BWA - Earnings call transcript Q1 2020

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Operator

Good morning. My name is Sharon and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2020 First Quarter Results Conference Call. [Operator Instructions].

I would now like to turn the call over to Patrick Nolan, Vice President of Investor Relations. Mr. your begin may you conference. Nolan,

Patrick Nolan

our Good Thank Investor for this Relations And our on you homepage. everyone. us you, morning. and today. our posted earlier Sharon. joining release We thank earnings on morning, issued on borgwarner.com, website It's homepage our

we and begin, to uncertainties our call detailed we forward-looking statements, that during inform in Before make you which I this need may involves risks XX-K.

significantly from the discussed results actual may differ Our today. matters

means provide prior to clearer certain and say, say, FX non-GAAP you and and that measures how basis," During excluding non-comparable net core excluding the of you FX, "Organic," picture hear means the comparable today's impact When presentation, impact M&A. items. the other order of we'll highlight of for you hear in comparison periods. us non-comparable that a excluding business performed items. a purposes "Adjusted," means "On us with When hear M&A that net When us say,

to refer weighted for to that in production vehicle also us our light means geographic the will exposure. "Market," hear you our our say We When change market. compared growth

Our as outgrowth revenue organic versus market. is our the change defined

presentation Please with our website. posted have that earnings the follow our our discussion. note page IR the of We call to we you during encourage to along slides

happy the that, call turn to With I'm over to Fred.

Frédéric Lissalde

overall update. to results for our company share the Pat. you, pleased and everyone. good And provide quarter very Thank an We're morning, first

highlights the with start first on X. me the Let quarter Slide of

X.X% outgrowth. we down This clearly with about organically $X.X to we performed almost on basis strongly rates down approximately this being While drove we means market compares the sales, a in industry volatile significant XX%. during and were quarter, the our production billion relative were

saw double-digit In fact, major regions. in outgrowth the quarter, all for we

quarter the performance Our impacted related our in margin margin was approximately was by XX% COVID-XX as shutdowns. decremental

production for occurred, free the the is flow of we pace think delivered million strong second a $XXX we the the an quarter. cushion manage expected additional cash outcome. cash good shutdowns the We in at as this levels quarter lower which providing Given relatively through

the North this met proud Lastly, and at orderly in how production facilities ramp-ups while Europe managing China. managing the I our also production on has environment. am America, challenging shutdowns reacted challenges We in team of to

Let's turn X, see especially to our challenging environment on expect can very production. Slide global perspective Overall, now industry in you where quarter. the a XXXX, in second the we

the full-year range. be On minus we minus XX% in basis, XX% to decline the to expect market the

down the decline XX% Looking decline. In in at we're North range. region, this America, XX% XX% for we to by be to expect Europe planning XX% to

On was the outlook seeing to in decline as geographies, China but QX in relative other shorter shutdown full-year. for China production than in expect the for basis, their the XX% two stronger is we still what we're XX% the

pace of line see the biggest has are the largest from our the and showing production declines industry The scenarios, for expected and the uncertainty. production As same the the QX the restarts ramps. significant at of the you'll most different is time declines timing uncertainty chart quarter these drivers production which and

Under our mid-May. line, and the represented production which we're America by green Europe by largely high-end North is resume to light scenario, expecting

America dark until by blue will uses Our that the line and Europe resume the represented assumption low-end scenario North mid-June. fully production not

lower half we consumer XXXX challenged both confidence. of to For the remain second expect to scenario, due

manage production support We're consumer this is versus of an order but ramp-ups has effectively active suppliers month a and tremendous ramp-up Visibility of the restarts, through there very our still ultimately around uncertainty a challenging demand. ago, production into dialogue in and and pace certainly improved the maintaining with outlook production environment. amount plant to orderly customers

executive action of the reductions you X, these temporary been has moderate all impact many to across taken due at taken in down. company. locations of our We've This complete world, or the pay amongst salary cuts that cost lower team. leadership in the we've on see locations Employees layoff to temporary shut help XX% areas major many the throughout declines. production have actions cost Slide severe production of including many the senior On been our put production facilities

that I sacrifices of our financial we These engagement reducing to team the agreed strong by well-being the internal relationship And billing rates. share work also in all with the thank been despite to things especially who worked voluntarily focus actions to vendors, right painful, of strategy members who have although endured. company. in their our have and third-party most or cases situation economics involved, want were do have their for our kept this

manage big next to successfully industry's restart. the challenge will be production The

manage Let's X. on take look Slide how at we a this

While terms supply in best we are our customers they we safety production, focused health must as of on ready resume to foremost and of our first people. what is be and

and all program practices. Safe continue to rollout minimum will Program We XX our nine global best and a task of recommended have has that additional facilities. our high-level to Restart set a standards formed The includes force

of However, beyond people our safety extend the our will focus on these standards.

