Core Viewpoint - BorgWarner Inc. is facing significant challenges due to higher tariffs and rising selling, general and administrative (SG&A) expenses, leading to a recommendation to offload the stock from portfolios [1]. Group 1: Financial Performance and Guidance - The company has reduced its guidance for adjusted operating margin to a range of 9.6% to 10.2%, down from the previous estimate of 10.0% to 10.2%, reflecting a 20 basis point impact from higher tariffs [2]. - BorgWarner anticipates free cash flow of $650 million to $750 million in 2025, indicating a year-over-year decline of $29 million at the midpoint of the guidance [3]. - The Zacks Consensus Estimate for 2025 sales and earnings suggests a year-over-year decline of 2.57% and 2.78%, respectively, with earnings estimates for 2025 and 2026 moving down by 8 cents and 12 cents [6]. Group 2: Cost Structure and Debt - The company is experiencing high SG&A costs, which are expected to persist, alongside elevated research and development expenses related to electrification programs, limiting profit margins [3]. - BorgWarner's long-term debt increased to $3.8 billion as of March 31, 2025, up from $3.76 billion at the end of 2024, which restricts financial flexibility [4]. Group 3: Competitive Landscape - BorgWarner competes with larger manufacturers and distributors, including Robert Bosch GmbH, Denso Corporation, and others, which may have economic advantages such as lower labor costs and subsidies [5]. - Increased competition could negatively impact BorgWarner's business prospects [5].

PART I. Financial Information [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the three months ended March 31, 2025, show a decrease in net sales and net earnings compared to the same period in 2024, with positive cash flow from operations and a new segment reporting structure [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets slightly decreased to $13.83 billion, while total liabilities decreased and total equity increased Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $6,379 | $6,521 | | **Total assets** | **$13,830** | **$13,993** | | **Total current liabilities** | $3,230 | $3,646 | | **Total liabilities** | **$7,940** | **$8,287** | | **Total equity** | **$5,890** | **$5,706** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2025, net sales decreased to $3.515 billion, operating income fell to $237 million, and net earnings attributable to BorgWarner were $157 million, resulting in diluted EPS of $0.72 Q1 2025 vs Q1 2024 Statement of Operations (in millions, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $3,515 | $3,595 | | Gross profit | $639 | $644 | | Operating income | $237 | $295 | | Net earnings attributable to BorgWarner Inc. | $157 | $206 | | Diluted EPS attributable to BorgWarner Inc. | $0.72 | $0.90 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, the company generated $82 million in cash from operations, a significant improvement, while cash used in investing and financing activities led to a $387 million net decrease in cash Q1 2025 vs Q1 2024 Cash Flow Summary (in millions) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $82 | $(118) | | Net cash used in investing activities | $(94) | $(175) | | Net cash used in financing activities | $(397) | $(183) | | **Net decrease in cash** | **$(387)** | **$(497)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, including a new four-segment reporting structure, the financial impact of exiting the charging business, revenue disaggregation, restructuring plans, and debt information - Effective July 1, 2024, the company implemented a new four-segment reporting structure, recasting prior period information for Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems, and Battery & Charging Systems[21](index=21&type=chunk)[128](index=128&type=chunk) - The decision to exit the charging business in February 2025 resulted in **$65 million** in Q1 2025 charges, including estimated loss on sale, goodwill, and intangible asset impairments[34](index=34&type=chunk)[36](index=36&type=chunk)[70](index=70&type=chunk) Revenue Disaggregation by Product Type (in millions) | Product Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Foundational products | $2,878 | $3,089 | | eProducts | $637 | $506 | | **Total** | **$3,515** | **$3,595** | - Restructuring expenses totaled **$31 million** in Q1 2025, primarily from the 2024 and 2023 Structural Cost Plans[47](index=47&type=chunk)[155](index=155&type=chunk) - The company repaid its 3.375% senior notes upon maturity on March 15, 2025[78](index=78&type=chunk) - A lawsuit was filed against PHINIA to recover approximately **$120 million** in VAT refunds from the pre-spin-off period[119](index=119&type=chunk)[144](index=144&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=38&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 2% decline in Q1 2025 net sales to $3.5 billion, impacted by foreign currency and market production, offset by eProducts growth, with strong liquidity and a flat to modestly down 2025 sales outlook [Results of