Good morning, and welcome to Dana Incorporated Fourth Quarter and Full Year 2024 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 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. To ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers limit themselves to one question at a time. If you would like to ask an additional question, please return to the queue. 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.

Good morning, everyone, and thank you for joining us today for Dana Incorporated 2024 Q4 and full year earnings call. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we've discussed today. For more details about the factors that could affect our future results, please refer to our safe harbor statement found in our public filings and our reports with the SEC. Find this morning's press release and presentation on our investor website. And as a reminder, today's call is being recorded and the supporting materials of the property Incorporated. May not be recorded, copied, or rebroadcast without a written consent. This call this morning is Bruce McDonald, Senior Chairman and Chief Executive Officer, and Timothy Krause, Senior Vice President and Chief Financial Officer. Now I'd like to turn the call over to Bruce to get us started.

Alright. Thank you, Craig, and good morning, everybody. Probably a little bit less than normal for me on this call given we just spoke with the street here a month ago. But just slide four, it's a high-level perspective on our financials. For the full year sales, down about nearly $300 million, really reflecting softness, I would say, in a few key areas. One would be EV and some of our sales to the programs that we are currently in production on. And then as the year progressed, we saw increasingly weak markets in off highway. In terms of our profitability, we benefited from strong operating performance with our sales with our sort of EBITDA up $40 million on lower volumes and driving our operating margins up by 60 basis points. Again, just a little bit of color there, strong operation performance, we're starting to see the early benefits of some of our footprinting actions and plant consolidation. And really good to see here in the fourth quarter as we previously talked about, the benefits of our cost reduction, our $300 million cost reduction program. Flowing through in the quarter. $10 million in Q4 here and as I mentioned last month, about $100 million of the $300 million is actioned and you could think about in the bag. And lastly, in terms of free cash flow, big improvement getting from a slightly negative position in 2023 to $70 million in 2024. We're pleased with the improvement, but it's nowhere near where it needs to be and the guidance that we're gonna share with you later on. We have free cash flow more than tripling in 2025. Turning to slide five. Again, this is sort of a lift from the deck a month ago. Focusing on very Tim and I and…

Thanks, Bruce, and good morning to everyone. Please turn to Slide eight for a review of our fourth quarter and full year results for 2024. Beginning on the left column with fourth quarter sales were $2.34 billion, $159 million below last year due to lower vehicle production and currency impacts. For the full year, sales were $10.28 billion, down $271 million driven again by end market weakness. Adjusted EBITDA was $186 million in the fourth quarter for a profit margin of 8%. That is a 170 basis point improvement over last year's fourth quarter. Full year adjusted EBITDA was $885 million, $40 million higher than the previous year, for a profit margin of 8.6%. So 60 basis points better than last year. The profit improvement is primarily due to cost saving actions and better efficiencies throughout the organization. Net loss of attributable to Dana was $80 million for the fourth quarter, $41 million lower than last year, primarily driven by $31 million higher restructuring charges this year to implement our long-term cost savings plan and divestiture expenses. Full year net loss was $57 million compared to net income of $38 million last year. The primary difference of $51 million and higher restructuring charges and the $26 million loss recorded for the planned divestiture of our non-core hydraulics business, that was announced earlier this year. The transaction did not occur in the third quarter as expected and was no longer classified as held for sale. However, this loss was recognized to adjust the carrying value of the net assets to fair value remains due to account Adjusted EPS for the quarter was $0.25 per share compared to a loss of $0.08 last year. For the full year, adjusted EPS was $0.94 per share, $0.10 better than the prior year. And finally,…

Ensure that everyone has an opportunity to participate, we ask that you limit yourself to one question at a time. We'll take our first question from the line of Tom Narayan with RBC Capital Markets. Please go ahead.

Hi. Thanks for taking the question. I'll try to keep it to one. I just have a quick follow-up, if that's okay. So the robust process and strong interest and I know a lot of this is covered on the January 25 call, it just it just it would appear that signing in Q2, that's only, like, two months away. So I guess, is this timeline based on just a prediction of interest or is this something farther along, you know, specific interest from one or two bidders, and then I just have a quick follow-up.

Yeah, Tom. So, you know, as we mentioned, we have a very robust process with a number of interested parties. I'm not gonna get into the specific numbers, but we are well along in the process, and we expect to be able to sign a transaction here in the early in the second quarter.

Okay. If it's okay to follow-up, so on the 2025 guidance, yeah. The market for light vehicle flat. We have heard some from some other suppliers noting kinda get down mid single digits. Is this specific to your light vehicle OEM exposure or perhaps to your graphics? And then on the backlog that you guys have, the $150 million is that could you split that out on across the segments just so we can know, just understand how that works with off highway. Thanks.

