BWA - Earnings call 4 2023 | BorgWarner Inc.

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Operator

Good morning. My name is Savannah, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2023 Fourth Quarter and Full Year Financial Results Call. [Operator Instructions]. I would now like to turn the conference over to Patrick Nolan, Vice President of Investor Relations. Mr. your begin may you conference. Nolan,

Patrick Nolan

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

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

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

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

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

Frederic Lissalde

everyone. We're more XXXX. Slide With XXXX approximately billion share and sales, Pat, organic an overall results in $XX growth pleased than for to on company X. you, starting XX% we update, in Thank delivered good and provide our day,

guide. high at end of Our was the coming strong, performance margin our

slightly line we the but at saw cash XXXX. margins. the as 'XX, of to the It top Eldor resilience lower line reflect product the we adjusted well our e-products a supported of We of This what good acquisition. the portfolio we executed company marketplace. for example the million the in $XXX flow free share This in exists During course a top is BorgWarner. higher fourth of delivered quarter in flow repurchases cash of million free the that that $XXX during closing resulted as

over adding progress multiple new secured already the challenging announced across continues of and BEV the our awards year. awards These to on We fronts. the multiple fourth the architectures. e-product for Our hybrid course quarter, forward during both portfolio were

of see sourcing strong to for portfolio on globally. based our our continue a the products We pool strength

our of Lastly, strategic to BYD, agreement strategic strengthen outside packs acquisition we took Electronics for steps new several further LFP executing portfolio, business business the with actions FinDreams well of as Eldor like by to awards China. enable e-product as the batteries

some let's Slide new product on at awards look X. Now

next state XPeng for to the XX electric for MPV sedan in January as B XXXX planning B been XX 'XX. well BorgWarner its the and their class QX First, sedan. producing rotor selected start in as has for we're supply e-motor to began class Production by and for the

where XPeng competitive NEV data rotor motor and ] a [ is we offers ] excited on in proven our China, Our at XX% than more efficiency We're and to continues us cost. for high-voltage with hairpin XXXE long-term believe of density penetration as already it supply power the to higher success [ position high market. to

high-voltage existing [ OEM meters. global business, XXX-volt has with Second, world the to supplying in BorgWarner its secured ] major coolant a extend

three This business their awards best vehicles. passenger with high-voltage truck of Some American the incorporating into and North [ for specifically is platforms, vehicle the programs. ] OEMs heaters of automakers SUV cooler its one BorgWarner's light and win

dual Third, secured electric with dual vehicles. inverter expected its major to begin Production a September the is the on XX-kilowatt extended to a in hybrids supply OEM Chinese automotive in world range plug-in BorgWarner an and has series of developed [ is ] for utilizes and this power in year. virtual and hybrid inverter integrated The The solution. the as product [ are leadership platform scale. vehicles leverages for five ] product BorgWarner's both

X. on Next, Slide

and additional to securing to three would like to took within build today. driving business, product addition In e-product capabilities steps them highlight we of leadership multiple portfolio, differentiation. our new I

in integrated us acquisition First, expected provides chargers, existing electric boxes, its completed complement hybrids and additional to DC/DC of of capabilities onboard converters in BEV. This are BorgWarner's all Eldor. product with high-voltage BorgWarner of and the segment portfolio hybrid systems which

to CV continuing powertrain [indiscernible] able its supplier agreement subsidiary. electric We're be and then accelerate in of these BorgWarner with for with China. market is world. working the and our vehicles CV commercial product a and portfolio the a to joint Auto efficiency in largest hybrid the BorgWarner battery venture to Next, growth products Fast technologies expand form to product the for will Dry Shaanxi rest through Group, Chinese use together the

battery in non-OEM from this area for FinDreams' sold strategic in signed FinDreams FinDreams that battery for is The utilizing and in BorgWarner with batteries These technology this commercial localized with rights of sales. BYD our experience We're competitive numerous manufacturer right with subsidiary, in chemistry laid international LFP to BorgWarner chemistries. product Under expected batteries packs battery Americas tax. successful exciting with Pacific relationship for Battery with Europe, select BorgWarner Asia vehicles, in batteries market be an some customers FinDreams agreement, sales and packs increased other to tax sales. sale localize years over will XX the agreement the are launches. with is unaffiliated the CV Finally, for comparison is LFP LFP cost an regions. seeing demand LFP only with be

e-product in Next, sales on in expect XXXX. to Slide X, summarize our we I the would like growth

from of One continues important to ability XX%. eProduct commercial representing year-over-year Systems produce. We driver of expect $X.X growth XXXX vehicle our to our to be customers, our our of to product line. XXXX is and expected to trucks buses demand billion sales a outpace growth XX% system Battery $X.X battery billion,

we to our Seneca However, this and customer capacity North both to Europe. Carolina, strong increase in in are and meet demand, continuing