Operations](index=41&type=section&id=MD%26A%20-%20Results%20of%20Operations) Net sales for Q1 2025 decreased by $80 million to $3.515 billion due to foreign currency and market production, while operating income fell to $237 million due to impairment and restructuring charges - Net sales decreased **2% year-over-year** to **$3,515 million**, primarily due to a **$85 million** negative foreign currency impact and a **4%** decline in weighted average market production[153](index=153&type=chunk) - eProducts revenue grew to **$637 million** in Q1 2025, now representing **18%** of total revenue, up from **14%** in Q1 2024[141](index=141&type=chunk) - Operating income was impacted by non-comparable items totaling **$0.39 per diluted share**, including impairment charges, restructuring expenses, and costs to exit the charging business[168](index=168&type=chunk) [Results by Reportable Segment](index=44&type=section&id=MD%26A%20-%20Results%20by%20Reportable%20Segment) Turbos & Thermal Technologies and Drivetrain & Morse Systems saw sales declines, PowerDrive Systems sales grew significantly with a narrowed loss, while Battery & Charging Systems sales declined with a widened loss Segment Performance - Q1 2025 vs Q1 2024 (in millions) | Reportable Segment | Net Sales Q1 2025 | Net Sales Q1 2024 | Adj. Op. Income Q1 2025 | Adj. Op. Income Q1 2024 | Adj. Op. Margin % Q1 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Turbos & Thermal Technologies | $1,454 | $1,574 | $235 | $228 | 16.2% | | Drivetrain & Morse Systems | $1,361 | $1,419 | $243 | $253 | 17.9% | | PowerDrive Systems | $561 | $436 | $(43) | $(62) | (7.7)% | | Battery & Charging Systems | $150 | $177 | $(22) | $(15) | (14.7)% | [Financial Condition, Capital Resources and Liquidity](index=46&type=section&id=MD%26A%20-%20Financial%20Condition,%20Capital%20Resources%20and%20Liquidity) The company maintained strong liquidity of $3.7 billion, with $82 million in cash from operations, and used $397 million in financing activities primarily for debt repayment - Total liquidity as of March 31, 2025, was **$3,707 million**, consisting of **$1,707 million** in cash and a **$2,000 million** undrawn credit facility[177](index=177&type=chunk) - Net cash provided by operating activities was **$82 million**, a significant improvement from **$118 million** cash used in Q1 2024, driven by adjusted net earnings and working capital changes[185](index=185&type=chunk) - Financing activities included a **$346 million** debt repayment for matured senior notes and **$24 million** in dividend payments[187](index=187&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is foreign currency exchange rate fluctuations, particularly for the Euro, Chinese Renminbi, and Brazilian Real, which is mitigated through various strategies and derivative instruments - The company's most significant market risk is foreign currency exchange rate risk, primarily exposed to the **Euro**, **Chinese Renminbi**, and **Brazilian Real**[196](index=196&type=chunk)[198](index=198&type=chunk) - As of March 31, 2025, a deferred gain of **$153 million** (before tax) for designated hedges was recorded in accumulated other comprehensive income[196](index=196&type=chunk) [Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded the company's disclosure controls and procedures are **effective** as of the reporting period end[200](index=200&type=chunk) - No material changes to internal control over financial reporting occurred during Q1 2025[201](index=201&type=chunk) PART II. Other Information [Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal claims in the normal course of business, which management does not expect to have a material adverse effect on its financial position - The company is party to various legal proceedings but does not expect a **material adverse effect** on its financial condition[204](index=204&type=chunk) [Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2024 Form 10-K, except for an updated risk concerning administrative policy changes, particularly tariffs, which could impact costs, supply chain, and demand - The risk factor for tariffs and trade policy has been updated, highlighting that changes in administrative policies could adversely affect the company's supply chain, costs, and product demand[206](index=206&type=chunk) - In 2024, the company imported approximately **$875 million** in value to the U.S., with **55%** from Mexico and about **10%** each from Canada and South Korea[207](index=207&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company did not repurchase shares under its common stock repurchase program in Q1 2025, with $467 million remaining available for future repurchases - No shares were repurchased under the common stock repurchase program in Q1 2025[210](index=210&type=chunk) - As of March 31, 2025, **$467 million** remained available for future repurchases under the plan authorized through December 31, 2027[208](index=208&type=chunk)[210](index=210&type=chunk) [Other Information](index=52&type=section&id=Item%205.%20Other%20Information) No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2025 - No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2025[211](index=211&type=chunk) [Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including stock incentive plans, officer certifications, and Inline XBRL data files - The report includes filed exhibits such as management compensation plans, CEO/CFO certifications, and XBRL data files[212](index=212&type=chunk)

