Hello, my name is Jason and I’ll be your operator this morning. I would like to welcome everyone to the Garrett Motion Conference Call. This call is being recorded and the replay will be available later today. After the company’s presentation, there will be a Q&A session. I would now like to hand the call over to Paul Blalock, Garrett’s Vice President of Investor Relations.

Thank you, Jason. Good day and welcome, everyone, and thank you for joining the Garrett Motion Fourth Quarter and Full Year 2022 Financial Results Conference Call. Before we begin, I’d like to mention that today’s presentation and earnings release are available on the Garrett Motion website at garrettmotion.com, where you will also find links to our SEC filings, along with other important information about our company. Turning to slide two, we note that this presentation contains forward-looking statements within the meaning of the Securities Exchange Act, and we encourage you to read the risk factors contained in our filings with the SEC, become aware of the risks and uncertainties in our business, and understand that forward-looking statements are only estimates of future performance and should be taken as such. The forward-looking statements represent management’s expectations only as of today, and the company disclaims any obligation to update them. Today’s presentation also includes non-GAAP measures to describe the way in which we manage and operate our business. We reconcile each of those measures to the most directly comparable GAAP measure and you’re encouraged to examine those reconciliations, which are found in the appendix to both the press release and the slide presentation. Also in today’s presentation and comments, we may refer to light vehicle diesel and light vehicle gasoline products by using the terms diesel and gasoline only. With us today is Olivier Rabiller, Garrett’s President and Chief Executive Officer; and Sean Deason, Garrett’s Senior Vice President and Chief Financial Officer. In addition, I would like to introduce Eric Burge [ph], who joined Garrett as Head of Investor Relations earlier this month. He is based at our North American headquarters in Plymouth, Michigan and is now responsible for Investor Relations. I will remain at Garrett until the end of March to ensure a smooth transition of all activities to Eric. I would like to thank everyone for your time and support over the past five years and wish you and Garrett a very successful future. I will now hand it over to Olivier.

Thanks for joining us and welcome everyone to Garrett fourth quarter and full year 2022 results conference call. First, I would like to personally thank Paul for his support since the spin-off and I'm wishing him all the best. I would also like to welcome Eric as our new Head of Investor Relations. I will begin my remarks on slide three, where we start with the highlights for the year. Garrett had a strong 2022 performance, and I'm very pleased with these results. I would like to recognize the global Garrett team for their dedication and flexibility, which helped achieve our results in what continues to be a volatile environment. In Q4, net sales were $898 million, up 4% from the same period last year on GAAP basis, but up 15% on a constant currency basis. Adjusted EBITDA was $140 million in Q4 versus $129 million in the same period last year. Our Q4 adjusted free cash flow was the highest quarter of the year at $162 million. This strong operating performance offset headwinds from inflation a weaker euro and sequentially lower volume that were mainly driven by late in the quarter softness in China, but I want to take a moment, and give a special thank you to our employees in China, who once again, and all the COVID disruptions in the first quarter in a very effective manner. In Q4, we also benefited from a richer mix driven by our higher margin commercial vehicle and aftermarket businesses. For the year, net sales were just over $3.6 billion, down 1% on a GAAP basis, but up 8% on a constant currency basis compared with 2021. This outpaced global light vehicle production by 200 basis points. This growth is driven by our successful efforts in recovering full inflation pass-through improved…

Thanks, Olivier, and welcome everyone. I will begin my remarks on slide 6. Looking at the upper left hand graph, you'll see reported net sales for the last eight quarters with Q4 2022 at $898 million, up from Q4 of 2021 by 4% on a GAAP basis and 15% on a constant currency basis, driven by continued pass-through inflation and favorable mix. Looking at the upper right-hand side of the page, Q4 2022 adjusted EBITDA of $140 million was up 9% from $129 million last year. The adjusted EBITDA margin in the period was 15.6%, up from 15% last year, and includes the dilutive impact of FX and inflation pass-through of 70 basis points. On the bottom left hand graph, we show that Garrett generated positive adjusted free cash flow of $132 million in Q4 2022, up sequentially from $120 million in Q3, 2022. And the best quarter of the year, even with the slowdown of volumes in Q4, mentioned earlier by Olivier. Turning to slide 7. We show our Q4 net sales bridge by product category as compared with the same period last year. Net sales were up 4% on a GAAP basis and 15% on a constant currency basis. We had double digit gains across all major product lines driven by our ability to pass through higher costs and a flat volume environment combined with improved mix primarily across commercial vehicle and aftermarket businesses partially offset by effects. All verticals improved compared to the prior year with gasoline products up 17% at constant currency, adding $60 million in sales, gasoline products now comprise 42% of reported net sales with versus 41% last year, driven by new program launches and share of demand gains. Diesel products grew 13% in constant currency, adding $29 million to sales and comprise 25%…

