Good morning, and welcome to Dana Incorporated's First Quarter Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please note that today's meeting, including the speakers' remarks and the Q&A session, will be recorded for future playback. There will be a question-and-answer period following the speakers' remarks, and we will accept questions from the telephone only. At this time, I would like to turn the call over to Dana's Senior Director of Investor Relations and Strategic Planning, Craig Barber. Please proceed, Mr. Barber.

Thank you, Regina, and good morning everyone. Thank you for joining us today for Dana's first-quarter 2021 earnings call. You will find this morning's press release and presentation are now posted on our investor website. Today's call is being recorded, and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied or rebroadcast without our written consent. Allow me to remind you that today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from those suggested by our comments today. Additional information about the factors that could affect future results are summarized in our safe harbor statement found in our public filings, including our reports with the SEC. On the call this morning are Jim Kamsickas, Chairman and Chief Executive Officer; and Jonathan Collins, Executive Vice President and Chief Financial Officer. Jim, please start us off this morning.

Good morning and thank you for joining us today. During the first quarter our customers continued to accelerate production to meet strong demand across all of our end markets, driving sales for the quarter to nearly 2.3 billion compared with last year, representing a $337 million improvement. Adjusted EBITDA in the quarter was 234 million compared with 205 million for the same period in 2020. As is normal with the first quarter of our business, adjusted free cash flow was a use of 26 million, but this compares favorably to the use of 114 million in the first quarter of 2020, which saw the onset of the global pandemic shutdowns. Diluted adjusted earnings per share were $0.66 in the first quarter of 2021, compared with $0.47 in the same period of the prior year due to higher earnings this year. Moving to the key highlights on the upper right-hand side of the page, we were able to meet stronger demand in key markets and continue to execute our strong sales backlog to drive sales higher for the quarter. We also continue to manage higher costs related to supply chain disruptions, logistics, and labor constraints that are challenging the industry as the end market recovery quickly recovers from last year's production shutdowns. I will provide more detail around this in a moment. I'll also update you on the efforts to expand our electrification capabilities to meet the growing EV sales and our backlog. Finally, we'll discuss the progress we're making on our ESG goals, which is illustrated in our recently published sustainability and social responsibility report. Please turn to Page 5. As I like to go into further detail about how we're capitalizing on strong demand across all three of our markets. The world has certainly changed from a year ago, as markets continue to recover globally. Strong demand in the first quarter was driven by continued higher volumes, especially in the light vehicle market, particularly full frame trucks in North America. We successfully capitalized on higher volumes at the same time we remain cautious on the outlook due to some of the challenges facing our industry, including the shortage of semiconductors, which are impacting many of the major OEMs around the world. Moving to the center of the slide, the heavy vehicle market continues to be strong, particularly in North America. The rebound of Class 8 truck sales continues, as we're expecting production to be around 300,000 units. The medium-duty segment also remains strong. However, we are seeing demand for heavy and medium-duty trucks in Brazil remain somewhat subdued. Lastly, in our off-highway markets, we have a strong presence in Europe and Asia. Demand for off-highway equipment is improving. It remains especially strong for agriculture equipment, and we are seeing global construction and mining markets beginning to rebound. As you would expect, the higher demand across many of the end markets is pushing up against both capacity and labor constraints across the global supply chain. Please turn to Slide 6 for how we are managing this challenge. As markets continue to recover from last year's shutdowns, higher raw material costs, semiconductor shortages impacting our customers, logistics constraints and labor shortages related to COVID restrictions continue to test the mobility industry. Through all these challenges, we've remained focused on managing these issues to successfully serve our customers. In the upper left-hand side of the slide, we have seen a rapid rise in steel and other raw material costs, particularly SBQ steel and aluminum. As we have stated before, we recover the majority of the increase from our customers. Our supply chain team has done an outstanding job planning for these various impacts. And we continue to actively manage our supply base in recovery mechanisms. Moving to the upper right-hand side of the slide, everyone on the call is fully aware of the semiconductor shortage causing many major OEMs to slow or idle production. So far, there's been less of an impact on many of the key light truck programs that we serve as our customers have prioritized these productions for those key vehicles. This remains a risk across the mobility industry, and it is something we continue to monitor in conjunction with our customers and adjust our output accordingly. Moving to the lower left, our sea container shortage and vessel availability also impacted global supply chains, resulting in shipping delays, bottlenecks at port facilities and importantly freight prices. According to the industry reports, the cost of shipping a container has risen by 80% since early November and has nearly tripled over the past year. While these and other supply challenges have put cost pressures on our supply chain, we continue to implement countermeasures to limit the impacts where we can while still maintaining our commitments to our customers. On the lower right side of the page, it's very clear that we are not past the challenges related to the COVID pandemic in all parts of the