Summary of Dana Incorporated FY Conference Call Company Overview - **Company**: Dana Incorporated (NYSE:DAN) - **Industry**: Manufacturing of driveline systems, power conveyance, sealing, and thermal systems - **Market Capitalization**: Approximately $2.8 billion with around 130 million shares trading at about $21 [1][1] - **Recent Performance**: Stock price increased by 80% over the past year [1][1] Key Business Segments - **Sales**: Just over $10 billion [5][5] - **Segments**: - Light vehicle driveline (largest segment, focused on North America) - Commercial vehicle segment (products for class 6 and above trucks) - Off-highway axle business (recently sold to Allison Transmission) [5][6] Strategic Decisions - **Sale of Off-Highway Business**: - Decision driven by the need to fund electrification opportunities, estimated at $4 billion-$5 billion [8][8] - Sale was strategic despite being the highest margin business [7][9] - Anticipated closure of the sale in the current quarter [9][9] Financial Performance and Projections - **Debt Position**: Post-transaction, Dana will be nearly net debt neutral with about $100 million in net debt [1][1] - **Margin Goals**: Targeting 10-10.5% margins by 2026, with current margins around 10% for the on-highway business [12][12] - **Cost Reduction Initiatives**: - Initial target of $300 million in cost cuts, now increased to $310 million, with $235 million expected in the current fiscal year [14][14] Market Conditions - **Commercial Vehicle Market**: - Forecasted decline from 225,000 units to around 200,000 units in North America for the next year [16][16] - No signs of recovery or prebuy activity anticipated for 2026 [15][15] Electrification and EV Strategy - **Current EV Business**: Approximately $700 million [18][18] - **Market Stagnation**: North American SUV electrification has stalled, with significant reductions in program volumes [18][19] - **Strategic Shift**: Focus on existing customers with internal combustion engine (ICE) exposure to mitigate risks associated with EV investments [19][19] Growth Opportunities - **Aftermarket Business**: $800 million business with potential for margin improvement [22][22] - **Manufacturing Operations**: Plans for rationalizing plants and increasing automation, with an estimated $70-$80 million opportunity in automation alone [35][35] - **Defense Business**: Potential growth in military applications, leveraging existing technology [39][39] Future Outlook - **M&A Considerations**: With minimal net debt, Dana is open to exploring M&A opportunities but focuses on rebuilding investor credibility first [29][29] - **Long-term Growth**: Emphasis on underappreciated growth opportunities beyond 2026, including niche products and aftermarket expansions [31][31][32][32] Conclusion - Dana Incorporated is undergoing significant transformation with strategic divestitures and a focus on cost reduction and margin improvement. The company is navigating a challenging commercial vehicle market while positioning itself for future growth in electrification and aftermarket services.

Financial Performance - Cummins Inc reported Q2 2025 revenue of $8643 million, a decrease of 2% compared to Q2 2024[9, 13] - The company's EBITDA for Q2 2025 was $1587 million, representing 184% of sales[9, 13] - Net income for Q2 2025 reached $890 million, with a diluted EPS of $643[9] Segment Performance - Engine segment revenue decreased by 8% to $2899 million due to lower On-Highway demand in North America[13, 22] - Components segment sales declined by 9% to $2705 million, also driven by lower On-Highway demand in North America[13, 25] - Distribution segment experienced a 7% increase in sales, reaching $3041 million, fueled by higher demand for power generation products in North America[13, 28] - Power Systems segment saw a significant 19% revenue increase to $1889 million, primarily due to increased power generation demand[13, 31] - Accelera segment reported sales of $105 million, a decrease of 5%, with an EBITDA loss of $100 million[13, 34] Additional Information - Operating cash flow for Q2 2025 was $785 million[39]

Financial Performance & Guidance - Q2 2025 sales for continuing operations were $2.047 billion, compared to $1.935 billion in Q2 2024[25] - Q2 2025 adjusted EBITDA for continuing operations was $145 million, up from $110 million in Q2 2024, with a margin of 7.5%[25] - The company increased its full-year 2025 profit guidance by $35 million and free cash flow guidance by $50 million for continuing operations[12] - Full-year 2025 sales guidance for continuing operations is approximately $7.4 billion[21] - Full-year 2025 adjusted EBITDA guidance for continuing operations is approximately $575 million[21] - Full-year 2025 adjusted free cash flow guidance is approximately $275 million[21] Strategic Initiatives - The company announced a definitive agreement to sell its off-highway business[8] - The sale of the off-highway business is expected to close late in the fourth quarter of 2025, with net cash proceeds of $2.4 billion from a $2.7 billion purchase price[11] - The company announced a $1 billion capital return authorization and a $2 billion debt reduction plan[8] - The company repurchased 14.6 million shares in Q2, representing 10% of shares outstanding, returning $257 million to shareholders[11] - The company anticipates a $100 million to $150 million share repurchase in Q3[11]

