The conference call for BorgWarner's 2024 first quarter results has begun, with Britney as the operator and Patrick Nolan as the Vice President of Relations. The company's earnings release is available on their website and they will be attending multiple conferences in the future. The call will include forward-looking statements and non-GAAP measures, and they will also discuss incremental margin and growth compared to their market.

The company has posted their earnings call presentation on their website and encourages listeners to follow along with the slides. They had a strong performance in the first quarter of 2024, with 7% organic growth and a 9.4% margin. They received new eProduct awards and expanded their product offerings for electrified vehicles. They also repurchased $100 million of stock and received an increased share repurchase authorization of $500 million from their Board of Directors. They secured additional e-motor awards and are excited to extend their partnership with Xpeng.

BorgWarner's new electric talk vectoring disconnect (ETVD) product line has secured new business with Polestar and a major European OEM, with production expected to begin later in 2024. This three-in-one system helps improve traction and agility in electrified vehicles, addressing the added weight of hybrid and battery electric vehicles. The company's foundational portfolio has an estimated average content opportunity of approximately $550 for combustion vehicles globally, with potential for growth in North America and across its national portfolio.

The paragraph discusses the growth opportunities for BorgWarner's foundational products, such as Turbo, EGR, and timing systems, in the North American market. It also mentions the potential for growth in the eProduct portfolio, particularly in hybrid architectures and plug-in hybrids. BorgWarner's strong market share and financial strength position them well to support customers in the evolving automotive industry.

The portfolio has grown through M&A and focuses on technology for EVs. This has allowed the company to establish product leadership in multiple areas and support hybrid propulsion. BorgWarner is well positioned for electrification adoption and aims for above-market growth. The first quarter results were strong, with outperformance in sales and strong conversion. The company secured new eProduct awards and has a resilient portfolio for efficient powertrains. They are confident in their ability to convert mid-to-high teens regardless of where the revenue comes from.

BorgWarner has had a successful first quarter, with 7% organic sales growth and strong margin performance. They plan to continue managing their business holistically and focus on driving sales growth and converting it into earnings. The company also reported a 23% year-over-year incremental conversion on an all-in basis. The strengthening U.S. dollar had a slight negative impact on sales, but this was offset by growth in China and Europe, as well as acquisitions. The company's adjusted operating income was 339 million, with a 9.4% margin.

The company's adjusted operating income from continuing operations increased by 54 million due to higher sales and cost controls, resulting in a 23% incremental margin. Adjusted EPS also increased by $0.22, and free cash flow was impacted by timing of customer collections and tax payments. The company's full-year outlook includes a sales headwind of 100 million from weaker foreign currencies and organic growth of 2-5%. The company expects to deliver 2.5-2.8 billion in eProduct sales and the Eldor and SSC acquisitions will add 30 million to 2024 sales.

The company is projecting total sales in the range of 14.4 billion to 14.9 billion for 2024, with an expected adjusted operating margin of 9.2% to 9.6%. The outlook for adjusted EPS has increased due to share repurchases and a reduction in the tax rate. The company also plans to deliver free cash flow of 475 million to 575 million for the full year. The Board of Directors has approved an increase in share repurchase authorization of up to 500 million over the next three years, bringing the total potential share repurchases to 767 million. The company has also returned capital to shareholders through dividends and a tax-free spin-off.

BorgWarner has distributed 3.1 billion to shareholders since 2020 while also investing in the company's future. Their focus on returning capital to shareholders while also investing in the business demonstrates the strength of the company and their commitment to maximizing shareholder value. The increase in share repurchase authorization is another example of their balanced capital allocation approach. The CFO expects the company to deliver organic growth, strong incremental margin performance, and generate strong operating cash flow for long-term value creation. The call is then turned back over to the moderator for questions.

Colin Langan asks about BorgWarner's strong Q1 performance and if there were any one-time factors that boosted results. Frederic Lissalde attributes the success to strong operational performance and reiterates the company's full-year guidance. Langan also asks about BorgWarner's opportunities in the EV market, to which Lissalde responds that about 40% of their light vehicle eProduct is going into hybrid vehicles and there has been increased interest in PHEVs.