the the seen We plant-level the And and appetite that ideas safety plant It solutions innovative at developed we the will BorgWarner to this is and to continue by this other promoted facilities utilize culture. level. our share additional have innovation globe. promote innovation is around to already

time by tornado I plants would was to at the supplying Carolina multiple guard facility unfortunately to at on April but the Thankfully, is South in security X. turn Seneca North a of which one transfer killed. the not was largest OEMs cases struck, struck plant like the operation our America. unfortunately in of XX. plant, now to Let's on briefly a comment Seneca, tornado was Slide our

family. Our thoughts with are his prayers and

to I'd give like the plant. Now update status a on

varies was portion see can the facility to widely. this the you As damage on limited. The by the damage slide, machining level of more of picture

assembly missing. sustained more left you of areas see the can significant on the a final That However, area of the of amount roof assembly side picture the damage.

work structure. a remediation have performed been of we weeks, and amount we also temporary past erected validation appropriate, there completed equipment where the Over significant and have of and testing several tremendous amount has

three hard production over work rates month for was weeks, am May the that throughout hard accomplishment. and This last to report this the our of thank facility Seneca and their to should of proud production May. on the all amazing improve customers an their With support. that I team for X the resumed personally and the like I would work

We have turned into a a story. BorgWarner situation success terrible

at like Technologies update debt cures amendment agreed planned asserted of that that This has effectively cash and This the on of breach the an would an the the end provide the closing Delphi to amendment, covenant not new will of Delphi that of with agreement. its of transaction I and XX. on acquisition the requiring BorgWarner exceed Delphi March. closing Next, transaction we net the Technologies gross to of million debt its time $XXX amendment conditions announced Slide at million. our revolver cannot balances Technologies Under $XXX to we morning, the terms exceed of agreed

also on its needs through that result scenarios environment and was deterioration. more In provide flexibility closing. will they could protect closing Technologies' specified significant or to cash EBITDA forecast. This current BorgWarner net same addition, that to manage with Delphi agreed at ratio parties the time, to condition in the new it debt not measured current a adjusted from execute usage structured the threshold At Delphi exceed EBITDA the

the to agreed be purchase equity also potential outstanding ratio party by In recognition debt The at incremental the price. was that the reduced revise of closing, could exchange X%.

transaction. respectively and of XX% technology current and shareholders approximately As would the following Delphi a of shares XX% own BorgWarner company of result, the the combined completion outstanding

pleased put this and are to our undivided the driving full turn towards behind to We attention us issue closing.

process closed amount work The has over teams together. past done to close week to we effort other several second million towards financing draw the integration this In as to delayed significant am a last to of transaction, term continue pleased on regards loan The our very needs $XXX regulatory of with of in time half closing. several our progress months. potential And closing the continue are there to filings the the geographies. transaction work the the in support I XXXX. well of on in at work been we

Kevin, financial free allow XXXX. us liquidity It year. company outlook significant quarter, first first turn on and outgrowth XX. expect most to achieved be full in We delivered BorgWarner expect it with will of our the is let flow to combined our flow first major we We challenges summarize positive the industry. as successfully strength quarter we our Before Slide results discuss, quarter the has regions. cash operational the manage all positive for during will me cash and over this Kevin position the throughout I that of the free one within robust to discipline

positioned I challenges financial will XXXX, that future remain support As we both continue look a profitable that on our the am trends capitalize and standpoint beyond to growth. technology I from to the of confident long-term strongly

to over Kevin. Now you,

Kevin Nowlan

you, good everyone. Fred. Thank morning And

in I the you'll Before to year-to-date results. two overarching highlight in I'd like see review detail, themes our financials

quite been of resilient environment. face the in have financials challenging our First, this

strong outgrowth all positive margins, flow. free in double-digit During the cash revenue first quarter, we sustained operating and delivered meaningfully regions, generated

of actually the has this remains course months over year. gotten strong liquidity the first our Second, four stronger and of

XX. to Slide Let's turn

As the XXXX. the QX, can in thermostat our from walk for see at we we executed look impact divestiture year-over-year revenue you early

about X% reduced from that the see you a revenue year can Additionally, dollar stronger ago. by U.S.