to We with XX% expect XX% drive of [ eProduct to help with growth heavy our more management the year be be looking vehicle expansion both Overall, from assume this in capacity in from other portfolio come. Then to launches portfolio, the number a across XXXX XX% to a million which increase parts related to sales in [ our to thermal guidance our to growth, year-over-year at expect $XXX with IDM the year-over-year systems battery line XX% a and of million BEVs market equates growth. for roughly power to mid ] our expected point motors ] $XXX hybrids. globally we XXXX, light to electronics to hybrid

we launch year BEV believe will While we and activities and support our the expansions in our another of expect outlook. for intense volatility capacity hybrids volume industry,

value. eProducts the XX. to XXXX, to XXXX Slide Forward on and three, the Finally, foundational of pillars: of I maximize three profitability; opportunity has Charging want two, intent eProduct growth; One, take remind Forward Charging the you

two pillars first BorgWarner's profitable center The long-term around growth. supporting

BorgWarner near-term business leaders despite believe long-term in among to mid- to clearly towards itself that of and e-product BEV awards strong. remain the believe be so electrification, do to positioning hybrids terms trends. the volatility, continue that and to We profitably. We

pillar is of this third enabler Charging Forward growth. long-term an of The

Our technology foundational business relationship, fund to customer brings internally the ability and capabilities our investments.

just business our leading and BEV margin June. back foundational this provides near-term we believe as our profile, we in strong with market at importantly, during volatility times Investor of hybrid highlighted positions market earnings resiliency As Day and

is XXXX our The our and business takeaway e-products both true our we lines and our that important in was both true Forward in is As results XXXX. Kevin will and it review, remains plan when June in that our unveiled today. play role key evident This Charging outlook. XXXX foundational

of spin-off We powertrain resiliency new PHINIA. of completed I As We free XXXX, the challenging of margins business sign strong during secured we We types back awards product delivered our revenue built. this: successfully which my are is look solid that all another electrification, that the and flow of XXXX. supportive cash take in long-term environment managed BorgWarner is objectives architectures. on successfully a

some CV for subsidiaries BYD with side [ and Weichai We of alliances, also inverters ] the critical especially on for secured battery packs.

to repurchased the We has also to BorgWarner the ] about shareholders of continued dividends. have [ million million in stock four about returned last Delphi to over since completing XXX we And also shareholders. capital return in XXX XXXX. years, acquisition

has returned considering the tax-free about and shareholders off So $X.X to BorgWarner since XXXX spin before PHINIA. that's billion

Moving and XXXX beyond. into

long-term We are objectives. near-term to relative our margins balancing

growth. future continuing expect invest manage incremental holistically, our to We while to our margin in

straight leadership a that growth As in final resiliency we've companies hybrids volatility strength, for opportunity and line. a near-term the will focus processes. be always long-term is the the the and BEV The industry great product with earnings not corner said,

Our for longer product margin portfolio tail generation. resiliency is such that built will combustion cash and help a

CFO contribution we contribution of shareholders is all to now I the with future. This initiatives tremendous I from As moment On entire for him Board years. Charging retirement. call the our acquisition here execute the as growth. With team into personally Aaron right I [ a played instrumental Delphi let BorgWarner's and me his has for our strategic month. in Kevin's and an our chapter of spin-off value the to are Kevin for profitable and the long confident forward and Craig wanted Kevin. am and of skills, to ] turn as XXXX, the a to deep I recent has ranging him to our company, thank which over the thank and major friendship to over earnings take look call of next wish company will Forward executing Charging [ into behalf stepping the PHINIA. knowledge his ] of deliver his him next our to we company, our expect a that, well the to the to Craig Forward and BorgWarner of past industry role management the last Directors the of company, of fantastic creation execution role

Kevin Nowlan

Thank you, and morning, Fred, good everyone.

like Before the provide financials, I'd a I results. our quick to dive into of fourth quarter overview

our was guidance, supported production First, midpoint stronger-than-expected the in the at of industry by quarter. revenue

And finally, the the year. flow performance Second, free delivered by our guidance, margin performance we finish strong higher high cash driven on out revenue. to end strong was conversion of at our

year-over-year QX. Last to from continuing billion. a look turn for for just $X.X over Slide was walk revenue operations QX at Let's XX our year's revenue

revenue, that growth e-product key programs volumes see that reason wasn't can in we the China, X% were strike due and our see launch program roughly stronger by negatively increase lost drove year-over-year EV $XX lower million. can in The the was impacted North in up customer You our in American weakening quarter almost organic why of increase of or a North America. is in X.X% and revenue dollar which Then customer U.S. UAW delays you the a [ the ramp on sales to ] year-over-year.

Finally, $X.X billion the over added of year-over-year. and this all of The revenue sum of SSE just acquisitions million Eldor to QX. was $X revenue in

to Turning Slide XX.

