DAN - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to Dana Incorporated's Second Quarter 2020 Financial Webcast and Conference Call. My name is Carmen, and I will be your conference operator today. [Operator Instructions] At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Strategic Planning, Craig Barber. Please go ahead, Mr. Barber.

Craig Barber

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

You the They supporting may release press are the on Today's this be Dana are materials is find Incorporated. of call and posted website. our recorded, and recorded being not property now investor from will presentation copied you expectation includes differ presentation about our suggested that for results or future those forward-looking rebroadcast Actual without our comments written consent. our today's Allow me to performance. Dana's today. remind by statements could morning's

about Jim Financial the Additional the and with results statements Chairman Officer. Jim, Officer; Executive call Kamsickas, Chief included our Collins, factors found information summarized yours. harbor And is reports our SEC. the and Vice Thank future Chief On that could safe President Jonathan filings all. is and with and are this affect in call you Executive public our morning in this

Jim Kamsickas

you thank Craig, you, families remain Thank Okay. difficult you safe and throughout hope season. continue of and us your to this morning, and today. We that all for good joining

As disruption the global half mobility seen the markets you of of result as in year a COVID-XX first deal great pandemic. are the aware, a the of have

production of a are had in seen online. and increase to the able we our begin some countries percentage of restarting U.S. a bit or we first until As customers we've ramp-up all at end not quarter, expected. production as back communicated The idled and April, all the in then, the than just of customers nearly a May initial we're large production demand May. few in since other was a But slower steady

sales second the last were year. As global second the over just for direct quarter a quarter XX% decline from of the result billion, $X.X shutdowns,

a restart of quarter and efficiently the and several as we as a to the a depicted win impact. April adjusted quarter the we to lower slight XX% we to improvement in actions EBITDA in safely in operations the further XX% ended restarting demand improvement May had of with, continued of reopened, the highlights notably new on challenges, vehicle majority restarting have Despite business. left the breakeven nearly an As continue saw we improve. second and all with pivoted cost programs. began EPS begin June in adjusted operations, and the as To our operations combination saw new management business, Through shutdown our side and successfully electric reengaging loss. slide, an We to and

handling for We also bring continue with and technologies the most programs Dana and leaders of just to In invest year, also Dana, on partnering to that acquisitions words, debuts anticipated the of capabilities It's new about than exciting to loyalty the robust Ford well-known of experience. the rugged watch in in a you The growing. is vehicles Perhaps to chance EV is targeted electric more brand terrain we consumer alone. the Dana had brand the market. But all-new of other industry delivered virtually it's growth products driveline and where experience. off-road not and the because, space durable Bronco. the it's through products decades, highly consumers hybrid one these capable with and to most strategically vehicle both key vehicle the

have to can page, integrated I'd as cannot thank how from supply countries. practices team ensure for chain our then around the supply hours and our I our third enough world. us operations to back you of as restarted brought the Moving talk imagine, Italy, the and the and facilities to and possibly factor They XXX helping that we've collaborating was safe operations. high-volume initial challenging efforts online countless one continuity Tier safely XX across enough, ensure stayed in as but supply required like to online the we COVID bring best you global five, Dana nearly and amazing especially Dana China manufacturing successfully chain continued and execution everyone approximately technical high-impact restarting and committed areas, in Starting manufacturing and slide their the in partners quickly such from our back left-hand about establishing sharing efficiently.

ago, and the customer market started with of line ramp weeks vehicle our markets. to North the Looking operations approximately light page, to in schedules, aggressively global up in we agricultural the center America start-up six most

resume, what this making reminder, and thus our the a would more never be occurring when Dana be businesses May good how end, operations operational at the In much to restart essential as all while to that a very was customers was was somewhat America up such there back As vehicle say, than Specific let's fast the especially industrial to slower challenge, as markets, ramp-up North light products, in Mexico. in expected, would uncertainty ultimately, permitted cadence. able all characterized was supply aftermarket came stopped operations but throughout the the operation to interesting. May, as and

replenish into experienced as we June, low accelerating As dealer moved customer they we inventories. to demand looked

record because down is downtime. run than some years, there but more with the a markets. to operations, shutdowns. they, have we indicated volume customers customers our our vehicle reasonable or and off-highway South to will In but markets In largely pre-COVID Pivoting America, Obviously, there have restarted are have from slower, vehicle several they, The addition, would the have previous rates global have end limited commercial many region African predicted. of that returned, weeks too, restarted the on summer resiliency no across in May levels. started the North too, board little quite light of volumes not the depending and highs in our but to of restarted our they after customers varying European volumes

I aftermarket business and our We in And stronger continues continue to in as uninterrupted. operate earlier, to demand agriculture see construction. stated weaker demand

navigating passion have normal where of brief our of and its As launch operational to management global and a customers. you remarkable starts different we did requirement and validation have having Most production customer success. we with off with we all pre-COVID. for team value albeit course, new is dramatic providence-by-providence a often changes. chain of the digital And in purchasing through facets the readiness only satisfaction At engagement importantly, The but a the in attention for and Drawing product job or ramping essential was DNA, rates, Customer is can back, other up great customer of all may consistently period cohesively the the your center and testing, and left our operational But team a Dana manufacturing altered very today, customer at supply is safely. a of ebbs state-by-state end as reviews management creating pandemic not robust communications markets the imagine, this the basis. slowed for the different Dana, page, flows who of basis are satisfaction chain people supply executing world, system tremendous reviews, on product design are executing on business. this doing to a country-by-country time. around

are in the right-hand notice our that many increased only result in As as could of safety from on ways, company environment not operations operating we required our we than coincide the page, have be you thoughtfully, new work the protocols with clearly manufacturing new challenges on the normal, in elevated in Accordingly, have also the to away deviating operating understand quality side will ever processes. normal standardized we focus any proactive our environment. manufacturing more

example, that characteristics we ensured our we product support and process revalidated floor For meet customers' distancing that requirements. social ensure shop have processes operations all are to as adjusted to protocols,

much of in bottom this course, over Of new launches into as product the corner page. translates right-hand the illustrated

new drive in We our which new internal-combustion support the the to in move continue to needs programs. new in the across continue stream we engine future serve. investments they we Furthermore, to for will steady technology to continue see make from product customers' vehicles, growth product electrified launches launches to minimal businesses as product of future, delays

to turning on. news working program are Now share six. about another slide exciting to like some we I'd electrification new

with recognize strong remind Our complete audience e-Powertrain I customers that mean the what a continue turnkey capabilities. full briefly by will value I suppliers for proposition e-Powertrain to capabilities.