Financial Data and Key Metrics Changes - The company reported organic sales of just over $3.5 billion, which was relatively flat despite a decline in market production [7][21] - Adjusted operating margin performance was strong at 10%, reflecting a 60 basis point increase despite a 20 basis point headwind from tariffs [8][22] - Free cash flow improved significantly, increasing by over $270 million or 89% year over year [22] Business Line Data and Key Metrics Changes - Light vehicle e product sales increased by 47%, significantly outpacing the 25% increase in global hybrid and BEV production [8][19] - The company secured multiple new product awards across its portfolio, indicating strong future growth potential [19][11] Market Data and Key Metrics Changes - Market production in the quarter was down approximately 3.6%, while the company achieved sales outgrowth of approximately 3.7% [21][22] - The company noted modest positive growth in China, with light vehicle e product growth exceeding 60% year over year across all major regions [48][49] Company Strategy and Development Direction - The company made the strategic decision to exit its charging business, which was not expected to create shareholder value [9][14] - Capacity consolidation actions were initiated within the North American battery systems business to adjust the cost structure to current market dynamics [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage through a challenging and uncertain environment, emphasizing the strength of the product portfolio and operational performance [19][30] - The company expects full-year sales in the range of $13.6 billion to $14.2 billion, reflecting stronger foreign currencies and anticipated tariff cost recoveries [26][30] Other Important Information - The company anticipates a $30 million headwind to sales from the exit of the charging business but expects a $15 million increase to operating income [15] - The company is actively reviewing its M&A pipeline, looking for opportunities that align with its core competencies and financial criteria [117][120] Q&A Session Summary Question: Insights on foundational product extensions and e product awards - Management highlighted the strength and stickiness of the portfolio, expecting continued strong margins and clarity from OEMs regarding hybrid product plans [36][38] Question: Growth outlook in China - Management noted strong demand for competitive technology in China, with significant growth in light vehicle e products and positive feedback from recent auto shows [49][50] Question: Tariff impacts and recovery negotiations - Management clarified that tariff impacts are manageable, with ongoing negotiations for recovery from customers [66][100] Question: Cash deployment strategy - The company plans to use its strong cash position for shareholder value creation through dividends, buybacks, or inorganic investments [73][120] Question: M&A strategy in the current environment - Management remains active in reviewing M&A opportunities, focusing on targets that provide industrial logic and near-term accretion [117][120]

Financial Data and Key Metrics Changes - The company reported organic sales of just over $3.5 billion, which was relatively flat despite a decline in market production, with a sales outgrowth of 3.7% driven by a 47% increase in light vehicle e-product sales [6][21][22] - Adjusted operating margin performance was strong at 10%, reflecting a 60 basis point expansion despite a 20 basis point headwind from tariffs [7][24] - Free cash flow improved significantly, increasing by over $270 million or 89% year over year [22] Business Line Data and Key Metrics Changes - Light vehicle e-product sales grew by 47%, significantly outpacing the 25% increase in global hybrid and BEV production [6][7] - The company made a strategic decision to exit the charging business, which was not expected to create shareholder value, and began capacity consolidation actions within the North American battery systems business [8][14] Market Data and Key Metrics Changes - Market production in the quarter was down approximately 3.6%, but the company outgrew the market by 3.7% [21][22] - The company expects a full-year market assumption reduction to down 2% to 4% due to estimated impacts of tariffs on customer demand, particularly in North America [27][30] Company Strategy and Development Direction - The company is focused on maintaining a product portfolio that can achieve a 15% return on invested capital (ROIC) and has made decisions to exit non-profitable segments [8][14] - The company continues to secure new product awards across its portfolio, indicating a strong focus on product leadership in combustion, hybrid, and BEV