Good morning and welcome to Dana Incorporated’s Fourth Quarter and Full Year 2023 Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers’ remarks and the Q&A session will be recorded for replay purposes. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest. There will be a question-and-answer period after the speakers’ remarks and we will take questions from the telephone only. [Operator Instructions] At this time, I would like to begin the presentation by turning the call over to Dana’s Senior Director of Investor Relations, Strategic Planning, and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Thanks Regina and good morning everyone on the call. Thanks for joining us today for our fourth quarter and full year 2023 earnings call. You will find this morning’s press release and presentation are now posted on our investor website. Today’s call is being recorded and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied, or rebroadcast without our written consent. Allow me to remind you that today’s presentation includes forward-looking statements about our expectations for Dana’s future performance. Actual results could differ from those suggested by our comments today. Additional information about the factors that could affect future results are summarized in our Safe Harbor statement found in our public filings, including our reports with the SEC. On the call this morning are Jim Kamsickas, our Chairman and Chief Executive Officer; and Timothy Kraus, Senior Vice President and Chief Financial Officer. It's now my pleasure to turn the call over to Jim.

Good morning and thank you for joining us today. Before I begin, I want to acknowledge that Dana is celebrating a 120 years serving as a leading innovator across all mobility markets. We've been serving our customers every step of the way, beginning with inventing the N-case [ph] universal joint, which enabled the transition from chain-driven vehicles to modern propulsion systems. Today, Dana develops fully integrated propulsion systems for the most advanced ICE, hybrid, and electrified powertrains. It's an honor and privilege for the 42,000 Dana associates today to represent the collective Dana family over the decades. Please turn with me to Page 4, where I will discuss the highlights from last year and our outlook for 2024. Starting on the left side, I'm pleased to report that Dana achieved strong sales in 2023 of $10.6 billion and nearly $400 million increase over last year, driven by strong customer demand, the rollout of our new business backlog across all end markets, including traditional ICE and e-programs, market share gains, and cost inflation recoveries. Our continuous year-over-year sales growth demonstrates the confidence and trust our customers have in Dana. Adjusted EBITDA for the year was $845 million, up $145 million, driven by efficient execution across the company. This is a significant accomplishment considering the headwinds the light vehicle market faced in the fourth quarter to the UAW strike, which you are aware, Dana was disproportionately impacted given the vehicles involved. As you know, some of Dana's largest vehicle platforms include the Jeep Wrangler and Gladiator, Ford Bronco and Ranger, and the Ford Super Duty, all of which stopped vehicle production due to the UAW stand-up strike last fall. Accordingly, numerous data plants immediately reacted and shut down all or substantial portions of their manufacturing, which supply these respective vehicle programs. As…

Thank you, Jim, and good morning. Please turn to slide 15 for a review of our fourth quarter and full year results for 2023. Beginning with the fourth quarter, sales were $2.5 billion, $61 million lower than last year, driven by the impact of the UAW strike at several of our key customers. For the full year, sales were $10.6 billion, an increase of nearly $400 million. Higher sales were primarily driven by improved demand in all of our end markets and recovery of cost inflation, primarily offset by lower volume due to the UAW strike. Adjusted EBITDA was $156 million in the fourth quarter for a profit margin of 6.3%. Full year adjusted EBITDA was $845 million, that is a $145 million higher than the previous year, primarily due to improved efficiencies aided by more stable customer order patterns and cost improvements across the company. The net loss attributable to Dana was $39 million for the fourth quarter of 2023, due primarily to the impact of the UAW strike, lower earnings from equity method affiliates and the devaluation of the Argentine peso. The net loss of $179 million in the fourth quarter of 2022 was mainly driven by the recording of non-cash tax valuation allowances. Full year net income was $38 million compared to a net loss of $242 million last year. The net loss in 2022 was primarily driven by one-time non-cash goodwill impairment charge and the recording of non-cash tax valuation allowances. And finally, free cash flow was $136 million for the quarter and a use of $25 million for the full year, 235 -- or excuse me, $234 million lower than 2022. The decreasing free cash flow for the full year was driven by higher working capital requirements and higher capital spending. Please turn with me…

[Operator Instructions] Our first question comes from the line of Noah Kaye with Oppenheimer. Please go ahead.