Acquisition Overview - Allison Transmission is acquiring Dana Off-Highway Business for approximately $2.7 billion[11] - The purchase price represents 6.8x Adjusted EBITDA (LTM 12/31/24) of approximately $400 million[11] and 5.2x including estimated run-rate synergies of approximately $120 million[11] - The deal is expected to close in late Q4 2025[11] Financial Highlights - The company anticipates net leverage of less than 3.0x at close, with a near-term target of less than 2.0x[11] - The acquisition is anticipated to be immediately accretive to diluted earnings per share[11] - Allison had $753 million in cash and $744 million available under the revolving credit facility as of March 31, 2025[11] Strategic Rationale - The acquisition expands Allison's global platform and end-market expertise[10] - It accelerates product innovation and enhances alternative propulsion capabilities[10] - The combination expands into adjacent, diverse, and attractive end-markets[10] Dana Off-Highway Business - Dana Off-Highway reported approximately $2.8 billion in net sales in 2024[16] - The business generated approximately $400 million in Adjusted EBITDA in 2024[16] - Free cash flow for Dana Off-Highway was approximately $280 million in 2024[16] Combined Company - The combined company is expected to achieve $6.0 billion in net sales[38] - Adjusted EBITDA is expected to increase by 40% to $1.6-1.7 billion[38] - The combined Adjusted EBITDA margin is projected to be 27-29%[39] End-Market Mix - The combined company's end-market mix will include 45% On-Highway, 4% Defense, and 51% Off-Highway[32, 33] - Construction & Forestry represents 35% of Dana Off-Highway's end-market mix[18] - Agriculture accounts for 18% of Dana Off-Highway's end-market mix[18]

Financial Data and Key Metrics Changes - AAM's Q1 2025 sales were $1.41 billion, down from $1.61 billion in Q1 2024 [20] - Adjusted EBITDA for Q1 2025 was $177.3 million, with an adjusted EBITDA margin of 12.6%, compared to $205.6 million and 12.8% in the previous year [22] - GAAP net income was $7.1 million or $0.06 per share in Q1 2025, down from $20.5 million or $0.17 per share in Q1 2024 [26] - Adjusted free cash flow was a use of $3.9 million in Q1 2025, an improvement from the prior year [26][27] Business Line Data and Key Metrics Changes - North American production decreased approximately 5% year-over-year [8] - The Metal Form business unit showed improved EBITDA margins, increasing by 150 basis points year-over-year [22] Market Data and Key Metrics Changes - AAM's sales were impacted by a lower volume mix, resulting in a decrease of $166 million primarily due to lower overall volumes in North America [21] - Foreign exchange fluctuations, particularly from a weaker Brazilian real, contributed to a sales reduction of approximately $28 million [21] Company Strategy and Development Direction - AAM exited its joint ventures in China, collecting approximately $30 million in cash, as part of a strategy to focus on core businesses and capital allocation [9] - The company is on track to close the transformational transaction with Dali by Q4 2025, which is expected to yield significant synergies of approximately $300 million [11][12] - AAM aims to enhance its EV portfolio and maintain a balanced capital allocation policy post-acquisition [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macro uncertainties due to new trade policies but emphasized a strategy of local sourcing, with 90% of products produced in North America being USMCA compliant [13] - The company updated its 2025 guidance, targeting sales between $5.65 billion and $5.95 billion, with adjusted EBITDA expected to be between $665 million and $745 million [17][32] - Management expressed confidence in navigating tariff impacts and leveraging opportunities presented by onshoring trends [34] Other Important Information - AAM's net debt stood at $2.1 billion with a net leverage ratio of 2.9x as of March 31, 2025 [27] - The company maintained a strong cash position of over $500 million due to operational performance and proceeds from joint venture sales [27] Q&A Session Summary Question: Thoughts on future contingencies and utilization of excess capacity - Management indicated that they have open capacity in several facilities and are willing to make adjustments based on customer needs [40][41] Question: Tariff exposure for Dali - Management noted that Dali has a similar production footprint and is managing tariff exposure similarly to AAM [44] Question: GM's volume outlook and its impact on guidance - Management confirmed that the guidance incorporates GM's strong demand for full-size trucks, expecting production in the range of 1.3 million to 1.4 million units [47][48] Question: Impact of macro volatility on the Dali transaction - Management stated that macro volatility has not complicated the process and both companies are focused on local sourcing [50] Question: Near-term production schedules - Management acknowledged some volatility in customer schedules but noted strong performance in core platforms [56][58] Question: Tariff policies and their impact - Management confirmed that under current USMCA policies, tariff impacts are limited, and they are working to ensure compliance [64][65] Question: Long-term implications of ICE and EV market changes - Management expressed that continued ICE production is beneficial for cash flow, while EV growth will be slower than previously projected [102][104]