Dana Incorporated (NYSE:DAN) Q2 2024 Earnings Conference Call July 31, 2024 9:00 AM ET Company Participants Craig Barber - Senior Director, IR and Corporate Communications James Kamsickas - Chairman and CEO Timothy Kraus - SVP and CFO Conference Call Participants Colin Langan - Wells Fargo Tom Narayan - RBC Dan Levy - Barclays Joseph Spak - UBS Jake Scholl - BNP Paribas Operator Good morning and welcome. Dana Incorporated's Second Quarter 2024 Financial Webcast and Conference Call. My name is Regina and I w ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q2 and H1 2024 financial statements show decreased net income, reduced assets, and a loss from the European hydraulics business sale [Consolidated Statement of Operations](index=3&type=section&id=Consolidated%20Statement%20of%20Operations) The consolidated statement of operations details the company's revenue, expenses, and net income for Q2 and H1 2024 versus 2023 Q2 & H1 2024 vs 2023 Performance Summary | Metric | Q2 2024 | Q2 2023 | YoY Change | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $2,738M | $2,748M | -0.4% | $5,473M | $5,392M | +1.5% | | **Earnings Before Interest and Taxes (EBIT)** | $104M | $124M | -16.1% | $174M | $214M | -18.7% | | **Net Income** | $16M | $36M | -55.6% | $16M | $67M | -76.1% | | **Net Income Attributable to Parent** | $16M | $30M | -46.7% | $19M | $58M | -67.2% | | **Diluted EPS** | $0.11 | $0.21 | -47.6% | $0.13 | $0.40 | -67.5% | [Consolidated Balance Sheet](index=5&type=section&id=Consolidated%20Balance%20Sheet) The balance sheet details the company's assets, liabilities, and equity as of June 30, 2024, and December 31, 2023 Balance Sheet Summary | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $419M | $529M | | Total current assets | $4,076M | $4,103M | | Total assets | $7,808M | $7,965M | | Total current liabilities | $2,758M | $2,602M | | Long-term debt | $2,386M | $2,598M | | Total liabilities | $6,059M | $6,137M | | Total parent company stockholders' equity | $1,475M | $1,575M | [Consolidated Statement of Cash Flows](index=6&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) The consolidated statement of cash flows summarizes cash movements from operating, investing, and financing activities for the six months ended June 30 Six Months Ended June 30 Cash Flow Summary | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $113M | $86M | | Net cash used in investing activities | ($177M) | ($245M) | | Net cash (used in) provided by financing activities | ($30M) | $209M | | **Net (decrease) increase in cash** | **($94M)** | **$50M** | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes provide detailed explanations for significant financial events, including business divestitures, restructuring charges, and segment performance - In February 2024, Dana agreed to sell its European hydraulics business for approximately **$38 million**, resulting in a **$30 million loss** to adjust the carrying value of net assets to fair value less costs to sell[28](index=28&type=chunk) - Restructuring charges of **$12 million** in Q2 2024 and **$17 million** in H1 2024 were primarily for separation costs related to global administrative rationalization and manufacturing footprint realignment, affecting approximately **500 employees**[30](index=30&type=chunk)[31](index=31&type=chunk) Revenue by Segment (Six Months Ended June 30) | Segment | 2024 Revenue | 2023 Revenue | | :--- | :--- | :--- | | Light Vehicle | $2,230M | $2,028M | | Commercial Vehicle | $1,051M | $1,048M | | Off-Highway | $1,527M | $1,684M | | Power Technologies | $665M | $632M | | **Total** | **$5,473M** | **$5,392M** | Segment EBITDA (Six Months Ended June 30) | Segment | 2024 EBITDA | 2023 EBITDA | | :--- | :--- | :--- | | Light Vehicle | $151M | $115M | | Commercial Vehicle | $40M | $45M | | Off-Highway | $231M | $249M | | Power Technologies | $49M | $42M | | **Total** | **$471M** | **$451M** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A analyzes Q2 2024 sales, gross margin, revised full-year outlook, and strategic focus on core operations and electrification [Operational and Strategic Initiatives](index=32&type=section&id=Operational%20and%20Strategic%20Initiatives) Dana's strategy focuses on leveraging core operations, customer centricity, global expansion, and leading electric propulsion solutions - Dana's enterprise strategy is focused on four key pillars[107](index=107&type=chunk) - **Leveraging Core Operations:** Driving synergies across engineering, purchasing, and manufacturing to improve profitability and competitive advantage[108](index=108&type=chunk) - **Driving Customer Centricity:** Focusing on customer relationships and engineering solutions to win new business[109](index=109&type=chunk) - **Expanding Global Markets:** Prioritizing growth in Asia, particularly China and India, through partnerships, acquisitions, and organic investment[110](index=110&type=chunk) - **Delivering Innovative Solutions & Leading Electric Propulsion:** Investing in e-Propulsion systems to capitalize on vehicle electrification trends[111](index=111&type=chunk) [Trends in Our Markets](index=36&type=section&id=Trends%20in%20Our%20Markets) Market trends show stable light-truck production, weakening North American commercial vehicle demand, and mixed off-highway growth - **Light Vehicle:** 2024 outlook reflects relatively stable global light-truck production compared to 2023[122](index=122&type=chunk) - **Commercial Vehicle:** 2024 outlook indicates weakening demand in North America, with moderately lower production, while South America and Asia Pacific expect modest increases[123](index=123&type=chunk) - **Off-Highway:** 