Dana, As has you page, can e-Propulsion the capabilities, bottom system of driveline. see the including side left-hand course, of in the and the inverter motor,

these software SUMO production coupled a will commercial the including the business describe partner vehicle we new system, complete capabilities the systems. to right, what urban chassis. equipped that new system. next year. the also electric system. complete to X-emissions motor and their provide needs. with presentation us the the and vehicle, Dana, e-Powertrain and and optimized will in power truck only major controls inverter we to sourced consisting the enabling thus Dana-developed as by of the slated all which e-Powertrain the supply provide manufacturer will distribution. Dana Moving packs the for utilize having battery and medium-duty to house, vehicle exciting well used We'll The and stores recently to competency award, be closely system upfitted electric supply content By COXXX Dana announcing the our run supplier e-Powertrain capability, telemetry efficient also generates The to and will Dana customers the is battery with is the electrified diagnostics start page e-thermal our the electronics for product a driveshaft. and e-Powertrain Specific the regional truck full we as a to a European truck be meet auxiliary The with the and and for to were solutions as battery complete HD manages of energy to of

and our to Motion Rational in acquired of XX than Dana electric and GmbH, by expertise our the driveline step everything drawing customers of a earlier of European-based coupled and strive experience the the especially Motion only years vehicles. vehicle lead of team As capabilities month, software, software, talented integration our executing the to is capabilities, increase timing most decades ability in you've innovative our be proven and well e-Powertrain opportunities global we a to company something expertise key controls the more demand this electric system fuel-efficient, the controls on strengthen solutions for localized support and Accordingly, often cost as skills of efficient its eyes complete open, technical via capability of controls many And highly customers filling now rich with most integration. reduced With lineup Rational And and, taken expand, to recent discuss for for and total proven from into the for history, of And software of further that strengthen global development a experienced and new right and program engineers, that enterprise be our way, coincidence. accomplished their team electric full asked as continue our been will members Dana a announced vehicles market numerous more has about other the the projects Dana software, truck Europe to need? on. last Please year. the the have by the with in my in having provides am company in we area to our to as capabilities, turn the especially well with to our electric the not to develop launch hitting There's is ownership Class application long-standing like: lot support to turn slide services. The the told we eight been of of previously This emission about electric does propulsion. engineering this, question our white M&A low-emission former the hybrid of in year. I winning to Hyliion, leadership you eight best me keep working objectives. team Dana new leverage strategy first Slide will been specifically, a controls truck can Rational learn solutions. European the buzz further element is with in about new truck most Accordingly, as have people. we systems. space always me in on acquisition electrification, involved to we and a Motion response earlier that out and seven and with this more question: Please continue

and later this the year, about through our investment to anticipated for sustainability the this a opportunity be source strategic excited controls, first partners a well Class to or delivered Dana's with e-Propulsion meet implement we eight nine motors, of Hyliion services high-value helping can The and me their Earlier servicing. solutions have with about equity-linked electrification inverters, boxes for into simple to Slide manufacturer. e-Propulsion system, navigate are market which in an vehicles installed revolutionize leading long-haul and hear example from partnership years. and delivered debuts such technologies. gear exciting to as industry-leading highly our Through traditional their help vehicle one, Class to to Please how thermal We customers transportation as customers to eight system hybrid Thanks The three that on agnostic the Hyliion. commands the more strategic as It's remaining opportunity slated any are committed easy be year. this vehicle a opportunity Hyliion the vehicles e-Axles, programs. this provider system. Dana to proposition, our with and as installation fully components including power timesX unique well allows turn management goals. as system another our partnership, is and hybrid is adding traditional technologies include driveline we X engine-type integrated journey with by This of converts any

Sport As unveiled and two-door revealed Bronco I'm Wild, its Built a Ford four-door, mono the and you're XXXX aware, ago. Broncos few or weeks sure new

for You thermal involvement XXXX, to dates its program to new offer Dana's driveline, advanced exciting with once technologies aware not a with management collaborating Ford Bronco of be this, be sealing and to the vehicle this back initial but in and suite excited launch family. are robust we again may of

in is upgrade front to featured include there AdvanTEK AdvanTEK axle. rear AdvanTEK axle independent Bronco Dana and Ford who XX independent the an those solid the Our technologies Dana want to the From Dana front extreme the XX axle. optional performance, want

shaft differentials. are uses axles sealing Dana-designed locking joints program first XXXX. in constant pro these this The with available in a track management Spicer, Bronco and Spicer and the our technologies. also back win electric We of drive All thermal velocity forma rear announced industry-leading

decided history in the In on SmartConnect Dana's system we're they fact, Ford again have Ford to time We're Ford the forward stated disconnecting AdvanTEK not times Bronco they new of the selected ultra rear to that vehicle are the partnering Bronco be sport. and these This will together, the Dana Dana announce frame fastest-growing United before with seeing we the driveline four be which and States. was out axle would and once proud exciting of all-new the on at be able system. Spicer has equipped even trail. four looking and Spicer vehicle are to featured on a axles the one segments vehicle, long models, part of Dana's

