DAN - Earnings call transcript Q2 2019

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Operator

Good day and welcome to Dana, Incorporated's Second Quarter 2019 Financial Webcast and Conference Call. My name is Dennis and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session, will be recorded for replay purposes. There will be a question-and-answer period after the speakers' remarks and we will take questions from the telephone only. [Operator Instructions]

Barber. would over begin of to and Planning, I turning presentation Investor time, Strategic call the Dana's Craig this like the to by Relations At Senior Director Please go ahead, Mr. Barber.

Craig Barber

us everyone, Dennis, you, phone. for XXXX call. and quarter morning, today Thank on our for good Thank the you earnings second joining

Incorporated. site. be release are being is recorded copied, supporting materials You'll press are without consent. posted call and find our this not on Today's now property They of or rebroadcast Dana, the presentation recorded, morning's our may investor Web written and

includes Today's today. Dana's from results statements those presentation performance. differ forward-looking for about our could comments future expectations suggested our by Actual

about in including public information results filings, factors Harbor future reports in affect are our the with our Additional our summarized SEC. that statement the could Safe and found

Jim are Financial and President President Kamsickas, Executive Executive and Chief Collins, Jonathan Officer; morning this Presenting and Vice Officer. Chief

Jim. Now call over it's to turn the my pleasure to

Jim Kamsickas

you Good morning us. thank for and joining

our $X.X backlog Dana report Dana. achieved to driven bringing our consecutive half also first a This from market Pleased to quarter recent sales was of our sales and execution our demand, second of $X.X by year-over-year benefits growth record XXth of billion, billion year-to-date and of acquisitions. quarter strong sales

XX the a million, basis of than the point XXXX, Our over quarter second was adjusted is $XX improvement EBITDA year. quarter margin, XX.X% resulting for $XXX million which higher in last a

the XX% year share. increased Our $X.XX share over last diluted earnings adjusted per to per

We have key several quarter. highlights this

discuss a by as expect our are stable affirming year just markets we offset moment. will headwinds we guidance currency we ranges the for which First, in

application the equity to Systems what our component the this acquired action strategy, the moment; Oerlikon a earlier the electrodynamic in And possible took exciting you with in an refer to electrification will year. manufacturer also the high from Prestolite of portfolio of by Graziano PEPS. we element just I enhance purchasing business remaining that's share made our performance through Dana one in E-Propulsion as acquisition or electrodynamic quarter

new opportunities Dana. exciting We are for seeing already growth

Lastly, received more for Dana few highly outstanding quality centricity, in capabilities. drive share will this just in recognition world-class customer industry and a we service, have to minutes. I our details customer advanced continues quarter technology major

like would X, global macro perspective I to turn Now, share our Slide to to indicators. on

balance As you know, as strength conditions, regional base is some "Build and well disputes. regional where us customer Dana a see a operational general we provides diversity issues as as our we key This it strategy. to global relate our we and from insulation of sell" manufacturing in trading broad global at When the key strategy macro scale, with look global footprint Dana.

Beginning like end driven construction continued markets miles in inflation purchased This North positives growth all growth Dana's investment. truck low benefiting capital freight from and translates economic are more our sold equipment for America, relatively business.

However, few pressured our not to can business. discuss top-line currency to are this generally And strong in translation trade disputes minutes. imagine will helpful by dollar. you as the States a impact is Jonathan due our being United

of the the May. effective aluminum by Canada States, encouraged proposed and North Free are within However, United Trade made in tariffs and we Mexico Agreement exemption were which America, Mexico, Canada from on

our mainly customers. operations primary domestic Europe to U.K. Moving serve

remainder to relatively is continued of Europe because a remains its concerning conditions the More the However, expect we economic on stable Brexit of a concern in the effect growth where year. potential for local with currency euro sales the back in has the weakness the we the compared dollars impact our of the for reporting it States United as revenue purposes. and on translate dollar

technology our segments. further highway and We this headwinds which year impacts are expecting Euro power primarily

as the in manufacture relates United of to trade to we potential European XXX escalation which the impact limit previously we regions between of autos. countries sell mentioned, where primarily Section I disputes As the States on helps and

lower around economic of year. to stable but GDP conditions Moving in growth nearly Brazil improving quadrant South to with expecting next the look in into X%, are we X% America, left as we

biggest real the currency dollar America, As our has in as remains weaken with last primarily the against commercial Brazilian segment. to concern our continued over This South quarter. vehicle the euro, impacts the

In cars. this from monitor work GDP most that visible We last in well our impact continue slowing year to X.X% with economy about passenger with for recoveries inflation lower our customers suppliers are understood growth that to and economic be to China's year Argentina and with down is ensure X.X% it's the being demand aligned. expected Asia,

economic market Dana overall exposure exception for car of limited. Dana to for expect Technologies year X%. expected especially the to when China at year important we and is growth the about further comes energy this to growth passenger to stable rate X.X% India, relatively In market next a vehicles. growth see to remain the Power of is new at economy With business it an X.X% remains

for our we opportunities and commercial especially expanded have good highway country as the in Our vehicles presence see growth equipment. in off recent acquisitions

Asian of greater of discussions are Key cover broad could inflation. major commodities commodity to any And from we of while this have and are to encouraged tariffs cost we Section lead finally, remain a reengaged, the XXX with tariffs disruption China year them for categories trade not mostly year. been current and past expansion for have Dana flat that stable China India, currencies that expect Thailand the remainder

me by Slide our with business X an segment. of turn for overview to Please

while overexposed benefit any or one gives a can end we our not all and business market. As multi-market across with Dana's as strategy changing global us advantage technology being in mobility and to conditions investment approach unique leverage from market scale our three markets

our have stable we and remain in the end markets them seen expect years, year. to few past we all the the of three growth remainder Over throughout of

and page Duty Ranger Super On the to the Wrangler North see and as light left America SUV light and Jeep the Gladiator. truck markets strong of continue the demand evidenced vehicle we the strong segment, and for for in in sales by Ford

be expectations. with In addition, in continues the line key inventory vehicles levels for to these

year. good as to achieved for typically group quarter, second is but launching we continue vehicle new the during and And time finally, light reminder the results great second a margin the quarter programs. Our success sales have peak

Our to continues team's customers. and commitment excellence for value our operational to focus drive