Yeah. I saw on your first the light vehicle our light vehicle view is really related to our programs. Not to the overall market. If you you gotta remember, one, we really only play in full frame truck. And even within full frame truck, you know, we have a disproportionate number of our amount of our sales in a number of key programs. With Ford and Stellantis in particularly. And on the backlog question, the vast majority of the predominant of that is not off or is LV and PT. So it still the majority of that is in the light vehicle driveline parts of the business.

Got it. Thanks. I'll turn it over.

Our next question comes from the line of Colin Langan with Wells Fargo.

Oh, great. Thanks for taking my questions. Just a basic question here, but what is going on with the tax and guidance? It seems like EPS is moving a lot more than the EBITDA guide. Is there a change in the valuation allowances that we should be thinking about? Why it seems like I assume that's the big driver why UPS is jumping a lot more.

Yeah. I mean, Colin, this is Tim. So yeah. I mean, because we have the value US, you know, you don't get a normalized rate, right, as mix changes, you know, if a lot more of income comes into the US, it ends up being taxed essentially at a zero rate because of the evaluation allowance. So it and until we kinda get through this and through this period and on the other side of the off highway sale, we're gonna continue to see a fair amount of volatility around the rate and it's also a bit more difficult to sort of predict and, you know, just due to the mix of income especially from year to year or quarter to quarter.

Yeah. And I guess this this column is following up on that. I guess after we get through the other side of Selena off Highway deleveraging our balance sheet, and we get the benefit of the $300 million that we're road mapping. We'll be back to sort of, like, a normal company in terms of a tax rate.

Yeah. I would agree. I mean, we would anticipate we obviously won't know till we get there. But, you know, given the changes in interest expense as well as the cost saving program, we would anticipate that we could probably be able to relieve the valuation allowance at some point after that.

And start talking about EPS being more normal flowing. Correct.

Yes. So this would be a sign though that your US operations have went from unprofitable and are turning profitable and that those profits no longer have a tax I'm not.

Yeah. That's correct. And, obviously, a big chunk of our cost saving program is predominantly or disproportionately in North America and specifically in the US, so that should help as well.

Yeah. And then so you think about why it's high now. It's like we have losses in the US that are not tax benefited.

Correct.

Yep. Okay. And then just to follow-up on the prior question about customer mix, because S and P has, like, the super duty down double digits. Are you assuming a similar assumption there? Because that is a pretty big platform for you guys if I'm right. And then so if the that's the case, what what is offsetting that to keep it only? Know, flat.

Yeah. So you I mean, the way we're way our forecast is built is based on the mix of models that we're seeing. And so even within Super Duty, there's a pretty big difference between the mix. And so even though overall super duty could be down single digits or even double digits depending on that mix, it will have a different impact to us. We do most of the super duty, but not all. So some of the still done in house, especially the low end two fifties that are generally gasoline powered.

Yeah. They're really glorified f one fifties, you know, with a few extra. Yeah. And it's also somewhat offset, the super duty by the fact that we don't not expecting the inventory correction on some of the Jeep products to occur in that a second lot of second shift coming on. I think it's for Gladiator.

Got it. Okay. Alright. Thanks for taking my questions.

Our next question comes from the line of Edison Yu with Deutsche Bank. Please go ahead.

Hey, good morning. Thanks for taking our questions. I just wanted to come back to commercial vehicle. It seemed the quarter was a bit weak. And, I mean, just thinking more high level about it, when could we start seeing that kind of turnaround?

Yeah. Edison to talk with you. Hey. This is Tim. So couple of things in the quarter for CD. I think that your last part of your question, you should start seeing that in the first quarter. There's a couple of one-time items that really impacted fourth quarter. So we did end up taking some adjustments for easy bad debt and inventory in the quarter given where that business has gone. And then we did have an inventory or a warranty item that we ended up recording as well. So and they're they don't. There's gonna be significant cost savings coming through in CV as part of the three My dog program.

Got it. And just a quick follow-up. Gotcha. Just quick follow-up on that. Contracting there. Right? Light vehicle was quite strong. Is that a good kind of jumping off point for twenty five?

Yeah. I think we're gonna continue to see strong improvement, you know, really across all the markets for all of our end markets as we go in. But, yes, we do expect there to be continued growth in both core profit and the margin in light vehicle as, you know, sort of see production stabilize and we start seeing the benefits of the cost savings flow through.

Yeah. And I maybe just add the we do tend to see a bit of lumpiness, though, in timing of custom recovery. We incur costs in some quarters and get sort of catch up recoveries in different quarters. So that business is always sort of lumpy and things like that.