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

adjusted excluding quarter from on R&D operating the e income X.X% performance fourth of increase This basis, million million. impact income was Our $XXX million, operating or exchange M&A, of compares million $XX sales. of and to impact margin. planned $XXX million higher $XX a equating comparable adjusted ago. from product-related On $XXX income of adjusted a increased includes continuing of foreign a the That a year operations X.X% operating to

we Excluding the on R&D this an converted approximately sales organic investment, increase. XX% higher

free from from we Our in Recall that than XX% effective EPS of operating our continuing our higher higher adjusted as was XXXX the adjusted compared only down tax was year flow tax lower And adjusted $XXX flow our moment provided tax a continuing fourth at quarter, was in during at finally, provides rate. XXXX effective resilience current $X.XX to the rate income it I'd operations million look a helpful free operations offset rate. was typical by a ago compared QX cash June, full we guidance product $XXX to spin-off think because us to of deliver our post a I results to PHINIA which million. On year like take allowed that believe portfolio. to underlies the look XX, cash Slide

that that modestly see below sales midpoint the in of guidance. overall You'll came

$XXX about by short relative to our offset the foundational than guide, fell the largely of coming million $X.X billion guidance. sales million this billion product sales about $X.X in higher $XXX While midpoint to June

going operating guidance, income real evidence adjusted of midpoint relative margin of are adjusted operating isn't to our the performance. grow then Investor operating of the However, June in June in Despite been midpoint speaking we've second but resilience the be revenue likely as our the our and products dollars This our stronger, earnings the shortfall the since in about margin our is our weaker, to quickly, Day. above happened If what that's half margin of to precisely resiliency adjusted demonstrates came the going is sales and in XXXX. guidance. that

to now Let's turn XX. Slide

can industry our global see XXXX. You perspective production on for

light our be and flat to commercial markets down this X.X% global weighted We to expect vehicle year.

to planning this at Looking American to for And we be expect X% overall we up X%. X% year-over-year. X% to be to markets market region, X% by to X%. market the China, expect In weighted down down we're our up to North down our blended Europe, be in

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

year minimal full sales. from guidance our that note on currencies foreign to important it's assumes First, impact

be mentioned, to Second, deliver continue previously to our growth, as for X.X% that, year. sales in flat to we product expect I year-over-year to sales. down driven by markets growth the Despite our expect organic we

XXXX, between $X.X significantly eProduct to expecting sales, XXXX. in from up in Specifically, billion in the we we're approximately $X.X billion generated is $X deliver and which billion

range expected these to expectations, Eldor X% Based $XX.X billion, XXXX the million projecting we're total approximately growth Finally, of to approximately acquisition of equates which is revenue $XX to to X%. the XXXX billion on $XX.X add to organic revenue. in

margin. to switch Let's

operating capabilities believe range be note expect It's the more We a to year full to X.X%. the an operating we in addressable engineering product path our X.X% market puts strong will income in to by impact that expect XXXX. that Eldor clearly purchased leadership this margin acquisition. we we to on billion guidance Eldor, adjusted includes to due us the negative With $XX that important achieving approach of

next which However, we'll the that be years. for business little generating revenue has operating very losses means today, few

is XXXX operating a expect which the to hybrid That in in X.X%. rest planned compares the expecting the of related this of per in adjusted full including of incremental we implies believe the delivering losses the of teens, mid- to those margin the to Eldor margin to Excluding margin range impact and We drive in this earnings be year the XXXX, ER&D. our X.X%, our the to even outlook, X.X% business the ability power growth with and company diluted to of year from revenue continuing of of of beds margin markets. and conversion $X reflection $X.XX we're adjusted the full underlying performance range on volatile costs in face manage to share. Based EPS operations high

Turning That's capital than generated to cash build year. we'll working for in our million the full to we free free this midpoint $XXX deliver due $XXX outlook expect slightly flow the modest XXXX of cash of outlook. in revenue million $XXX to is lower a that The supports we growth. XXXX flow, million our

product revenue. remarks. financial associated our EV solid in and we despite me So a summarize my let volatility Overall, XXXX markets result delivered

operating shows resilience Our our performance of income adjusted flow the and portfolio. free cash

performance pressure, is offset the be Specifically, it's by to portfolio. when stronger the likely of rest in under product a growth

continuing Fred Now our secure to delivering company to to is and of my the our drive a moment, organic long I an in with success team the the probably near-term earnings BorgWarner. but With I the long-term when and poised electrification leave ahead margin proud the delivering growth the that like company to translate basis, and Craig. progression years after will will how hybrid I'd spending company thank with I'm will leaving we joined as can finance this the journey, world look result, that growth creation the hands will the believe to of the prudent as truly I call which team support and in strength the the five winner case believe markets future. This be including make transformation inorganic, function of into keenly organic good global it's believe and on to shareholders. and investments, both electrification the for for I toward in softening XXXX, that variety last growth BEV in financial despite I'm Fred on the be help incremental into in the our positioned a performance to I and coming resilient for a working of be be expected I value a not plays part out volatility years. all-in a of opportunity portfolio, is no in And across know expect industry the strong production, matter we focused eProducts, and XXXX.