Thanks. Good morning. Appreciate you taking the questions. First one, just start out with a question around cadence in the outlook. Are we kind of back to a more normalized cadence for the company with what Q1, Q4 being lighter 2Q, 3Q being the heaviest. Is there anything that would kind of impact seasonality this year that we should be aware of?

Hi Noah, it's Tim. No, I would -- I think that's accurate. We see our profit pattern and cadence returning to more normalized range and you have it right.

Okay, great. And then actually just picking up on your comments around the EV profile. So, your sales will be at more than $1 billion and you're getting a pretty significant growth year-over-year here. Is it possible to kind of dimension out the level of engineering spend step up? I think it will help folks understand kind of what the profit actually looks like on an underlying basis for these programs?

Yes, we're not going to give any real specifics. Obviously, as we continue to move through the development cycle, it's pretty fluid given what's going on with many of the end markets and the customers. But as we've been saying, the profit margin in terms of the contribution is positive. The other issue with sort of dimensioning that is it's a competitive issue for us. We don't like to give too much away to the competition.

I had to try. Let me ask a little bit about the backlog in a way that maybe hasn't really been asked -- at least we haven't asked before. To think about kind of the mix of components versus systems, now that may be an arbitrary distinction, but when I hear about some of your wins and some of them are for components like motors, some of them are more integrated units. Can you just talk a little bit about how that is trending? Whether you can put it into numbers or just talk about it qualitatively, I think it will help us get the sense of how much of this new business and particularly on the EV side is really integrated systems or subset

Hi, Noah. Good morning. This is Jim. I'll take a shot at it. The answer to the question is there is no one shoe fits all in terms of that. It is different by end market, vehicle within end market, by region, by customer across the board in -- our various customers have changed strategies, two or three different times over the course of the last three to four years, and that's going to continue to be that way. And if I just go like an example, forms, right, there may be some regions where the -- of a particular customer just wants to go with the component type of strategy with Dana. Conversely, just take an example, perhaps we have footprint, managed footprint and capability, et cetera, in a region where maybe they don't, that it's more appropriate for us to do a full system whatever the case may be. And there's multiple -- as it relates to differentiating between the technology that we have versus other people had efforts whatever. So we will never get to this is a black and white cut and dry one shoe fits all for everybody. It's always going to be based on those type of factors. The thing that works for us, just to remind you, though, is just that because we're able to scale across not only across the end markets, but to be able to scale across the regions to scale across multiple other factors. It puts us in a good position for whatever our customers want us to adapt to, we just find a way to adapt with them either on a component level or a full system level. Q – Noah Kaye: Thanks very much. I’ll turn it back.

Your next question comes from the line of James Picariello with BNP Paribas. Please go ahead. Q – Unidentified Analyst: This is Jake [ph] on for James. So in the slide deck, you made a comment that you're on track to hit the 2025 sales target. So do you also still expect to exceed the $1 billion EBITDA and can you share just some of the puts and takes on how you're thinking about cash flow because obviously, there's still a pretty big bridge to hit that 3% of sales.

Yes. Hi, James, this is Tim. Yes. So absolutely, we're still on track for both sales and EBITDA. I think the -- when you think about cash flow, it remains a little bit more fluid given timing on programs and whatnot. But as you saw, what we put out for next year, we do continue to see improvement in the cash flow conversion over the next few years as we continue to grow the business and move through the investment time line for the end markets and the products. Q – Unidentified Analyst: Thank you. And then how should we think about the overall alignment of your EV and your ICE programs. So if EV launches are pushed out or come on at lower volumes, should we expect to see some of the ICE programs extended and kind of fill in that revenue gap. Thank you.

Yes. To the extent you were seeing a delay or a trade-off between ICE and EV. That's a good assumption. It really does depend on what the program is and whether we're on the ICE version because we're both winning conquest business and as well as traditional business with customers that we historically supplied ICE on. Q – Unidentified Analyst: Very helpful. Thank you.