Yeah. Some of that. But yeah. I mean, if you think about the first quarter, sales are you know, we would anticipate sales being down quarter over quarter given how strong first quarter twenty four was coming off of the strike. So even despite that, I still believe that we'll have a strong margin that we can turn in on first quarter given the work we're doing on the cost side of the business.

Got it. Thank you.

Our next question comes from the line of James Picariello with DNP Paribas. Please go ahead.

Guys. This is Jake on from James. Hey, Jake. As we think about I have to think about the discussions with Hydro Quebec. Around their TM four foot option. Can you just provide any clarity on the timing or the magnitude of potential payment you're expecting?

Yeah. I so I don't wanna into anything specific, but we continue to work through that with Hydro Quebec. But I'm pretty confident we'll be able to get something done here this year at some point.

Alright. Thank you. And then just one housekeeping. When do you guys expect to actually implement, the resegmentation with, Powertec getting folded in light vehicle and commercial vehicle. Thank you.

Yeah. We'll be doing that during, you know, here in Q1. So when we report first quarter, you'll see Power Tech having been folded into LVCD.

Alright. Thanks, guys.

Our next question comes from the line of Ryan Brinkman with JPMorgan. Please go ahead.

Hi. Thank you. Thanks for taking my questions. I know that consistent with every other supplier this quarter, your guidance excludes the impact of obviously difficult to predict tariffs. I'm curious though what you know, early scenario planning you may be doing around tariffs. On Canada, an excellent one for particular, Mexico especially, and, you know, what your exposure there might be how you're thinking about the ability to either mitigate or pass control tariff costs aligned to customers?

So I think the you know, we're obviously, you know, looking at the impacts, you know, across the business. You know, it's hard to predict, as we said, what they ultimately will be or really what the impacts will be. What I can tell you is that, you know, we have put all of our customers formally on notice that we intend to pass every dollar of any tariff impacts through to them. And that that's our position, and we're not planning to waiver from it.

Good to hear. Thank you. And then regarding the $175 million of targeted cost saves, in 2025, is a very impressive amount. How much of this end of the $55 million of lower CapEx how much would you say relates to the change ED strategy or you know, maybe less percent of other future revenue opportunities versus more simply fifteen and greater efficiency on your part.

Yeah. I mean, there's a sizable piece of the $175 that's related to ED. I don't wanna get into all the specifics, but there's a large portion of the total $300 related to the change in our EV's strategy that's going through. So you would have expected that. I think the know, when you think about the $175 as Bruce mentioned, we've already actioned $100 million of that number. And if you look at where we think we're gonna end up first quarter between $35 and $40 million, you know, our ability to hit that $175 for the full year is you know, we think is very, very, very certain.

Yeah. And then just on your question about capital, I guess I would say is you know, we'll get be able to return back to, you know, the sort of roughly 4% type capital reinvestment. In the business. You know, obviously, we were significantly higher than that last few years. In the next couple of years, we still have a few programs that we have that will require some capital expenditure, and we expect you'll see a little bit of change in the balance sheet, but what we do expect suppliers sorry, customers providing us with offsets to the capital expenditure beginning this fiscal year.

Okay. Thanks. And then just lastly, you know, I think one of the reasons why there's been such a positive shift as reactions here multiyear cost savings plan is that it comes at the same time as the off highway sale, and it sounds like it's maybe been catalyzed by the sale. Given the simpler corporate structure that it can allow. But, you know, earlier, I remember management highlighting the cost synergies of supplying across multiple end markets, and you will still be supplying across the light in commercial market course, but just wanted to check-in on that and what you think you know, there may be from a dissynergies perspective or are most of those synergies between, you know, the light and the commercial sort of, you know, in between say, fair class, you know, four or five, etcetera? Just curious.

Yeah. I'll do a few things maybe to this. I guess, first of all, know, there definitely dissynergy associated stranded costs, and we've talked about that. You know, we're continuing to chip away. But, basically, it's our corporate cost to get allocated to off highway and how some of them are very variable. Some of our corporate cuss would go, with the sale, but that is a dissynergy that we have to chip away at. Secondly, you know, if you think about we buy steel and a lot of common components. And we do similar things like make gears and things like that. So yeah, for sure, there is a benefit of having the off highway in terms of purchasing scale and maybe leveraging our footprint. But in the scheme of things, you know, it's manageable. And to your point about so, you know, all things being equal, you know, we're not we're certainly not doing it to capture synergies. We're doing it. You know, the driver for the off highway business is very straightforward. It's what's the value of that business in terms of the multiple it trades at. It will sell for. Versus the value that's reflected in our stock price. It's just not being recognized at the market. And the market has spoken. Our stock price has reacted very favorably because we're gonna encapture that delta. Tim, you may have a few other.