world. There remain hotspots such as Brazil and of course India that are putting added pressure on an already challenged supply chain. To mitigate the risk we have taken a proactive approach to work with our customers and suppliers to ensure the right material and labor is available. As we continue to be very thoughtful about the level of service we need to maintain for our customers both within the impacted regions and outside. While we expect these issues will be a headline for the entire industry this year, our multi end market focus and global presence aids in our ability to manage these forces. We have been successful in protecting our customers and enabling demand fulfillment while we continue to launch significant new business backlog and strengthen our position in vehicle electrification. Turning to Slide 7, I'd like to update you on our new electrification facilities that will support our strategy to lead in electrification. Vehicle electrification isn't just a far-off ambition for the mobility industry. It's right here right now and we are investing in the infrastructure needed to meet this demand. As we continue to expand our sales backlog by winning new electric vehicle programs, we're adding manufacturing capacity in a measured fashion to ensure that we have the capability and capacity to meet the specialized electrodynamic needs of our customers around the globe. By expanding our electrification manufacturing footprint, not only are we installing the capacity to support current and future volumes, we are also strengthening our electrification design, engineering, and manufacturing capabilities across the globe. The mobility industry exists on all points of the global map. Hence, it's important that we have the equipment and human capital in all regions of the world to support our customers. Today, Dana has commissioned more than 250,000 square feet of electrodynamic manufacturing capability to meet current and future demand in regions with strong EV growth. Beginning at the left side of the slide, in China, we continue to have an active and growing footprint ready to support the fast-growing vehicle electrification trend including the new Dana Weifang Electrodynamics Manufacturing Center. The Weifang facility provides our customers a full portfolio of motors and inverters leveraging our global systems expertise in electrification. This facility has automated production lines as well as testing capabilities for electric and hybrid drive lines. In India, Dana's new Chakan Electrodynamic Manufacturing facility is a world-class operation serving both the light and heavy vehicle markets domestically and for export. The Chakan team is responsible for manufacturing integrated mechanical and electrical components for alternative propulsion applications including low voltage synchronous and high voltage solution for vehicles from the smallest to the largest across our customer base. Moving to Europe, Dana's Chudleigh, UK facility further expands our motor manufacturing capabilities serving a variety of important customers. This facility produces electrodynamic products that are integrated seamlessly within its e-Axles, gearboxes and hubs or pumps. Applications include aerial work platforms, excavators, telehandlers, and many more. As the only supplier capable of delivering all elements of a complete fully integrated electrified system across all mobility markets, we expect the electrification to continue being a larger percentage of our sales backlog. To meet the growing demand, we are investing in partnering with our customers to support their electrification journey. Moving to Slide 8, I'd like to talk about the continued progress we are making towards our sustainability and social responsibility objectives. From time to time, we're providing you an update on environmental, social and governance activities. This quarter, I thought I would mention that we recently published our annual sustainability and social responsibility report on April 22. For us, this is not just a report that we pull together each year, but rather, it helps encapsulate our vision for a better future and measure our progress as we adopt a balanced approach that considers the people we encounter, the products we develop and the planet that enables us to do our work. Highlights include Dana's commitment to reducing our total annual greenhouse gas emissions by more than 50% before the end of 2035, along with supporting vehicle electrification and other sustainability initiatives to help achieve the Paris Climate Agreement targets. In addition, we're committed to 90% of our US electricity demand being addressed by wind and exceeded more than 1 billion customer miles driven with Dana's electric motors in 2020, equivalent to more than 275,000 metric tons of CO2 eliminated. To be clear, it all starts with people. Our number one priority is the health and safety of our employees, customers, suppliers, visitors, contractors, and the communities we call home. We practice safety first in everything that we do. And part of the work-safe work environment is providing a respectful and inclusive workplace where everyone can contribute, participate and thrive. We believe that listening to diverse voices and opinions gives Dana strength, enabling us to solve problems faster and drive continuous improvement and profitable growth. We're also driven by a desire to provide innovation that helps to anticipate, understand and shape market trends and fast-track new products that deliver industry-shaping ideas. Our strategy of leading in vehicle electrification is a key element of our sustainability objectives, and ultimately helps our customers and their customers to achieve their sustainability goals. This brings us to our planet. In addition to our commitment to reducing greenhouse gas emissions, we've established a technology and sustainability committee with our Board of Directors and appointed a Chief Sustainability Officer to our executive leadership team. Last but not least, we take corporate governance very seriously at Dana. Approaching everything that we do honestly and with integrity is ingrained in our strong one Dana culture, which has delivered outstanding service and unwavering commitment to ethics for more than 116 years. Thank you for your time today. Now, I'd like to turn it over to Jonathan Collins for our financial update. Please go ahead, Jonathan.