SUVs In States United fact, in XX%. XXXX, in were sales the nearly of

exclusively segment and segment, As their enhance, to and driveline their we pickups used SUVs as for deliver performance growing as personalize help now experience Jonathan our well. high-performance call their our off will market. by this best to a in to off-road this Dana leverage aftermarket solutions increase technologies this as turn And further over solutions maximum for customers to are like the and vehicles offerings financial Thank at to looking for offering designed look supported with the you. the grow roading to I'd results. on-road only well customize desire

Jonathan Collins

with near-term I begin of the Thank to financial an all on like quarter's I'd outlined you you, on in. Good Jim. to progress listening morning we last made our which on update call. priorities,

global We with objective. sales market to first actions cash we pandemic. conserve to fall began slide, Page due left Starting four as on was to our uncertainty production on schedules of priority, as to key turn please focused off the achieve and face So side this the the XX. me the to

first First, aggressively reducing year. our managed by than and the $XX half million by supply we chain of more orders our inventory the material lowered in

our Second, actions all in categories. on and aggressively we moments. associates, across more an bit utilizing indirect layoffs than sales associates temporarily margins I'll costs The temporary spending of by than to flexed these salary and few which decline for our lowering a a conversion led XX%, direct of compensation decremental reducing less of combination hourly XX% overhead discuss nonlabor of more organic

on to Third, than compared we by our serve capital the spending In capital. reduced more to customers while where continued second to to our and make quarter, last prudent invest continuing on current programs. decisions we XX% year new

Finally, dividend remained a preserve stock our unprecedented time. this cash suspended common means during temporarily as to further

$XXX we our out facility allow our million $XXX Proceeds beginning page, of to capital terms billion access guarantee was our notes. place shown actions took to We We senior as million the an the than maintained repay end. the facility Our headroom March. of several maximize an senior of from million issued balance We We've pandemic access $X the of a added $XXX terminated credit to the cash compared of balance, of We $XX on in entire of to this made bridge additional draw now the the unsecured the of undrawn of at revolver more to end million, end facility into over in was and covenant. second the under to abundance second portion priority, was increase caution the additional the have the maintenance million issuance the from $XXX at quarter new on liquidity. that of proceeds in sole our put ready that June right the to liquidity. which to our to amended used March.

results the of second is maturities not we had reminder, a the liquidity working year. last slide XX for any an for significant period our with years. the capital the few with of In quarter, same quarter billion we to Please in $X.X total, now typically turn next end have business. our overview second debt the compared do at peak As seasonal me of which

million lower $XX million, in a quarter jurisdictions. demand XXXX. just year, by second income lower to the than establishing $X.X the same the $XXX resulting due of breakeven decrease at tax the period million, quarter higher were nearly reduced was loss expense to last of a sales $XXX $X same income the from million the were loss a than $X.X allowances Net valuation was from driven COVID-XX compared to Adjusted lower of for period in last Second Earnings EBITDA resulting million year. foreign shutdowns quarter due pandemic. billion, billion $XXX production of

quarter second year, transfer a net onetime foreign $XXX the this quarter of in credits. the tax tax benefit from pension reduced $XX XXXX plan termination of of to by driven U.S. onetime was The charge charges the last settlement was future pension in the million Partially related by and pension offsetting liabilities third-party insurers. pension of second to million

lower Please now in quarter. which three to look factors profit onetime the for net largely year, a was second impact million quarter here. the turn last and in adjusted items, period these $XXX second $XXX capital spending. pension quarter nonrecurring was $X.XX key $XXX tax lower is change sales than of slide lower adjusted million of cash year year compared flow Excluding in reflecting The closer use period of excludes COVID-XX as changes last with of operating shown this offset earnings lower the free Diluted to XXXX a to income our with last at by and than loss charges, working sales the the attributed me EBITDA lower second the the taxes net driven adjusted loss to $X.XX, the $XXX in resulting capital more and same lower year, sales due compared million, XX a was cash the requirements, same EPS, million profit than XXXX, from pandemic. Adjusted EBITDA. and

of billion period extremely second cost customers' mid-March First, than in low toward organic primarily of Throughout a last the organic our to effective demand, attributable sales the and the lower for the margin no were production year-over-year portion May. Graziano nearly on QX. this of overall Fairfield last margins year, decline with businesses we own the there's our year, XX%, end $X.X reopenings quarter large halting impact. quarter, decremental in held to so actions impact first tempering flex entire the Unlike

translation dollar to was million the quarter foreign U.S. of to This profit. year. key against stronger $XX the with Second, second impact lowered last impact by compared a sales currencies negligible

XX lower change commodity overall with margin a decreased a look costs net $X closer $X EBITDA to in commodity slide million. as turn in gross our how provided at cash converted position profit flow, leading benefit million costs a free Please for adjusted by to quarter. for gain Finally, adjusted cash slight the the of me to

were cash revolver. bottom no taxes interest, what This middle July can proceeds was this lower after the August and $XXX considerably balance and overview will lower you was the with offerings for see sales Please turn of based increased from slide cash and $XX little until meaningfully As the last that slight in reduce you sales market flow quarter. volumes as page, page, our a from adjusted in our the can to net the At our levels as improved of the an result fact May, customers which lead use me to we're the of now capital the fact cash bond the second the for there seeing was repaying the our April capital that quarter free production XX million flow in on in releases to for of well to virtually of was significantly the June, September. opportunity third taxes as was inventory conditions in of due use the a despite of than profit idle see a and to expenditures million there the at year capex as Working quarter. year. cash despite fund

providing in have a full key in than we is vehicle production frame a for North low, months the for platforms just a market, our ago, vehicle stronger particularly would truck inventories remain America, environment. demand robust First, light bit expected few where