Moving medium right to side page, duty truck expect of to X of we the Class strong through America production year. North and remain the remainder the the

continue in bus Brazil with We see over also X% to up improvements truck last production year. and

remaining as mobility as in well vehicles continue growing in PEPS commitment As in-house investing mobility in largest electric types I systems purchased to in manufacturer our demonstrates the and world's manufacturing we motor capabilities highlights, Dana's inverter for the of the and equity all This mentioned expanding China. market. sector the electric electrodynamic

drive demand Moving business business. page are left plan market is we off highway in stable seeing target as this anticipate to with to cost business, on normal part lower down the We the end integration off all positive synergies growth markets of highway accounts our in for already the in year. the system the seasonality

having starting strengthen great and and been of we organic commercial the great gains. as off have highway in acquisitions a leveraging of deal have marketplace it's share channels off in to terms focus our pay to placed success We the growth and on

power and unfavorable other have mix And highest we technology segment finally, recovery have in to margins commodity sales segment and segments. This the passenger primarily has rates trough than levels remain the small have segment significantly trended right of the where cost, business our our that is been due in bottom lowered car a global where lower. percentage of market demand in in elevated are at aluminum the and

vehicle that to look remainder will be we product management inefficiencies on and product launches year, the battery expect BMW in the will General advanced moderate technologically continue As programs programs. to to thermal commodity cost Neo see Included we as launches of solutions currently a cooling for engine a be rate Motors at profitable are in are costs driving and driver growth. growth run we new with our the new duramax and electric

I we electrodynamic capabilities this highlights, our to in strengthen actions As to in mentioned take further have quarter manufacturing continued products. the

the X, Prestolite. Hydro-Québec venture equity TMX. arm manufacturing PEPS us capabilities expand transaction stake and for TMX This is enables inverter and Slide vehicles. venture. minority joint types PEPS all of initial the to XXXX the motor recently called Turning from products of we had and our in-house Dana electrodynamics joint a acquisition acquired as of remaining We acquired TMX manufacturing Dana manufacturer our of control to between now part of

well partnership in January. XX% of Additionally, which Hydro-Québec Dana our Hydro-Québec of manufacturer remaining PEPS broadening XX% with motor portion as capabilities on and and motor are acquired as of Dana and SME inverter the purchasing inverter

of in energy partnership experts North expanding storage The Hydro-Québec and energy investing across growing all sector our producer three commitment end electric leading and of to mobility clean America's in conversion markets. in demonstrates our with continue

how technology share high Turning you electrodynamic to with it's suite traditional where in being of is combine our example our to When technologies, technology, priorities capabilities hybrid performance a business we to across application. easy utilized e-propulsion electric I'd with all you Graziano for earlier the this see X, end full sector. Slide we an and Dana's of electrodynamic to advanced like the demanding are lead Dana's was year, positioned development our this software to acquired strengthen capabilities and important vehicles When markets. in strategic one engineering significantly and

which first that the traditional can per Ferrari's Dana drive, a the accelerates a one partners battery combined strategic to to turbo engine X.X Stradale XX SFXX from and built its kilowatt configuration system This zero powered of is features and the in electric per rear electric operate hybrid wheel ground X.X lithium ever a plug-in just hour hybrid hour drive vehicle, BA electric with The proud pack. production for by out wheel an front featuring includes miles unit XXX as put up seconds Dana's in from drive pure front electric drive electromagnetic horsepower. their combined thanks be hybrid to vehicle plug new vehicle very all brand car fastest disconnection. a

end of suite well traditional demand customers all traditional advanced driving performance requiring customize Our who as provide e-propulsion across technology our innovation technologies markets, extreme more capabilities. those our full electrodynamic cutting-edge as can

and leveraging electrodynamic are roadmaps. across capabilities all technology innovations propulsion our these We

Chrysler. Slide customer named quarter, alone, past than Fiat again Awards. May, for we how being the Motors Industry X Motors is recognized. was the This Dana's are customers This been by year year passion highlights for General of XX General In Last supplier two thermal in has leading AdvanTEK this longstanding management axles honored Dana with and and most products recognized centricity to of our more battery for powertrain year, and the class recognized vehicles honored we second and we and America our supplies including technologies solutions, front driveline including were Spicer which Dana Spicer electronics cooling propshafts. were rear in North GM for South for year a row. and Dana year

Dana has General and Motors reinforces a century. prestigious is, the of over may of award the through that aware you been supplier that existed of our Something years. helps This relationship technologies not maintaining be importance consistent for a innovation partnership to XXX strengthen to strong a for high-quality has delivery

Equally a driveline technologies deliver a exciting, one long-term were our AdvanTEK We proud and as the and well finding nearly Dana longstanding a named and honored. as to ceiling vehicles recognition companies year importance XX diversity FCA are success. and This to award better partnership. supplier by for for Dana was for the axles is position team way products back demonstrates our thermal of Spicer rear and our propshafts, commitment, diversity their very we front including everyone of culture. ensure recognizing supplier FCA, core dates inclusion of XXXX and and supplies to our Spicer our customers with only places which continuously value of FCA also finalist Dana century

this Thank you time morning. for your

like I'd turn Jonathan walk you the to through over Now, it to to financials.

Jonathan Collins

Thank Jim. you,

of XX our the last is year. period financial an compared quarter results Slide overview same with second

billion increase the off-highway $X.XX in strong our an vehicle light growth accretive Second last same period demand to in businesses the driven compared sales or billion, $X.X by vehicle and acquisition continued our year quarter top XX% of segment. commercial over and

ameliorated liabilities pension million by $XXX prior million the $XXX margin basis for $XX the million U.S. related million XXXX. point third-party a quarter XX benefit a due settlement for income insurers, by The year Earnings tax driven a the were XX% increase or over EBITDA was to a decline was of profit $XX in to to Adjusted million $XXX net quarter of of is charge was of pension of transfer the one-time XX.X%, second net million XXXX. $XXX $XX compared which the plan net to from primarily net million, of from of structuring actions. improvement a which loss

When income year of basis, to compared an the to second one-time adjusting million net XXXX was million $XX $X.XX, on the growth. second for last XX% than non-recurring last excludes items increase of comparing or each in this $X.XX for last $XXX quarter which these million in year a like-for-like impact period, growth. higher the XX% adjusted year of or Diluted $XX EPS quarter items was

