BWA - Earnings call transcript Q2 2022

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Operator

Good morning. My name is Chelsea, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2022 Second 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

website, between regard see conferences Good the Thank for Relations joining morning. home of IR Thank and With Events attending Investor to a calendar, homepage our for earnings homepage everyone. our section today. you, It's on we We Investor page. on our this Chelsea. full be us next earlier issued will you release our morning, our our on borgwarner.com, Relations multiple posted now and Please list. release. our earnings

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

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

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

that turn call over you With slides Fred. earnings discussion. vehicle to commercial to the production market, the you hear weighted an during our that encourage We our our us these we to growth will and our to for I'm to also exposure. say light in means posted have with refer We page compared call happy markets. note Please vehicle When the that, geographic presentation change along to IR of follow website. our

Frederic Lissalde

being $X.X and we shutdowns planned R&D pleased able slightly impressed the company revenue quarter. about increase day, starting customer North perspective, for were with margin impacts China we on headwinds approximately I our we production through X. Thank That billion progress sudden everyone. strength industry. during impacted these up our and overall XXXX production America be quarter Slide eProducts despite and of with outperformed overall a said, investment, executing in this to Pat, to partially actions X% relative Europe. on results you, performance continue net update, and by in negatively number to was and a material in provide a the cost an sales, in pricing customers. down organically From our of good share and With overall mitigate performance key second global to the We're were

will success continued into a You half see second improvement margin in customer and sequential our our executing expectation is that of by pricing our actions. implies XXXX, driven guidance which in improvements volume the of

on in we with QX this We made progress are pleased the front.

discussions ongoing are there customer year. still the However, the of other to expect that we resolve half in some back

the that our expect actions successful strongly execution will We of into XXXX. financials position heading more these

our near-term the we industry took quarter. long-term drive navigating the positioning step to While also during environment,

Solutions. acquisition Rhombus the completed we Energy First, of

opportunistically repurchased we million electrification lastly, In new secured addition we $XXX multiple investment, fund awards. our stock. to to of capital M&A deploying And program

lives. by our to inclusion, this I around I the cleaner, our drive embodying and in beliefs responsibility our work the clean, world's healthier sustainably Next, collaboration. leave released called empowering we by comes of and transition report. delivering XXXX we vision Sustainability recent highlight excellence, In eMobility Together, and integrity, -- to everyone are accelerating across leaving X. the world the a ESG Forward June, Charging energy-efficient And BorgWarner safer employees like report of of on would Slide to Together. Report proud our globe, am on of

committed consistent to Forward vehicles with cover to electric in is from neutrality of by and XXXX. We XXXX by remain X revenue target our X Scopes goals. generate XX% Charging our Our environmental

addition, XXXX. emissions by by we reduce XX% to greenhouse target gas introduced now a our have In

our and measurable equity commitment We have to inclusion formalized diversity, with targets.

industry's We continue our to advance towards the day top with future talent. and vision our build each

Our invite website more read I this you changing to Report on us XXXX our Sustainability join the world's and are employees journey. mobility. our on in

I on highlight our like eProducts Next, would X. portfolio to hybrids for Slide

Over this the these advanced see we of asked slide, we've sizable. last generating been it's can amount And quarter, about actually from you on were hybrids. on revenue as quite the products

improve and customers world and many products of inductors, many OEMs hybrid have eHybrid with high-voltage electric in our these efficient include to our The the few, eProducts several to We have drivetrains. pairing electric what by efficient that products name battery the technical drive In products used gasoline the similar are advanced heaters. of full capabilities help that before help a allows I very the are provide profiles to bridge cooling competitiveness scale modules and To times, a instances, EVs. vehicle. bridge product additional wide engines is range us these of electric overall helping motors, a for and as to same mentioned vehicle. This drive in EVs

product the eHybrid used does many sales to of will As And to these vehicles. close XXXX. we billion $X.X you also hybrid expect include can be efficient highly be this our our not see that by on combustion same chart, from

in one for this is our revenue So and vehicles. beyond electric BorgWarner product leadership that substantial which goes reinforces battery electrification, really opportunity a pure

Slide Now awards let's on at BEV look pure X. some

in comfortable offering internally improving happy battery itself, time, pack for X I'm additional BorgWarner's is at leadership. to we short China. performance. is where emerging high-voltage and high-voltage the cabin have that temperature is in and quickly battery One generated secured temperature global OEM heater established and used a product coolant a be can be They By passenger BorgWarner heaters This developed also energy story experience. the success coolant vehicle improving product allow an we've consistent inside for one great to programs. for other distribution announce First, electric brands