American in truck started there was other the key first after light than a experiencing the faster production North in our regions. is case quarter, recovery market As China

commercial though eight Class vehicle improvement. market, rates showing the order encouraging in in America remains North Second, challenged, truck some are demand

However, are to as America, hard-hit other of ramping production on Outside North in have on economy. the up this such see a regions health impact our more Brazil the crisis customers continues than as production to we've yet meaningful schedules. India slowly weigh regional

Dana Finally, around off-highway key impact in XX%, the agriculture with and generation in. market strong, focused result the and to demand now segments remains the mining improving team listening the demand entire and employees questions. while to sales with safe in with Thank in demand The these improve cash growth third match much the in our level that market. our should to of financial to equipment of quarter. your conditions continues world work take softer turn as combined for demand our our back market, of lag call excess to a to We'll reasonably flexing customers construction exception The of Chinese our environments, profitability results on the you shareholders. structure supporting over cost protecting return to sequential remains leading deliver of

Operator

America. [Operator Aileen with Smith go Please from Bank Instructions] question of line first ahead. the comes Your of

Aileen Smith

Good morning, guys.

performance talked and free the higher? in breakeven some reporting, slide saving I at that that presented actions still could it the question. your estimation your that operating cost conferences taken, flow that you've cash since. and First quarter Is cash valid? excluded you've of at Or based and noticed XQ potentially even be you you on about breakeven

Jonathan Collins

Sure.

little sales, that third to I indication We we've consistent. than level the progress our quarter better but think would in be bit it bit would some remains a I the perspective, highlight improve for from that, still of scenario. made the cost may with on reductions a given that have demand pretty structural demand

demand outlook that. from quarter, in the So than least standpoint, at is better an third

Aileen Smith

And to comfortable balance And repurchasing repaid what terms of this put potentially would aggressive front now get your across revolver, terminated that facility work? look or to you and like dividend the tree need some decision end the your your see to specifically, more of markets on Okay. bridge what the does shares? feel you've reinstating and to enough sheet in

Jonathan Collins

Sure.

stable would future have any of to think it be significantly probability shutdowns. reduced I types with demand of a

look further as and to numbers demand, toward we'd comes and at moving capital the we'd in have more So confidence would a approach. and health a start control the normal be more crisis move under repatriation back to down consistent position

Aileen Smith

Great. And may. I if last question,

a of made commercial market. the lot cited electrification You've you've the progress on vehicle in front

segment pursued Dana lot starting Can of products attention new get to in market pickups that's electric Ford, remind GM, Tesla, is from vehicle hype coming around you Another light where of us in the fits with being internally new the of at in etc. terms a quoting are customer more heavily involved programs? you these of Are architectures Or many for the some discussions? these level? in

Jim Kamsickas

I just today. what not the light as in involved it's the moved announce more today, side, board. Thanks even I to Aileen, one of things. obviously, said mixed question. it or of that beginning, last in initial as your would about say we Thanks here you. much about Then there's across another bag as the would bus a involvement but form communicate or give into anything, say the in I joining of vehicle the mile. this That's market. I've We're can plenty for Certainly, is was for since talked Jim. pull-through

Aileen Smith

Great, thank the you for very questions. much

Operator

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

Dan Levy

morning. good everyone. Thank you, Hi,

couple decremental with A look than That's commercial decrementals little obviously vehicle, If a would which you the get on of I is would which lower the of a higher I decremental. I to just of off-highway similarly, the better going for So at start questions typically what have only then business. XX%, XX%. think And wanted to rest of like that. on decremental. color than that, is segment

decrementals those the some segments, just two for color So on please?

Jonathan Collins

things. Sure. I'd to two point Dan,

is side of both units heavy have vehicle those The presences. on the aftermarket first business strong

So in still needed trucks to the this were environment, when OE repaired. road production be was on and idled,

help business, of that bolster which bit. would say in to a aftermarket is business, the both I profitable and those So that a good

cost thing second is really were that flex referenced board. widespread the The I actions across the that

because that better actions received So of will. the the we in support with partly we ended those with cost decrementals segment, combined up from you aftermarket if we severity took, that businesses, of the the

Dan Levy

typical of Okay. That's back specific that get you're indicative recover, mean, sort there's XX% And when is you cost to XX% can the still finally margin keep taking pretty to and intact. out revenue that I down a off-highway, are profile? things that like that And type margin. I actions we that mean margin then good. nothing It sounds to XX% those put

Jonathan Collins

Yes, cost off-highway those particularly the margin remains a all then of combination absolutely. makes segment high, through the of standpoint. attractive we've synergies The and achieved because The a the of margin that discipline very the cost the that acquisitions, potential from of strong operations. very business

Dan Levy

Great. just electrification. second And a question then on

truck extent a heavier you're broadly It a and only a the And on customer? the suppliers the on that they give Or us just in-source your electrification? at the to one just correct? on solution, win complete powertrain? your For only at electric you're considering choose sense the of landscape. competitive did with you you in so complete the it Was program made what sounds out is was you was there mentioned they multiple the how customers they doing wanted Or one that for specifically in-sourcing? sourcing Europe, solution? decision to could more all because were like looking complete solutions, And in applications are

