Dana(DAN) - 2025 Q2 - Quarterly Results

Dana Inc. Q2 2025 Earnings Report Overview Q2 2025 Key Highlights Dana reported strong Q2 2025 results, driven by the Off-Highway business sale, capital return, and cost savings - Announced a definitive agreement to sell the Off-Highway business for a purchase price of $2.7 billion, with expected net cash proceeds of $2.4 billion[2][36] - Initiated a $1 billion capital return program, repurchasing 14.6 million shares (10% of shares outstanding) for $257 million in Q2 2025[2][6][36] - The cost-savings initiative goal has been increased to $310 million through 2026, with $59 million realized in Q2 and $110 million year-to-date[2][6][33] - Raised full-year 2025 guidance for continuing operations, increasing sales by $250 million, adjusted EBITDA by $35 million, and adjusted free cash flow by $50 million[5][6] Strategic Developments and Capital Allocation Sale of Off-Highway Business Dana strategically sells its Off-Highway business for $2.7 billion to focus on light and commercial vehicle markets - The sale is a key step in the strategy to become a more focused supplier to light and commercial vehicle markets[2] Off-Highway Business Sale Details | Metric | Value | | :--- | :--- | | Purchase Price | $2.7 billion | | Net Cash Proceeds | $2.4 billion | | Expected Closing | Late Q4 2025 | - Following the sale, the Off-Highway business results will be reported as discontinued operations for all periods[1][7] Capital Allocation and Shareholder Returns Dana authorized $1 billion in capital returns and $2 billion in debt reduction, prioritizing growth and shareholder value - Announced a $1 billion capital return authorization through 2027 and a $2 billion debt reduction plan[33][60] - Increased the 2025 capital return target to approximately $600 million[6][36] - Repurchased 14.6 million shares for $257 million in Q2 and anticipates an additional $100-$150 million in share repurchases in Q3[6][36] - Capital allocation priorities include funding organic growth, reducing debt to a target net leverage of ~1x, and shareholder returns via dividends and buybacks[59][60] Cost Savings Initiative Dana's expanded cost-savings program targets $310 million by 2026, with significant Q2 progress mitigating cost inflation - The total cost reduction program goal has been increased to $310 million through 2026[6][33] Cost Savings Realized in 2025 | Period | Savings Realized (USD) | | :--- | :--- | | Q2 2025 | $59 million | | YTD 2025 | $110 million | - The cost-savings program is a key factor in the company's commitment to deliver a 10% adjusted EBITDA margin in 2026[2] Q2 2025 Financial Performance (Continuing Operations) Consolidated Financial Results Q2 2025 sales decreased, but adjusted EBITDA and margin improved due to cost savings and tariff recoveries Q2 2025 Financial Results (Continuing Operations) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $1.95 billion | $2.05 billion | ($0.10 billion) | | Adjusted EBITDA | $145 million | $110 million | +$35 million | | Adjusted EBITDA Margin | 7.5% | 5.4% | +210 bps | | Loss Before Tax | ($24 million) | ($53 million) | +$29 million | | Operating Cash Flow | $36 million | $215 million | ($179 million) | | Adjusted Free Cash Flow | ($5 million) | $104 million | ($109 million) | Sales and Adjusted EBITDA Analysis Q2 sales declined due to volume/mix, yet adjusted EBITDA improved significantly from cost savings and performance - Sales for continuing operations decreased from $2,047 million in Q2 2024 to $1,935 million in Q2 2025, mainly due to a negative volume/mix impact of $172 million[46] - Adjusted EBITDA for continuing operations increased from $108 million to $145 million. The key drivers were cost savings (+$59 million) and performance (+$30 million), which offset negative impacts from volume/mix (-$52 million) and tariffs (-$15 million)[46][47] Free Cash Flow Analysis Q2 adjusted free cash flow decreased due to working capital and higher taxes, partially offset by higher EBITDA - Adjusted free cash flow includes cash from both continuing and discontinued operations to align with the sale transaction structure[49] - Working capital was a significant headwind, with a year-over-year negative change of $159 million, attributed to timing after strong Q1 performance[48][49] - Capital spending was lower by $70 million