2024 outlook projects modest growth in the Americas and Asia Pacific, offset by moderately lower production in Europe, with softening global agriculture equipment demand[124](index=124&type=chunk) [Sales, Earnings and Cash Flow Outlook](index=37&type=section&id=Sales%2C%20Earnings%20and%20Cash%20Flow%20Outlook) The 2024 sales outlook was lowered due to reduced EV demand, while Adjusted EBITDA guidance was maintained and free cash flow increased - The 2024 sales outlook was lowered by **$200 million** to a range of **$10,450 - $10,950 million**, reflecting a reduction in electric-vehicle demand[130](index=130&type=chunk) 2024 Financial Outlook | Metric | 2024 Outlook | 2023 Actual | | :--- | :--- | :--- | | Sales | $10,450 - $10,950M | $10,555M | | Adjusted EBITDA | $875 - $975M | $845M | | Net cash provided by operating activities | $500 - $550M | $476M | | Free cash flow | $75 - $125M | ($25M) | - Adjusted EBITDA guidance remains unchanged, with the margin expected to improve by **60 basis points** over 2023 at the midpoint, and free cash flow guidance was increased by **$25 million** due to reduced capital spending[130](index=130&type=chunk) [Consolidated Results of Operations](index=38&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated results show a slight Q2 sales decrease and H1 organic sales growth, despite gross margin compression from inflation and mix - Q2 2024 sales decreased by **$10 million** YoY to **$2,738 million**, with weaker international currencies having a negative impact of **$22 million**, partially offset by **$14 million** in organic sales growth[131](index=131&type=chunk)[132](index=132&type=chunk) - Q2 2024 gross margin decreased by **$16 million** to **$255 million** (**9.3% of sales**), down **60 basis points** from 2023, driven by lower sales volumes, unfavorable product mix, and **$51 million** in non-material inflationary costs[134](index=134&type=chunk)[135](index=135&type=chunk) - H1 2024 sales increased by **$81 million** YoY to **$5,473 million**, with **$102 million** in organic sales growth partially offset by a **$19 million** negative currency impact[145](index=145&type=chunk)[146](index=146&type=chunk) [Segment Results of Operations](index=44&type=section&id=Segment%20Results%20of%20Operations) Segment results highlight organic growth in Light Vehicle and Power Technologies, with challenges in Commercial Vehicle and Off-Highway sales declines - **Light Vehicle:** Q2 sales grew **7% organically**, driving segment EBITDA up by **$18 million** to **$84 million**, with margin improving to **7.4%** from **6.2%** YoY[159](index=159&type=chunk)[160](index=160&type=chunk) - **Commercial Vehicle:** Q2 sales were up **1% organically**, but unfavorable product mix caused segment EBITDA to fall by **$5 million** to **$23 million**, with margin contracting to **4.4%** from **5.3%** YoY[161](index=161&type=chunk)[162](index=162&type=chunk) - **Off-Highway:** Q2 sales declined **10% organically** due to softening global markets, particularly in Europe, leading to a **$15 million** decrease in segment EBITDA to **$116 million**, with a stable margin of **15.5%**[163](index=163&type=chunk)[164](index=164&type=chunk) - **Power Technologies:** Q2 sales grew **7% organically**, with segment EBITDA increasing by **$3 million** to **$22 million**, and margin expanding to **6.6%** from **6.1%** YoY, despite unfavorable product mix[165](index=165&type=chunk)[166](index=166&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity, with **$1.56 billion** available as of June 30, 2024, and remains compliant with all debt covenants Total Liquidity as of June 30, 2024 | Component | Amount | | :--- | :--- | | Cash and cash equivalents | $419M | | Additional cash availability from Revolving Facility | $1,141M | | **Total liquidity** | **$1,560M** | - As of June 30, 2024, the company was in compliance with all debt covenants, with principal liquidity sources expected from cash from operations, cash on hand, and borrowings from the Revolving Facility[176](index=176&type=chunk)[178](index=178&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk exposures, including currency, interest rates, or commodity costs, have occurred since the 2023 Form 10-K - There have been no material changes to market risk exposures concerning currency exchange rates, interest rates, or commodity costs since the 2023 Form 10-K[188](index=188&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of June 30, 2024, the company's disclosure controls and procedures were effective[190](index=190&type=chunk) - No changes occurred during the fiscal quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[191](index=191&type=chunk) [PART II – OTHER INFORMATION](index=52&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, with no expected material adverse effect on its financial condition or operations - The company does not believe that liabilities from pending legal proceedings are reasonably likely to have a material adverse effect on its financial condition or results of operations[194](index=194&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since those disclosed in the 2023 Form 10-K - There have been no material changes in the company's risk factors from those disclosed in the 2023 Form 10-K[195](index=195&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including incentive plan amendments and required CEO/CFO certifications - Exhibits filed with the report include the First Amendment to the Dana Incorporated 2021 Omnibus Incentive Plan, CEO and CFO certifications under Rule 13a-14(a)/15d-14(a), and Section 1350 certifications[198](index=198&type=chunk)