architectures [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage through a challenging and uncertain environment, emphasizing the strength of the product portfolio and operational performance [19][20] - The company anticipates continued outgrowth over market production, with a full-year sales outgrowth expected to be approximately 200 to 400 basis points [30][32] Other Important Information - The company expects to eliminate approximately $30 million of annualized operating losses from exiting the charging business, while this exit is projected to be a $30 million headwind to sales but a $15 million increase to operating income [15] - The company is undertaking capacity consolidation actions in its Battery Systems business to adjust to current market dynamics, which are expected to result in annual cost savings of approximately $20 million by 2026 [16][17] Q&A Session Summary Question: Insights on business extensions and reinvestment needs - Management highlighted the strength and stickiness of the portfolio, expecting continued strong margins and similar profiles for extended foundational products [38] Question: Concerns regarding rare earth elements in e-products - Management acknowledged the use of rare earth elements in products and mentioned ongoing efforts to manage supply constraints [40] Question: Growth outlook in China - Management expressed optimism about growth in China, citing strong demand for competitive technology and successful product launches [49][50] Question: Clarification on North American light vehicle production outlook - Management indicated a conservative outlook for North American production, adjusting expectations to down 7% to 12% [52] Question: Breakdown of tariff impacts - Management provided details on tariff impacts, indicating that about 50% is related to IEPA and auto parts tariffs, while the remaining 50% is from China retaliatory tariffs [98] Question: Future M&A opportunities - Management remains active in reviewing M&A opportunities, emphasizing a disciplined approach to ensure targets meet specific criteria [118][120]

Core Insights - BorgWarner (BWA) reported adjusted earnings of $1.11 per share for Q1 2025, exceeding the Zacks Consensus Estimate of 98 cents and increasing from $1.03 in the prior-year quarter, driven by better-than-expected performance in the Turbos & Thermal Technologies unit [1] - The company achieved net sales of $3.52 billion, surpassing the Zacks Consensus Estimate of $3.39 billion, although this represented a 2% decline year over year [1] Segment Performance - **Turbos & Thermal Technologies**: Net sales were $1.45 billion, down from $1.57 billion year-over-year and below the Zacks Consensus Estimate of $1.49 billion. Adjusted operating income increased to $235 million from $228 million, beating the estimate of $222.7 million [2] - **Drivetrain & Morse Systems**: Net sales totaled $1.36 billion, down from $1.42 billion year-over-year and missing the Zacks Consensus Estimate of $1.37 billion. Adjusted operating income decreased to $243 million from $253 million, falling short of the estimate of $247.9 million [3] - **PowerDrive Systems**: Sales increased to $561 million from $436 million year-over-year, exceeding the Zacks Consensus Estimate of $396 million. The segment reported an adjusted operating loss of $43 million, which was narrower than the loss of $62 million in the same period of 2024 but wider than the estimate of a loss of $30.8 million [4] - **Battery & Charging Systems**: Sales decreased to $150 million from $177 million year-over-year, missing the Zacks Consensus Estimate of $234.5 million. The segment incurred an adjusted operating loss of $22 million, wider than the loss of $15 million in the prior year and the estimate of a loss of $15.5 million [5] Financial Position - As of March 31, 2025, BorgWarner had $1.70 billion in cash and equivalents, down from $2.09 billion as of December 31, 2024. Long-term debt increased to $3.80 billion from $3.76 billion [6] - Net cash provided by operating activities was $82 million, compared to a net cash used of $118 million in the same quarter of 2024. Capital expenditures were $119 million, resulting in negative free cash flow of $35 million [7] 2025 Guidance - BorgWarner revised its full-year 2025 guidance, now expecting net sales in the range of $13.6-$14.2 billion, up from the previous estimate of $13.4-$14 billion [8] - Adjusted operating margin is projected to be between 9.6-10.2%, an increase from the prior guidance of 9.1-9.2%. Adjusted earnings per share are now estimated to be in the range of $4-$4.45, compared to the previous estimate of $4.05-$4.40 [9]

BorgWarner (BWA) came out with quarterly earnings of $1.11 per share, beating the Zacks Consensus Estimate of $0.98 per share. This compares to earnings of $1.03 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 13.27%. A quarter ago, it was expected that this auto parts supplier would post earnings of $0.92 per share when it actually produced earnings of $1.01, delivering a surprise of 9.78%.Over the last four quarters, the com ...

