one XX% then the What's the of would on just that target to

Brady Ericson

misspoke. may quick One -- Chris think have I Yes.

XX% so I XX% they heard think and or towards heading down I below. you XX%, we're think XX%, said

well... ask... No, heard as Mike and I'll XX% I then So

Chris Gropp

misread. I Sorry. wishing. was I

already Now, with a so this to, in going year, to plan of but bit time. work these we've things put it, place a obviously, take it's

get between just much period time I get to away and XX% business have this at said, it in it all going year, have and a place. we So to going stuff we're anything to of that's as so we But because down. to takes good continue of XX% this chunking overseas,

So it's of years. couple going to take a

John Murphy

But be delta. that cash, that that will correct? Is mostly

Chris Gropp

Yes.

Operator

from comes question Fargo. Langan next with Your Wells Colin

Colin Langan

it up you content hybrid. to opportunity? Is follow on well? and me that a opportunity just hybrids take do the GDi higher per or hybrid you the product on remind actually have more there's vehicle rates Just Can on as of

Brady Ericson

Yes.

I hybrids think is higher on things. penetration combustion engines. One Primarily on a next-generation is one combustion. X rates GDi on bit traditional than a are working little because traditional no

newer the hybrid to technology GDi using. a while engines a standardized to GDi so similar. be whether and And it's GDi tend a or be From is content, key is hybrid going they're a

control With units. that is or ECUs now the of we're said, that engine winning one things our

And those reselling we'll And for those sourcing is line kind some they're more We and and supplying be were customers. product guess, our typically sourcing so are new, of from products systems. those with the of former that our there parent designed, and us. next-generation directly a to I purchasing those

we GDi So system. overall there is that some on content see increase

Colin Langan

the the life are hybrid Got they develop it. at the lot of programs conversations Are to vehicles. been place pushouts changing Are sort for your and looking part? most that electric sort new just Or of extending are of a already customers of on in And programs? there's seeing all? next-generation you engines on

Brady Ericson

for few see in a I years. the us, we slowdown in code mean didn't activity last

activity high. code the still so And is

a, were more expecting going of volume be they're than And think extended. lot it they being higher want volume a much so around or is originally or I they to

Chris Gropp

come GDi a we But to had on and is we to some GDi extend make and mean, sure different. really that not be to customers ask before in I come for applications really little CV see and there. going they're spoken we're that then did looking in

Brady Ericson

Right.

we that hybrid hybrid applications on customers now number the as had that think asking originally a we're are we've as on, I of for and many Xx contracted. side,

so And programs. necessarily new not it's I think

it's think I and/or extensions. increases the volume

Colin Langan

year? high your recovery and expectation could Are assumptions? then into Okay. the have expect labor just A suppliers get lastly, from seeing are to recoveries of do inflation inflation, been get what headwinds cost your calling you full this lot other year. continued And customers? they that this out And you

Chris Gropp

this world the for because increase rate different around next X%. labor X% blended is Our year it's between and

areas higher, we to cases, -- leveling few part, but most the a Mexico. reimbursement it for much And the those that's get For year. where world last because out, it back in are there expect it's in got instance, is in do we

We would that call, will I go what of out reimbursement it's place the of sort any for original the, norms.

Brady Ericson

overall see do little I muting costs, we But inflationary a guess, bit.

in labor there some not that high looking So or inflation the years of but as items to it I as last was still think couple into. be going we'll it's be specific are pockets

Operator

comes from Dong Bank. next question with Deutsche Your Winnie

Yan Dong

end I bit revenue more maybe seems was wondering if or down, maybe XXXX can into the if a a on you markets. gains like it's was It you you flattish on the the is and talked maintenance of of outlook. just sort that dynamics and wondering performance, but more revenue earlier? of comment various flat penetration details mostly I share about on your your go detail even bit can for

Brady Ericson

be in pretty America in North general, was CV going especially are markets year relatively to a and Yes, the depressed, I robust globally think market. Last Europe.

this regulations kind 'XX of people preparing are year new token, think prebuys. rebound be for down and and the expecting potential to 'XX they're emission same I with

customers still we're be with that working now making on we're And for capacity additional prepared sure installing so to prebuy.