Dana (DAN) came out with quarterly earnings of $0.31 per share, beating the Zacks Consensus Estimate of $0.24 per share. This compares to earnings of $0.37 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of 29.17%. A quarter ago, it was expected that this automotive equipment supplier would post earnings of $0.10 per share when it actually produced earnings of $0.02, delivering a surprise of -80%. Over the last four quarters, the ...

Dana Incorporated Reports 2024 Second-Quarter Financial Results with Increased Adjusted EBITDA and Adjusted EBITDA Margin, Raises Full-Year Free Cash Flow Guidance Exhibit 99.1 IMMEDIATE MAUMEE, Ohio, July 31, 2024 – Dana Incorporated (NYSE: DAN) today announced financial results for the second quarter of 2024. "In the second quarter, Dana's strong end-to-end execution delivered steady profit and improved margin despite continued future program development costs," said James Kamsickas, Chairman and Chief Ex ...

Peloton Stock Decline - Peloton stock has struggled to regain its former glory since Dana White, CEO of UFC, decided to remove all Peloton bikes from UFC training facilities last year [1] - The removal of Peloton bikes was prompted by comedian Theo Von's revelation that Peloton, a sponsor of his podcast, asked him to take down an interview with Robert F Kennedy Jr [2] - Following the removal, Peloton rival Echelon shared an Instagram reel from one of White's gyms showing Echelon bikes replacing Pelotons, leading to a decline in PTON stock from $5 83 on November 29, 2023, to $3 42 [5] Dana White's Reaction - Dana White expressed indignation at Peloton's actions, stating "Peloton sells stationary bikes, and they've got a problem with Robert f–ing Kennedy F— you, Peloton Who the f— are they?" [6] - White ordered the immediate removal of Peloton bikes from UFC gyms, declaring "My guys are going to take the Pelotons out of the gym today We're getting rid of them We're going to throw them in the f—ing garbage today We're throwing them out of the UFC gym" [7] Stock Performance - Peloton stock has declined by 41 34% since the Instagram video showing Echelon bikes replacing Pelotons [6] - As of July 25, PTON stock reflects a decline of 2 13% on the day, an 8 99% drop across the week, a modest increase of 1 60% on its monthly chart, and a 60 91% dip over the last 12 months [7]

The conference call can be accessed by telephone from both domestic and international locations using the information provided below: Audio streaming and slides will be available online via a link provided on the Dana investor website: www.dana.com/investors. About Dana Incorporated MAUMEE, Ohio, July 16, 2024 /PRNewswire/ -- Dana Incorporated (NYSE: DAN) will release its 2024 second-quarter financial results on Wednesday, July 31, 2024. A press release will be issued at approximately 7 a.m. EDT, followed b ...