Thanks, Sean. Wrapping up with the summary on slide 15, I'm very pleased with the performance of the Garrett in 2022. We delivered net sales of $3.6 billion, down 1% on a GAAP basis, but up 8% at constant currency versus 2021. We've achieved strong operating performance generating $570 million in adjusted EBITDA successfully offsetting inflation, and near the high-end of our latest outlook. We achieved an adjusted EBITDA margin of 15.8% for the full year of 2022, which includes 80 basis points of dilutive impact from FX and inflation pass-through. In Q3 and Q4, we paid our Series A dividend in cash, which was supported by solid adjusted free cash flow of $313 million for the year. We continue to invest above 50% of our R&D into electrification technologies, and we have one new predevelopment contracts with major OEMs. In 2023, Garrett plans to grow in an industry flat, thanks to our new launches and the growing share of demand. We expect this to translate into full year outlook of $585 million in adjusted EBITDA and $350 million in adjusted free cash flow. Overall, I'm quite pleased with the performance of Garrett in 2022 and I'm looking forward to an even better 2023. I would like, in closing, to thanks once again, all of our employees around the world for that dedication and resiliency as their contribution and flexibility drove a successful 2022 for Garrett and positions us very well for 2023. Operator, with that. I think we are now ready to begin the Q&A session.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Hamed Khorsand from BWS Financial. Please go ahead.

Good morning -- sorry, good evening, since you're in Europe. First off, I just wanted to ask you as far as the new turbos are considered, fuel cell and the E-Axle, when can you actually see these come to market and generate revenue in a meaningful way not just being just nominal news from you?

So, just -- Hamed that’s a great question. Just a correction for everyone. When we talk about E-Axle, or when you talk about fuel cell, we're not talking about turbochargers. We are talking about new products that are not turbocharger, we are talking about electric motors plus the gear box, plus in the injector that are in fact the propulsion system of any kind of electrified vehicle, whether it's battery electric vehicle, fuel cell vehicle or hybrid vehicle. So, we are today targeting technology differentiation, which is important. This company is about technology differentiation, it's not about just achieving content on vehicle the channel, but technology differentiation, there is a significant difference between the two. And as the first wave of electrification in the industry was directed at providing customers with a solution available to buy battery electric vehicle, our focus is pretty much on the second wave where customers meaning OEs are trying to differentiate from each other by working on the efficiency of those solutions in order to bring technology to their customers. So, we are pretty much targeting the second wave. So, think about it as programs that will start in production before the end of the decade.

Okay. And then, but you you've been talking about new products for the past year, has there been any traction as far as generating the sales or has it really all been trials and with different OEMs?

I think we've -- specifically to the E-Axle, I think very early we've said that we have an expertise in this company, which is the ISP. Nobody else is running electric motors at the speed at which we run that. And we were looking at opportunities which differentiate with those high speed solutions for the mainstream battery electric vehicle. We've been working on that silently with a lot of customers. And we are going to pre-development contract, which is very significant in our world, because it means that there is a customer that believes into our solution and start to put money behind it. But that's the milestone that we are sharing with everyone today.

And my last question was given the cash increase in Q4 from Q3, in 2023 what's going to be the primary allocation of cash, is the debt balance Series A preferred buying back more shares?

Hi, Hamed, this is Sean Deason. For us, as you know we've paid the Series A dividend in cash last two quarters. You can expect that we'll continue to do that. And then we'll be evaluating the best use of the excess funds whether that's share buybacks or payment of the accrued dividend amount that we're still carrying. And from there, really just trying to get line of sight to when we think the capital structure will normalize. As of right now, our midpoint guide does not allow us to achieve the $600 million, two quarter target. And then you also have the trigger of the 75-day V-WAP on the share price of $7.88. But we do think if we see some tailwinds from FX, and perhaps volumes come in a bit higher, we could be in a position to start to meet those targets by the end of the year. But again, there's a lot of there's a lot of uncertainty in the second half still. So, we are forecasting growth in the second half, we need to see how the macroeconomic environment unfolds.

I did have one follow-up. Sorry, you reminded me to ask you, given that your guidance is not $600 million, what is holding you back from achieving, is the product mix not carrying the margin you're looking for, or are you seeing headwinds as far as passing through further cost increases?

Maybe, first, to correct the perception. I think we did achieve a great margin in 2022 with the recovery of the inflation with customers and the productivity efforts we did. So we are basically at quite a high level. If you consider on top of that the fact that we had increased shift between results together. So I think we are delivering quite well in the company. If you look at the bridges that we've shared today, we have basically two things that are holding us back. The first one is FX. That's an obvious one in the bridge, we are very much exposed to euro, and therefore, this has a negative impact on the margin that we report. And the second one is, obviously, that the market has been slowing down quite a bit and is pretty much slightly up versus PY, and even if we are growing faster than the market, as we explained today, we've grown faster than the market in 2022. We will grow faster than the market in 2023 thanks to the sharp demand gains that we have, a little bit of more strength on the end market with our purse, obviously, grow faster above some of the milestones that that we talked about.