Your next question comes from the line of Colin Langan with Wells Fargo. Please go ahead. Q – Colin Langan: Great. Thanks for taking my questions. Your commentary indicates that you're expecting cost recoveries to offset inflation. Any parameters on inflation, other suppliers have kind of highlighted continued labor inflation and other costs into this year. Just trying to gauge how much of recoveries you're going to be needing?

Yes. So I mean, we're continuing to see inflation from 2023 into 2024. I think what we're certainly starting to see is the customers reverting back to their traditional way of looking at recoveries, where we need to go and get recovery around inflation and other costs through added productivity improvements within our own cost structure, and that's really what we're concentrating on. We continue to address the recovery question as we go through and have new roll-on programs. But I think from our perspective, we're starting to see a movement back to the environment in which the OEMs really across all the end markets operated in prior to COVID.

Got it. And the backlog rose, but not only did it rise, but your mix of EV increased, which is -- it's a bit surprising because all we've seen our headlines about EV programs getting pushed out, I mean, what is driving the higher EV growth in the backlog, despite some of the cuts to programs that have been going on?

Hey, Colin, this is Jim. Good morning. What I would offer to you is maybe think about it in buckets of time. If you kind of go back, I mean, we've all seen the significant shift on, I'll call it, somewhat of a pull back and push out on electric vehicles for all the reasons we all understand at this point. But if you go back in buckets of time over the last year, two years, three years, I mean, the cadence of electrification sourcing in that window of time was really heavily influenced or pivoted towards electric vehicles. So now from a balance sheet standpoint, I think you'll start to see maybe that kind of blend back to more of an average, more of a middle of the road average. I'm not going to predict what that's going to be exactly. But again, it's important what was sourced, what was pursued and what was sourced over the last couple of years is what's going to be reflective that we're putting into the backlog. So that's the best way I would do it. It's just buckets of time would be the most important thing to think about.

And I guess, I'd also add that it doesn't include wins for the current business in ICE, our ICE business because that's all staying in line, maybe even slightly better because those are often -- or more often to be a replacement win in our backlog. So it doesn't add to the pile.

Got it. And just lastly, how should we think about off-highway that's obviously the highest-margin segment. Is that a – and those markets seem to be rolling over a bit. Is that going to be down next year? Is that a drag overall that we should be considering? Thanks.

Just briefly, Tim may have some additional color on that, Jim, again. Just I tried to mention in my prepared remarks that we see agriculture down a little bit. This year, we see the other end markets, underground mining or material handling, et cetera, to be relatively neutral to prior year.

Okay. All right. Thanks for taking my question.

You’re welcome.

Your next question comes from the line of Dan Levy with Barclays. Please go ahead.

Hi. Trevor Young on from -- for Dan Levy today. Thanks for taking the questions. So I guess, first, I just wanted to ask for the guide on free cash flow. Are there any ways for you to manage down CapEx spending if customer plans slow? And is there also -- is there not a meaningful unwind of working capital coming from the non-repeated UAW strike impacts you mentioned? And then I guess more broadly on free cashflow, when can we expect to start to see a stronger conversion?

Yeah. I'll take those in pieces. So your first one, absolutely. as we move through the development cycle and programs are pushed off, then absolutely we're able to flex capital. Don't forget some of the largest wins that we've announced are not in the backlog. So we wouldn't be spending an enormous amount of CapEx in the near term on those programs. So you're not seeing some of that necessarily affecting CapEx spend, but absolutely we continue to flex capital, not just in ED, but in ICE as well. And then, yeah, we'll continue to see an unwind in some of the working capital that is the result of the UAW strike, but the sales growth will also come with some additional capital. And then we continue to work with customers around terms changes and things like that. So I think there's still some opportunity in free cashflow as we move through, but I think when you look at the sales growth and I think it's converting at about 20-ish%. So a little bit, some efficiency there that we can probably still go get. And then I think we'll continue to your longer term question on sort of the free cashflow conversion. As we continue to see the replacement programs come on and the margin increase that free cashflow conversion, that growth that you've seen from last year to 2024 and then 2024, 2025, 2025, 2026, I think you'll continue to see that cadence grow throughout that period. : Great. Thank you for that. Then on the guide to the $20 million EV headwind in 2024, can you quantify the portion of that that relates to spending that was delayed from 2023? And then I guess on top of that, do you have any updates and sorry if I missed it, but do you have any updates on the timing for reaching EV breakeven overall?