engagement in the last turn enjoyed years. with as to you chance our back a that, Finally, public a been over It's all had of of Pat. the many I've over I've thanks investment build the to and years for the to company I'd my ride, XX CFO. the to you community over relationships call fun With like

Patrick Nolan

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

Operator

Bank from Our Murphy first of America. question Instructions] will come with [Operator John

John Murphy

a to were XX% would into kind volumes you to volatile that range, assume instead it, reasonable run to it flat to X.X%. might potentially be here. a we live outlook. of upside cash and of that sometimes way up question the makes happen? incremental flat think I Just in and your midpoint to were the first reasonable slightly they be But tack. about being revenue and X.X%, earnings Is would that to flow. if down in of if the $XXX of conservative wall margin, about sense I have a understand about you, convert sort take tell to At business add could a those to in translate really to to million that that that it to your about X% Would XX%

Kevin Nowlan

mean stronger, we a it. would guide I expect our basis convert guide you our in flat X.X%. think It's is down can on deliver Yes, way But expectation see our execute the that reasonable markets are markets in implied to a on conversion and if is promised our the that, we to on revenue all-in come fully that conversion. an And mid-teens it. on about

And converting see should incremental revenue, on we to that you upside us so see expect revenue. if

John Murphy

would and believe over but just XXXX, some in just market moving it's lead hybrid shifting a XXXX then and in strategy beyond, follow-up. a cap it's not much not Fred, would allocation all stranded. greater not ship and leave you I place, kind you is there in you and as EVs capital the the hybrids? to maybe how And cap as although execute quick in is have of potentially strategy to the I saw between shifts a And and slightly you commentary mean could shift the sensitive mean penetration quickly are if how we allocation? that of to

Frederic Lissalde

hybrids of The similar coolant for BEV. the the B the same side high-voltage heaters same electronics, products are cases, motors, same [ the the transmission are same they than on the ]. They power products are are they

perspective, capital a engineers, same an standpoint, it's the and from from it's too. So it's they're extremely fungible, R&D pretty fungible

So fungible very we've I BEV [ that much developed so. very agri say, ] eProduct across an is, portfolio would and

Operator

[indiscernible]. from come will Question

Unknown Analyst

XX% start be thinking away? about to about? years? we when to margins, does Or Eldor. here ] does is this sort Just we think other something of to for there, and talking commodity a headwind come that should a when then R&D, is on you that much of issues contribution if drag going go how it puts mentioned Any labor several any exclude be you out takes And [ or like Eldor,

Kevin Nowlan

'XX, I unusual year-over-year the respect about. basis. that we're think all-in conversion right, is there's at an really mean the on mid-teens you're and to nothing With in looking to

that we look million $XX more $XX eProduct will a you are up investing million, R&D organically be in again at within but little It embedded If -- in XXXX. bit about to that's conversion.

mid-teens an at we and all-in So perspective looking now the mind. basis, from the of in with the scale eProduct on given contribute conversion an expect our we're in to that business

Unknown Analyst

And that any when on thoughts Eldor, moderate?

Frederic Lissalde

back me So step let here. a take

good globalizing was done Delphi, we've Akasol is with we've ] them. technologies think Look very great what done them what and about revenue. [ This Borg at and had which taking at both [ at look I with commercializing ] charges at ], we had converters The on million midpoint. [ that. -- $XXX which the is DC/DC exactly plan Eldor year, on with lower literally

we and can I'm generate that that engineering can generate that from so And the drive profitable base optimistic acquired we about very the Eldor. we growth with

Kevin Nowlan

Colin, billion we some $XX short we time, in start it us that, an that and to knew we Day several as add this back margin a a that success looking so long-term XXXX in but just impact Investor term, away. we business was the as guidance addressable over because market us, have positive gave start years impacting be next that's success I'd our well well anticipated would maybe the in for at Eldor out, the flight term. is position something still to is And to on in our years in to it near But few will have when for

have to business. our years support next the in operating of necessary that support R&D expect business that we for to as We couple the on capitalizing were losses

Unknown Analyst

powertrain this same higher Investor sort Day, a But of I between mix you ICE sales forecasting or sort similar And 'XX. dollar imply about 'XX flexible prepare those your still try be And higher at lower, basis in add probably talked just fivefold through a offset ER&D today you're ] [ being in to lot you for is would mean EV dynamics profitability. on you your to you'd touched like it, EV of increase guidance launches. EV and year's the of that a to of as