Okay, great. Thank you.

[Operator Instructions] Our next question comes from Eric Gregg from FTIA. Please go ahead.

Congratulations on the strong quarter and the good outlook. Just one more question on the capital allocation. What is holding you back? Your cash is up over the last quarter from paying out the accumulated unpaid dividend on the Series A preferred, given that that compounds at such a high interest rate, it would seem like a high priority to get rid of that. Thank you.

Sure. As I mentioned, that's something we're considering. We have to take the full macroeconomic outlook into accounts. But as I mentioned earlier, that is one of the top priorities we're looking at to utilize our excess cash, excess liquidity.

Thank you.

Our next question comes from Chris McIntyre from McIntyre Partnerships. Please go ahead.

Hey, good morning or afternoon guys. Can you talk a little bit about the pace of the VNT ramp and like how and when you expect that to start impacting margins? Thanks.

So Chris, your question is about the VNT ramp? And when do we expect that to get into our margin? Quite frankly, the VNT ramp has started already. I mean, in 2023 will be a significant increase in VNT production. When does it translate into our margin? We are already seeing the benefits of that. I would say, that I'm sure Sean can comment on this further.

Yes, as the technology penetrates and starts to displace Wastegate. You will see overall gasoline margins start to improve a bit. As you know Wastegate gasoline is one of our lower margin product products. But that does take some time and the programs have to launch and then also ramp up. We see growth in 2023, primarily in China on VNT small gasoline engines launching in the second half. So the margin benefit of that wouldn't necessarily be completely recognized in this in 2023, as these programs have to ramp up and there's always a higher cost being launch program into the market. But I think going forward into 2024 and in the future. If we see penetration rates increased like the industry is forecasting, you'll see the gasoline margins creep up.

Maybe one addition, if you remember Chris, when we did the spin-off, well I think a shell of gasoline as percentage of revenue that was in the mid 20s. And everybody was predicting that as we are transitioning together in we would see a very significant margin dilution. The increase margin – the VNT increase on the gasoline side is one of the reason why today, we have 42% gasoline and we are still adding very strong margin

Am I right, if you think about it is like a 500 basis point gross margin sort of benefit on those units obviously, not.

On some it's possible but I wouldn't use that as your average. It can be anywhere from two to five, depending upon the product we're in product complexity. Again, the reason gasoline is lower margin is because it has a higher nickel content because of the level of temperature burns out.

Yes, and not really included too much into details but the other temperature, the monitor you have and therefore the more you have the negative impact on the margin, let me tell you up, so you would have to study already same kind of exhaust temperature, same size of engine. It's a bit more complex than just getting to a proxy like that.

Sure. And – as I think about like you guys have done very well on, like, just keeping SG&A, despite all the craziness in the world and inflation and whatnot, pretty flat, right? If we were to get a volume tailwind this year, like where do you think -- if finally auto has a -- not a semiconductor issue and everything else, like, where do you think SG&A ramps relative to an increase in like sales base, in say like a 10% market growth area.

Well, what we -- when you look at the way the cost structure of the company is build up, and I'm giving you the glide-over view. So we have positioned ourself to deliver a stronger with assumptions on the industry that are flat. Meaning, in contradiction with some of the consultants, we did not factor any tailwind from industry growth and I'm saying industry growth is like [indiscernible]. Because -- and history has shown that, when you look at the last two years, everybody was wrong. So we decided to position the company right from the fixed cost standpoint to deliver in an industry that would be flat; doesn't mean that we are flat, because we are growing in volumes, thanks to our share of demand growing and the turbo penetration growing. So, quite frankly, when you look at the way we have planned the year, when fixed cost offset, there is no reason for a significant increase of fixed cost that would be driven by volume up. We have very significant portion of our cost that is variable, which is a way to protect on the downside, but it's also a way to deliver on the upside. So that's the way we are thinking about it.

Great, great. Thank you, guys, very much.

This concludes our question-and-answer session. I would like to turn the conference back over to Olivier Rabiller. Please, go ahead.

Thank you. Well, thank you all for your time you spent with us reviewing the results of 2022 and the outlook for 2023. I'm quite pleased about what we deliver and then the way we've positioned the company in 2022. We have been planning very carefully 2023, as we've said on the call, depending on the macroeconomics. It could be better, but we have prepared the company to deliver in a flat environment and we are looking forward to 2023 to be a strong success that will reinforce our financial position and given -- give us, sorry, even more options for the future. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.