major down were compared to quarter. That sales in XX.X% points revenue Excluding X,XXX means the outgrowth that in these our the of the basis occurred the in production. X.X% delivered markets industry importantly, globe. of items, outgrowth around organic decline we all vehicle light And

strong as organic digits new In related outgrowth light by close The of market mid-single we XX%. vehicle was our flat as versus revenue, to than year-over-year growth decline the challenging deliver Europe, were decline America, year-over-year programs. diesel by to driven in well better expected XX% due DCT business to strong In approximately the revenue industry we new that other North XX% down was new compared in and even the this pleased we're the in China, outperformed mix. environment. growth end-market than we our and And business. to more Overall, revenue continue driven by programs market

year Now income performance, adjusted our at XX. be million QX Slide was a look income which found operating operating ago. can million adjusted to let's $XXX $XXX compared on

margin compared of Our XX.X% down delivered was which was XX.X%, the in first the adjusted quarter we XXXX. to operating

on million to operating translates basis $XXX $XX decremental decreased million a On adjusted which XX%. a comparable sales, margin lower of income

when you could markets decrementals we last like year. tend higher we see quickly points time in or at be just saw move XX% As to initial that know, downward

drivetrain So portfolio. we in objective expenditures view production in while we're R&D good of And we the invest increasing where XX% electrification as industry our our performance quickly declined. level given continuing how a segment accomplished reasonably this to

of quarter XXXX, share earnings per driven lower per quarter. earnings income. $X.XX compared the by the was the Adjusted was adjusted operating for in decline share first adjusted $X.XX to The

cash to flow. Moving

to of were are first which great environment We are able pressure, that just the for the In first cash is where our in capital result. flow delivered deliver million we under we fact And it's revenues critical proud why manage free $XXX the of such an did positive working to effectively. we quarter, that, a quarter.

discuss our outlook let's XX. on revenue year full So Slide

Our to on XX% down reviewed assumptions the Fred being with guidance that end-market is earlier XX%. based global production

We drive expect level market year, the total but continue in not for the outgrowth saw first we to the quarter. at to

XXX year which how guide assessment is than assumes XXX outgrowth points, XXX But in incorporates of points, basis the in this outgrowth year initial XXXX now much in-line the given range our obviously, XXX outperformed prior guidance Our for simply full full first to is of the we remainder points XXXX basis basis approximately of quarter. basis higher our this year to points with is our guidance. full

a year to XX% As a revenue expect XXXX translates expected billion. to of And XX%. of full range $X revenue $X.XX result, to an we decline that XXXX organic billion

of can update you to liquidity profile. our turn where XX, Let's Slide see an

revolver of $X.X XX, or $X.X our and cash billion had balance of of our of This we XX% billion. March of As of undrawn quarter-end XXXX consisted million sales. liquidity $XXX

bank to March we level at was $XXX capacity billion, end the in the with the our December to our middle new recall might bolstering the million. increase group our worked that of but capacity revolver thereby of liquidity You by $X.X

an additional more is our also note have below unfettered that access ratio two covenant credit we the entered needs instead current we to manage in place we this important the in think It's delayed this, insurance provides liquidity potential the now Adding us is simply facility don't of which financing full available term into that Delphi which have turns liquidity. as facility. need which to $X.X we to means in Nonetheless, an that more environment, we policy to week to put any draw through facility, that right that to means with liquidity XXX-day a we such a have closing additional billion this the be clear, facility a leverage loan close much prior last revolving we million to any facility, today. us to related transaction. $XXX than support To technology

not full to to of our the positive $XXX $XXX the in year challenging want generate a In financial range color of environment outlook. while earnings our the of capital, million suggested Finally, million and we're thus light results outlook. guidance, by on our we specific strong condition did cash even providing free flow flow the to expect cash the for That's you give our first testament revenue company. far in managing we working free our success quarter to in

our was their time. confidence evidenced by current financial to dividend board's this decision in condition at our Our maintain

However, be our don't the in near repurchase current I program we expect on global term. the pressures, executing given note macroeconomic that would share to

free let flow. summarize of had and So strong me we pressures the positive outgrowth cash delivering spite in remarks. my industry solid a financial quarter Overall,

positive the markets through we XX% from tremendous deliver environment. pressure significant to to year throughout to manage free the this of We last expect sources we finally, year. expect liquidity XX% And down have Yet, cash under flow. remain to

and are As with through future environment a industry we ensuring strong the the management is actions growth. team, for profitable company to the the navigate eventual while recovery position current taking necessary our

over callback With that, the turn Pat. to to like I'd

Patrick Nolan

Kevin. Thank we're open ready Sharon, up questions. for to you,

Operator

[Operator Instructions].