Thank you, Jim. Good morning, everyone. Slide 10 provides an overview of our first-quarter results of 2021 compared to the prior year. In the first quarter of this year, sales approached 2.3 billion, delivering growth of 17% and exceeding the expectations we outlined in February, as heavy vehicle demand accelerated and light vehicle demand was negligibly impacted by the chip shortage. Adjusted EBITDA was 234 million for a profit margin of 10.3%, which fell just short of last year and our expectations as commodity costs rose sharply, and we incurred premium costs as a result of the supply chain challenges that Jim outlined a few moments ago. Adjusted free cash flow this quarter was a use of 26 million, an improvement of 88 million over the first quarter of last year on higher profit and lower working capital requirements. Net income attributed to Dana was 71 million in this year's first quarter compared to 58 million last year. The difference was primarily higher earnings this year and lower impairment charges partially offset by changes in the valuation of marketable securities, and higher income tax expense compared to the first quarter of 2020. On an adjusted basis, net income in the first quarter of this year was 97 million, 29 million higher than in the same period of 2020. Diluted adjusted EPS was $0.66, a $0.19 improvement from the prior year due to higher adjusted EBITDA. Please turn with me now to Slide 11 for a closer look at the drivers of the sales and profit changes for the first quarter. The changes in first-quarter sales and adjusted EBITDA compared to the same period last year are driven by the key factors shown here. First, organic sales were more than a quarter billion higher than last year as all our segments benefited from stronger end market demand. The profit conversion on incremental sales was constrained by premium costs resulting from supply chain challenges. Second, foreign currency translation increased sales by nearly 50 million, but with no margin impact as the dollar weakened against a basket of currencies, namely the euro. Finally, the recent spike in steel cost compressed profit margins by 90 basis points. Gross commodity costs increased by 35 million, but only about half of the cost was recovered from customers in the form of higher selling prices in the quarter due to the typical lag we see during a rapid run-up in cost. Please turn with me to Slide 12 for a closer look at how adjusted EBITDA converted to cash flow. Free cash flow was far closer to neutral than our historical first-quarter precedents despite the typical seasonal buildup of working capital at a use of 26 million. This was an improvement of 88 million compared to the same period last year, due to higher profit, lower working capital requirements and slightly lower capital spending. Please turn with me now to Slide 13 for a look at our revised full-year guidance for 2021. We are raising our full-year financial guidance ranges that we provided just a couple of months ago as end market demand continues to exceed our expectations. The revised guidance is bolstered by our strong first-quarter sales results, and a relatively clear line of sight for second-quarter sales. However, we remain cautious on the second half of the year given the uncertainty surrounding the ongoing supply chain disruptions and regional pandemic containment actions. We now expect full-year sales to be approximately 8.75 billion at the midpoint of our range, which is an increase of nearly half a billion over our prior guidance. We now anticipate adjusted EBITDA to be approximately 960 million at the midpoint of our range, with an implied profit margin of about 11%, which remains unchanged from our prior guidance as we anticipate higher commodity costs and premium costs from supply chain challenges will continue to temper our margins in the short term. Adjusted free cash flow margin is expected to improve modestly between 3% and 3.5%, which is 25 basis points higher at the midpoint compared to our previous guidance. Diluted adjusted EPS is now expected to be approximately $2.35 per share at the midpoint of the range, an increase of $0.20 per share. Please turn with me now to Slide 14 where I will highlight the drivers of our expected sales and profit changes for the full year. As with our earlier comparison, this chart highlights the key factors driving the change in expected sales and profit for 2021 compared to last year. First, organic growth is now expected to add nearly 1.5 billion in sales, including our new business backlog of a half a billion, and the end market volume increase, which is approaching 1 billion. Incremental margins are expected to remain strong in the mid 20s, providing more than 300 basis points of margin expansion. Second, we're updating our outlook for the timing of closing the pending acquisition of Modine's automotive liquid cooling business. We originally expected the transaction