OEM. will be battery BorgWarner a commercial been to utilized announce Second, vehicle battery company's to system the in trucks electric heavy-duty deliver range selected of has in European first This systems for XXXX. expected

our from which in long-distance a will provides vehicle upgrade density latest great solution new This ultra-high increases it benefit commercial for transportation. exciting range energy increase of system predecessor. generation this project, the making significantly, over XX% a electrified its battery customer our energy For

since to fruit. Lastly, of investments I'm really excited development to of station, units And the that pleased capabilities share in have fast-charging the the to at working installed BorgWarner see on We've new bear in space starting I'm been first been organic Iperion-XXX, this BorgWarner our XXXX. charging Italy.

our which I next investments well will stationary look will in to on the success discuss inorganic We accelerate with slide. charging some as

once a award of activity quarter's wide This capabilities. grid products X-wheel again highlighted range and our

which Solutions, can We announced Slide plan this existing local of charging and capability believe hardware would and on accelerate X, we complement We business growth. acquisition DC knowledge charging particular focus to with morning. I that Next, to enabling to of organic Rhombus discuss BorgWarner accelerate the fast-challenging leverage on footprint our software. like we Energy to high-value the Rhombus

Rhombus America and will BorgWarner North global we engineering, synergies chain, add quality, Specifically, [indiscernible] sales. across supply plan leverage product manufacturing to

system potential with see also battery We customers. synergies

next we million X to expect In $XX Rhombus the XXXX approximately add over revenue our terms to quarters. of revenue,

revenue to We expect approach million $XXX in our million business combined XXXX. $XXX by fast-charging to DC

innovative area. to strengthen about this infrastructure elements we electric ahead, supporting especially to also As you in commercial the as products And as the we drivetrain we for look and for of our continue care we only mobility, vehicle further capabilities see a supplier key certain delivering success auto but not charging. market, believe electric are will we

As can on you aspects see, Charging made our we've of strategy. progress key Forward

means in this organic XX. progress look Starting So revenue the on Slide what let's electric first vehicle at with report growth.

we for in electric $X.X This the of about awards this of as account booked XXXX. we With that programs a believe now is the BorgWarner achievement teams. secured revenue have great billion by call, vehicle

Turning to M&A.

start the have revenue $XXX EV-related business vehicle X done our now Central's XXXX. Solutions. due generate Rhombus believe Forward: will we not AKASOL, late completed of those and e-motor We businesses either. in on million of Charging additional acquisitions We're Based Energy diligence, since

of engaged and could targets, of EV with take a are number parts to expect steps, various additional our We portfolio. which M&A actively potential we enhance

announcement electric $X.X achieve and track So awards new of announced XXXX on based less date. Charging to business XX actions Forward, of by to approximately months since revenue the than billion vehicle we're on

summarize second quarter me results solid. outlook. was performance let quarter and So our second our Overall, our

the again outperformed once delivered strong volume revenue as growth. organic industry Our we

necessary key actions also We the made full progress in quarter to deliver the commitments. year on pricing our

line industry are top sizable deliver detail full unchanged a As in despite organic volume market on relative our perspective XXXX year. has this Europe believe double-digit and improved to shortly, largest and and from Kevin outlook growth will performance we revenue [indiscernible], margin outlook year our in is we track our pressure

portfolio revenue our proud very continuing booking I'm Charging successfully and we XXXX, As executing are on vehicle I look our We're process. electric M&A beyond the progress of Forward. across disciplined

sharing half completed business with achieved. with electrification. hybrid world when accelerate context, $X.X great as of booking size M&A we've progress additional the even to to achieve to look nearly XXXX. the I out intend with revenue And became puts BEV company turn in reach the by in electric business, assets call new $X.X acquiring Combined this us the vehicle forward in organic carry what become We will total in now done. to and business the to expected the on that, not approximately to in our on portfolio XXXX, future. To booked to and our is Our over date CEO we're I I is to on, eProducts billion billion more XXXX track Kevin. but put you towards already that stronger With continues

Kevin Nowlan

and Fred, morning, good you, everyone. Thank

to our the financial into dive out I the second quarter. with Before going key you takeaways coming provide I'm of details,

high Europe. expectations, relative performance the at of in America in by our came strong North revenue and revenue our First, end driven

investment, our incremental our planned R&D in by cost eProducts year. shutdowns was Second, China. half finally, the inflation And margin reflects the more performance margin underlying second production performance normal of increase material sudden year-over-year guidance impacted in the our in and

our year-over-year QX. XX last was just disposition year's $X.X Slide turn walk at Let's adjusting revenue look Valley revenue billion. for facility, a After to over the for for our of Water

delivered we X% under can year-over-year just in about The $X.X you the means sum production, see of another compares million. weighted of market our in revenue organic increase this decrease can in You quarter decrease to revenue the a which a than was X% dollar $XXX revenue all that see outperformance. Then That billion strong year-over-year. of drove U.S. average about X% strengthening QX. or in more of

to Turning Slide XX.