Or get about to $XX ready midterm? because that 'XX? and some that puts there pretty some have takes you the over for R&D to be chunky consistent talked you be to is going flexibility that is So in billion going needs

Kevin Nowlan

we the terms the R&D. thought in to XXXX the at Yes. the of look as that the be was you in growth going in real eProduct in When related past, in eProduct R&D, mentioned peak we've

stepped expect stepped year, year-over-year. pace million we it happening. step that you we to $XX up ahead million And look that so step about it might not big we $XX And the what to saw about up an to in as growth it's organically. But 'XX, XXXX. the up then as remember, as in the to Last we down said year. million R&D increase of $XX see You $XXX million going can

So the of opportunity the in slowing still is the that our pace growing it's well ability capitalize to programs launch but to R&D and as up as supporting to growth ramp definitely successfully because profitable down on future. continued

So pace seeing right what now we're we outlook long-term for is our supportive think of the electrification. of

Operator

from will Our UBS. question next come with Joe Spak

Joseph Spak

going I in guess here the sort a I wanted to midterm of light what's touch on strategy. factors in of your of couple on

first, hybrid industry, about roughly plus industry I Slide you're combustion the if look the of and X% decline level. XX So look I showing at at at a

Your implied is growth revenue foundational like minus X.X%.

And the X% as you ICE like that on margin if to foundational continues level like coming ICE stuff out can of reasonable that's a still continues ]. to decline hit outperformance to XX% that Is decline? over grows years? foundational target you So laid X% at [ the that

Frederic Lissalde

are the And that on in Joe, ] the would we constantly And by I than as strength. by about believe, Forward. a allow called say, maintain foundation point months we of our it review I tell third as would we ago downside is presented this basis inflational at margins us the I team of see as that, So constantly will regularly, we're position I a that outgrowing time. pillar more upside points. the few restructuring XXX side, to Charging of side you [ and we're in

Joseph Spak

bit. a question question off a Colin's And build to then guess I maybe of little second

year. Let's $X.X billion call guidance this it, for eProducts

billion billion. $X Your $X.X prior [ 'XX ] to was

looks like that jump. a big So

So like maybe of seems that through Like product there. it the year. of a things launches couple maybe some

mean, year-over-year. understand maybe like sense. know attainable? that still products 'XX of is, but guess just your I seem the if better agree for 'XX doesn't would is I secondly, the I'd with rate I curious it market exit And be sort really you that. And is to a level it So believes how don't

Frederic Lissalde

you in U.S. And ramping packs, Europe come. and and more if at So year-over-year. in end the growing XX% up year the in CV CAGR are the we to of QX take significantly

is We're launched XXXX on year. the launching programs would end far. I last year. XX% the this the of year at we've tail vehicle, late that roughly say of disclosed jump-off we've higher CV On much that the So end or point current than so of

So I even if as is bigger point it I end the some possible, year standpoint, a right, the much alluded on be there this variability you're base to light vehicle of a at going on to side. think just is the from jump-off is, CV

So customer in as say volumes that range be our to I would we are that holding if would expect XXXX. the within forecasting, country

Joseph Spak

just sort talked still the the year on Obviously, in you growth what of market monitor volatile of sort it about, to we need but on what seems based you and achievable? see now through

Frederic Lissalde

our in the different the 'XX. products. between we're of and let focus, course. on 'XX, many For blocks just launching we'll wanted on We're now, vehicles. We're you CV give finally so due know focusing color on what we 'XX focusing to is you think I light but building and 'XX

Operator

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

Rod Lache

in of to, and are XX% all, market, confirm but on flat eProducts question asked the moderation is I just margin. first the the there's that some appear a based just it maintaining business, in would that want foundational growth that Joe on in you

referring the the $X.X revenue billion So what's I'm for secondly, XXXX? for remind to to you're you not eProducts us within embedded And target billion. can M&A $X delevering?

Frederic Lissalde

take billion I'll It booked billion. billion significant of $X to second There question. $X.X is business. M&A in of portion the about $X the There So in part is XXXX. is no M&A the a of

Kevin Nowlan

technology side of combustion-based know And grow strategies on our then over one that will outlook. the we're on cost margin our underlying cost our at that's case expense that business over electrification beyond time P&L the delivering that overall well structure that and I is key our price even the of sustaining as we say through the the be time, expect foundational And to as that business, and go the of pressure continues to sure make revenue we put fully of is margin, on we or managing to make challenge to the profile, sure we're that. whether XXXX should side

Rod Lache

or just take think when and I'm of your thoughts defer we vehicles? have really the maybe OEMs kind for regulatory that flexibility how back light any you to plug-ins from customers, to analyze you step shift requirements any you if if they electric much hybrids I might And curious Do the kind on picture, technology? accelerate. a would vehicle a you off-the-shelf bigger the they have you late have a of sort benefit And to are are able be would lot fact to decisions, seeing hybrid imagine Which extent? of that these greater of much