$XX free the cost contribution is to flow excludes $XX cash a year pension largely acquisitions. million year last to Adjusted contribution cash million than Operating million, discretionary pension the included related lower transfer. discretionary million the the was pension which $XX $XX flow one-time this associated with due

with XX at for a in QX. profit Slide growth the sales turn me now look Please to and closer

ascribed quarter second four The year growth EBITDA last is key to to adjusted factors. in sales and compared

Jeep by overlap April. end of conversion This reoccur growth $XX overlap expansion. of due offset backlog net this Wrangler in market organic of organic profit $XX impact added points of of XX million the million the well growth in increases year. in the First, million demand. continued from added the primarily as as a and year-over-year margin headwind ended was delivered to our basis not that $XX The sales did programs The Wrangler profit

Conversion and growth the year million will remainder we the two the energy through and Fairfield million Graziano Oerlikon quarter. for we steadily sales the improve organic profit to the on in in plan. businesses as from acquired growth from inorganic Second, continue $XX prosecute contributed cost of the Group, in $XXX

by sales and EBITDA million adjusted during dollar U.S. million. the the lowering against foreign quarter by $X $XX Third, currencies most strengthened

However, the was negligible. margin impact profit

higher of the Finally, by the same prior lowered cost were increases to million in incremental million increases in compared $X a gross of points commodity margins period offset in reduction impact in year resulting XX in the basis of prices costs quarter, customer $XX recoveries the largely million approximately form profit. second by to of net selling $XX

the acquisitions; debt XX a second $XX Adjusted the $XX mix in quarter; million offset adjusted due actions look flow. acquired and to the costs closer related driven turn recent million of million for new our free payments cash was as to to how change at Please million converted fund $XX acquisitions, increases of was following; to with period businesses. interest in year, me million a cash million higher increased recent by the to due used in $X by taxes restructuring new of flow term cash and higher to transaction to now profit adjusted our Slide increase same jurisdictional $XX acquisitions; our programs one-time $XX capital the service EBITDA legacy $XX the the in free than lower to last and million expenditures of support cost

made $XX As million mentioned cash excludes previously, free the contribution adjusted pension discretionary in flow QX.

In that me Please we certain quarter frozen announced plan here on we to the we pension and with associated XX completed transferring by liabilities ago, this second sheet. Slide insurance Nearly details second to assets terminate in turn plans eliminating the worth process two plans now in liabilities. executed year, carriers. of this for third-party quarter the to to of net we the strengthen and the by balance $XXX our $XX contributing U.S. further million years million action to the

year to year. increase obligations in and the ordinary million. the change the of last the of in existing of the of end second chart The The illustrates of Fairfield XX, $XX in our resulted pension of our this from Page activities businesses quarter unfunded on an plans net Graziano end acquisition

driven reduction to is net pension termination liability The related factors. by three million the of primarily $XXX plan

changes which result payments eligible of cash voluntary no population sum by First, reduced the to from of planned $XX liabilities the and funded contribution. impact lump participants, million were as plan in a were assets required

insurers Second, net were million third-party resulting a the liabilities remaining $XX by independently reduction. in valued

able liability Third, we were a an a million action efficient as made was at by eliminate a discount. cash of capital This contribution our effectively $XX significant Dana. of use was to

Slide our full me look with a to for guidance. now turn XX at Please year

our this We year ranges quarter. again full are affirming guidance financial

are remains indication U.S. translation improved outlook and to an slightly from under foreign adjusting sales unchanged, from dollar slightly our commodity commodity lower recoveries costs. to billion. our $X This resulting indication currency just stronger is previous in range due we below but Our a

margins adjusted for and of diluted as both Our expectations EPS profit cash unchanged well as in spite flow lower sales. remain the

adjusted of free XX.X% expect the EBITDA diluted prior cash X% $X.X $X.XX. a XX EPS We adjusted of for over adjusted billion approximately basis point and flow of approximately expansion margin year, of a

sales, the our cash first double-digit we With free for year, performance and the the track in consecutive remain flow deliver profit on half year. of to strong third growth

me at drivers for our for and profit growth Slide XX quarterly with the growth to factors and four are the sales are the driving full growth expected year. the also year. look turn now same closer for Please profit a primary The expected full sales

is First, a to key this year. growth our organic growth sales contributor

about backlog year. million to but strong growth organic old Wrangler new generate of is this we growth, the non-recurring Jeep primary the from of also first profit on driver is $XXX resulting had in and the year margin about expansion our this $XXX conversion of in and remains overlapping. sales programs half million the Our The expected

Graziano margin expansion. Fairfield in inorganic million will sales the profit $XXX businesses add million growth and from points XX in basis and contributing about Second, approximately $XXX of

now of million expect $XXX Third for impact million foreign full sales profit. the of to to be and headwind to $XX currency we the year, a

expected not this However, to is affect margins.

$XXX from million million. year, than to We as begun cost will gross the Fourth, to moderate. remain subside raw to last continue prices reduced material increase cost they've while commodity commodity higher expected $XX

headwind recover margin profit headwind of about million $XX the from this previously anticipated about a from reducing million headwind to resulting million profit points. We in year XX the down XX basis $XX expect we $XX to net

we free with flow. convert turn me adjusted on the Please EBITDA XX Slide to cash detail more for will expect how to adjusted

outlook interest cash full and and capital EBITDA $XX taxes million growth capital or of adjusted higher working of $XXX will about combined million increase of free unchanged. higher resulting $XX one-time of cost million and offset for growth. expenditures XX% year Adjusted between by be $XX net $XX Our partially flow remains million the million, in

as points due cash XXX with free margins year remains lower remain adjusted flat year requirements margin adjusted higher from this one-time of largely expansion contributions acquisition, lower capital While EBITDA, the basis cost, to poised move the flow next business lower comparable working will for to and we expenditures. capital

Please turn for our a of Page drivers through the impact this There an carefully the that could XX that this are with on will me of now of remainder to next. our year review outlook year and variables for remainder a few have of full year monitor we the performance.

is sustained X American North first in The truck the demand market market. Class

production tapering fourth projects in the this outlook Our year. current volumes quarter

However, year-end, indication. if rates production through provide it current upside volumes would to remain at current our