Jim Kamsickas

have you're the to a complete we've all, question. this for when how made, batteries, of you that's you I'm you one, they're to OEMS, all how they at with bet XXX been think tell sure get When it's all have to I moving as to engineering of business No about full kind that to an one impact the they're parts years. and the a tell e-Propulsion it. kind engineering with And thinking system how that cooling on not to specifically is full example question on level, tell do But thermal in there's Jim. boardrooms their differentiator. somebody each terms, in that speaking you're of is sure you of your to I'm the pretty the our that at I the couple would whole going And one business can management it, But about engineering would it And great get going integrate. big system to differentiation back you react one have confidence electronics, be the know the will I products. other the system now that's in road, have things. able that the this, OEM customer. aware, starts with all to teams with decisions the capability the capabilities, on specifically of your bet the is as to emphasizing more shoe actually make fits going Yes, on associated system coming the

is everything of from is to the things looking when out not shopped confidence And trying that cobble You're parts get their they're face you're in, to going that to that know kind it, road able able to everything. brand don't in everything be it, together it. for get of be to diagnose going and customers the of pop if to you're to kind going great that, a gives supply to a going deal to they're to down vehicle, I just going outside the have

we way. we that all they And that's talks it's to competitive engineer that And many Joel get engineer believe same it advantage think way a to see Tony to our customers done. engineer, we Suzi a the find in-house. talks and find of that, it So

So to can I the about give that's long-winded best it's question, you. your a but answer

Dan Levy

That's helpful. more. could in I just one If Okay. squeeze

what capital if on half? the second provide expect in in parameters housekeeping, you could, you you working some could if Just

Jonathan Collins

the we third Yes. this the to cash. start shared communicated Similar in to we what quarter, for decline quarter. the first of with of with going expecting the sales breakeven that be It's a were working substantial capital of analysis end a significant we to at happen source really

down the to quarter. inventories came second late to third in That's So going cash in quarter. the convert

a have second from half on cash basis. would So generation and working in we year significant a full to capital of of expect year also the the

Dan Levy

thank great, very you Okay, much.

Operator

a Noah. I have

open. line is Your

your line. please If you're on mute unmute

Joseph Beninati

for on our taking for this morning.. questions Joe Noah. It's Thanks

EBITDA you puts Can in And the $XXX back on saw if point more circling sequentially. XQ any that? were decrementals I just imply in XQ than decrementals guess Just so, XQ? million. you expecting Are potentially as raw decrementals. to similar And the regarding would material that you takes and

Jonathan Collins

full I at think decrementals of No, shared the as last year breakeven quarter. far the mid-XXs. decrementals as It end we the in the concerned, implied scenario are

to close expect I year-over-year quarter. the pretty third remain that on think range to basis we So in a

pretty I So assumption. reasonable a think that's

Joseph Beninati

quarter, quite commercial to Got seen for then of the on I access in fuel cell and we've past guess, it. vehicles. development attention And bit in policy a particularly hybrid powertrains, also, capital

But similar already see So have like you've focus fuel guys going need with EVs? supplied you stacks. forward area, expand or if offerings to where your cell in investments? to done your And you'd opportunity if to so, this the wondering you how

Jim Kamsickas

very the for much. Thanks Joe. question, it I appreciate

You never say never.

right. You're

we'll support the as fuel in well. in certainly continues to relative to on helps solution our the relates our in now, regard it market projects working integration Our in many commercial that intention. years. Right to the we're or the is for us full segment. and we To not as it's be cell game experience stack, how have It as to customers do goes more that's But see vehicle that driveline back especially decades unfold. like actual solution

place But road thinking be flexible. our maps a it. little in keep to are of know, we keep it's there, the lot you out and to a our it, working further As about ground bit on folks technology ear and

Joseph Beninati

just could back in, squeeze I the circling more on one product If Sure. launches.

talk supply. integrated in chain these limited line-wise a for you to And managing generally first-buy number announced can make the powertrain decisions You've then the for tracking a industry? fully your and Are components, launches EV time of those bit second, you're supply scale the given the similar expectations? how wins about little

Jim Kamsickas

the yes, tracking. I Thanks they're would all, say, of first question. again for

think way a in previous of world, pick, six, people the there's said calls, I bubble As weeks. most in eight a I would to for you are the I whatever want look everybody bit at it,

don't doing off and well a that, supply chain piece goes been the vehicles good we that's decades, to on can. that SME, are electrified to You robust today's That's on the but and of The announcement have that not working obviously, chain bit it, your observation think some that that little roll-up but have and the sophisticated as could components of history Ashwoods. We're various that up delayed list with as Motion, of don't such supply etc, Back a accident worked I by much on, you there, argue amount, assets form people that with. anyway. and you're of of Rational even by substantial launches right. base out our working and TMX, best for over most we're electric build best them, they've supply acquisition

Operator

Your question of line Picariello Capital Markets. James comes next go ahead. with KeyBanc from Please the

James Picariello

number mid-XX% should Or next If a margin considering contribution? savings there be to compare from be is impact in any incremental year captured XXXX? just base, we your cost structure as would cost maybe for acquisitions, that a we excluding structural XXXX a

Jonathan Collins

number, but cost a in At would specific second point, taken Yes. that structural not indicate we quarter. actions the this of we're giving

will insignificant. be won't of It be Some them permanent.

they be or that. the been have be it's margins prior higher going think the the upswing on going to incrementals do to we help So be something to to would that's higher than

provide are And as end that next There referred year are color start on there more to, of outlook some the we number well providing certainly, So temporary there. an the that. combination. ones get toward and we'll a as but for we year, there's actions some a permanent of

James Picariello

within backlog, original the contribution million, there's just right, could thoughts. launch the delays year, you're of full as back it. half wondering you order though Got the magnitude the seeing guide for if think programs. we $XXX or color for of And on backlog Okay. new context It as seem of about business minimal any your provide your new and maybe does

any Just color.