Frederic Lissalde discusses the global interest in plug-in hybrids and advanced hybrids, with China and Europe seeing an uptick in demand. In North America, it is too early to see a significant increase. Lissalde also addresses the investment and spending on electric vehicles, noting that while there may be some hesitation in the U.S., there is a strong push in China and Europe that prevents them from pulling back on investment.

Frederic Lissalde, CEO of BorgWarner, discusses the company's approach to managing costs and achieving mid-to-high teens conversion regardless of revenue source. He emphasizes that BorgWarner is focused on efficient powertrain and has scale in all architectures. When asked about capacity and capital efficiency, Lissalde mentions the flexibility in their facilities and gives an example of similar products for hybrids and bets. In response to a question about revenue split, he does not provide specific numbers but mentions that foundational products are still experiencing solid growth due to market dynamics.

Craig Aaron discusses the breakout of eProducts and foundational products in the quarter, with eProducts accounting for over $500 million in revenue. The growth over market was driven by both China and Europe, particularly in the drivetrain side of the business. When asked about margins, Frederic Lissalde notes that they are aiming for mid-to-high teens incrementals across all product lines. Noah Kaye asks about the company's deployable free cash flow after dividends and repurchases, which is estimated to be around $250-300 million.

Craig Aaron, speaking on the company's pace of buybacks for the rest of the year, says they will continue to repurchase opportunistically and take a holistic approach to capital allocation. In the first quarter, they repurchased $277 million in shares and are pleased with their Board of Directors' additional authorization. Frederic Lissalde adds that the company's products revenue increased by 25% in the first quarter, in line with their full-year outlook of 25% to 40%. In the next quarter, they will be launching various programs with major companies such as VW Group, Daimler, HMC, and BYD.

BorgWarner is increasing their battery pack capacity in Seneca and expanding into other areas of eProducts. They are also seeing increased demand for their traditional core products such as turbos. However, it will take time for customers in North America to adopt these technologies. The company will continue to manage incrementals and may consider restructuring or pricing actions in response to market volatility.

The speaker is discussing the potential for increased margins and pricing opportunities in the R&D sector for next year. They mention that the ePropulsion segment is currently running at a 30% incremental and steps will be taken to improve this. They also mention adjusting costs based on market trends. The speaker is unable to disclose specific information about their orders and exposure to Chinese companies.

The interviewer asks if China's market is a foreshadowing of the rest of the world's evolution towards electrification and if BorgWarner is prepared for various propulsion scenarios. Frederic Lissalde responds that China has a high percentage of advanced hybrids and BorgWarner is not attached to any specific region. He also mentions that there has been volatility in production schedules at OEMs in recent weeks.

During the earnings call, Frederic Lissalde was asked about the company's market projections and production schedules. He stated that the company's view of the market for the full year is already below other companies, but they will adjust accordingly. In regards to battery systems revenue, the company's guidance for the year is $700 million to $800 million, with $750 million for commercial vehicle battery packs. Lissalde also mentioned that the company's eProducts revenue is expected to improve throughout the year, which could lead to a better margin loss rate. However, he did not provide a clear explanation for why the foundational profitability would degrade through the year.

Craig Aaron, a representative from the company, states that they are focused on achieving mid-to-high teens growth on an all-in basis, regardless of where the revenue comes from. They are pleased with their 23% all-in performance in the third quarter and aim to continue executing for the full year. When asked about the strength in the Drivetrain and Battery Systems segments, Aaron attributes it to overall good performance and growth in China and Europe. The company is also looking to improve ePropulsion margins and potentially push for more engineering recoveries in light of increased uncertainty in the West.

BorgWarner is taking a strategic approach to improving margins and growth in their eProducts segment. They are implementing cost actions to reach mid-to-high teens margin performance and expect the business to grow in the future. The company's focus on efficient systems and mobility, particularly in power electronics, has played a role in recent customer wins. They are confident in their $2.5 billion to $2.8 billion revenue outlook for eProducts despite volatility in light vehicle back plans.

The speaker is addressing the question of whether the previously communicated 2025 outlook for new products of $4.5 billion to $5 billion is still achievable. The focus is on securing new businesses and strengthening the product portfolio, with a goal of delivering mid-to-high teens incremental on an all-in basis. More information on 2025 will be provided closer to that year. The call is concluded.

This summary was generated with AI and may contain some inaccuracies.