You can quarter. cash and earnings the flow performance see for our

operating million comparable exchange $XXX million. a The to the planned impact X excluding year higher foreign the quarter on Valley million our investments of adjusted of biggest ago. this was income the was basis, of operating $XXX we sales. X.X%, XX.X% a driver million of or income There Water drivers of $XXX impact R&D, second or margin adjusted million which were where Our income eProducts $XX from disposition, compares On in by performance. adjusted operating decreased $XX primary increased the step-up and

$XX COVID-XX drove finally, Second, net material in the disruptions and China. production inflation cost headwind in And a million was overall quarter. year-over-year lower

we the year. most challenged All we which of expected for have were these normal incremental margin why items early excluding quarter more our our when anticipated for looked in the business. May, importantly, is being provided second And items, these our would guidance margins

in to was our quarter. of was previous to came $X.XX last -- from year, and planning That's only benefits income sizable starting saw because tax materialize. operating adjusted second tax of due our geographic down decline below mix a initiatives the earnings our favorable the EPS rate the effective in XX% adjusted Although

generated of year sustainable XXXX and rate While beyond, level, the rate see about that tax flow are some positive cash more to free expecting QX I full guidance. at in sub-XX% million improvement And flow. talk free We second cash which our about for speak year the I'll full quarter. finally, our during we isn't when $XX

by choppiness Our of to cash of impacted global and by overall driven levels production. continues challenges inventory be the flow elevated chain supply

challenges, slide, market the global production. Chinese range from and background in you XX, markets a you where X% assumptions flat primarily With to our recovery see stemming and on to the in Ukraine the relative end trajectory assumptions the our that our of global for expect look result demand perspective to can production challenges this industry commercial we mind, ongoing the prior incorporate When Let's vehicle supply which conflict of that in year, our of a light vehicle see you potential vehicle at now Slide light guidance. production range X.X% can outcomes. semiconductor European in is this XXXX. weighted and to That's turn the underlying of increase

on our let's outlook XX. Now take look a year Slide at full

guidance our headwind note First, to foreign it's important currencies. from assumes weaker $XXX expected million an that

the produce line strategy region dollar top the U.S. our to our While generally a components remember significant appreciation is is same in customers. that the of impact, having as purchase and

the As a impact translational currencies predominantly on nature. of in our result, guidance is

recoveries about outlook, generate organic from costs. I outperformance be market. to above revenue But about to previously primarily change on for billion to bigger $X.X That mentioned, as up growth we our to slide. item the our impact current stronger material Next, our X.X% That's growth much outlook X% net revenue for due the year, the contribute in sales on growth the pricing other impact X% organic growth see and end the markets to market of is of production. we than prior inflation the continued expect is end that estimated or line above which expect you

it are cumulatively is and $XX million XXXX to as outlook, even to $XX.X have prior guidance, million our revenue. all Rhombus our to relates to $XX is current of deteriorated to expected Finally, outlook Switching Santroll the to $XXX FX revenue of this The billion our add unchanged result million from $XX.X rates billion. that at margin. overall outlook though revenue by our acquisitions

in our from XX.X%, expect to our the adjusted margin be also to outlook. of continue to full X.X% We which prior operating year is unchanged range

from portion customers, material and on While we've mitigate our negatively these negotiating costs financials, already our we're a impact to of continues with in cost pleased the help P&L. started our of that's to progress higher recoveries inflation the made impact

the We expect partially we're continuing to headwinds to customer and inflationary negotiate facing. that we're the in of that will the place recoveries continue put impact mitigate

year, full million negatively by material the million. net results to impact we $XXX our For now $XXX cost expect inflation to

of in our R&D business by prior new investment, to in R&D anticipates investment wins. to eProducts-related This the end relates our $XXX it increase is guidance, a at driven $XXX XXXX. million As guidance million higher continued

the year, the impact material flow of cost our as R&D we the teens. XXXX at inflation delivering year in And of half investment, effectively implies full the business second volumes to contemplates expect that through the that outlook Excluding recover this in eProducts incrementals normalized in our conversion, is high margin adjusted EPS to margin unchanged, an revenue our step-up which full the operating diluted margin by in outlooks are second Even supports per reflecting and now the sequential we're prior increase implied $X half $X.XX guidance. This expecting versus year X our though share. of guidance, things. them

