BorgWarner(BWA) - 2025 Q1 - Quarterly Results

First Quarter 2025 Results and Business Update 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 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] - Consolidation of the North American Battery Systems business is expected to generate annual cost savings of approximately $20 million by 2026[3] - The company achieved market outgrowth of approximately 3.7%, primarily driven by a 47% year-over-year increase in light vehicle eProduct sales[3] New Business Awards 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] - 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] - 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] - 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] Full Year 2025 Guidance Update 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 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] - 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] Financial Statements 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 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 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 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 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 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 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 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 |