Frederic Lissalde

Yes.

customers, you for need think most to them. So ask I probably

think some flexibility. is I there

U.S., is outside thermal percentage, electronics, hybrid ], me a We ] Europe, hybrids hybrid XX%. report do it's is that the that engineers, R&D new and BEV. totally is transmission, In motors, is the are across the commentaries same too. portion it's big [ to of as built important that we've hearing portfolio [ at same a It's of big U.S., energy thing. XX% product is power to you What's the fungible the intention in a there some vehicles. to China,

does they it wherever We support us, go. For can not to to matter. customers our want

Rod Lache

your hearing accelerating in the about interest to it. customers you area? that are seeing sort Are So clarify, actually that? U.S? increased We're now this you We're activity Fred, about just with in reading of

Frederic Lissalde

hybrids materializing that see too think the launch grass a our communication one I say hybrid, I the different to RFQ can of we of a the in those types little hybrid hybrid and that rapid eProducts it's be enablers scale the that the But cuts with BEV, early would we have for of side. on Rod, the powertrain customers. and of

Operator

will Your next question Levy come from Barclays. Dan with

Dan Levy

originally M&A in maybe lot originally we you And environment line specifically, start these is process integration weaker deals then in integration just because managing, could Eldor, risks? what manage you any the you than Or are maybe integration? way a is EV what a the remind I for strategy, Eldor, how we anticipated? done How you function are the could the could have us broader the do you did of just with deal? when . say a maybe M&A guess, And on of losses this you with

Frederic Lissalde

comprehended a So way, Eldor And it and comprehended the was we do first Integrating diligence was the our doing of financials. very of it disciplined BorgWarner. a we financial becoming, views when I and in a all, we're did fully with of due Eldor into the strength fully very profile disciplined way companies of with that too. real think,

the technologies BorgWarner discipline. again same in There box one are large attractive and [ too. a lot ], products, chargers, converter one But Day we businesses managing of people And manage are in electronics We it's are is BEV. which onboard we couple a and the a totally financial Eldor owned those we've from customers business the hybrid or DC/DC the business months starting our pools business either to Eldor are And event now. of where with we locating BorgWarner just we for as on location. going manage see

Joseph Spak

And as we Keep mind, we're maybe back to business. if on look be we just a this in that, we guidance without implied were look out and piggyback margin at line. the Eldor Dan, being losses to in X.X% thought what's year, X.X% the XXXX, in track you I'll on to at our XX%

we to of on have the lot short today. the that were shop without investing Eldor knew but doing Eldor of -- and be engineering in was the cusp because already a basis revenue that we'd that in contemplated XX to tune of us impacting strong points doesn't we term So a XX

that guidance. original in And our contemplated was so

Dan Levy

maybe then follow-up that. just as And on a

a a could Given the go-forward today. a what But or customer standpoint what an sense your targets. you sense $X what else some remaining not maybe mean, M&A? of capital you I going some a can would isn't update to how require for from allocation capital does give appetite how change? ago know give M&A of And product portfolio capability the still is perhaps plans, us of us environment that you Fred, there's in or your this that maybe is the still exposure shifts product in on allocation? just we've that XXXX seen mentioned moment in we're billion assumed shifts get I that

Frederic Lissalde

I would unchanged. capital is say that allocation pretty much the strategy

an as the at at very strengthening M&A disciplined way part capabilities look looking We M&A. we important electrification are in of we are

than could that impact at near-term looking environment are the attractive we some rest consider companies assessment. the buying way putting trigger valuation think And provide in We assured current and include actually more we're on. be the and opportunities we the that will

really spin-off It want M&As prepared allocation I alluded near-term part and buyback cash that remarks allocation which I much a the even includes We've think we've in the is great those flows. covet. stocks my of anything? PHINIA, of our impacts strategy. Kevin, is importantly, policy success. left to to given at to with of also the repurchased capital are you dividends how the unchanged on shareholders We're We discounted capital and on the are strategy. start back also was do add we've during taking looking

Kevin Nowlan

I think it. No, that's

Operator

from come Adam Jonas will Stanley. question next Our with Morgan

Adam Jonas

questions. simple two Just

XXXX First one, to of is and E-Systems? R&D allocated portion CapEx of your what budget

Kevin Nowlan

really out, what or We tell R&D R&D in look million terms disclosing of and we $XXX in would way. don't I terms break in publicly overall CapEx in foremost, you allocated of you million the $XXX an versus what in But if been total. first we've about that $XXX is, of or but million invested XXXX, or R&D so eProduct-related R&D that at

been million expect come will million to can to R&D 'XX R&D $XX doing the a And a perspective. years. $XX year-over-year foundational basis you another few last the as eProduct As it's add on probably we'll that bit based we ahead from organically, there down little look

investment. From focused meaningfully, you see be a and particularly well the level e-Propulsion XXXX it our a pretty a capital of comparable you'll some our continue capital toward our eProduct, we really business year will eProduct last and majority ups the as perspective, that relative in in R&D to within ramp the that. pack XXXX, the dollars weighted to of was needed, increasingly of So segment battery see as we on that stepped going investment can million is portfolio investing of and up capital hundred investment towards couple in

be couple it little battery pack that peak come particularly probably perspective, the a And to bit investment from of 'XX levels a normalized years business. CapEx as these on hit see beyond. we and back I of then down will more a think you'll