The potential to result is our conversely of disputes in current prolonged markets off-highway second variable indication. global as downside provide a for the the trade would which weakening

the pressure is this to few strength the further if relative months currencies. it past variable on of over will our has third top-line. put The The trend the continues, strengthened dollar U.S. dollar foreign and

year, profits margins we laid the and in expand our ability unpredictability the year. convicted half out of remain some to to profitably Despite cash grow flow the year earlier we and our this targets next business second in this

market increase will year our demand headwinds backlog next will that commodity offset and costs We lower synergies continue and profits. cost to expect

of our do work take Jim the around team of the Dana I customers deliver of shareholders. leadership globe our members great our value and team the remain XX,XXX rest and for to care proud the and

to Dennis, take the for and going turn your in Thanks to can over we morning I'm now so call that questions. this back listening

Operator

At like And go this KeyBanc we Picariello Instructions] question from Q&A would to Please ahead. first James the begin comes Capital. line [Operator time of session. your the with

James Picariello

Hey. Good morning guys.

Jim Kamsickas

morning. Good

Jonathan Collins

morning. Good

James Picariello

vehicle, strong. quite obviously, came and in growth just especially in So with margins light starting

think not for Just wondering outlook is Are there and back about half. into the repeat might half one in are -- profitability what margins? the Thanks. anything the that what any there your sustainability factors back

Jonathan Collins

Sure.

a pleased start backlog as a delivering that We So the of do performance that be very peak obviously, certainly with think we continues on are a to we we big the strong quarter margins and out light only to is we piece it's some piece and business big efficiency that second but the grow of area see to do but for year that high under launches were full look a what profitably. we're great as a our had the improve. margins of going in to belt that continue the to seeing get XX% program vehicle. the and of not going that the do we're in business, perform quarter operations We range to we note basis, forward our drive that major so

James Picariello

obviously, on Okay, with this top-line the great. off-highway, industry trends at then, consistent deceleration And just on some an point. which runs

you your demand there quite had there. in accretion sure is what for came expectation ODS wondering market margins And in some back Just resilient, the in half?

off-highway, just for Thanks. and deceleration outlook your demand? the So, industry given

Jim Kamsickas

Yes. business our forward. in We're see most construction, segments monitoring as same move things We in and the we certainly agriculture that mining. carefully of

the start is, headwinds there we bit deceleration of remarks our potential remain if volumes think we've see We that to in some segment. that those in indicated see closing further. what a to pickup strong we I a in if little markets expected we indicated fall

the a point doing capitalizing the where it's synergies volume and it's still performed so From this well. a high in really of up legacy ODS in that's margin very very manner. that on at is picking perspective level efficient the has business and business

continue we the half on look So, there performance quarter, market. to second what encouraged to overall the see cautiously by the and second the to but in we

James Picariello

it. Got

in an the one, contribution, have the pension Just back additional one housekeeping half. for you'll so outlays

a We cash free get no? or standpoint will flow not

Jonathan Collins

No.

We will not.

contribution termination terminate our the payment adjusted is but the exclude was the pension included plan. million to free cash which free occurred cash which is from that flow flow, $XX second with final everything So in we happening the cash in The quarter.

James Picariello

it. Thanks. Got

Jonathan Collins

Sure.

Operator

Brian Your Barclays. Johnson of the is line from next with question

Brian Johnson

Yes.

Just a financials. interest dive question and of into I'll

you are So, parts of on X, actually you which highlighted Ferrari Page on providing? the module, that module

Jim Kamsickas

Jim. to is This voice. axle. hear on Nice the Brian. morning, your It's front Good

Brian Johnson

Are axle the that? the doing electronics power the part you Okay. of motor or of or sort

Jim Kamsickas

the particular the piece with drive Not motor case, working this with just and hand tied portion the obviously mechanical very controls more in but in in, that. axle the it them of software associated on glove

Brian Johnson

Over to on things performance segment Okay. slide, at kind couple want better the looking appendix a I of get a kind of the just feel for.

So, power technologies, mid-XXs quarter takes but for running I range XX.X%. were think XX%, Consensus the XX% been is sort there had third or year and it as was? we the was that where believe has see in on the power in I row or not I where dump checked at What been of I a is technologies that there, going a It's puts second in ago question business. there, looking broader XX%. the a about in year-over-year frankly?

Jonathan Collins

three things business. Brian, really there of the are are that affecting Sure. performance that

peak is business four of mentioned we aluminum segments. and us recovery the that has all commodities of that ratios and first our The lowest a the for is this

it the costs than any So, the margin feels of the commodity high others. more of impact

an that's impact. adverse So,

pretty significant contribution in I in U.S. one volumes good internationally is that in a loss. particularly passcar with a markets which tech mix are felt of and Europe call power the outside second would are the for what The software really geographic China, segment or

lower where at to some volume admittedly that's margins. It's of on So offset a that. bit we're up pressure picking putting

area another hurting that's that's So us.

saw content, major a And very the the third for some business is content us have dip further is in from the the a in taken it engine year, quarter some major we programs you lot putting that's in even duramax this some up levels that place new on cooler is with dissipation a the a These do where level aluminum which things perform first and diesel believe of have steel long is GM quarter. being the of the in resiliency that launch are big We're stainless are these second why margins. will mid-part that sight what the resource. expected. productions And this we adding launching would that saw products those business as see returning launch can that towards success some cost on We run. new historical business closer the quarters. see a with demand few the globally in half higher this line the margins combined over second into on to pressure helpful year. this of that We to next go long We better particularly way moving of we in in large

Jim Kamsickas

Brian, My our we there have worry job out all I add. lot jobs of guess I whatever Hey, we be. a if may may like of stress, beads, it

This sales, you name power bunch not one I can completed group it. that. of past just perfect Our technologies kind China a a mine. is of storm, car tell what issues of you is call it commodities, you want,

we technologies Jonathan content a power when vehicle vision group is to news set just was grow referring what the But per for collectively good and is, to.

duramax cooler, for just to the that stainless is more basis. traditional content a the launched vehicle a example, Just we cooler we been would steel per take sales have XXX% over on with

create the complexity to business to that's see just do, is has value, our can more you mean what more products. technology I exactly So, put

of expect doing should in see we job is to and back better in returns So, good for the the that regard. a half the year sure team