to close in the first half of the year, but based on the status of the regulatory approval process in Germany and Austria, we do not expect the transaction to close until later this year. We continue to exclude the impact of this acquisition from our guidance and we'll provide further updates as the process unfolds. Third, we anticipate the impact of foreign currency translation to now be a benefit of approximately 100 million to sales and about 10 million to profit with no impact to margin. Finally, we now expect gross commodity cost increases of about 125 million, as fuel prices have continued to rise. We anticipate recovering about 95 million of the increase from our customers in the form of higher selling prices, leaving a net profit impact of 30 million, which will compress margins by about 50 basis points. It's also worth acknowledging that an 11% margin is 80 basis points lower than 2019 despite comparable sales. This is driven by three factors. One, gross commodity costs are nearly 100 million higher than 2019, and even though we will recover a majority of these costs, this compresses margins by 40 basis points. Two, we've elevated our investment in electrified products by more than 20 million, holding back another 20 basis points as there are limited abilities to offset these investments with cost efficiencies given the current condition of the supply chain. And three, the retroactive recovery of indirect taxes in Brazil in 2019 will not recur this year, resulting in another 20 basis point headwind. Regardless, we remain confident in our ability to expand our margins to over 12% in the next few years as we execute our plan to achieve more than 1 billion of sales growth and the supply chain challenges abate. Please turn with me now to Slide 15 for more detail on how we expect this year's adjusted EBITDA to convert to cash flow. Our full-year outlook for adjusted free cash flow margin has increased to a range of 3% to 3.5% of sales, representing approximately a 220 million improvement over last year. The growth is entirely driven by the increased profit I just outlined on the prior page, which is partially offset by higher working capital requirements to deliver this year's sales growth, higher capital expenditures to fuel future sales growth, and slightly higher cash taxes as a result of the profit growth. Please turn with me now to Page 16 for our perspectives on the major issues we will navigate through the remainder of the year. As Jim outlined earlier in the call, in keeping with a core tenant of our strategy, customer centricity, we remain laser-focused on the quality and delivery of our products as we manage external factors that are pressuring the entire mobility industry. Our cost recovery mechanisms are working effectively to mitigate the economic impact of the rapid increase in raw material prices. So we expect to see higher recovery ratios through the remainder of the year as the lag effect abates. There's also the potential for costs to moderate later this year as more steel capacity comes online. We remain cautious regarding the uncertain resolution to the microchip shortage and resulting production slowdowns at our customers. As we mentioned previously in the first quarter, we were impacted to a lesser extent than many in the industry due to our beneficial end market mix of full frame trucks and heavy vehicles. But we are seeing a more meaningful impact in the second quarter in our light vehicle businesses, which is reflected in our guidance. We're also actively managing our global supply chain to buffer many of the logistics constraints and higher costs associated with access to shipping capacity and port bottlenecks. We expect to see higher costs continue into the second quarter, but moderate in the second half of the year. Our operations in regions still facing the impact of the global pandemic continue to prioritize the safety of our people while serving our customers through heightened restrictions and resource constraints. As we step back and survey the landscape of the global mobility markets, we're extremely encouraged by the demand fundamentals driving a definitive cyclical upswing in all the markets we serve. We're clearly cautious about the supply required to fully meet this demand in the coming months, but are prepared to take all the necessary steps to capitalize on this opportunity. We're also incredibly encouraged by the long-term secular trend towards vehicle electrification and the significant opportunity this creates to grow our business and as a result have taken meaningful steps to put the capacity in place across the globe to deliver these new products to our customers. I'd like to use this opportunity to thank the entire Dana team for your tireless work and commitment to support our customers and thanks to all of you for listening in this morning. And I'll now turn the call back over to Regina so that we can take your questions.