Group 1 - Dana Incorporated announced the appointment of Brian Pour as Senior Vice President and President of Dana Commercial Vehicle Drive and Motion Systems, effective July 22, succeeding Aziz Aghili [1][6] - Brian Pour has over 30 years of experience in the mobility industry, including leadership roles at Auria Solutions Ltd., International Automotive Components, Lear Corporation, and Textron Automotive [2][4] - Dana reported sales of $10.6 billion in 2023 and employs 42,000 people across 31 countries [7] Group 2 - Dana is recognized for its commitment to ethical practices, being named among the "World's Most Ethical Companies" for 2023 and 2024, and as one of "America's Most Responsible Companies 2023" [7] - The company focuses on designing and manufacturing efficient propulsion and energy-management solutions for various mobility markets globally [3]

Core Insights - Dana Incorporated has appointed Lisa Amend as Senior Vice President and Chief Human Resources Officer, highlighting the company's commitment to a people-first culture and its 120-year legacy [1][2]. Company Overview - Dana is a leader in designing and manufacturing efficient propulsion and energy-management solutions for vehicles and machines globally, focusing on sustainable progress through both conventional and clean-energy solutions [4]. - The company reported sales of $10.6 billion in 2023 and employs 42,000 people across 31 countries [7]. Leadership Background - Lisa Amend brings over 20 years of experience as a labor and employment attorney, with responsibilities including human resources strategy, talent management, diversity, equity, and inclusion [5][6]. - Amend has been with Dana for over 12 years, serving in various legal roles before her recent appointment [6].

Ms. Hamilton is a long-time public company board member with committee experience that includes Executive, Nominating and Government, and Audit and Risk Management. She recently joined the board of Opendoor, the nation's largest e-commerce platform for residential real estate. As a member of the board of Life Storage, Inc., Ms. Hamilton helped guide the company during a period of significant growth, transformation and shareholder value creation. Howard Hughes Holdings Inc. owns, manages, and develops commer ...

Core Viewpoint - Dana Incorporated has shown mixed financial results, with significant revenue growth but volatility in profitability metrics, leading to a recommendation to maintain a 'buy' rating due to its attractive valuation compared to peers [4][12]. Financial Performance - The company reported a revenue of $10.56 billion for the 2023 fiscal year, a 3.9% increase from $10.16 billion in 2022, primarily driven by organic growth [10]. - Revenue from Europe increased by $491 million, or 16.1%, with $460 million attributed to organic growth, supported by strong demand in off-highway, mining, and construction sectors [10]. - In the first quarter of 2024, revenue reached $2.74 billion, a 3.4% increase from $2.64 billion in the same period of 2023, largely due to a 14.1% rise in light vehicle production [9]. Profitability Metrics - The company transitioned from a net loss of $242 million in 2022 to a net gain of $38 million in 2023, influenced by the absence of goodwill impairment charges and lower income tax expenses [2]. - Operating cash flow decreased from $649 million to $476 million, but adjusted for working capital changes, the decline was smaller, from $450 million to $406 million [2]. - EBITDA improved from $700 million to $845 million, indicating operational efficiency despite challenges [2]. Market Position and Valuation - Dana Incorporated's shares are considered cheap, trading at a price to operating cash flow of 5.0 and an EV to EBITDA of 5.4, making it one of the most attractively priced companies in its peer group [6][8]. - The company is expected to benefit from organic growth of approximately $270 million year over year, with additional contributions from electric vehicle sales [5]. Future Outlook - Management projects revenue for 2024 to be between $10.65 billion and $11.15 billion, with EBITDA expected between $875 million and $975 million [9]. - Despite mixed results, management remains optimistic about future performance, particularly in light vehicle production and organic growth opportunities [9][10].