Brian Johnson

next currencies think questions, the being about have it Brazil kind to related Okay. vehicle question, are there two mostly can we driveline, think there other second, as settle. and down that. X there the modeling is incrementals quarter Class vis-à-vis we as to settle to year from And attention wherever decrementals anything to pay they're then, decremental take built fair similar commercial [indiscernible] one, is currency on and or A going I of especially to over

Jonathan Collins

Sure. real. vast it of majority the you're The absolutely currency. Brian right is on Brazilian

going the it in for quarter relates levels. to forward, we continued customers the volume well margin to As at deliver the high very incredibly profile certainly

and to be counting of that through in continue mentioned decrementals premium the costs to that that in demand. into expect the we we to and quarter soft because as on we're the delivering a We see away. efficiency would as quarter business we tapering wrestle do going issues fourth that are pretty next the We efficiency move on improving go the

quarter, efficiency with see to However, the the fourth bottom-line if in on of put hold could out. the up the we we some volumes compared projection improvements, top do some and benefit

So, hopefully of there. some -- dynamics you the sense gives of that a

Brian Johnson

Okay. you. Thank

Jonathan Collins

Sure.

Operator

Your is with the Credit next of Dan line Suisse. question Levy from

Dan Levy

good Hi, morning guys.

Jonathan Collins

morning, Good Dan.

Dan Levy

the taking for thanks if I and I morning it wanted earlier. I and start to Good apologize missed questions.

$XXX its organic but now have your post previously. first guidance you $XXX converting -- million the $XX within you $XXX growth the quarter Your had on versus same million, million the today, versus on top-line guidance million backlog

the if I what's apologize, conversion? missed that it So, delta in earlier, I but

Jonathan Collins

A Sure. of couple factors.

I were a that quarter the just the put full will the flow that in margins of second areas to pressure year. two think discussing we on bit through little

some going well the demand of we're at issues product of conversion level experiencing the a power with a within bit challenges this to of there sales on than peak do some as from are be put the we expected. in lower as mix tech, that vehicle, a higher the perspective So launch segment softer that conversion commercial

on for It's all attributable lowering guidance other would early or factor sales The overall to we being our in lower primarily year to better us is think FX margin. and of the that the do commodity costs. that attributable with the

if in the So, some there. but upside we're second we well could see execute to half, sticking we with XX.X%, the continue

Dan Levy

maintaining still though of those And in core profitably... you're terms the Great. programs -- but

Jonathan Collins

That's flat, called sales markets, well are of That we Everything as the because -- calling strong, there organic driven. our but haven't column, that Backlog that on that flat backlog are all net discretely net it's this in were new is it downs includes too and right, coming ups and Dan. up. aren't out it -- about no. else year, we're good, be programs but is happens it launches zero major to on the a included just holding volumes just

seeing from on. coming good new results we're business So, the

Dan Levy

Class there's down I Class being or the then, to is reduction when And Great. in consideration at that the much commercial that about it aftermarket the and you've that X OE, X a terms piece on we And question freight. then, smaller of relative some think helps is in commercial looking year of materially to of at business on previously. also, premium Brian's the next things up X vehicle Class just other know following of is that really that to past up is just X. wanted is, And vehicle follow quite we're talked one

we So, the you? of there that in where as for aftermarket are expect what reduction terms we performance XXXX, premium of is between go we any Class X sort into the on OE correlation freight of versus performance and

Jonathan Collins

Sure.

to continued will good the a and certainly So on supply quarter in And quarter point of less see did hoped to make benefit volumes premium have where we third would first conversion, in the some little chain. improvements the we second the we freight into sight the bit the continued we have for. pretty than have line remain improvement a high. And what sequential into most

the third the to we volume we into incrementals the improve year-over-year expect quarter. do increase So, on as move

the into execute year. on and that of second half work So going we plan continue to the

impact margin us business starts only the heavy three X freight, to we've of do profitable lot a into low mid-cycle aftermarket. We're vehicle of duty on that the all certainly the year, when Relative to of volumes those equal to on in because next half that the basis we've or probably indicated because just than mid closer Class the clear of segment. heavy, commercial and parts been with our Class medium subside right that note is it we the that higher moving not of business. global premium the a but approximately is year in business least now is the X not vehicle pressure next American But, that XXX, at North that to business there's

between Directly a there aftermarket the direct isn't to two. correlation the necessarily

you the lower. If where go is OE to aftermarket well environment back an and look, perform in even can continue quite production

aftermarket So, we're meaningful a of the in into component moving counting necessarily business reduction on XXXX. not the

Dan Levy

at just the all relates expense? Great. that pension your to EBITDA it housekeeping pension on a liability. pension Thanks. And reduction quick as the or income move of Does

Jonathan Collins

No.

it's our adjusted also So, diluted excluded $XXX excluded our million EBITDA. EPS. the charge from is And from

Dan Levy

your modify or your expense that income Wouldn't pension pension rather?

Jonathan Collins

It's and remain cost Yes. included unchanged. EBITDA only No. the that is service component in will No.

Dan Levy

very Thank much. great. Okay, you

Jonathan Collins

problem. Yes. No

Operator

of from Langan question Colin UBS. is with line next Your the

Colin Langan

outlook? expect off-highway for market the Thanks Oh, question. lower mean mean shows XX, products my it lower it's what around? This production, end one on taking I you great. Slide that driving I is

Jonathan Collins

Yes.

to side So, a left-hand represent that aren't or the headwind things Colin, second gave. do on tailwind we included on the what some indication necessarily we're trying could that XX the indicate Slide outlook for is in a the our half to year of

the saying, of we little over now the the us estimate levels impact right fourth production down if the the are could that the example it's that, a X a or tariff The handicap on So Class based off-highway stay be in we're to going give hard volumes tailwind. or bit prolonged the dispute. a flagged to what side, production for quarter high bit on is headwind

example, know as U.S., can see and crops are the that So, there that's some of we how be. going hard long could see purchases impact in for or equipment that here tariffs stay on to what indications lower we to it's

that signaling in in some example, of in the just an mining so could for and we're So, see less the probably we softness balance and construction year. agriculture,

Colin Langan

And apologize, missed I Okay. this. I if

mentioned in quarter? margin. margin vehicle I is moderate and light the What think it peak the why [indiscernible] would peak driving you

Jonathan Collins

Yes.