Frederic Lissalde

or And and it light what's goes EV really then it's the are It's RMB for in again, times, products important say us is I'd in the to And the people same same vehicle, hybrids. the wonderful the for R&D, whether it's understand same the are the above. hybrid it's same that CapEx CapEx.

Adam Jonas

that won't much are of just going range XXXX but to temp or then business a specifics, include point, to BEV guess ask of best your plug-in hold I'll agnostic hybrid that would Fred, between many E-Systems And into your are be -- I hybrid. hybrids. what on that are you there and going you of E-Systems foundational and aspects how

increasingly to were your know. just some isolate we hybrids you specifically before of If is well. all as hybrid into foundational stuff as going

would much revenue guess So be great. how I in A didn't know range would of the for isolate hybrid account a you could if 'XX.

Kevin Nowlan

[ Yes. from just me I ]. couple guess maybe a

you thing in first top billion say billion EV But what million is can back the details. I'd commercial say the to the look off EV. on to I $X.X $XXX Pat the It's battery the in the associated would I million $X.X $XXX all space. when with think space the CV to guide, at come is you is

a really of then the and billion $X.X I want off. and is bit specific a at breakdown. we'll eProduct to other to you're put the with come to you don't it billion back number So have revenue little what $X looking

Operator

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

James Picariello

Just a clarification question first.

is that you're rate then million, roughly $XX excluding addition on And loss $XX to million. is for the by products implied in impact, to the organic So right? stepping based margin up $XX that Eldor, R&D guidance, Eldor this million year

in $XX all is million an at million to So in spend, right? additional $XXX that

Kevin Nowlan

portion yes. the $XX of somewhere million. engineering loss, Eldor The it's around Roughly, that's related

of to around million right, So Eldor around another what -- about to $XX midpoint of overall it's adds you're is the you million $XX the million the $XX said. Eldor R&D. loss And organic and is then step-up

James Picariello

that? a on and out Or transparency that the another share behind the of part guidance And XXXX? was was what the Just possible And to are to on to Is just way, provide on the segment-specific margin what eProduct propulsion asked propulsion. there eProduct thinking losses then progression. impetus separating just in year-over-year? based clarity can be of close product about is you then maybe the should we covered, confirm we how flat it

Kevin Nowlan

disappointed focused at breakeven quarter any started last the obviously, to to e-markets segment-specific on we of year, was not on our successfully last give on our saw was in and that that the revenue impacting look the volatility that pull were how e-Propulsion what fourth as segment, year. the when would I incremental we this on year guidance in and toward year. truly of We're That that premised going say, we But the you to some back was revenue. out guidance ability and had were we driving convert we the the when

up guidance when short can million million of $XXX we about year, in in segment, our about the look $XXX at ended revenue even. of which original get the to you you to ended we e-Propulsion see when the million is coming as to expecting $XXX So were break quarter, at we fourth

the or business that in So about, quarter. up so ended I fourth losing million think, $XX

what profitability flow in revenue, business would loss we million than comfort lower guidance simply is margin fact bigger million that I on $XX quarter. think the revenue $XXX if through had that a our had probably contribution we the to were us that $XXX in we're million have managing the down gives we versus some the way in of original let

eBusinesses. that mean we we breakeven successfully the take into at to the XXXX in we a profitability what is on you that managing growth that an that of business from And business of the see And from flowing on we're comfort the think in margin the all comes of mid-teens. revenue. of in But volatility. business. see ultimately, through I feel XXXX really good about path in right? the lot the incremental of the contribution is coming We're profitability So guide can light I fact converting of near-term all-in it long-term basis converting the some the

see it. of through So coming profitability the we the underlying fundamentals

intact the scale profitability the for see that towards as that portfolio. of the So we business, path we company objectives

Operator

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

Emmanuel Rosner

a to I just And trying the the foundational work on business. little incremental to hoping was the understand for margins. would your bit follow math of how up side

down, basically we've your of the the a point where are market. revenues I foundation So guess, XXXX within already even that with reached guidance, growth

contribution like think quickly restructuring offset basically we [indiscernible] this? you the sort it need better sort And some potential I of our within Do guess, can of think to how become should decisions I of decremental you like restructure if And margin? go to having like offset sort about the out Like of versus margin how future? does so sort sort foundational? downside? [indiscernible] any to of the if having in of about from volume plays incrementals like Like