down a we're XX%, of expecting lower guidance from earnings prior XX%, previous planning First, our rate full initiatives. of by the tax benefits our year's tax driven and of year of mix

our year. we second the free of lower of expect result XXXX Second, finally, to we range the the bit outlook. executed from share for benefiting And $XXX quarter. the a That's average buybacks stock $XXX flow million are as in a during the count deliver full we'll million continue we that to cash

had So industry We quarter. positive delivered despite let volume me solid a declines. summarize. organic Overall, growth we

negotiated and several believe focus And full sequential helps headwinds. to awards making year EPS we including we a we're on external half. quarters, we positioned with for customers, we're improvement recoveries position also prior parts our in stock we in and in new present, a vehicles other To the of during step-up acquisition for despite guidance, and believe successfully $XXX while had end, through progress Rhombus second and meaningful of quarter. which said on additional key in to the in pricing growth quarter we're of the the shareholders margin team value of And we deliver managing as adjusted secured customers portfolio, our key cash to Our us working deployed another drive which create million electric we profitable multiple future. the that repurchase our invest to across we business for

that, ongoing I'd balance to commitments the to ability success. Pat. over Our turn objectives our back With long-term to near-term our key the these is like call to with

Patrick Nolan

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

Operator

Instructions]. [Operator

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

John Murphy

on as at a But to M&A? outperforming need these you M&A organic organic the you're as not of might targeted bars specifically do Slide that one and have look organic that you on EV here keep you at this the not if target on wanted outperforming look you as and Just yet as this, M&A. Fred, X between sort first and sales to XX. total together, you could underperforming you you question ask opposed consider, to at split a that's on look

Frederic Lissalde

is the product M&A way at and I leadership look look scale. technology think and So at very We strategic. we

of jump-off, I those looking collapse for if bars so Forward, at kind keep Markets X at would say as even is a sake. things a we we're not And revenue the maybe not And independent going I because the We're revenue's little we XXXX point, those streams. where Day those March Capital are to different. work one Charging X which announced are somehow think

John Murphy

ask that could out able might at would being an the looking way playing and this But customers easing Would the right Okay. we again? benefit of actual inflation. peak on benefit inflation settlements help spreads just as inflation if reversal. getting structured some saw open raws now. the to cost some to that just automakers God on things to with go follow-up be and would those ball Or If be I'm costs curious are and right now? capture we're how your in that forbid, structured a commercial I or other what up are them you input are pricing because being cost from you're

Kevin Nowlan

Yes.

have generally we're a there through a linkage price the that recoveries drive meaningful portion negotiating the with in cost we're discussions we're and price material adjustments between customers. trying higher, if inflation But would the there's adjustments customers, at we those that making is with portfolio. cost inflation our that undoubtedly, material experiencing those to then movement such to look continued that we're expect we of of As our further

if inflation think fair to if those some of price to unwind, starting increases. that unwind like to we it's experience Just we thought would to or think I as expect we have

way I about So it. think right the that's to think

John Murphy

sound actually for time, does volumes reversed may some Is on period you is could it time. So a it to on be pressure a there a could be statement there raws of where of as period actually go like are that real for a margins that up, period going able that upward would if and be some there? fair capture there lag

Kevin Nowlan

discussion. I'm it's I automatic think how that guess it'll upward with an not the I ultimately place when in sure, in to just we'll downward, mechanism to a we'll terms of things are to we those It's point. further have see discussion not that that's I necessarily mean get lead or have customers. additionally

So to get see we'll to and if have we that when point.

Operator

Rosner next Deutsche come will Emmanuel from Our with Bank. question

Emmanuel Rosner

takes? is in higher, more second you Can is obviously those talk way -- to in are sort half I you expecting puts lives your our of play second the implied than first little out? then volume make What bit how the it easier walk you outlook? growth and half but market about what's on Is its based does a maybe And see first? and the like mostly the of there materials recoveries. the half assume in over higher, are

Kevin Nowlan

Yes.

as way look look you when the material the the to right headwinds on kind versus XX,XXX-foot you other and a second coming level, at that a equation total about of commodity and at I on first expecting same of terms it half, picture, both think the suppliers half is basis cost in first year-over-year think getting, And eR&D. basis. our half we're we're half the magnitude inflationary from second somewhat the of recoveries to . a of year-over-year push the costs side the with it's through big

one the and those it volume seeing coming conversion. of the ZIP ability It's we happening. continue half customers not think the that's a incremental would As to drive effectively recoveries It we're you code. what's from in half to with of that And on the bit means how of what of our in first We're similar rest half is first managing year back allow pricing the second through think supports inflation, year. Volume half, to half getting up conversion as the would headwind managing a we're about structure to going impact the means to from what? year. incremental the we're it stepping the substantial put the going I that, next, drive is which mitigate cost to happening to expect, we our of what's ordinarily the similar I