from question Bank comes John First America. Murphy of with

John Murphy

to it's you for the year, great and from It's guys. the all at very the morning, and hear Good for you thank detail stab this helpful. outlook

question. simple first, really, Just

look there's we're As some but X, in you're we second Slide quarter. the indicating second variability that quarter, the at around

early sort to as now we're which right and understand, mentioning of just mid-May you some Europe for America. restart of scenarios at. hearing versus May, I'm mid-May restart, you're is trying looking what when the So were Fred, mid-June We're North for in

you'd from just getting information should what the that at should customers expect can in to because you that that the variability curious your planning, how scenario of information So customers. lead of time reasonably to just you time this them much moment eliminate be of and stuff kind you're releases, from some communicated from some like be lead hopefully available reasonably on for restart. seems your scheduled it I'm well

Frédéric Lissalde

wide of restart range restart a and there a scenario. John, is date

it about I date both have ramp production. of what restart. think we level the to not restart at from And think up just date changing daily of restart, we a but is capacity and

So perspective. still uncertainty it -- QX a of we'd still -- we still volume it's in varies lot think I have from a and

John Murphy

from communication it obviously is But on would but to Okay. flowing getting that dates, fair some restart say the be you're uncertainty down customer. still the

level is assessment? fair Is what point. So a there's at to still uncertainty starting the on going this be need that you tremendous

Frédéric Lissalde

customers things in are things we that is that change, assessment following yes, constant and, change. fair closely. communication very, we're very the And think yes, I do with our

John Murphy

lower the there very XX% Are a how we any around the quarter? performance mean, should bracketing make Okay. we good I maybe Then I because curve very the actions kind follow-up. that be end towards year, the quarter bit mean, XX% thinking? impressive a about on the volumes the the of of in the think might just better in I first we second that which end lower or sort of worse? number first in throughout of pressure maybe was be mean, sort about you're the the that think detrimentals is third, mean It's should I quarter. that of as and quick U

Kevin Nowlan

that were pleased in well. back last segment. us think while we lot we even the the we dollars about were And now in manage allowed really of I were that's that R&D the additional function a and drivetrain and that's actions to XX% restructuring seeing of Yes, the April as that. we benefit And year with the of it we're announced cost decrementals and that on executing investing

in all environment. considered -- result this good things a all So in

the than think manage year-over-year of which think challenging I with on still decrementals an it's are coming -- something XX% environment. in range to production down a I less type this basis, is pace that at

to of a I reasonable to our forward. think about going that's decrementals directional think how proxy think

Operator

comes question David from Next Baird. Leiker with

Erin Welcenbach

Good Welcenbach morning. This is Erin actually David. on for

you So pacing the my the kind the on that? on of in just about terms OEM QX us kind in of back question color Any assuming that in you're year? production through ramp the is slide? if scenarios can what of the ups that What terms first you of your cadence walk put of of QX, means

Frédéric Lissalde

we me some give is your very are you here. question color looking So broad, at -- but let

So XX% the looking QX. the and would seen XXish full low on especially down at XX% be bit that, in in We're that And the year. to. for down in little QX you've the alluded the QX, QX, lower at looking scenario high than a in we're John scenario on as XX% charts in about page

matters quarter-by-quarter. and when how aggregate customer-by-customer, this is what but we customer restart. really to where standpoint go they restart not And fast I'm on is going So are certainly an

Erin Welcenbach

you delay what as or to in OEM back ramps a of terms And you. up? QX of in of shipping timing be bit impact Okay. shipping Thank but was second can if mentioned QX? number helpful. talk the And is factors kind of a about then of kind drivers That's of I there question early there outgrowth you're I production by you on my from a you're in mean, just that any stocking plants? benefits could what obviously, region, got

Frédéric Lissalde

gas was also And China Group and diesel stronger And engine in small We DCT was demand. actually in of our strong strong and stronger demand -- strong with standpoint. turbo with don't stronger Engine think America. an add business emissions it's from Europe new pretty our North business we stocking.

significant much QX. in pretty that's outgrowth the drove So what

Operator

Galves from Research. comes Wolfe Dan question with Next

Dan Galves

Hoping you could might have how changed be... headcount talk a from year-end little bit to about

Patrick Nolan

we Dan, you. I think lost

Kevin Nowlan

lost Dan? your Can you repeat you. question, We

Operator

Johnson from question. to on next is next Brian with Move question go And the ahead. Please Barclays.