At this time, we would like to begin the Q&A session. Our first question will come from the line of Colin Langan with Wells Fargo.

Great, thanks for taking my question. Last quarter, you had indicated sort of Q2, Q3 would be the higher margin. I noticed that slide wasn't in here. Any color on the cadence? It does seem like some of the key platforms are going to be a bit weaker in Q2. So is that now a much weaker quarter? How should we think about the progression through the rest of the year?

Sure. Well, good morning, Colin. Just want to start by welcoming you back to Dana. Thanks for joining this morning. Yeah, just a little color on the margin color, the second quarter, we think will have the opportunity to be modestly improved from Q1 primarily because of commodity recovery. So the lag effect should start to catch up in Q2. We are going to continue to see some premium costs. So that original curve we indicated where margins get better in the middle of the year will likely continue. As for the second half of the year, essentially our outlook is relatively unchanged from what we showed you just a couple of months ago. We'll continue to see how all of these factors shape up in the next 60 days. And then we'll have a little better sense on the second half of the year when we're together in July.

Great, that's helpful. And just maybe one quick follow up. There's a lot of headlines around the infrastructure bill. I know a lot of your off-highway business is in Europe. Any sort of color on what kind of tailwind if that goes through, we could be expecting? How much of your business could be benefiting from something like that?

Yeah, a lot of the benefit that we're seeing in off-highway right now is from the ag market. So there's still quite a bit of room for construction to improve. As you noted, even though we do a lot of our production in Europe, that's for equipment that's used around the world, so certainly any of these stimulus catalysts that could help to increase demand could benefit our business. And that could be a real margin benefit for the off-highway segment as well as Dana because construction and mining are more profitable segments within that business. So yeah, we're certainly encouraged by that.

Great, thanks for taking my questions.

Sure. Thanks Colin.

Hi, good morning. Apologies if I missed that. Could you quantify the impact from the supply chain inefficiencies in the first quarter and maybe how to think about it in the second quarter or over the rest of the year?

Sure in Q1, it was significant for us. While we didn't put a specific number on it, just to give you a sense, it had a meaningful impact on our margins in a couple areas. Number one, we still continue to see quite a bit of expedited freight. We have suppliers that have gotten behind. And then with the slowdowns in the global logistics chain that Jim talked about just a few moments ago, we ended up having to continue to incur some premium freight at a rate that's well above what we normally would. Secondly, our operations are less efficient when they're sitting around waiting for parts. So you can imagine running overtime and other factors that drive that as well too. So in terms of how we see that progressing, unfortunately, we do see it continuing into the second quarter. We are seeing improvement in some areas. So we're cautious that we may see a little bit of a tailwind there in Q2. But we certainly expect later in the year that we would start to gravitate more towards normal levels. And we'll have more to share on that when we're together again in just a few months.

Okay, that's helpful. And then just a point of clarification on some earlier comments, so I think you indicated the increase from the prior guidance at the top line is mostly reflective of the strength in the first half of the year, but you remain cautious in the second half. Just to be clear, are you seeing any sort of risk factors specifically in the second half? Or are you saying that this is too early not to get more positive on the second half as well?