Emmanuel Rosner

digit you first the And versus sort of the mentioned terms in half then in I of growth Does back over market that X% for half, like growth, think second year. half? mean double

Kevin Nowlan

Yes.

code -- I But to of not -- look the at high overall single or think or somewhere X% mean so you're at low the of what I low end depending it that our you half year. if guidance. the in it's maybe on for implies high digit when an ZIP full year, basis, I'm second sure the double-digit the end

Emmanuel Rosner

sort the sort outlook? look Okay. an margin of a your when it I your half to second outlook, forecast the like run good a now to of is try at extent Like rate? half in rate as at what exit it to is to way XXXX second implied clean base And look

Kevin Nowlan

Yes.

supply what impacts think head is is where the second we half to profile jump-off recoveries into our we're have stable the That's seeing really the point with get along using to as I customers base we're trying the from XXXX. we price negotiate objective. the our inflationary a point do margin we with

from year But we're more need conversion we we go And to cooperate year. a as next with going obviously, and have noise into into create inflationary pressures standpoint. us to hopefully, normalized not and so head we a XXXX, can more

Operator

come will question next Kelley David Jefferies. Your with from

David Kelley

lot North of the obviously, Rhombus with charging starting Maybe here out XXXX, infrastructure build meaningful revenue a America. acquisition, in to step to up

their the to winning about pipeline, segments the trajectory? that of visibility they're can of where makeup the build kind and revenue So talk you maybe

Frederic Lissalde

right vehicle, imagine, trucks as synergies same now which, North is Their Yes. varied kind of doing some buses, growth. with footprint we more synergies, can both and really essentially in in the current focused quite depots profiles bring vehicle car customer which and America vectors fast and We from especially on tax our of and a Europe, is see on that we're electric and in top the we focus post. commercial commercial like line, line on what DC you charging standpoint, here bottom the more can

So we're pretty combination. excited about this the outlook for

David Kelley

Okay. is space. Got it. light charging then is core America And the your in North more in vehicles, expertise Europe more commercial

So the can you America? on in businesses? light the charging go to of leverageability you elaborate X just North market vehicle the Do after expect

Frederic Lissalde

to expect we top synergies on manufacturing. and technology the on the line Yes, harvest

it's the as IR of to modularity to the of as and way, design the product the the global is the and definition far where is more a is local leveraging see assume acquisition So little you demand be is BorgWarner back deck By company our Rhombus. as a the fair goal on global granularity concerned. But bit that far around the technology scale there the as website concerned. and supplemental the the office, will of

Operator

Langan from Colin next with Your Wells question Fargo. comes

Colin Langan

you do as you're like of Because that what to seeing this more positive model be kind try the does seems those talk your going view it to automakers at core the position on of those of in to components. sort assets? investments. There's been Are any in engine sole to kind with of one trend be -- be And for all? a future more of if components a change supplier combustion to for a focused internal of on their a some about moving ICE they source

Frederic Lissalde

forward, you will a product not. commodity combustion a And competitiveness, of for and going i.e., in that buyer at for see at suppliers products BorgWarner. one need what key maybe also those top one for OEMs are leadership efficiency you combustion, you focus the call if we think I on cost

OEMs. competitiveness think I around this important -- you're of from going the some think those customers the I globe will case, scale in maybe see similarly, you're think standpoint an and so see in to with that product combustion in support to again, some be we leadership key supplier And of consolidation forefront panel going for fewer our suppliers market. efficiency to And

Colin Langan

Got target It ICE just market divest for a billion assets any give pretty uncertainty on seems rough on the to time it. to mean, $X.X And be update then like line there? out the trying I any in dispositions there.