Brian Johnson

morning are Good questions. some Yes. you of or as Couple afternoon in Europe. of good

performance? your on and was of real a and between the half in we it America quarter then more kind when in drivetrain, second of the think month First, Not decremental impact was production comment February the March you and of in North different engine the Europe. could of bit it China operations only

little you on decremental margins, if So could by maybe give a division. color more bit by the ideally geography,

If want far, to least begin don't So you through at of that to if QX. go kind think you geographically?

Kevin Nowlan

a the there, revenue. segment they margins could even the decrementals their program. because then the manage segment year-over-year for quarter drivetrain as in see but give in the the I the the in by that that you simple that in math Engine says the of And past around decrementals bulk taken we've see lower that R&D in spend getting on way the -- you it actions our And bulk decremental increase our support can would XXs, the have was on segments, more I think low XX%, I and the if that electrification year-over-year to cost mean on that's benefit of the disclosed came been basis, publicly. year directly were restructuring the we in the a it's they're say, that basis over the because of of that in segment segment

had So would were strip the in have are that increase XXs. out low to the R&D if in decrementals you that the they

Brian Johnson

is that because in can your and perhaps structure being cost was guess in China? XQ I flexible at we less what than I European American Okay. decrementals of worse North expect getting

Frédéric Lissalde

Yes.

is the as decrementals by unique the pace the are revenue I at about think really opposed driven something to geography. the down which

like So to decrementals, probably just of that I the driver at expect lower in just time point challenge of that be higher really of rate we a decline decremental the think significantly driver the that's a the magnitude operating change in wouldn't experienced with the last I year. the is of production,

pressure. more year this even under it's think I

think that something code about XX% So way probably ZIP the is to us. in right

Brian Johnson

Okay.

question. Second

that dictate. half, a the need the this, -- As going take steps PPE, social we distancing, sort you affect factories for talk margins, say to where in maybe easy you the of the of can parts bit go productivity keep and you're that and a protections analyzed operations kind be about probably impact to and supplier since might in so opposed credit of how second of little the that of to to practices particular kind it'll in cut another work relatively kind as best

Frédéric Lissalde

is where excels. Brian, BorgWarner safety

high and we're safety and have to a PR over decades production in the safety the We company past we same excellence results using with and that restart from perspective have extraordinary built exactly this COVID-XX.

done done goes which beyond would PPE, have to plant-by-plant Also, way restart all so we getting work always but a been possible the the job but poses people said what And have plant exactly and tremendous we including terrific our and out restart. way a distancing, people So it the not wonderful to managers also plants social at. in you ready of is amount on impacts way figure that it job, and area. looked breakout, how our production do has

Kevin Nowlan

that, point, it's specific a reason, reason talk I the at this the decremental, XX% not part guide I guidance. that add we're And about that's when directional just think earnings of the we to Brian, of giving part

over the actions there's I we what there are What decrementals take? to and how operational lot of ultimately plan. might a in be what's will months that's the additional there's a cost are base, coming can prices the variables that happening wide, efficient be a those be we million we're think the it low-to-high things from So efficiency of struggles whole when impact revenue It are host what going range is supply you commodity can think learning that in $XXX I operate. what of have some there? doing,

Operator

from comes question Oppenheimer. Next Kaye Noah with

Noah Kaye

Yes.

Okay. Great. Thanks.

to as reramp. Sorry about that. part prepare Two you question

two, of how assess would you First, And supply the base? are...? stability how the

Frédéric Lissalde

lost we've too. I Noah think

Kevin Nowlan

-- while you lost we think I Noah,

Frédéric Lissalde

are we seeing I the would that restart. of suppliers for the under clearly some I base. fund kind their -- ability to-date have seen And undoubtedly two the we we say disruption, but those on is supply stress. base not any will answer have production be -- that a some to can absolutely key supply

all years, would that the past practices no over when I -- We several scale. managing potentially different best developed but this are applying is the a say is de-stress it that we around yeah, supply clearly

Patrick Nolan

for Sharon, the question. we're ready next

Operator

Next from McNally with question comes Chris Evercore.