Jonathan Collins

The before, sales. is is much change line right. there pretty give in that's we'd in in think backlog I what what of be the we're reduction the Yes, which to overall is seeing only we our going color with shared

lower amount dollar is the comparable certainly, to be by going So amount. a

at As Jim we mentioned, relatively next that shifts this this expected have year into the year. of we expect to pretty point, earlier cadence launches would and going a program similar insignificant have still are

James Picariello

mix been or Rational Motion the vehicle with standpoint, a in worked you have customer past? channel Have from And who with? today they working

Jim Kamsickas

way. the Good question, by

early years some kind in our you Yes, answer that it. question, of various give and racing, components. that's or of those if part particular products so, Toyota, coordination TMX They and TMX first whatever ago products. of E back a to of quoting actually, integration a spent their activities, then into and question, from tied of electrified and can background in it via X.X we into the They've to were team on we multiple see essentially And your you hosted the to other business engineering with in for the was whatever call acquired literally I'd in their pictures to And a The worked a of recently. their background, but sentences. it large what Formula outlet case days portion can they they each other's finish started the may anywhere yes, design the all for Europe be.

a really and good background So history.

Operator

Your next with comes ahead. line Please question Lache Research. Wolfe from go the Rod of

Rod Lache

big morning, you EV of business backlog at for growth also you're intensity time? XXXX. looking in I then about of that in us this more your programs, be the new on front, in on hoping could aware new Good obviously, to was How this able the that a updated vehicle of speak just as out little of have hearing about look at you bit you Sport. A view you trajectory the we're certain you? everybody. the business might the activity just a focus, see that light and Bronco, I given Bronco lot to position And on be wasn't on to for EV point your broadly

Jonathan Collins

Sure.

our in the contemplated Jim to the moments few that on three backlog. the Rod, a the technology variants been ago, have backlog, of Bronco, all talked and just about Just specifically vehicle

to been that direction. SUV moving time. think capability the many cars full-size really or that a part shifting trends of from the them really that's of We So calculation have entire right in our consumers sedans in is the and off-road

the really product. excited we're about of launch that So

electrified the now particularly electrified On and continue products, we backlog accretive grow Certainly our that more opportunity to of we It backlog portion in significant backlog highlighted will the the one started year, call electrified announced earlier on side, this earlier this see we vehicles. not there's the that. market. in vehicle a the was the in more our to that's when heavy as we be year, on to

about well, through-the-road Class as lot urban a mentioned, coming of of there, also, then activity But in delivery too. via medium-duty years we're the vehicles. hybrid over-the-road Jim as eight Hyliion to excited come the applications or could last-mile potential really in So for the the that

Rod Lache

a while Any comment ago. color the on I you? of but on for opportunity some the Investor the just that was know magnitude you that provided Day,

you'd what suggested And bigger the like sounds opportunity then. is than back

Jonathan Collins

we're we've amount a next talked XXXX. far, us tracking but certainly we'll programs the those on about of of And But our early this all a keep we electrified by refreshing opportunity, sales point, $X.X to that. There's tremendous deliver probably take pretty look at year, so remain Yes. convicted And pretty ability track to of well. billion projections. in that at

Rod Lache

don't those? there decoder a I just arrows, directional lastly, just on just colors off-highway. for for you color maybe key, specific Or give on And a are is bit us know, commercial to your a what bit little gave a you slide of what maybe of little magnitude. expectations be some could Can vehicle key more different sort those XX, the you Okay. your

Jonathan Collins

on expected. is indications we Sure. how that's what really to shaping up page, third quarter we that compared the the From put

represents So that have what than the performing certainly we better it's that is to give were would North America sense in expected. light that a market we trying truck green is

would during some So back sales There May April remained production anticipated. June. with of in little stronger those than we coming in vehicles second the production and quarter have was

our platforms Demand for products July than been higher. expected. in would better those key levels inventory So have for we are

ago. coming to of Class market it's soft. truck light have the that of indicating if just it's expected is vehicle, eight little X, those continues we're And we be a would a couple than bit whether Class probably Commercial back months duty, So a softer anything, or both medium better. just bit

So is pretty And that consistent arrow segments off-highway, to is represent. thought. we intending then on across what that's with balance, three probably all what

strong. construction reasonably that around and of quite As with we where said, been ag really, came back exception continued But quite do soft China well. have mining to world in the the

sense balance, on gets that's were all what that and to expected, than trying So in to that we what from XX% last XX% be we QX compared a we indicate better sequential the were think to compared as we're we going to quarter. to where standpoint

Rod Lache

Okay, all right, thank you.

Jonathan Collins

Sure.

Operator

Your your next Please question ahead Emmanuel comes from Bank. go Deutsche of line with with question. Rosner the

Emmanuel Rosner

everybody. morning good Hi,

Jonathan Collins

morning. Good

Emmanuel Rosner

bar. and low cash it third quarter seems EBITDA adjusted flow, a like pretty positive outlook free Your for adjusted

the revenue to than, than going decrementals mid-XXs, you $XXX guess, more your than and If I probably grow are do is in can more still million. more XX%

So to are any terms not it in thinking is vague? offset? a stay trying you negative more little other we're just of about that factors just Or

Jonathan Collins

obviously, indicating just they more will. It's were We line, that, improving are of on and the Yes. conditions significantly latter, the top Emmanuel.

And lower in implies would to still would we in basis it QX, going expect and on that certainly conversion basis, on sales. we tailwind incremental a on a year-over-year working a tailwind right So moves going based now what we going me, cash on see breakeven we're capital weren't both. saying excuse and a a to starts headwind from of becomes to quarter year-over-year but year, last be are still just or We're to than significant flow above strong in amount think mid-XXs. sequential to be the generate be the headwind on to the a we we those decrementals third see as

where we think enough information too specific. are points, to So a giving of give we're people being sense getting without all we those

Emmanuel Rosner

Can that solutions of think capacity much relationship will the willing existing to you and Great. is your do curious Do motivation the over Hyliion. was invest good it of or you Also if how learn comment And little of like use on more work how and just have? off? go take did truck bit for you own? sort you the Or about Company there? hoping how secondly, some with works then of you you're relationship I a sort of natural to a that much gas