OE business of relatively continue that which part CV we share see to see demand we strong on our is the cyclicality the products is flat. for our still gains, but and just why sector market it's So

on penetration out are lot despite market Production of side, increasing. EV the there, about engines. vehicle for mentioned is still EVs light X% press the down a we the is As because

able down see although to share X%. again, that those our penetration, -- for gains, in a down expecting, engine business, in back with so offset bit market the position. our OE we're gain we'll But and put light go And slow in some us to with will business. pretty production a people light about continue of and our good increasing to flat our market slower vehicle headwinds down with And were and little GDi will still being than we market, a EV Hopefully, up. market share global vehicle

the in think of And that's a away I continue continued vehicles of on market, overall keeping is business benefit as of good the continue for with gain low our strong just be aftermarket well, aftermarket buying the think, one X/X to balance, going have digits. and Regardless X/X their revenues to our service the the growing to it they're to close as business overall growth road. still momentum just and is that in aftermarket area. to we a people delay customers to purchases, our mid-single we I chunk parts

Yan Dong

That's very longer-term helpful. question. maybe And then a

on also the relates limits was target from potentially earlier and down EV like target there to of do and the you billion perspective. slowing potentially a upside might you what end as for to are of EV $X potentially your on years just now getting think of tailpipe there's opportunities it emissions. administration decade at sort now point relaxing in lower that regulatory revenue, years. have curious requirements like adoption Just I some adoption slower and questions And

Brady Ericson

have can we're are I bring value. provided drive to going mean higher programs going we try think continue that obviously, significant to to we to that

us billion, going X% roughly to our acquisitions X% existing is and are average a In And $X help #X our using portfolio. to to some cash revenue always free going that as as continue our relatively aftermarket it's percent -- in focus. modest our a acquisitions assumptions with increase in to those that's as growth our bolt-on organic of be well modest that's So flow. assumption CV

is opportunities our -- us start that there what Are Where obviously There's could are assumptions plateau. there think Obviously, be will to does going I And significant the different higher? penetration it? for out question that with opinions rates. still drive be. EV it there. where is be to to going

think going going to grow, they hey, XX%. they're around but to saying, are are Some EVs plateau it's to globally, continue

the Not And it better And competition us. for Is of are we'll that increasing. declining. we market see. kind XX% the again, lower, in obviously, a or it is XX%, is

continue So there's to also gain and complete we us to provide ECUs those And calibration there's as share. us definitely customers. opportunities for systems, opportunities I continue to services including content earlier, more for as for mentioned

Operator

question next Levy Dan Your comes Barclays. from with

Trevor Young

Young Trevor on for Levy. Dan

I this you -- bit first, that. touched yourself here curious, area. your curious on just new highlighted designed wanted from But little ECUs Electronic buying I parent, to just color bring And a former the So little bit also hires if And And first like out give did team then and you the you growth called Systems launched a things year. go a all on within do I was in versus you in as you just internally to remarks your just could more was what ECUs you're doing Q&A. the that in developed being The progress... a area. this

Brady Ericson

former probably ago. parent, about years mean, over our from we started close X to Yes. bringing engineers I actually

we inverters lot next-generation and as within so focused and doing high-voltage a already engineers their our of started And that on walls. calibration were software engineers had their so all were X engineers the all and we already the

split. they were so that's how And

The and was former the had software on we all our hardware side and engineers. calibration parent side,

support so our to folks time needs. they hardware started did have bringing over And ECU as we the

on as ago. Phinia years system started it be X first launching I our our of year. to this going actually about design so we're mentioned, And part And later ECU as

source launching Design application years in Phinia Phinia we It's application, hydrogen actually well. and in our as a few we'll the and first next won be that

our will on will so former our starting based parent be already. cases, software. we're our as programs supplier, progress a and and but and In some it And designs use that calibration we our

on continue we'll and to these more less into more have What hybrid we their of they is so with resources of And some awards their resources applications. customers recent combustion and grow electrification as business. moved that also see have

and we're want system, So ECU them. that for including source that and the services supplier they means service then provide to entire fuel the calibration to one to ready

Sorry, progress. on the metrics in

I continue that our sourced from developed number examples we Phinia year gave designed a to and started think grow Phinia to through the customers that of decade. with I being and design we'll awarded this see and

back and opportunity if think think market us share had to an billion there go rates. mid-teens opening see Investor back up see our grow to old with our hopefully, that's in And a you deck continue $X is you'll Day and us us we closer of going on what addressable to penetration CV there fuel diesel was to June, for I our where line opportunity like we injection we after. GDi to in ECUs,

Trevor Young

That's been And wanting out GDi, initial I it? I guess portion entering seen guess the been or very you Day, of the of you has of any on that. with space longer coming laid suppliers people of gaining from exiting just it's competition? an into then bit. share talked just quite curious, I interest -- hybrids helpful, have in uptick was that even I kind Brady. in about more a seen indications maybe deck you more in suppliers know space -- your stay either bit to the Investor a you in late, Have