seasonal that second on fire Some of of is to some it it is really in fact cylinders we the all and the began quarter.

half the our we launches in program. the as So, Ranger do we drive the second some year on coming ramp meaningful launch online we'll continue the to Ford well, on backlog have up that of

ramp we're the moving the just year. continue into on things of up the Gladiator half to second about We cautious program. of that are the those And some

Colin Langan

any buyers is I some in your than lastly, that indicated more your of pricing have just have you pressure. normal OEM? mean a aggressive increased there And business, from push seen

Jim Kamsickas

end crisis is, dating very supply in now by the to OEMs a learned economic ebbs have day, I'm business. if But Good crisis, flows the it stuff. the and industry like to the be secure the stable This did say, Colin. in years that mobility successful. question, you we always in base collectively anything the in that had we and to the learn of myself plus at that I'm now, -- And I the XX

a worked through to less every I basis. on it balance. find the ebb deal or on you flow don't case-by-case any any we with through more be and So, honest

to that's guess just lot now. So, for normal words us I a it's right say, is of course of action

Colin Langan

right. Thanks my All question. it. for Got taking

Jonathan Collins

Thanks Colin.

Operator

from Bank line Your question is of Aileen Smith of next the America. with

John Murphy

Good pinch-hitting how John And Aileen. you? It's actually Murphy are guys. for morning

Jonathan Collins

Good John. morning,

John Murphy

the mean what set I'm of some game is variables, are than you Class curious offset things your more Page look difficult quickly of next and year. from factors XXXX you game talk if pull look plan you're the to I'm at you you are macro there kind plan at and and there in tougher we a is these point is I predict these weakness. obviously and a direction, sort maybe of just for just potentially some even there. Or XX as to, you expecting. that quarter to levers when risk fairly if question, this, real and X look XXXX fourth about what you things in all macro First a other curious at bit very could that have it could some

Jim Kamsickas

Jim. Hey, John. This is

the you to some in as see well at me I guess things. would refreshing and of on side right? and light to refresh our those we going be Bronco vehicle was where got put truck are swings programs you cyclical side, business would most and the In more to off-highway SUV well. of start side the Let all or the that not you'd vehicle just and color supplier, would commercial coming in have to Jonathan, The bigger your see words Maybe it we I one but and would kick mouth, off. this. add as be

to it, Back there. light vehicles put say because I'm volumes to these your into long spot plan, it So, know our sweet for think a saying run the run putting se we're at mean, foreseeable efficiently. to let's say a actually we've to XX come of sweet of specific I'm little be been you question, I some we cost to how about commercial going for enough around would able more stable to more we efficiently, more bit prediction range per and what vehicle, out that's flex just I what months it's more relatively a we into I like peak future. just and I'm to straight platforms sometimes compartmentalize XXXs. mid say know, spot when not the running

and run able what base need efficiently can to More we importantly supply accomplish. our provide to us, more for us be

time the we all call that and and cyclical it of what curve vehicle commercial do that. we that So, CV, do CV through we'll

mean to via gotten when on model and off-highway our in good at the in-source, in costs at supply we way set margin I answer that your our downs do very hope let's or I look the last flexible manufacturing flexing even we've outsource then, maintained segment side. by or or in improve last say we ups the And up that the of any because question, and is, our gone you what history trough comment if because this, even we've of five Dana back seven I years, time, I through in-house

keep go and playbook what we playbook lose sleep. of don't moving. lot I We a execute So, is, the the know

John Murphy

product And of maybe vehicle understand in see the be I respond -- in ultimately if I to might what the just kind any a business cost a or would in structure mean what we I be will mean light light certainly to industry? on follow-up, downturn in months you of next and in you near think skeptic, certainly a side kind helpful so. the the be flexibility XX the offset about the term vehicle But launches the have probably order the pressure that

Jim Kamsickas

of out over and our relative end -- to to off-highway vehicle book mean normal into take cost. it's same than of the X at No. know of down to and different it work days characterize running seven commercial max X is side driveline other that I mean running mean saying and there. than day, and and and play facilities we business have the I weeks customers the lot the are our I still no at don't are by days a six our because streamline tighten this. I back ability our capacity business

need that. in been how we to same our we core you the that much to do had to that cost and reductions many recently, so know fixed like If suppliers We situation of make have haven't and hard game. OEM make growth played because

we'll levers, it's the the linear been attack those answer it the you I amount wish this triggers. buckets the and off. word sales reality the all a cost do what dropping it to are is, of appealing the just but that know we've sure know and I more So, don't you normal all for, doing in just make I is could long make and

John Murphy

look they're just then, little as you're acquisitions, Graziano, question And Yet, you're bit digesting hybrid. working out playing with a on it as well spear their a sounds pretty tip you're when acquisition good of is in a hold you that's like at Okay. good seems and on which integrating sort plug-in small the it's Ferrari and tell of you RFPs because to like story gives a going on ODS.

and shut I'm from -- off you are commercialize integrate make time. are are shut you look you you just right over and them really use as these acquisitions tech working on now off those there -- ODS maybe large still more or as somebody can at maybe of the them we're acquisitions landscape, and acquisition smaller curious and

front, you aggressive the or might how curious Just acquisition on be? aggressive not

Jim Kamsickas

We products off-highway. participate of for that from question We've products, saw place of the for out the put clear so portfolio larger at all We to markets of to we tried that go and the strategic great mission thanks critical as in filled and and out John trucks SUV we of our not suite. industrial mobility question. be our A the vehicles and forth products commercial end plan that but which XXXX. just and completely in largely it in fill in course

filled induction it if the standpoint So software. to got that the range controls to a between motor we've magnet want out, need, the Mostly speaking and from in we inverter motors that. permanent call motor you everything we and from the

of small not last transformation here anything asset a things suite out we always PEPS. we pick for up of together announced pull before, that or We do As the see need complete like the over said years. we an else we like some couple relative a boutique filled any today to may thing that to

to Never And we think forward. you get assets like do with these market focus I the integrate we're continue now these Ferrari. to moving say did never their if just they and does so, head sand, in to is ever anybody our products take but

John Murphy

if lastly, deals of look are you if do or I we Is then, opportunity you XX there hanging any pension here. more tough picked And just do off fruit. to Great. think kind the at the Page done. and more what with about work to know these here, lower get

But, a work this over just do I'm tough and over stand where here So, and and liability I'm lower naturally not immediate. of of is you sort internally. work you'll this mean to or potential think hanging there lot down you'll to it on of is fruit I drift this kind there's more sure work. time call time it

Jonathan Collins

actionable was This most would under latter a but some we'd of was U.S. in more bit to look that we'll a the have bargaining the continue of at the these that It's Yes. plan John. number be domestically. collective to It that through, largest work the one was agreements remain opportunities

is remaining vast that that the the there's plan, piece the at opportunity makes majority German a you now balance, largest million look which up $XXX go piece there. pay you If over a of in as the market international that the plan is limited and of

scenarios it within this would of I'd most opportunity was characterize more that the this the ripe I the latter two of say So, area.