[First Quarter 2025 Results and Business Update](index=1&type=section&id=First%20Quarter%202025%20Results%20and%20Business%20Update) BorgWarner reported Q1 2025 financial results, including a slight sales decrease but improved adjusted operating margin and EPS, alongside strategic business exits and new contract awards [First Quarter Highlights](index=2&type=section&id=First%20Quarter%20Highlights) In Q1 2025, BorgWarner reported a 2% decrease in U.S. GAAP net sales to $3.515 billion, but achieved flat organic sales, outperforming its weighted markets which declined by 3.6% Q1 2025 Financial Performance (Continuing Operations) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | U.S. GAAP Net Sales | $3,515 million | $3,595 million | ~ (2%) | | Organic Sales Growth | +0.1% | N/A | N/A | | U.S. GAAP Operating Margin | 6.7% | 8.2% | (150) bps | | Adjusted Operating Margin | 10.0% | 9.4% | +60 bps | | U.S. GAAP EPS | $0.72 | $0.93 | (22.6%) | | Adjusted EPS | $1.11 | $1.03 | +7.8% | | Net Cash from Operating Activities | $82 million | $(118) million | +$200 million | | Free Cash Flow | $(35) million | $(308) million | +$273 million | - Announced exit from the Charging business during Q2 2025, which is expected to eliminate approximately **$30 million** of annualized adjusted operating losses[3](index=3&type=chunk) - Consolidation of the North American Battery Systems business is expected to generate annual cost savings of approximately **$20 million** by 2026[3](index=3&type=chunk) - The company achieved market outgrowth of approximately **3.7%**, primarily driven by a **47%** year-over-year increase in light vehicle eProduct sales[3](index=3&type=chunk) [New Business Awards](index=1&type=section&id=New%20Business%20Awards) BorgWarner secured several key new business awards to support future growth, including hybrid eMotor contracts, HVCH awards, EGR component extensions, and DCT awards in China - Awarded a high-volume hybrid eMotor contract with a major North American OEM for full-size trucks, SUVs, and a performance vehicle, with launch expected in 2028[3](index=3&type=chunk) - Secured a high-voltage coolant heater (HVCH) award in North America with a global OEM for their PHEV lineup, including trucks, SUVs, and minivans, launching in 2027[3](index=3&type=chunk) - Obtained four program extensions for EGR components (valves, coolers, modules) with a major North American OEM, with production continuing through the end of 2029[3](index=3&type=chunk) - Won two dual-clutch transmission (DCT) awards in China, including a seven-year extension with a German OEM and a new award with a prominent transmission manufacturer[4](index=4&type=chunk) [Full Year 2025 Guidance Update](index=3&type=section&id=Full%20Year%202025%20Guidance%20Update) The company updated its full-year 2025 financial guidance, providing revised projections for net sales, adjusted operating margin, and adjusted EPS [Full Year 2025 Guidance](index=3&type=section&id=Full%20Year%202025%20Guidance) The company updated its full-year 2025 guidance, projecting net sales between $13.6 billion and $14.2 billion, with adjusted operating margin expected between 9.6% and 10.2% Full Year 2025 Guidance | Metric | Low Range | High Range | | :--- | :--- | :--- | | Net Sales | $13.6 billion | $14.2 billion | | Organic Sales Change | (2%) | +2% | | Adjusted Operating Margin | 9.6% | 10.2% | | Adjusted Net EPS | $4.00 | $4.45 | | Operating Cash Flow | $1,323 million | $1,375 million | | Free Cash Flow | $650 million | $750 million | - The company anticipates its weighted light and commercial vehicle markets to decline between **2%** and **4%** in 2025[10](index=10&type=chunk) - Sales guidance implies an estimated market outgrowth of **200 to 400 basis points**, an increase from previous guidance due to anticipated tariff customer recoveries[10](index=10&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section provides detailed consolidated financial statements, including statements of operations, segment performance, balance sheets, and cash flows for the reported period [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the first quarter of 2025, BorgWarner's net sales decreased to $3,515 million from $3,595 million, with operating income and net earnings also declining compared to Q1 2024 Q1 2025 vs Q1 2024 Statement of Operations (in millions, except per share) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $3,515 | $3,595 | | Gross profit | $639 | $644 | | Operating income | $237 | $295 | | Net earnings attributable to BorgWarner Inc. | $157 | $206 | | Diluted EPS from continuing operations | $0.72 | $0.93 | [Net Sales and Adjusted Operating Income by Reportable Segment](index=7&type=section&id=Net%20Sales%20and%20Adjusted%20Operating%20Income%20by%20Reportable%20Segment) In Q1 2025, PowerDrive Systems was the only segment with organic sales growth, while Turbos & Thermal Technologies and Drivetrain & Morse Systems remained key income contributors despite sales declines Q1 2025 Net Sales by Segment (in millions) | Segment | Q1 2025 Sales | Q1 2024 Sales | | :--- | :--- | :--- | | Turbos & Thermal Technologies | $1,454 | $1,574 | | Drivetrain & Morse Systems | $1,361 | $1,419 | | PowerDrive Systems | $561 | $436 | | Battery & Charging Systems | $150 | $177 | Q1 2025 Segment Adjusted Operating Income (in millions) | Segment | Q1 2025 Adj. Op. Income | Q1 2024 Adj. Op. Income | | :--- | :--- | :--- | | Turbos & Thermal Technologies | $235 | $228 | | Drivetrain & Morse Systems | $243 | $253 | | PowerDrive Systems | $(43) | $(62) | | Battery & Charging Systems | $(22) | $(15) | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $13.83 billion and total liabilities were $7.94 billion, with a decrease in cash and an increase in stockholders' equity compared to year-end 2024 Balance Sheet Highlights (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $1,707 | $2,094 | | Total current assets | $6,379 | $6,521 | | Total assets | $13,830 | $13,993 | | Total current liabilities | $3,230 | $3,646 | | Long-term debt | $3,803 | $3,763 | | Total liabilities | $7,940 | $8,287 | | Total BorgWarner Inc. stockholders' equity | $5,720 | $5,532 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2025, net cash from operating activities significantly improved to $82 million from a prior-year use of $118 million, while free cash flow also improved to negative $35 million Q1 Cash Flow Summary (in millions) | Cash Flow Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $82 | $(118) | | Net cash used in investing activities | $(94) | $(175) | | Net cash used in financing activities | $(397) | $(183) | | Free cash flow | $(35) | $(308) | [Non-GAAP Financial Measures and Reconciliations](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section details the non-GAAP financial measures used by BorgWarner, such as Adjusted Operating Income, Adjusted EPS, Free Cash Flow, and Organic Net Sales Change [Q1 2025 Non-GAAP Reconciliations](index=11&type=section&id=Q1%202025%20Non-GAAP%20Reconciliations) For Q1 2025, U.S. GAAP operating income of $237 million was reconciled to an adjusted operating income of $352 million after accounting for various non-comparable items Q1 2025 Reconciliation of Operating Income to Adjusted Operating Income (in millions) | Description | Amount | | :--- | :--- | | **Operating income (GAAP)** | **$237** | | Impairment charges | $39 | | Restructuring expense | $31 | | Costs to exit charging business | $26 | | Intangible asset amortization expense | $17 | | Other non-comparable items | $2 | | **Adjusted operating income (Non-GAAP)** | **$352** | Q1 2025 Organic Net Sales Change Reconciliation (in millions) | Description | Amount | | :--- | :--- | | **Q1 2024 Net Sales** | **$3,595** | | Foreign Exchange (FX) Impact | $(85) | | Organic Net Sales Change | $5 | | **Q1 2025 Net Sales** | **$3,515** | [Full-Year 2025 Guidance Reconciliations](index=12&type=section&id=Full-Year%202025%20Guidance%20Reconciliations) The full-year 2025 guidance reconciles projected GAAP operating income of $1,098M-$1,223M to an adjusted operating income of $1,310M-$1,445M, and GAAP EPS to adjusted EPS FY 2025 Guidance: Operating Income to Adjusted Operating Income (in millions) | Description | Low | High | | :--- | :--- | :--- | | **Operating income (GAAP)** | **$1,098** | **$1,223** | | Restructuring expense | $80 | $90 | | Intangible asset amortization | $65 | $65 | | Impairment charges | $39 | $39 | | Costs to exit charging business | $26 | $26 | | Other non-comparable items | $4 | $4 | | **Adjusted operating income (Non-GAAP)** | **$1,310** | **$1,445** | FY 2025 Guidance: EPS to Adjusted EPS | Description | Low | High | | :--- | :--- | :--- | | **Earnings per Diluted Share (GAAP)** | **$3.44** | **$3.85** | | Restructuring expense | $0.28 | $0.32 | | Impairment charges | $0.15 | $0.15 | | Costs to exit charging business | $0.11 | $0.11 | | Other non-comparable items | $0.02 | $0.02 | | **Adjusted Earnings per Diluted Share (Non-GAAP)** | **$4.00** | **$4.45** |