So on the amount that was delayed from last year, I don't have a number, but there's obviously millions of dollars that continues to get pushed around depending on program timing by customers. So it'll move this year as well. I have no doubt, it'll go up, go down just depending on where we're at in the product cycles and what new, quite frankly, what new business we win. So -- and then in terms of breakeven, our view on breakeven hasn't changed. We continue to see both the sales growth. And then as I've mentioned on a number of the calls, we continue to get more efficient in terms of deploying the cost that we need to commercialize these technologies and these programs. And we think that'll continue. So no change on our view on when we'll hit breakeven on our EV business.

Great. Thank you.

Your next question will come from the line of Joseph Spack with UBS. Please go ahead.

Thanks, good morning. Maybe to start on the traditional organic in the guidance for 2024, just organic 56% conversion. I know you sort of provided some of those factors on slide 12. Is there any way you could sort of help us with order of magnitude or even a little bit more detail there to sort of get comfortable with the conversion on the higher sales?

I'm not going to go into a whole bunch of detail, but if you really look back, look back to 2021 and look at the decrementals that were impacting us when we had a lot of the supply chain and customer order pattern issues. You know, those are starting, obviously started to reverse last year. We'll continue to see those benefits coming into 2024. And that's part of what's reflected in that positive conversion rate that you're seeing. I think the other thing there is, we continue to drive efficiency across the business. So whether it be plant related on conversion costs or with our fixed cost structure, and those are all being reflected primarily in that ICE traditional conversion rate.

Okay. On the 225 million higher EV sales, if I look in 2023 and in your appendix, it actually looks like it was pretty evenly split between the different segments. Is that what we should expect to continue in 2024 or is any of that growth targeted more towards one segment versus another?

I think the growth continues to be relatively balanced. I mean, I think that, we continue to see a lot of puts and takes even throughout the years relative to where we're seeing, growth or demand. And I think that that probably continues, but I don't think there's one segment that's over weighted.

But is it still the case just broadly, right, where you sort of first started with this technology in the commercial vehicle segment where that's sort of still the largest, I guess, profit contributor? And then you need to sort of continue to scale in the other segments as that growth comes through?

Yeah, there's some of that. I think, when you think about some of the places where the growth is coming from, yeah, we continue to see it in, we continue to see growth in the CV market. But I think the other thing you should think about is, as I sort of rethink through that, right, I think we will see a little bit more growth in the light vehicle segment than we will in off-highway or CV this year, if you're trying to weight it. Some of that's due to some of the production lost in the LV business last year from the UAW strike.

Okay. And last one, sorry, if I missed this, but did you say how much of the $450 million in CapEx is for electrification?

No, we don't break out the CapEx between ICE and EV.

Okay. Thank you.

Okay. With that, thank you very much for joining the call. As always, we appreciate the privilege of your time. Just to recap from my standpoint, from a business perspective, collectively it's been a life and death life and death collided every day as a company that's trying to survive product portfolio disruption as well as a three to four year COVID/UAW driven industrial crisis but I would offer the Dana has more than survived these two once-in-a-life-time generational challenges. In fact, I think we're used to it is the events to significantly strengthen the company. Arguably, it's terminology. I'd like to use call it the crisis is a terrible thing to waste. By doing that, we focused on the processes. We focused on the business. We focused on the customers. And as you can see, as it relates to creating long-term shareholder value, we believe you're starting to see it come through in the numbers, and you'll continue to see it come through the numbers. So thank you very much for your continued support and interest in Dana, and we'll talk to you all soon.

That does conclude today's conference. We thank you all for joining, and you may now disconnect.