Chris McNally

so much, guys. Thanks

the we've think exiting to you know I on the of give decremental a in production just help when through? teen flat us rule production but couple restart. super lot to year, year. well, could cost when us early, the a of are had I super, high comes of I positive. it's this that used increased questions figure the about essentially essentially out be think, that as we you the incrementals turns thumb trying to Could think guys maybe

get the able things trying margins, QX sequentially high-teens achieve XX% into we'll you QX? even be across So model think still when do to low sequential, better and incremental

Kevin Nowlan

expecting it we QX, what our of we're managing pressure how under standpoint. can even from think of in terms the our a decremental. we're right incrementals from Obviously, will still challenging revenue the process chart in be the as I well as in terms of that's decrementals think now as QX you production manage more about and see we in way

supplier and us cost risk, that positions to in So that on as to ramp high sequential or at then process we And consistent of operational in operating that on basis that environment. we see an whether basis making able our be additional guidance to managing the manage decrementals, up. which a actions looking the sure right now basis start manage of in efficiency, rebound take something we're deliver year-over-year means teens with to a you're increment historic we

Chris McNally

-- inflow, trying And juxtapose back capital like a working little that assuming a talk have of year, sort Great. you'll just working of one. to expect, capital When production can decline? you technical would then EBIT which so Okay. really and the we a in just you about often just for Are the assumptions? apply sort the bit given it we're

Kevin Nowlan

because working the heading That's exactly seen capital. positive QX as right, into and run tailwind as well of that's QX we've in some do already that we

you payables look XX.Xish%. called really receivables, If to in run we around inventory, the, tend

when I'm we're think flow we coming sorry, from think now. or cash an about from that but working experiencing cash right also we obviously have real flow I and decrementals, decremental, the coming free have you pressure capital from So the -- offset

type slowly. an you I payables -- in positive we in the that real much inventory of all this say, we're that still of seeing more and receivables would when tends capital out moment. that's run to working at environment come system XXXX, said, we saw But this XXXX, the versus and look the benefit

at one high operated we is Couple that's continue company liquidity a with year. about to of our now other flow to the but that's well things goes anything right we that the we'll at with as that investments in continue a there. And assumptions, to year we're maintain you because cash us, because the think needs, to the capital should we end, levels from something can perspective our invest continuing our monitor flow planning like our last to you see in on need whether support of customer as is profile obviously and of strengths free our differently programs cash in do long-term can

think those you and So some about takes the puts as cash of key flow. I are think

Operator

question comes with Next Spak from Capital. RBC Joe

Joe Spak

half. capital year, capital of Kevin, is to cash back still morning, I clear, working is as have the point ramp your for free that there would be a you the working everyone. in follow-up back to expect guidance to some Thanks. on in what's flow Because and Good use source? up that just to be

Kevin Nowlan

but of at look be that to down and each on you allows mean I and well a as Yes. in quarter when by quarter pickup use a ramp you of when year the we're year the each year. up it they net-net as full back basis entirety so all the

working going expectation. that's be capital is for the a year, yes, positive So, to our

Joe Spak

guidance your prior I maybe it's the the And window Thank But quarter. because is here. then this on you. And Okay. think I of sort know backlog just thrown out all $XXX can really previously showed. to in first industry of down million obviously million, for quarter, you that over $XXX $XXX we I But guys think strong, million mark sort was volumes.

So better could little of planning, maybe did you backlog that that in? a talk more timing come in rolled or that about bit just you some is initially how some were of than

Frédéric Lissalde

QX. to outgrowth this willing with but I think of not better it's that Joe, assume very going pull this we're We forward don't than at that expected. backlog, happy continue point. think was a It to we're is

the demand our that especially assumption outgrowth. watching, the in diesel looking are QX. And detail in we're was We China great also, versus strong

Joe Spak

I ensure would on And back has needed? of Okay. in or it some be or potentially how take be those us of sort just of that could would hoping on some mean is the your lastly to sort support the to supply government supply, are sort mean rely businesses to done demand remind if supply and you Borg comment. just your what you assistance? that payment will -- terms, maybe able past. I But base you of stress Fred,

Frédéric Lissalde

in some when over we would Well, of do about tools the I years we to the say the the past. base started Europe, that two know talking about same supply how distress it. we're of using we've used

departments and management those, that We risk can have we all all levers up. understand pull we the

when help, -- and inputs some put a it. do government, we now we how different that how consideration right, bit is you in would state decide we do might what what's and You're we these have we

base, ups to thing key stay the close to and to is ramp to of close One the it. supply the link understand customers really

Operator

James Picariello Next Capital with Markets. question from comes KeyBanc

James Picariello

relative the can does or at quarter? curious, cadence environment in and your delay possible current outlined your the restructuring savings what of acceleration to you the all, a COGS, there timing last Is SG&A Just affect achieve? you