Brady Ericson

refire that and and resources number next-generation the to that product. product. R&D these to it example number very technology. And for we're that up of great competitors our the to Bar. developing I a of Again, a production them technology the to continuing and be are pressures XXX some of to difficult parts, It would easy calibration next-generation No. is years bring It's one and develop develop have then taken develop their not. stopped not

how before to I to going stay back I'm then stay OEMs exit to again. have that if long they it of skeptical else. if committed be and that they to long that the because are would OEM, an how I'm And customer please very to market And me, resource told business are comes they are in somebody to going suppliers already these supplier a the

provide reliable a my why said of this of to I a which for that that's And statements. so the come supplier one decades want we things why successful. we've in that's I been space. them, lot is And Customers think

our competitive have come back quoting, exit to going announced them with difficult able confidence again. gain from stopped to be the product. competitors have that some think be And -- in for their I of to it's a our to and OEMs very

Operator

question next Joe with Your comes from UBS. Spak

Joseph Spak

is there stated has willing I leading of of or sort help resources, wondering not backed commit of could about maybe I have your gains. capacity right sort from actually guess to wondering invest does sort come that sort to capacity industry us utilization the for I'm of suppliers are to maybe of stronger coming because your I'm And it of down longer if you've sort perspective, to product. wanted your you up away, because on GDi or market like right sort support seem for further your down. understand just is I pick think need clearly OEMs not But share which basically other competition to

Brady Ericson

of kind data, I prior think Yes. mean the GDi. a the of turned give kind in into I guess I the Delphi they kind bad I'll good overcapacitized of you that in --

And primarily Asia a taken seen we've and so that some we significant actually capacity we and some where in wins North the on of out regions of new have moved it we've into see where stronger our business. in uptick plants actually in and GDi. And some excess America demand,

we've of of as think low-pressure a diesel using capacity commercial mentioned one well I and kind excess converting system. And as that But we're hydrogen capacity over to both also injection applications a as of it technologies that for hybrids. some direct I the of well use to so GDi as that able support been to same

to And actually injection stringent diesel in off-highway XXX range that so XXX emissions. Bar launching more we're applications of direct that's helping their meet them for

this think we've I even -- uptick some so in in got with And demand. general, of

hydrogen applications. necessary and capacity And think off-highway I that got it we've support have we're capacity it. to we to also still probably enough reallocating

Chris Gropp

have this which want incremental depreciate some asking return gone period X-year do to and that had buy a has assets, but us if the a whatever but they're they program, program of to over giving it time. if is it's we'll on of some add again, and for, we've a the We to are into that view customers capacity normal small that bits

long-term So very trend. not a a still being trend does we're careful short-term because make obviously,

but... carefully, trading we're So

Brady Ericson

our support see outlay with I -- Yes, we to at and wins market guess, don't gains, our business significant, least new capital share a these programs.

I think applications. capital of still the is our bulk on CV the off-highway and

Joseph Spak

to has know down say comments of I calculate, is industry Yes. industry-wide? this I on capacity your you would competition, difficult come based guess. sort more on But

Brady Ericson

at think to mean light we I what million, at think down. I one vehicles it's were predominantly $XX starting I again, what, that $XX peak million point combustion. come

I coming And still have exited stop programs. capacity, has there's market but some some and/or out quoting as so capacity think of the next-generation been

has come I well. in so I the and down marketplace, capacity And think good that's as think yes,

Joseph Spak

I you Okay. said right just that million But At EBITDA. comparison. pretty within $XX with EBITDA are would of of then and we midpoint, Slide Bridge, puts sort year-over-year, XX, the not sort sales for think And larger takes on million of the million [ pretty $XXX there back flat should to the you for considering? maybe guess I ] outlook sort although suggest any of base flat just $XX be is sort wondering

Brady Ericson

No.

light. allocation, full of comparison see $XXX pretty think we in half a the rate again, because have the think, first can million was year once you corporate a our I base in we they were cost run more is the

improvement normalize $XX XX we of more in so about only EBITDA seeing in the we're midpoint a if million and And $XX that revenue. number, to to million

$XX the dealing the additional revenue $X another driving and well performance conversion long and So as obviously, million that conversion some that's -- to improving conversion, as supplier challenges. on that's on driven $X incremental of operational then that's and million improvement million probably really with by revenue. and strong on

Operator

There this further at are questions no time.

Brady Ericson

for looking another of 'XX this Well, our the Thanks, year call. and what We're in and team XXXX has joining beyond. year really forward to good proud delivered really great. in everybody,

investment. for and very your interest much thank you So Have a good day.

Operator

This concludes today's conference.

You may disconnect. now

PHINIA (PHIN) 21 Feb 242023 Q4 Earnings call transcript