John Murphy

at black white print and I And looking out here. apologize, I'm a

$XX domestic. So, it's is million

I So would the you remainder right, funding mean… pay that's that's requirements where so XXX all you really, have go, is never

Jonathan Collins

Yes. The vast majority right. in you're the XXX,

Jim Kamsickas

Yes.

John Murphy

Thank much. great. you very Okay,

Jonathan Collins

Sure.

Operator

with Lache Wolfe Research. Your is Rod next line from question the of the

Rod Lache

everybody. morning Can hear you Good me?

Jonathan Collins

morning. Good Yes.

Rod Lache

Yes.

had questions. a couple Just of

you're that And to sounded a or simply like bit additional million feel the of that just conversion. accurate? launch lower comparisons, the guidance, back QX on cost thinking so it a something any to million XX. QX is vehicle, XX%, don't of premium that a need adjustments that to has about Dan's to $XX comparisons. close drive incremental XX% based launch improvement, off-highway half this question an of talk variables revenue, was on the footprint following EBITDA. costs. $XXX the that's improve First, on you commercial make you that about you that little of have up you Is XX%, there's earnings earlier Can was at lot reflect expectation point, like because

Jonathan Collins

both on right fronts, Rod. you're Yes,

improvement For the of meaningful that. the launches half, second half a organic conversion portion are first

is the place vehicle at efficiency tech we The touched probably on point on about. the improvements is power I'd And talked based that what just commercial we in operating also other continued bit biggest peak in part a segment segment demand a bit the to.

So, that's driver the bigger there.

system such the There at improvements Relative to can actions we there year. in high the restructuring we correct. are in most of as characterization that mentioned. a ongoing operations back or Jim make level is We demand half continue on existing think going do inefficiencies can is your of structural the we're what operating work the think to be based the because in of we on we see large to

Rod Lache

you'd you product to Ford flag unusual anyone the on slide disruptions quarters the their with with want XXXX through launches they And for of about on had lastly you. cautioned Are over few seeing the or Duty. and to anything second just Thank showing pipeline great. of on one next quarter street big call launch launch kind them else? production Okay, products their that Ford Super was the the that continuing respect

Jim Kamsickas

of, is I that know aware tell question. of Rod. Good I the for the aware you're Thanks No. year because should you a would reminder more of is, preparing this anything end you, of we're don't be if or -- the are see or preparing new That's the like extremely add. can really Things we anything really fine, only we're that. anything launch, anything vehicle. like pullback exciting for Bronco which I thing any

Rod Lache

All right. you. Thank Okay.

Jim Kamsickas

Rod. Thanks Okay.

Operator

next Markets. RBC Your question the of Capital from Joseph is line with Spak

Joseph Spak

morning. Good Thanks.

Jonathan Collins

morning, Joe. Good

Joseph Spak

revenues is on of sort different, margin the lower. be is going difficult and revenue might Going back a levels This little back we're of because those bit the to but to composition XXXX commercial vehicles.

is So, there dimensionalize a high of like level. versus to of way Class any how change mix just sort such that the inefficiencies at that being it, sort the that on of much is, Xs

Jim Kamsickas

product to in on are even mix do that right factor principle factors, you that just a decent business. tough commodity at margin we of inefficiencies of the in that give level little the margin at such together both of but be there contributing change another And are to put profile costs the the then, that. demand, to It'd while job of high ratios in some certainly Yes. my get on of operating all those put pretty pressure of with bit of bit business pressure at it that you fingertips, partnering recovery pressure of higher recovery comportment higher a the a noted some those a put those customers

of going potentially production and to margins level schedules double-digit more on chain capable then, high think of year the this we see of We improvements within become year. the demand. end this relief supply we're second that do in believe there business towards of as And some at get this to the continue here make half we is the to efficient the

Joseph Spak

the Okay. near-term. business eventual in any But business sort back path And sort an go you do you of a didn't that then, does it you like you of And very good color mid-teen levels. what's were lot those on as Jim sound in that you provided impacting of that forward. mean need into see power to worried. technologies, And footprint actions

Jim Kamsickas

good for cliché hate almost it's still the I of the the of the when been it word, is but whatever better never to can were word commodities, bad of best in we're once bad fantastic And nearly, high China, parts it. probably up volumes down but of like on the in different comes fantastic characterize the as world business year slower, everybody this kind range, for you because we've way was first it's question. we of side it that volumes everything this it, not XX is well. the aftermarket a It perfect half a that knows it was of lack call business. This Yes. Thanks the is I went a or it's out name out business, of a as XX, situation and

anything we've a are XX% that's to be help. vehicle is, doesn't good answer that We've programs launched through aluminum, steel going to XX% and in. May. giant never somewhere just the of like to So, back deal new are complex comments this my it in a the in happen. in But return things I things it other and the it's it's aluminum with then, way going passed got mentioned but that and getting is going more to starting content that the range per come into the these to come leap specifically to in earlier, take

this all better to that's I half I years forward forth. start back even then, show to that so year. on in beyond of situation and on that. mean look going the So, fruit And

in is back to be ranges I it'll that So, the XX% think belongs which XX%. where business

Joseph Spak

looking to on impact towards guidance, that next because costs sort then commodity range. year, flow sort then color does XXXX of think move but through tailwind on still $XX end for slightly you're just I Okay. the CapEx? more How of And two points I of to the EBITDA. the And an higher think million sort made to then, quick recovery any one, sales of like lower of the on which you the

of that does as XXXX some So, for well? trajectory that impact

Jonathan Collins

Sure.

point. flow timing. by First CapEx cash The driven program the change on in is primarily

by going look we primarily lay timing. get half towards we the end at a better how the out, to as program second driven cash some see just the disbursements So, year higher of is

to your a To few for showed do months in we of that down the is on in cost comparable a We XXXX. XXXX ago. commodity change further that question still convicted step a just there remain opportunity level

move as ahead. a that's to for into see to do sustained really year big don't costs. tailwind be an we it's We think we margins opportunity We next relief on a issue there's So, continue on think of us pull going to well. a commodity think as

Joseph Spak

much. Okay. Thank you very

Operator

next Bank. is the of Your Deutsche from Rosner line with Emmanuel question

Emmanuel Rosner

morning. Good

Jonathan Collins

morning, Good Emmanuel.