Kevin Nowlan

January don't can movement way there environment, identified outlook. say restructuring We're we a forward timing directionally In the call. to actions bit, not even from I or proceeding is to some be a movements We're January back think significant there out talked movements, one change path. in to modest funding what of just continue a the the on that I'd we that's but support other. about still this going that the little and some on -- guided or pull material overall pushed there's

that that unforeseen risks, anticipate to be good types mean what sure t the COVID-XX when were didn't actions. to necessarily, initiatives, good unforeseen have to make manage We long-term our we announced one offset is risks margin an we sustain those were to in -- taking talked and is set about that those potential to proactive up we I And we here profile front risks manage and remember margin restructuring trying -- profile. unforeseen but it of out ability is our of is, trying to by news we of restructuring

James Picariello

what say. of the led you you Got X% world to just mean that original dramatically changed timing announcement, I a number maybe valuation the the X%, on walk curious based from willing standpoint? reduction the it. can let's the conversion compared the clearly to beyond has pretty through helpful. amendment, rationale And on to share, just just what the you're That's Just on rate? acquisition

So helpful. color there any be would

Kevin Nowlan

guess merits so all transaction, two of of the prospects confident this -- strategic of we long-term combining first thing remain that about Yes. and us companies. see these I'd is in say I the the and

from that risk. that the provide with execute way covenant. a in resolve agreement Delphi amendment, further of morning, And what is is we flexibility downside an we its nature financial the to us signed to so issue to environment this needs with consent plan on this while an is the And and this unanticipated up to remember operating protecting view

The compensate that BorgWarner, that. included, providing environment covenant BorgWarner been that is agreed price the environment and relief. in companies under for result been taking reduction us, we're exchange to impacted by the Delphi, in sector in has all we're the prices have And of stock reflect this remember, additional our since that to financials of pressure we others equity ratio equity is risk an And transaction, a purchase equity the as effect in. of all the this all already intended

this. about think we how of totality the really that's So

James Picariello

to there? to on your That's diesel that you And just the the carryover Europe. don't what's demand Okay. you think follow the which fair I on saw take This uptick in last continue, on fourth in expected just enough. helpful. is so one, in the that a demand quarter, strong on Well,

Frédéric Lissalde

granularity, trend. it in a seen we're we're And looking we that call I registration. lot And of haven't Yes. study that this great in not but would at doing detail. a with

sizes you still at big think that 'XX. X% QX due for penetration we're element So something and to of be the bet I the more the I diesel, about diesel XXXX into also more look is this it's it to Actually, -- would lower -- rate but that on in this than QX might we're different and trend diesels ready a not if and is say that yet.

So but a could the that bet not on fact to happened, trend. has it ready this be

Operator

Please Next Deutsche Rosner question ahead. comes Bank. from with go Emmanuel

Emmanuel Rosner

Hi, morning. good

are outlook. in clarification backlog the question the First around

$XXX that million as of the the at the million assuming backlog new the business $XXX the is which you over million the there? So things Or is case, an first Is of seeing? and to in full essentially of is in quarter. to you're of outgrowths So if the Is element is year is $XXX right that delays to close no year look are amount limited way a outlook, conservatism the in left case there or result that or it so? market rest

Kevin Nowlan

would two major and see line to delays. that the four is don't which XXX in our We with of two guide, to growth. I to XXX are points prior say basis

Emmanuel Rosner

or $XXX in. the outlook, my know what or if math, in to is was $XXX But the that million thing? one million $XXX did chime was different a that in Was my QX don't the XXXX through front right? with million that the Okay. math Is is comparable I

Kevin Nowlan

the that remaining backlog guideline. is their outgrowth % Fred through be through that just the X.X you to think the with take the to prior I'll line offline, the math but Emmanuel, quarters, average X.X% three in way about mathematically will it's but referenced

Emmanuel Rosner

Understood. in the see delays quarter. not well first growth get you're okay. the then strongest basis, and as it's I no, intermittent see just And to seeing to any encouraging And Okay. more then

a adoption powertrain they're and of automakers from electrification America So could of changing some powertrain post acceleration of high be be other result the back there level COVID, changes of point in they be some of pace various the in technologies pulling structural could using view any there of let's see technology or not North of anything mandate, say you an the Could as versa? under midst if the there? COVID? vice midterm a Do