Jim Kamsickas

first Thanks don't take have but a the us Emmanuel. today. has relative tell and to all strategic plan all Thanks for future drivelines to powertrains. question. words, it's a word, I'll they're for other almost on me be the and when any certainly, fuel of energy-source more ball, part, what and use anybody the crystal will I projects thing, know is always OEMs of set one The joining our working for and talking we're been those of that cell And to heard you agnostic supplier key the I essentially is I you've we're cell plenty that that ball about of often in electrification, What you would energy stuff. or which that, vehicles, is our fuel mobility, terms than Dana's just relative drivelines adaptable take sources. of type these crystal

of Jonathan, answer Dana. best I you else? give to probably what's I'd kind So anything if going at as that's on know don't you you're that's have the evaluate trying

Jonathan Collins

see opportunities. because for we've Investor last the of segment on our we Sure. electrified vehicles investments we our And discussed concentrated at what just a more the near-term reminder, Day year, medium-duty fully

with run. in the electrified So believe the the for carry longer to that. infrastructure day term, the long spoke as fully in that Jim we've near about haul, comes that is we that But hybrid place on applications heavy-vehicle the Europe going platform the are obviously earlier particularly over-the-road won side, solutions in fits in

opportunity excited in the year. last Spicer not will but Company. investment financial really the electrified From category. on the be return we're about we're major road made it, get on a that equity-linked a So an standpoint, the a we in early e-Propulsion nice systems to owner There

a but have that's to will a We that going us Dana. for return, significant stake not nice will overly anything give it's be

Emmanuel Rosner

financial of Spicer three do are one, you the a also supplier? for And systems? the How the besides the you terms Do Tier Okay. work, sell does the relationship do you And actually integration? that you in in them are work way practice?

Jonathan Collins

partnership aspects. the system. couple has Number aspect, their of be The has, e-Propulsion a one, financial the aside Yes. of we will from supplier

driveline be that Dana the axle the system. to inverter system, battery and to, via with controller, that that and the combined going the had will electric electric referred that the So transfer their torque or the hybrid all Jim the powertrain. That full e-Power there pack to is the motor, auxiliaries hybrid be gears provide

The is of standpoint. manufacturing second from relationship aspect the a

to expertise get customers. the help We delivered and to put have together, offered manufactured systems our manufacturing full

that's part as of the well, relationship So too. a

Operator

is ahead. Your JPMorgan. question of Please next the go Brinkman line with Ryan from

Ryan Brinkman

Hi, I question. to thanks taking for ask on wanted my capital allocation.

prior already the investment-grade to you'd planned march even credit leverage times toward think X to or metrics crisis. I

course, now Of it take longer. would

all coronavirus with repurchase You'd bolt-ons. But experience see changed recent And shares, doing not maybe thankfully broadly, capital in at the you suppliers. think leverage levered some still to does going I like or years allocation forward? you're how other about just

Jonathan Collins

No, so. I think don't

going take given think longer you I get noted, as there, bit to us environment. a it's to this

and we our priority, anticipated as That a generating the intended substantial to to it's to use take that had in longer. we pre cash remains crisis, delever. but bit business going flow So

you So would balance very Motion the delever flow as stabilize play to as generate of of you out, small. us and be the to seeing to sheet. this meaningful hopefully, the market And more second in half we look year use conditions noted, and improve XXXX, Rational that things continue the cash see cost acquisition is

to of make in of the to get most to ourselves plays to coming continue toward continuing to electrified turn position target see one going you're net great customers that we'll toward leverage. our products So it smart to years, but go the deliver

Ryan Brinkman

hopefully, just then in public recently relation markets to been Hyliion soon. obviously, with you And in Tesla, for a Okay. there's enthusiasm of to regard tremendous Nikola, amount the

content curious that extent sustainable perspective just side. the per think toward coronavirus from means or you vehicle commercial what which delay may to for Just transition transportation, the you on a guys accelerate potentially knowing that the

Jim Kamsickas

go. based all OEMs' doesn't I on have, can answering in crystal better It from as the changed. the That's chair, or quoting, our program I question. capital really, have for a hearing a on, of earlier. course, nothing's working Every the my everything inputs allocation answer seeing ball and did it's least at direct go everybody, mean we're everything to everyone than a you is I But else. plans chairs, steady much only question we're we're I still

So answers. I that hope

Operator

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

Joseph Spak

follow-ups everyone. some on Thanks already up. were just Maybe that topics brought some

think positive I you The you build yesterday sort the I about, of maybe a first Class positively prior forecasts, and XX, a talked Xs competitor talked some little guess, revisions September on even we've there. is third-party bit pretty as of and seen on more has quarter being I the slide about above think negativity versus

what us odds of bit conversations So at can some there. out Because a you the are seeing with in just there's of with customers? your tell other little commentary you

Jonathan Collins

Sure.

to orders, the was necessarily remarks, the as will the bit our some a take. the were same what in seeing certainly, meaningful we anticipating, better. schedules prepared indicated production compared getting but impact a information are are think we to that I that We're what orders seeing not we improvement

only we're We a have coming dynamics I a the be probably into obviously, eight anticipated was think exacerbated to soft that. cautious. year remaining year it, and on this going bit Class just current

just cautious. think bit more we're I So generally, a

commercial thought as The at the recovery important, beginning a and the bit other slower. us that is we vehicle thing quite have a has reminder, medium-duty year, softer the bit in of there is, been would a and the for is segment than going started

of segment. a us vehicles it's put bit commercial in vehicle place segment and say in our that would on combination where views that heavy- the I medium-duty we're cautious a a on So

Joseph Spak

thanks for now, Jim, my we just like engineering little And that? better eventually, should Is it systems you Rational the about to think sort sort still competency Or bit your work. at guess these way about as in get did Motion. the so misinterpret head of more. good about how for explanation And help of customers. then of Okay. I a internally really acquihire, this around wrap least more trying I'm I you can

Jim Kamsickas

Yes.

you're in parts technology thing comes industrial any at your want world the systems, to distributed the you sitting about not about I line very around being this structure there. the absolutely acquisitions that. top it though. talent, the important best thought getting one headquarters, really efficiencies ahead moving is of over what's you're organization, your back curve, since All think I've from with being and okay, organization, people for through best learning I more the right. mean vehicles all it, Not ultimately, and electrification about and very the but the systems systems and It usual. really, out ability centers and is. you're and and sure. it's controls, call learning the structure Yes. really sitting said and all people and the and future the Because, to so efficiencies those between it, learnings winner that prepared go to if are best beginning,

to question, yes. So your answer

Joseph Spak

on just is one last then And Okay. Hyliion.