Yeah. You know, I think the CV and LV businesses certainly are much more aligned in terms of both process and product, but also geography. So those are just two businesses that are primarily North American businesses. So there are certainly more synergies there than between those and the off highway business. But the other thing to think about here is, like, we any of those dis synergies, we've taken those into consideration as we've thought about, you know, how the value unlock happens and where new data, you know, margins end up. So when we think about new data margins in the you know, the ten, ten and a half, you know, when we get on the other side of this thing, that already has those impacts. So and as Bruce mentioned, we are currently showing that we have $40 million where the stranded costs related to the transaction that, you know, we are fully focused on actioning and reducing as we, you know, after we get through the sale.

Very helpful. Thank you.

Our next question will come from the line of Joseph Spak with UBS. Please go ahead.

Good morning. It's Alejandro on for Joe. Maybe just following up on the backlog question I think you highlighted sort of roughly 20% will be an off highway. So should I be thinking about the sort of the major or the remaining 80% in LV, or how should I think about that LV and CV split?

Yeah. I mean, look, I think those are rough numbers in terms of, you know, 20% or whatever they move around. You gotta remember the backlog number we're looking at there is typically through the three years. But yeah. I mean, there isn't a lot of backlog in the CV business, you know, it's a catalog based business, and it's usually market share based not backlog. There is a little bit of backlog in there, but it's not significant.

Got it. Okay. And maybe as a follow-up, you mentioned some weakness in Q2 in your prepared remarks. You maybe just give us some additional color on that?

Yeah. It won't be as dramatic as first quarter, but we'll see a little bit of additional weakness across the end markets in Q2. And then we'll see that recovery start to really come through in Q3 and Q4. And I think if you look at page fifteen of the deck, you can see the bars reflect sort of that cadence.

Great. Thank you.

Our final will come from the line of Dan Levy with Barclays. Please go ahead.

Hi. Good morning. Thank you for taking the questions. I'm doing late, so I apologize if it's mentioned earlier. But if you could just talk to the backlog within the light vehicle side, how much of that is, reflecting extensions of current light vehicle programs. And given this idea of there could be a potential super cycle here as automakers see the longer tail of it. How much incremental activity could we see, you know, added to the backlog in subsequent period?

Yeah. Hey, Dan. So couple things. Remember, the way we calculate backlog is it's truly incremental. So, you know, we don't count additional vehicle volume on our programs in the backlog. So you should be able if you will hold were to hold FX commodity and volume constant across the three-year period, you should be able to just you will just add the amounts in the backlog to our sales to get what our resulting sales would be in twenty five, twenty six, twenty seven. So the idea that, hey. There's gonna be a lot more volume on our current programs, that would not be in our backlog. It would be in our market outlook but it won't. Now if they bring out a brand new variant, or something like that, that would go to backlog, something we haven't previously made or sold to the automakers, but not pure volume.

Great. Okay. Thank you. And then just as a follow-up, with the news of potential tariffs on steel and aluminum, can you just remind us of how this played out? When we saw this in 2018 and just what the timing effects are of you passing this onto your customers.

Yeah. So I know you're I we this came up a little bit earlier. What we you know, we've obviously looking at what the impacts are likely to be on the business, and we continue to kinda through that. And as we know more about, like, how they're gonna deal with and some of the other, you know, the other nuances within the supply chain. We'll know more, but one thing we have done is we have put all of our customers on formal notice. So we formally notified them that it is our intention to pass through every dollar of tariff that comes through as a result of and that we expect them that they're going to pay.

Yeah. I guess I'd maybe add to that, Dan, is if you think about the light vehicle business, we're far more indexed now than we would have been back then. So to the extent that tariffs drive up the cost, the recovery mechanism through indexes, we already have places. Higher than it was back in 2018. Yeah. And that at least gets you seventy five. But our view is we're not gonna eat the twenty five. The twenty five percent that doesn't get recovered in our current commodity agreements.

Alright. We also don't know if it'll be reflected in the indexes or not and maybe surcharge. We just don't know, but at the end of the day, our intention and our expectation is that our customers will pay every dollar.

Got it. Thank you.

Okay. Maybe just and a few concluding remarks, I guess, first of all, I'd like to thank the Dana team and our leaders for delivering our improved financial results. You know, for me, personally, I feel really good about the progress the team is making in actioning the $300 million cost reduction road map that we have. 2025 for us is gonna be it's a transformational year for Dana. The sale of our off highway business is gonna unlock significant shareholder value while at the same time enabling us to return capital to our shareholders and be left with a best-in-class balance sheet in our space. I'm really excited to be here, and I look forward to sharing our progress three months' time. Thank you, everyone.

That will conclude today's call. Thank you all for joining. You may now disconnect.