Emmanuel Rosner

color more and the puts XXXX. XX Slide of on little into and I side you was move hoping sort just as takes of a bit right-hand

on How you this, declines circle that your by basis, and market? some first was think previous -- have or for essentially I So commercial top-line fluctuation before I maybe be the contribution the there, understand the it are with guess market the offset arrow should the the I first guess you vehicle. in in seeing from essentially view? I on backhaul to quantified update primarily last some said looking Is you flat what backlog organic line versus you're

Jonathan Collins

the are at we by there, We see Class this indicate intended organic to will least see We out we we year. believe and be both expecting in will the growth as that that looked most is of market were be flat the those going be next are think declines that in one headwinds because certainly those backlog. next we Emmanuel first X to the but year this North we as American predicted earlier at our market year offset off-highway some that point even pullback

augmented that is a business to more comfortable we're mix than commercial the is within of X, contribution relatively vehicle the margin that to which going backlog. the remain by and lowest in profitable there that's Class a going So, flat the decline inferred be business segment our the in

feel outlook. still consistent there in the So,

by months year a then, XX about two a to other the we'll bump on the XX we get deliver million be little in able versus cost this convicted the cost end to of reach that we'll perspective, a But, plan and top-line. months is for cost $XX from look very next the well year. from variables feel within most And that perspective having, we'll the same of energy way synergy

Emmanuel Rosner

Okay. helpful. That's

with say In still assume magnitude, on I XX point basis midpoint? since you of remain terms at comfortable margin of the track, you expansion

Jonathan Collins

drive to both mentioned, commodity continued cost and going costs. that improvement I improvement in factors the well are the some of or but just are synergies that as as We

Emmanuel Rosner

calling understand finally if digits. And the of of still I is that near-term something apologize I of a term it But, double downturn. moving expect in that you as you X sort vehicle expect commercial you your the in able I for a guess the pieces to return going And earlier, as scenario mentioned think on margins. to on I XXXX? timing Understood. well that there's these for basic targets near was just the achieve Class but past, within like that or to lot be

Jonathan Collins

Yes.

XXXX the think believe to as that have volumes and because comparable fill costs double-digit are margins of for the meaningful demand. pretty premium to on that the the into all the lower of because half market not pressure year I Class the within move we going of we of reach are X something impact margin this second within

So, we for do is target in which there feel like the shooting in term. we're that's reach the near

Emmanuel Rosner

you Thank very Great. much.

Jonathan Collins

Thanks. Sure.

Operator

Brinkman come line with of Today's final will from JPMorgan. question Ryan the

Ryan Brinkman

next that confirm continue cetera economy me could duty America is a X been expected to of expect squeezing XXXX, level conversely to this of current suggest and can don't with ball there's going regard seeing and for order better softening is do that at anything expected year. either year to that speculation you're XXXX. in would the of et it'll you point what crystal appreciate demand strong but what the in. is in least than I slow books have terms remain medium North to that Class that this that Thanks Great. into you'd regard there with would share customer part the at perhaps or strength first I

Jonathan Collins

line say have but of which sense we sight we're We book pretty at there [indiscernible], the a would of be or a what order gives is fourth quarter or to good I some best a good days might us XX a line into little a early end the the of is, the upside. months having Yes. year. be that have get to reason of us some bit away look But, XX we're starting better, the from a into certainly bit the of sight may out, that really part line probably couple of we gives so sight few

together So, clearly of have in next year. going end months, when a of up the where in good we're balance a really view that's few to we'll the

Ryan Brinkman

with In generally, And Thanks. of could is so production, for point noting revenue that with turn suppliers currency recovering there truck you're ratcheted also tailwind. were Brazil the lastly more but think at decent but I just is the percentage a a production lower the cost and Okay. is exposure. down bus years in pretty recent think one ones this there, Previously the a you as relatively a shrunken weaker. you'd some into I then, slides of

tailwind Brazil with this continue So, much and to normalize extent it that from provide the for you could that current further. is upside that levels? to does How year

Jonathan Collins

Yes. space. been helpful has is business or that in margin The yes commercial the to vehicle within answer expanding contributing expansion

up our about moving and of confidence see that So, to truck digits that and proud to a ahead when cost high-single recover, commercial to through. increases really flexed the just to increase we contribution in to digits move our we continues market margin trough fact and And stated volumes, vehicle. it's get going were breakeven. and at in the we that we that go market, if double-digit these as we mid-single nice see for structure And coming ability our heavy in bus

not meaningful bottom-line to the probably at changes As close it pretty for through just with space. average impact margin currency. it's to the expect, relates a margin currency, you'd as the It's the the flows and top in

Ryan Brinkman

appreciate I Thanks. it.

Jonathan Collins

Yes.

Jim Kamsickas

but delivering last can of I other sales may, while companies growth, while improvement, XX continuing their to couldn't that $XX the year-over-year Dana on for we've those Okay. and of and today. proud to same near margin of out you points quarters of future. customer years. look you the at say taking matter. or just relationships the care be time who's EBITDA grow thank consecutive backlog for Dana of basis team everybody all the million done higher XX in what the here. year, record and the team more half over We'll the sales half forward there listening I'll On close talking But, this that Perhaps for in of I of I in are front, Thank in course first the called behalf not is, just out of year, that team there's first of of that's to delivering you the the little couple there if

Operator

Incorporated XXXX and gentlemen, financial Ladies Webcast include Call. Conference Second this and quarter does Dana

disconnect. may You now

Dana (DAN) 31 Jul 192019 Q2 Earnings call transcript