Frédéric Lissalde

Manuel, fast in some I'm very What our more an So China, COX is we look that in emission can regulatory and not We on being leading saying tell we is makes doesn't us. CH&E thing from that that moving matter it things at and Europe, XXXX see I really in to the first slow some to electrification down electrification strategy say, for any you is the it you electrification Actually, across I programs not -- balanced related like, of it if questions. were would are detail, In on see standpoint. XXXX countries, deemed electrification essential. programs.

and the we combustion. U.S., a and have making combustion happy U.S. the bit when longer will also more tail in technology we great leaner, and engine In world, growth product combustion and benefit might customers little cleaner electrification wherever go it in the a see a the decide for around to standpoint, in from they But take accelerating BorgWarner our are time. will making great

Operator

question Stanley. Armintas Morgan Next with comes in from Sinkevicius

Armintas Sinkevicius

question. you the Thank taking for Great.

Delphi, Looking you in repurchase for. looking the don't the that was But hand, on is it here executing transaction part I at buyback. adding the term, exchange expect ratio of mentioned that and share share to that be compensates near for understand Delphi you relief on with program that the some additional additional the other

share to and to trying try you take into why just exchange implications So that account for through, think ratio? the the buyback didn't with

Kevin Nowlan

the back end by respect we billion-dollar program the I that, we share, mean in January. announced the to of with to remain committed

the this environment all environment anyway in That on remain to we think have, in subject think result all program. that saying we're with in nonetheless and on that that. be term as moment decision a is the think number deploying the where it's we uncertainty operating don't to don't program. blackouts to to coming this we're and prudent near transaction at executing be the think the to just We're of I we said, that start a we it's liquidity executing prudent Delphi, I we the months, the with stand committed in billion-dollar but of

Patrick Nolan

we think I time. have

Operator

sir. Yes,

time from with for question Credit and have Dan Levy the Suisse. one We comes question final

Dan Levy

that? I quarter had but, to share dividend buyback First, why saw the and you you we've rationale cash. I seen the for others had you dividends dividend, buybacks What's got place, their your mean in why preserve own the in keep maintained so zero

Kevin Nowlan

it over quarter with the these shareholders. the took I cash of about in of the consideration the the to directors, under cash I make think management and first to to generating way, board shareholders was free to generate cash positive thought dividend dividend up Yesh, but for to decision commitments live is the the Board think the I full to its difficult were scenarios returning mean flow it year the commitment and of into as an to outlook $XXX that going team flow is ultimately that the our we that is that flow returning million that even cash revenue think good suggested undoubtedly free continue we free to

monitor calculus was and continue Undoubtedly, that's be environment to quarter it the might that how into a looks things sees each the went Board But the decision changing. it. I'm that at will as sure

I we billion-dollar to more respect we're think with execution buybacks, Armintas, remain do think to to the I timing environment look right going at discretionary redeploying in the towards now and the so the those mentioned program, as buybacks, we is the start cash moment to tends the of this committed, that. but to but to timing to and of program, the be be with don't liquidity prudent buyback that the

Dan Levy

deal a Great, Delphi. up thanks. And the on follow with just

would different you to than different world entity? restructuring goes it to coming time everything to saw think housing. there what how you with with the at forward may assuming you you're have the need to How operate you'll deal in more maybe is Is go tie forward for you in a in probably change way that the or think be though. areas? have be how Delphi in higher higher adjust aggressive we an change to forward, does on the -- in going the leverage leverage spend So going ratio the You're deal the operate leverage close go to where does will you to entity?

Kevin Nowlan

that financial Fred company. in we that what our be can for the about the talked leverage of the view mind grand Delphi when think to in limitation of the of part the to or indebtedness, it think when as with incremental the a to on on alters Keep combined agreed of And slide the you consent is expected don't potential things prospects agreement materially debt scheme we outstanding put ratio at amount closing. this

Dan Levy

Okay.

So this intact still the entire entity in as a with whole requirement is still place? new

Kevin Nowlan

the signed of consent billion You so we a but be about that of talked $X the additional may we closing not have remember net or to the $X.X $XXX could million we'd debt Delphi debt called that at up before. it and requirement, had there potential, the billion according agreement potential

of swings way So causes a in want differently to that really company number to scheme not in billion overall grand that's huge leverage any that plus that the post-closing. the it entity us of in debt, operate prospects the a has an $X

Patrick Nolan

up call. the thank With that, call, questions for time Sharon, that, and we're your like your wrap safe. I'd can and to close With to the you-all you good stay going today.

Operator

the Results conclude Conference XXXX BorgWarner does That Quarter First Call.

disconnect. now may You

BorgWarner (BWA) 6 May 202020 Q1 Earnings call transcript