Company Overview & Strategy - BorgWarner has a vision for a clean, energy-efficient world and delivers innovative and sustainable mobility solutions[9, 10] - The company aims to outgrow end markets, build on its product portfolio, and drive enhanced financial performance[21] - BorgWarner leverages its core competencies through organic and inorganic investments[21] Financial Performance & Sustainability - In 2023, approximately 87% of BorgWarner's revenue came from EV and emissions-reducing hybrid and combustion products[24] - eProduct sales reached approximately $2 billion in 2023[25] - The company achieved a 32% reduction in scope 1 and 2 emissions since 2021 and targets a 25% reduction in Scope 3 emissions by 2030 versus a 2021 baseline[26] - Since 2020, BorgWarner has returned approximately $34 billion to shareholders, including buybacks exceeding $1 billion and shareholder dividends of approximately $696 million, and the market cap of PHINIA at spin-off was approximately $17 billion[49] Product Portfolio & Market Position - BorgWarner holds a 1 or 2 market share in foundational products and is growing share in several eProducts[19] - The estimated BorgWarner content opportunity per light vehicle increases from $548 for combustion engines to $2,569 for BEVs in 2027[28] - The company's foundational sales are approximately $12 billion in 2024[30]

Core Insights - The company reported a decrease in U.S. GAAP net sales of approximately 2% for the first quarter of 2025 compared to the same period in 2024, with net sales totaling $3,515 million [5][6][14] - Adjusted earnings per diluted share increased by approximately 8% to $1.11 in Q1 2025, up from $1.03 in Q1 2024, despite a decline in net earnings per diluted share from $0.93 to $0.72 [4][6] - The company has provided full-year 2025 guidance, expecting net sales between $13.6 billion and $14.2 billion, reflecting slight growth from 2024 sales of approximately $14.1 billion [7][8] Financial Performance - U.S. GAAP net earnings for Q1 2025 were $157 million, down from $213 million in Q1 2024, while adjusted net earnings were $1.11 per diluted share, an increase from $1.03 [6][14] - The company achieved an adjusted operating margin of 10.0% in Q1 2025, compared to a U.S. GAAP operating margin of 6.7%, reflecting a 60 basis point improvement year-over-year [5][6] - The company reported net cash provided by operating activities of $82 million for Q1 2025, a significant improvement from a net cash used of $(118) million in Q1 2024 [17] Business Developments - The company secured multiple new business awards, including a high-volume hybrid eMotor award and a high-voltage coolant heater award, which are expected to support long-term profitable growth [2][5] - The company plans to exit its Charging business, which is anticipated to eliminate approximately $30 million in annualized adjusted operating losses [5][6] - The company is consolidating its North American Battery Systems business, aiming for annual cost savings of approximately $20 million by 2026 [5] Market Outlook - The company expects its weighted light and commercial vehicle markets to decline by 4% to 2% in 2025, a revision from the previous estimate of down 3% to down 1% [7][8] - The sales guidance implies a year-over-year change in organic sales of down 2% to up 2%, with an estimated outgrowth above market production of approximately 200 to 400 basis points [7][8] - The company anticipates operating margins in the range of 8.1% to 8.6% for 2025, with adjusted operating margins expected to be between 9.6% and 10.2% [8]

Core Insights - BorgWarner has secured a contract with a major North American OEM to supply its 400V SW130 (S-wind) eMotor for hybrid full-sized trucks and SUVs, with production set to begin in Q2 2028 [1][2] - The S-wind technology enhances power efficiency and performance while reducing costs and packaging sizes, making it a competitive solution in the hybrid vehicle market [2][3] Company Overview - BorgWarner has over 130 years of experience in mobility innovation, focusing on sustainable solutions to create a cleaner and safer future [4] Technology Details - The SW130 eMotor features a 130mm stator diameter and a 65mm stack length, optimizing peak torque and improving noise, vibration, and harshness [3] - S-wind technology utilizes a continuous rectangular formed winding design, which allows for better material usage and reduces welding points by over 90%, leading to increased scalability and flexibility [2][3]