Is So effectively you're what to a hybrid doing is brand-new is or between solution? fuel sort like solution of BEV what a retrofit and you cell, it providing major provide same a you're would which e-Axle basically would versus product? Or there whether the for what Spicer product. axle either the you them, provide OE, difference it's the

Jonathan Collins

basically No, it's product. It's point. same a the good

and powertrain north gears the you'd vehicle. motor, the comparable difference with what of to Most see of that. electrified on So the in a inverter fully would essentially the the three-in-one the system is be

battery of size the e-Power in would the be So that different the system. of into controls, all the pack,

is comparable. very e-Propulsion system the So

Joseph Spak

Okay, thank much. very you

Jonathan Collins

Joe. Sure. Thanks,

Operator

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

Brian Johnson

Yes.

question. Just the final housekeeping talk

between it adjusted difference updated to a was the the June that FCF for big swing working you your you breakeven capital parts gave conference, thinking? use guidance in at or it So inventory really was of when when in other your

Jonathan Collins

inventory up, ball to and the say and breakeven, be tried just month when to to through quarter. off QX. adjusted would Yes, clarify come back specific. about use Yes. in a than reduction more we that was we EBITDA be did sure we would that down it of to we we of said inventory. At of production first midway the really cash be that in saw the some that driver you're the right, of people really the the a back the were happened and we quarter And primary what bit knew go could schedules a that slightly that but Brian, would more June is we the end up crystal have going specified quarter, in didn't was bleed clear make it to when be We customer so running,

June, got it. cash reduction to cash quarter you So inventories see going well, inventory come down benefit and too. is third It the by to the in in quarter going driven the in was are the We're that. use as of the

of will the combination the So augment that help cash.

Brian Johnson

goods, kind And of it as a big above? finished a all raw process work mass, the or of in difference, was

Jonathan Collins

It's hand than crisis. board. categories to come we across most on Days the are pre right. going lower is demand really you're down when started across because No,

So board. adjustments the you'll across see

Brian Johnson

software win to your what's doing additional second the joint Hyliion, where electronic your offer question. in profiles? And Class And their partner But in that is for similar venture the if and Okay. the eight particular, North sort America better of business content or margin last with European you're you compare Dana e-truck could to content?

Jonathan Collins

Sure.

two the between pages e-Power to those as what difference refer we is system. the real the So the two on

So all the would battery pack, be system. the battery auxiliaries system, e-Power the of in management the all included

vehicle. to And moving So much manage software includes the the higher it But inverter system, and includes the just in in content. the in content, you Europe obviously, of also the all that's that win e-Propulsion those. remind controls the very high-value

we're of system. So in there's but both, the And greater and certainly, content system, the that good there's content in Hyliion, in e-Power a the case part they system. providing have of propulsion

to a between are X, us some for opportunity the great as differences a So but there you traditional noted. vehicle, compared

Brian Johnson

truck van provide Xs the those a built thing have that, and you of the you you electric? next were focused see at traditional But you platforms mean X/X-ton see of go I would even since than the follow-up. those into you as then Class going many used market though sort off down you would to are last-mile LCB the larger when that, America you're a just of do look kind and if in And And into five any when of get North for on electrify? focus X. delivery would Class

Jonathan Collins

you assessment. Yes. right I the No, have I think that's think

for electrified. could a lot You being see are that being vehicles medium-duty used those of applications

So applications has for broadly, And to used electrified. been economically cycle is attractive our think that those there. because duty market absolutely, I the target for are think the we you're be correct

put So much in energy and so that's we effort why segment. that

Jim Kamsickas

high-performance calling Thanks, and is to at everybody, business it that to and shout vehicle good certainly very our This more I'd That's exciting is pie. the than size recognition It's much. the the for of our Bronco example decades grow engagement that overall it, all up an coming vehicles, enthusiast so matter, to in us dialogue. so product Okay. of we family group customers, market, off-road and, it. to today back describe or least value and new that light for in Jim. enthusiast A to off-road questions in customer better carve out our for critical for at call Appreciate and are an of for our my what of the market, activities, forth. creation SUV pie those Moab quick extension I critical our keep even experience design, of existing and to like our appreciation school really learnings XXX. learnings as call but group, leading the

all you thank of So you.

to but the the buses whatever what's better a their to on roll way, people does things people are in underground knows infrastructure, our where again, who energy or people, of on or is what from doing medium-duty this? markets would as learnings, our next platforms How us All that going energy, we all quickly last strengths work exactly know preparedness, these kilometers we and readiness, great learned? and relative road. or area over and into, these have strengths experience? to knows all going who Moving standpoint, long people know are, new capabilities electrification, the are we're been end all who on going how or of have be that What to to actually for agree, What and the new But it mining etc, and matter, stop to are long etc? finding or is. road what the mile miles stuff, our their lessons up

it's it's shared, how of our together. of All all and it's is business model tied, coming

talking to you the thanks, for opportunity. at look We attention. next your time So and to forward everybody,

Operator

for Thank you joining This concludes webcast. everyone call. today's the

now many disconnect. You

Dana (DAN) 1 Aug 202020 Q2 Earnings call transcript