year-over-year due to the timing of investments[48][49] Full-Year 2025 Guidance and Outlook Revised 2025 Full-Year Guidance Dana raised full-year 2025 guidance for continuing operations, reflecting improved cost performance and tariff recoveries Full-Year 2025 Guidance (Continuing Operations) | Metric | Current Guidance (USD) | Midpoint of Prior Method (Illustrative, USD) | | :--- | :--- | :--- | | Sales | $7.25 - $7.55 billion | ~$9.9 billion | | Adjusted EBITDA | $540 - $610 million | ~$990 million | | Implied Adj. EBITDA Margin | 7.4% - 8.1% | ~10.0% | | Adjusted Free Cash Flow | $225 - $325 million | ~$275 million | - The guidance increase reflects higher tariff recoveries, enhanced cost performance, and reduced working capital requirements[5] Full-Year Sales and Profit Drivers Full-year sales are projected to decline due to volume/mix, but profit is expected to rise from performance and cost savings - Full-year sales are expected to be impacted by negative volume/mix (-$425 million) and currency headwinds (-$45 million)[53] - The profit impact of volume declines is expected to be more than offset by pricing and operating efficiency efforts[54] - Anticipated tariffs are expected to have a negative profit impact of ~$35 million due to time lags in recoveries[53][54] Full-Year Free Cash Flow Outlook Dana forecasts a significant increase in full-year adjusted free cash flow, driven by higher EBITDA and working capital - Adjusted free cash flow is expected to increase by ~$195 million year-over-year[55] - Key drivers for the improvement include higher profit, a ~$100 million positive change in working capital, and a $45 million reduction in net capital spending[55][56] Long-Term Outlook (2026 and Beyond) Dana targets 10-10.5% adjusted EBITDA margins and 4% free cash flow by 2026, supported by cost savings - Targets adjusted EBITDA margins of 10% - 10.5% in 2026[65] - Expects adjusted free cash flow to be approximately 4% of sales in 2026[65] - The $310 million cost savings plan is on track for completion in 2026[62] Segment Performance (Continuing Operations) Light Vehicle Segment Light Vehicle sales decreased in Q2, but adjusted EBITDA and margin improved due to strong performance and cost savings Light Vehicle Q2 Performance | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $1,335 million | $1,401 million | | Adjusted EBITDA | $112 million | $90 million | | Adjusted EBITDA Margin | 8.4% | 6.4% | - Ford is the largest customer, accounting for 44% of year-to-date sales, followed by Stellantis at 16%[70] Commercial Vehicle Segment Commercial Vehicle sales declined in Q2, yet adjusted EBITDA and margin improved from performance and cost savings Commercial Vehicle Q2 Performance | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $600 million | $646 million | | Adjusted EBITDA | $47 million | $39 million | | Adjusted EBITDA Margin | 7.8% | 6.0% | - Paccar is the largest customer, representing 17% of year-to-date sales, with Traton at 12% and Volvo at 10%[70] Supporting Information and Reconciliations Non-GAAP Financial Measures The report utilizes non-GAAP measures like Adjusted EBITDA and Free Cash Flow, with reconciliations provided for transparency - Adjusted EBITDA is defined as net income before interest, taxes, depreciation, amortization, and other adjustments not related to core operations[10] - Adjusted Free Cash Flow is defined as net cash from operating activities less purchases of property, plant, and equipment, plus proceeds from sales of the same[14] - The company has not provided a reconciliation of its forward-looking non-GAAP guidance to GAAP measures because it is not practical to project certain event-driven items[15] Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties, advising readers to consult SEC filings - Forward-looking statements are identified by words such as "anticipates," "expects," "believes," and similar expressions[16][29] - These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed[16][29] Financial Reconciliations Detailed unaudited reconciliations of GAAP to non-GAAP measures are provided for continuing and discontinued operations - Provides reconciliation of Loss from Continuing Operations before Income Taxes to Adjusted EBITDA[23][24] - Provides reconciliation of Earnings from Discontinued Operations before Income Taxes to Adjusted EBITDA[25][26]