Kevin Nowlan

portfolio little X implicitly, to bit. business, year-over-year. the our somewhere down right, mean to which with revenue point means guidance respect I you're $XX points in down foundational million, X.X a implicitly in the about around we're to $XXX is Year-over-year, million that

that products support from being hybrid at to markets down on the a basis. anywhere look underlying and markets, those the year-over-year X% X% combustion you are those If

we our through Investor So markets line. that way sure and coming that we're pressure. Charging And expectation we in we some to revenue going see we Forward that time. margin as restructuring portfolio that in sustain execute well 'XX to end over of sure do what are P&L are the going as expect would managing make our holistically, to to talked the all is you do profile pricing overtime, make fully the And outperforming are that know, we expect bit but year-over-year, those that plan. we're cost at down a as under Day, And we as foundational those revenue about little to seeing needed the a is we

Frederic Lissalde

It We transmissions I being or engines life on see or side. would current product. really longer new higher see new add volume is combustion one more thing don't that the developed. new -- a slightly on we is the don't really no

and mentioned, us tail as that combustion, if even prevent longer the the -- the mentioned, or engineering of you it I [ may to adjust So foundational go SA doesn't ] as P&L. back up

Emmanuel Rosner

guidance, sure really in a margins to is help also mentioned picture But like this revenues about so foundational as understand, could conditional so all for us you does does ] year. Any understand you the down about it. because mid- incremental what Just obviously a eProduct have longer-term to and XXXX this directionally make mentioned, I way versus up new that mid-teens [ actually on or eProduct think lot. look it on because, is obviously, then I a

better does what you bit could little forward. So a us help understand look that going you like? this And how I manage think

Kevin Nowlan

for we break mean, actually to means its blend that profile think the in the of all-in I It portfolio and line margin expectations mid-teens. need an you on P&L out we Forward. foundational the see guidance. mid-teens. e to years coming execute product on not to the Charging And of need on 'XX fundamentally, for convert that I coming we're details deliver And us to in decrement with the the in going in our [ margin our financials our in in through order guide, terms ] to over fundamentally, basis our but

Operator

come and with from will time have one Kaye we question And question, that for Noah final Oppenheimer.

Noah Kaye

First, earlier. just said a I clarification, what

to Should CapEx, 'XX, to trying your is about meant go-forward of of kind dollars? being the the just sort intent basis, about of we really be in reversion to comments. that sales in I'm like You [indiscernible] talked of understand more this X% the year 'XX? peak think absolute on CapEx that a for

Kevin Nowlan

Yes. years last running past below, range. coming we've we've to of elevated that closer X%. run toward the Fair rate over been dipped then time we're typically, we've back the run at we've as years, get is I where a in of expectation range. X% normalized that probably the We've environment, you than mean, X.X% we more down to X% to My been question,. and had see X%. But in couple X%

Noah Kaye

little you're to color bit earlier automation, tooling the us just was at I'd more And go cell a understand this in for visibility your good help and true of then, terms But year. as production honestly expectations throughout where love into staffing pack there delve supply you Fred, up ramp on the to into the year? battery

Frederic Lissalde

second Seneca are we line ramping Carolina. production North a Yes, up in

commercial any produce. production in is than And is noise at This the We for this same XX% we is to year-over-year the line that the vehicle, and the Michigan data have the don't can And we up will our ramp higher for up demand midpoint much slowdown those area. in ramping in being any is the year. daypacks. whatsoever first in growth commissioned contrary. see Europe, QX. the And The what of line

any pretty much sales issues doing back the on [ We of what we're So very play. that's on see the don't ].

all and that in -- and a precise reviewed way. monitored very very So and way a very is focused

Noah Kaye

Do program. this expectations ] of feel terms versus value help around Is quoted has OEMs your in [ labor but the for well publicized anything there for to customer I around to this of there always now? still to kind in understanding being Maybe one customer powertrain our comfortable you the behavior can versus more increase translated out shifting you've and ask able North the hit ROIC in that more. how call of insights target, broadly, in of more It's costs of the generally expectations into America, choice customer some proposition. dynamics you're you'd given but pricing in

Frederic Lissalde

always XX% businesses and experienced on and everything invested we meeting that. towards see we're I those how XX% tending [ that No we to capital. is very capital, closes do ], with have on return invested volume-based quoting I think return on

eProduct, For us, product are the rules is all it or same. new doesn't the a change it whether

Patrick Nolan

you today. Thank your questions all for great

follow me ahead free Savannah, out feel to can that, call. you or my and have With team. any go you reach today's to If ups, close

Operator

conclude Quarter does Year Call. that and Conference Fourth Full Results the XXXX And BorgWarner

now You disconnect. may

BorgWarner (BWA) 8 Feb 242023 Q4 Earnings call transcript