Yeah, I really think it's more of the latter Emmanuel. It's that we have pretty good line of sight into the next few months from customer releases. We can see the downtime that they're expecting due to the chip shortage. We're starting to see continued encouraging signs in our heavy vehicle segments as those orders go up. But we're in a position where with all the uncertainty in the supply chain and in particular with the chip shortage, we're just reluctant to call the second half of the year up yet. So I would characterize it as more of the latter. We just want to get through a few more months before we have greater confidence in the higher demand sustaining through the balance of the year.

Okay, and just one quick follow up on this one. So your contribution from market factors up to the top line, I think, increased by about $350 million for the year. Is there any way to split that between your nearest end markets?

It's pretty evenly spread. So in the first quarter, as an example, we had contemplated more downtime due to the chip shortage than actually occurred. Jim touched on the fact that we saw our customers diverting chips towards the key truck platforms that we produce, so even light vehicle was a bit better for us in the first quarter than we thought. But also, we saw encouraging signs or higher demand in the heavy vehicle markets. Ag really picked up in the off-highway segment. And we saw both heavy and medium-duty vehicles and commercial vehicles do a bit better than we had anticipated. So it was pretty evenly distributed across the board. As we move to the second quarter, we see that continued strong demand in heavy vehicle with just a little bit of a headwind on the light vehicle side due to the chip shortage. So broadly speaking, it's pretty well distributed across all three of our end markets.

I just want to start - I know we don't - you don't discuss the segment except in the appendix. So if I look at commercial vehicle and drive motion systems typically a low margin segment, but in particular it was negative incremental on that 50 million. Can you talk a little bit more about that segment? Is that where some of these supply chain pressures are most concentrated? And then I've got a follow up around kind of the longer term.

Yeah, so on - I'll take the first part. On the CV margins, you nailed it. It is the supply chain was more acutely impacted in CV. That is a longer supply chain. And some of the challenges we ran into affected them incurring more premium freight. That was the biggest driver why we didn't see incremental profit on those incremental sales. The other undertone is that's the business where we're seeing most of our growth in electrification early on. So when I highlighted that higher EV spending compared to 2019, as an example, CV is one of those areas where you're really starting to see it. So they've made some progress on the supply chain, we see line of sight into that improving, but that was the biggest driver in Q1.

Second question and it's not going to be around electrification. It's just around mid-term, if we are moving globally into a more of an inflationary environment, at least in North America. And it's not just commodities where, as you pointed out you do have contractual recovery mechanisms, but kind of everything, labor, electricity cost, freight costs and so forth. To what extent as you think about either your formal recovery mechanisms, or the pace at which you can re-price the business contractually, shorter cycles versus light vehicle programs that might have pricing locked in for multi-years, how do you feel about an inflationary scenario and its impact on Dana and the ability to pass on a broad range of input cost increases?

Hey, good morning, Brian, this is Jim, really good question. You already said it. But I'm going to reiterate the point, yes, there's hard structured programs much more so on the commodity side of it, okay. So we place hold that one for a minute. The second one would certainly be out of the box. But I will start with - from unfortunately, somebody that was running a company in the middle of the crisis in '08 and '09 that our customers are a different customer base, in my opinion than they were, say, 10 to 20 years ago. And they need a healthy supply base, so they'd be the first one to tell you that they need a healthy supply base, especially a supplier like Dana that put so much focus and commitment and money into electrification and providing solution for the future and where things are at. So the discussions would have to be had, but I think they'd be a different level of black and white. This is what the contract says this isn't what the contract says in the event that what you said holds true is related to inflationary pressures around the world. I'm not there yet. I know what you're saying. I'm not there yet that the inflationary pressures are going to be as extreme as maybe others are. But at the end of the day, again, I think between a combination of our ability to take out cost, the ability to have a global supply chain where necessary, as well as much more reasonable and understanding customers of the health of the supply base being critical. I think we'll get there and if there's no better evidence than that, I mean, just think about the challenges the OEMs are having right now as it relates to supply. They're going to want to make sure that they have sophisticated capable global suppliers such as Dana to be there for them to continue to create value for their customers.