Kevin Nowlan

Yes. And is. it

will, then resume processes. are financing businesses cash which fair temporarily think mean that These you're disposition eventually and financing here. now think seller the market a not we'll transactions. given debt practical to right in are I the when not I markets do the desperate our think it, it's fair markets those Colin, current to now, right to disposition okay. we're it's reopen, time now. that to nature transactions our simply alluding right flow-generating happy debt they execute it's But not hold to But for hold. environment, to put, the on I this assume projects are open being. We're And just that's finance then

flow we'll to the cash those and of again, to continue so performance our investment businesses generate to strategies. continue And drive support the

Operator

will question from next come Research. Rod with Lache Your Wolfe

Rod Lache

inflation you I believe $XX QX on the million side, $XX and in mentioned QX. in million then

XXXX over R&D? you Or R&D the increase, up e-R&D then was So if basis? on correctly, right million net on much the $XX did was into secondly, And pricing I'm spills benefit the I similarly? just kind mentioned just maybe about how and the a that's hoping in second you there's the other this just based overall tell can negotiations, understanding half. another if of you reduce me

Kevin Nowlan

Yes.

inflation, recoveries I think million, the cost we the I'm about mistaken. on if material net in So net quarter, the the not first talked cost $XX of

The second million. quarter, $XX

implies that year, of at to million headwind which actually year-to-date about the in the full now we're we're year. million basis a So $XX back saying million for $XXX year-over-year half about $XXX year-over-year the $XX another on there's million

was I similar first in comparable on. year, the half that's that headwind roughly to responding comments the to So to Emmanuel's question the of my

maybe that's the So point. first

the spillover I our we're really is material issues terms focus addressing P&L cost this In the year. from addressing customers mean seeing our of those with the on effect, inflation,

that's year and year-over-year half us the in guidance effectively to incremental what's seeing embedded then last to headwinds of million allows comes have code. as million so the manage are the ZIP P&L so us And in then somewhere in X normalized $XX and headwind conversion can allows our that -- that And that in mitigate the is to the months. we revenue the we effectively into that $XX do back more what back

question, e-R&D second quarter, the related which the R&D in line right guide million the being the year, basis. full our full R&D in little with $XXX up the year up $XX $XX million. million up eProducts is in of we on million were a respect half over a On we're means first was actually which R&D, to other $XXX the down year quarter, in other to With million $XX for the the

down of products it, So was total up was XX up combustion-based which R&D X XX. was and call R&D XX,

Rod Lache

just scenarios. high-level I you in secondly, challenges be the And just the pass of light might side. was just thoughts able on Okay. hoping M&A just to then on along Obviously, in divestitures,

of of any competitive really be So selling kind what instead on And those what them? moats you quickly, you are considering would just mid-decade if the on up high-level targets some to of of then Rhombus. kind that divesting holding wound on the businesses for thoughts lastly, impact of were

Kevin Nowlan

have moat. I'll the about competitive talk Fred

prohibitive us, hold that take honest, to me become these as this years. markets they're can disposition I period and debt including in for for question. markets time, all be types a down through lived view the we I of of shut before closed where mean first mean not the strategy. execution of the a temporary but you, of generally cost have Let financing

our on we we multiple really ago, from deliver X.X our Day before so want and expect And perspective, Investor we've got and objectives priorities the our on hit execute laid at that. EV years out to years we that to

And ready. I process mean debt reopen, your time, question. our the not we're it we'll of through I'll ready businesses for to those So plenty to still dispose the the when scenarios and these decade. Fred unable we're looking processes. resume it's go We have to markets where maybe of turn middle of still at is second

Frederic Lissalde

Rod, on... question, your What's

Rod Lache

just the My just question if describe moat for this was could competitive acquisition. you Rhombus

Frederic Lissalde

very time, that dramatically. the in of since one charging is a market BorgWarner expect also U.S.-certified it's hopefully we've in will regions think we in quite We strong I Rhombus think Europe. footprint, fragmented, this but The in that with $X selling Yes, and around presence we which I know shall like. one market with that some important, too. really consolidation with It's market and in is office with need this -- in is first we And products. we're these still technology the growing back this them bidirectional strong field, technologies we technology, local think feel grow low-volume in and very in help XXXX. now purchasing we're field, addressing market, manufacturing. a billion products Okay. Again, that organically in been And

used enabler very trucks and can related buses from an quite customers that. our We manufacturing be vehicle also world. to some around want we pull our to we solutions to commercial offer customers be to CV who able and do the to products for see And also them complete with their are for low-volume

Operator

Our with from next question Co. Kaye & comes Oppenheimer Noah

Noah Kaye

Maybe just a follow-up here.

good good EV the into of all, to it's opportunity. growth space, deeper first you -- see charging get think I

into as of right, You've about of electrons efficient the an at the the electrified from grid. think side flow charging expertise dispatch the or really, certain time domain there's how already signals and very points in of it to kind powertrain. and power reading we an got software charging in-house then and materials some And around and advanced utilizing high-quality efficient EV conversion, going

a technology is thereof what more from electronics? So is or competence core combination brings a in more perspective, -- your the or former around power of what Rhombus augmenting terms latter the

