Dana(US:DAN)2023-10-27 15:52Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2023 was $242 million, an increase of $50 million or 150 basis points compared to the same period last year, driven by strong operational execution and improved efficiency [6][42] - Sales reached $2.67 billion, a $134 million increase year-over-year, primarily due to strong customer demand and cost recovery efforts [9][16] - Net income attributable to Dana was $19 million, compared to a loss of $88 million in the previous year, which was impacted by a non-cash goodwill impairment charge [17] - Free cash flow was a use of $5 million, reflecting higher seasonal working capital requirements [10][43] Business Line Data and Key Metrics Changes - Traditional organic sales growth was $20 million, driven by higher demand and improved pricing, partially offset by the UAW strike's impact on light vehicle business [18] - EV organic sales increased by $81 million compared to last year, with adjusted EBITDA for EV up by $12 million, improving overall margins by 20 basis points [19] - Free cash flow usage was primarily due to increased working capital requirements, which were $115 million higher than last year, driven by higher inventory needs [20] Market Data and Key Metrics Changes - North America light vehicle production was significantly impacted by the UAW strike, resulting in $65 million lower sales in Q3 and an expected $185 million lower sales in October [31][33] - Demand in Europe showed slight improvement due to strong order backlogs, while Asia's production is expected to remain flat [34] - The North America Class 8 medium-duty truck market is expected to finish the year with a production increase of around 7% compared to 2022 [35] Company Strategy and Development Direction - The company is focused on leveraging its core operations, driving standardization and transformational change across the organization to improve operational efficiency and customer satisfaction [11] - Dana plans to maintain an aggressive launch cadence for 2023, with over 120 programs across traditional and EV markets, anticipating a more normalized cadence in 2024 [14] - The company is prepared to flex its operations in response to market demands and is committed to supporting its supply base during the ongoing UAW strike [30][101] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment is improving, with moderating steel prices and expectations for commodities to be a profit tailwind for the remainder of the year [63][128] - The company anticipates that once the UAW strike concludes, operational improvements and commodity cost benefits will positively impact financial performance [32][46] - Management expressed confidence in the resilience of the business to weather external disruptions, maintaining guidance for sales and profit ranges despite the strike [48][46] Other Important Information - The company has successfully completed or is nearing completion of four major programs, which account for over $2 billion in annual sales [40] - Adjusted EBITDA guidance for 2023 is expected to be about $850 million, with profit margins projected between 7.5% to 8% [47] Q&A Session Summary Question: Can you quantify the impact of the UAW strike on cash flow? - Management compared the situation to the COVID shutdown, indicating that the company has a playbook to manage the supply chain and ensure raw material availability [26][27] Question: How is the company managing EV investments amid mixed messages in the industry? - Management stated that the company is designed to be energy-source agnostic and can flexibly adjust spending based on market conditions [59][96] Question: What is the expected impact of the UAW strike on future sales and margins? - Management indicated that the low-end sales guidance assumes the strike continues, with significant impacts expected from Ford's production [72][73] Question: How does the company plan to achieve its break-even target for EV by 2025? - Management expressed confidence in achieving the target, noting that operational efficiencies and market demand will play crucial roles [85][108] Question: What are the expectations for the off-highway market in Q4? - Management indicated that there is no expected uptick in the off-highway market for Q4, but they have successfully managed recoveries from customers [115]