Frederic Lissalde

also I both think they're us, we help and of can them it's and them. helping

those into We substantial the that goes of knowledge devices. of challenging have, I think, bill material a

reach. We some can those We the and have trends with see We where charging to see our topical sales affairs BorgWarner power charging stationary global really excited about business. business, electronics leverage globe, government products. relationship to our bringing in this synergies know-how around we

a of lot technology bring I a this think we lot field. of in and competitiveness can

Noah Kaye

in perhaps I the and for your capital paying the Okay. inventories guess, of Helpful. the in the back timely financial receivables outlook here working guys bills half? year. Kevin. then implied and in question, a terms cash And flow have What's in You free been pretty have built half first of

trend the back do where So to half? that in expect you

Kevin Nowlan

that that to of ramp up half half inventory. of as we've to Yes. of the in start in volumes and unwind Fundamentally, the that we're see some year were back year the first built that able expecting the that consume we we inventory the

some than as here. little customers We would. bit that China receivable little saw paying third saw they bit a of into our quarter And China the to reverse later we the because also ordinarily expect well elevated we of shutdowns, we with a as get balances

perspective. effectively to that So where from expecting the start working we get year to were we're to capital back a

Operator

from Research. James Picariello Our with Exane next come question will BNP Paribas

James Picariello

Rhombus follow-on the Just space? of scale the How the so that charging a any is work on charging the infrastructure. start what factor in much a color can to the opportunity maybe competitive the content we into unit per And and quick just through TAM. landscape on play Energy does

Frederic Lissalde

and that So when today, as contacts But matter. far still is to scale and the is related electronics scale some any concerned. government still ramps regional. are channel, businesses content, matter significant business electronics certification as I as always will require would power quite specificities as like far as concerned, very sales say as It up regional far will it

think, I ahead, you As the Pat, -- far TAM, go Kevin. maybe as

Kevin Nowlan

to about say, but you was ways it's an think looking going after some mentioned, think think we about I Yes, maybe back will opportunity, to I billion come we've the XXXX, as market Pat on CPV, market global to $XX in little about detail which CPV Europe, of we're of play different positioned the how think America you now. there. that to where elements But give about to Pat North and more bit on of a right half can is

James Picariello

China Okay. sustain quarter, this extent thinking in to out just and normalization production? ICE we dynamic half? back this to And tied to weaker then about are China how the Is in And commercial [indiscernible]. that's expected programs called a what China, truck the just the is

Kevin Nowlan

than of that bit. we were outsized anticipating half penetration the And actually a talking as [Indiscernible] in we on see in unwound were were when year some our we penetrations last little to little having customer state. programs year, I'll exceeding year a say, our last higher being we bit started because expectations few about then last of steady a back programs particular

so X normalization that's or calling what effectively we're a And of the key in China. program

So start our lap that we materially shouldn't headwind anymore to into we quarter, as third in that the you now see head benefit and outgrowth.

Operator

next question comes Junk from with Baird. Luke Our

Luke Junk

your wanted XXXX outlook. start with organic I revenue to EV

you how look front? first provides And this this that window wondering an how to us a half second especially half morning, the that for updated on right year. into insofar it So that environment sets bookings I'm gave also relates think the of you characterize And at it the now, do you'd just as electrification. bookings up

Frederic Lissalde

request of we momentum globally. is launched a quotes into and what request an and for quotation the is What on EV-related demand lot and have also there think accelerated also increase I capacity see we for is the not have booking we acceleration the for and I where what see only in enough, half but request second Overall, yet, first higher versus years. EV demand launched coming funny half. there quotation in

Luke Junk

all I ask of current any, I terms question the that environment, impact seeing different marketing competition now, anything does of change change and this equity the in quality the signal volatility to the of follow-up in right available flip it in the about my Does then for terms several if the questions And regard? deal you the want particular what to in extent, in rising we're current Rhombus M&A, rates assets of to that and And -- things Okay. it does dispositions, understand. conditions in market? which markets in though deals?

Kevin Nowlan

Yes.

much growth businesses X more if the one has and inflationary lot are have to And exposed diligence one, a and that we bid-ask which have generically bit of that ability and I that customers, clarity seeing. Or types they the recover to a little look inflation a business companies from is still and those until generally that more trajectory speaking, a environment think more the of current creates to resolution of the one more income due look in and statement. a those buyer spread you two, of the -- the company create that's pricing about have we're some that, between issues topics. environment think they -- either around like of about statement that acquire, mature seeing, uncertainty mature market there's seller sometimes doesn't in a infancy Those income way P&L. much the a its can companies, on

it's because whereas focused on funding. are 'XX, there look of fund and, ability issues. 'XX, little we close to transaction, those developing talked gap So transact fact markets, of we walked given the objectives, their for the into lot of a more term those simply in profile And come those P&L earlier options the the that last the companies at we're companies particular on types we a say, tends Rhombus, some their to And couldn't by about on they're like bit companies of that's that in growth it like you a 'XX, like near apt lot that the companies to that of provide kind the that new of wins of a are a really that on capital secure be And we current types challenging trajectory, capital more harder growth margin, that their to are in When those Santroll, have the companies have that. saw limited on we helped environment. execute it's technology, away from where business quarter, driving to -- the to environment. the more

environment. the of an we gives strategic with type that a us companies working can that actually So bit in of capital advantage bear in this to an bring like

Operator

Our Joseph next Markets. from with come question will RBC Spak Capital

Joseph Spak

And acquisition. Sorry, Rhombus this you I pretty talked the Italy in but guess to you about which go installation is is day, theme still the and now to just I segment. want did a of the have back charging, fragmented how the

between in this really have You be an be to come to to talked North theaters, capabilities? what the continue what And mean you $X.X maybe via if area acquisition, organically should to also of you do from charging? and getting to billion America scale of X that think begin how will the Or you scale. we of about the importance you and you like much I expect expect build -- this do look that's enough Europe? could add sort mentioned you you're

Frederic Lissalde

the expect, of expect you inorganic on fast DC first, high-power So question in the think, organic field in this think, of growth and exposure us focusing about on the And my I $XXX was million our these was $XXX out and overall, it $XXX $X.X we charging. to overall, for second charging, billion, -- focusing million prepared should including million both organic stationary I in yes, remarks, devices. Rhombus

Joseph Spak

production conversations be real like in you sort bit a at concerned if -- about us but difficult your to the get any how Okay. could had be energy shortages balance customers, how with the of moving are And a been are just and or of more Fred, tell with secondarily, maybe what than for then sort what you little European summer some ahead sort of could I'm your they of into lesser of here, shutdowns curious, quarter winter? you the fewer planning peak, of sort evidence preparing? And everyone's almost may your are time year particularly maybe are third the seeing of

Frederic Lissalde

those too exposed say. to along I to discussions have it's think I not honestly early been lines.

the profile Europe in of the September, will we August, actually I after break. and think say around September early production this the know summer more I of early about end come back winter. -- would comes when

Operator

and have question comes for that one Goldman question, Sachs. from with We Delaney time final Mark

Mark Delaney

some terms reaching breakeven, start the comments M&A to mean both see question EV momentum EV breakeven made? your you in when in believe, for comments of consider the of the any that additional the And in A in there of bookings. about may reach terms the that well organic think prior some on the I as the we also thinking when as 'XX frame, you business and may When business. changes organic nice 'XX, for change is what time M&A, you these the OpEx you revenue of

Kevin Nowlan

Yes.

think really same at updated haven't perspective. is, eye guidance, couple grows code that -- One fair point, it's there's key we breakeven a we were But I to think as say as R&D of a the where our to that an ZIP can we we're but on. it's continue seeing in we're to our the I become from is this year incremental variables in other But keep to on eProducts-related headwind that which contribution, EV a hand, like as more breakeven. for now gives revenue tailwind. invest full million, a us expectation XXXX, that the to near-term $XXX

no we're keep key are specific there's directionally, grow. both an and But a outlook not going though those the even change how to those think X provide update in significant I to So items today. of eye our real on variables

Mark Delaney

are around That's of to recoveries. companies challenges And And on that manage expectations get pricing of harder for helpful. that persist? there. your the risk expenses are lot all second is though, net And to year. comments in was all for do the be more some of already reflected pricing? seeing high some macroeconomic that ability potentially more My the given out the extent pricing to are the this macroeconomic you trying going a your tightly you made level, thanks More conceptual net to

Frederic Lissalde

us I years We X, any ago we've we've about X cost if room planning that staying this, $XXX manage think for taken lean million that you And years cost X started benefit looking And from right? we overall. always really allows compute, reductions this focused and have the through reduction restructuring actions on to year and at X, ago.

of strength So I to going field constrain this, part the It's of what we're E. of we do compromising the grow vehicle. within to -- do the compromises not trajectory that position in BorgWarner long-term we and won't And in in we're doing without anyone elective think anything that. the battery

Patrick Nolan

wrap up the your Chelsea, all and for great can ahead questions you today. go you thank Well, call.

Operator

Quarter conclude this XXXX the Results BorgWarner Call. Conference and Second Ladies gentlemen, does

You may now disconnect.

BorgWarner (BWA) 3 Aug 222022 Q2 Earnings call transcript