Right, and they're benefiting from price inflation in the ATPs. Just a quick follow up and the first vehicle drive because that's fleet selected, is the pricing there a bit more flexible? Is it on an annual basis? Or is it similar to light vehicle procurement contracts where there's kind of a six glide path for pricing?

Yeah, there's some similarities and differences. So I would say it's a mixed bag. But in principle, there are some opportunities over time to address that. But there's certainly some structure as well, but I think you characterized it right. It's a bit more flexible than light vehicles.

Hey, guys, this is Brendan Steven on for Noah Kaye. Appreciate the color on the supply chain. Can you just talk a little bit about any strategic initiatives you're pursuing to better track suppliers and their inventory levels? And what you're doing to diversify the supply base?

Good question. And we welcome to the call. I appreciate that. I mean, there's a - we don't have enough time on the day right now to go through every initiative that we're doing to be able to kind of work through that. But there are many. There are those like you said, we've done anything from multi-dual sourcing, to re-engineering products to be able to produce them closer to home country. And I don't mean just for American manufacturing, but around the world. And the list is long. One thing is fortunately for us, it's not a journey that we just said, oh my goodness, we're in the middle of a pandemic, let's do that. That's something that we've been working on for at least three to four years, in terms of having flexibility in supply. And I'll even speak with an example. We're not a believer that everything has to be vertically supplied for sake of vertical supply. But instead, making sure that we have balance in terms of what we do for a living. So I'll give - getting back to an example forming back three or four years ago, many of you may recall that we bought or acquired the largest independent forging company in Brazil to give us more flexibility out of country, etc. So again, I could go on and on and on. But though all those are in place, we'll continue to see continuous improvement as we go through it on the supply chain, in my view. Because why one, everything I just talked about, and two as we came back from that V shape recovery, some may argue it was U, but whatever the case as you go through that you're certainly going to have to do it takes time to get some things in place. And many of those things are in fact in place now.

Great, thanks. And then just a follow up on Modine acquisition, can you give us any update in terms of integration planning and incremental thoughts that fit into the portfolio? I know you said it got delayed, but just any thoughts there?

Yeah, the PMI work has progressed as normal. We're in a good position to be able to integrate that business. Just the regulatory process has taken a bit longer. And we should have a better update for you when we're together again in a few months.

Good morning, everyone. And thanks for taking the questions. First one, when aggregating each of your segments is it possible for you to quantify how we should think about content per vehicle across regions? And where I'm getting with this question is when we look at the semiconductor shortages and supply chain disruptions, North America appears to be one of the more impacted regions, which I would assume is one that has higher content per vehicle for you guys. So is this a fair characterization? And would you expect to see any regional mix headwind on revenue growth in future quarters? Or is it going to be offset by the fact that mix within regions generally continues to improve?

Yeah, it's a very fair point. Certainly our highest CPV in the light vehicle segment would be in North America. So some of those foundational programs for us the Ford Super Duty, the Jeep Wrangler carry very high content, so you're right about that and that is some of the downtime when we think about North America that we've reflected in our second quarter. So we think that you're right, it's going to start affecting Q2. That's true in the light vehicle businesses. Maybe the exception to that is we do have pretty comparable content across the power technology segment in most regions. So you won't see much of a difference there from a content regionally in power tech, which largely serves the light vehicle market. On the off-highway and commercial vehicle side, I think there's a bit more parity in the content across the region. So largely what we're producing is for a global market and is pretty comparable, but I do light vehicle drive systems is certainly a bit more skewed to North America. That's fair.

Great, that's helpful. And then second question, when we look at the commentary around conversion on organic revenue, which I think excludes the impact from raw materials. Is it possible for you to bridge for us how you get from 15% conversion in 1Q to 26% for the full year, and a backdrop where you've talked about supply chain disruptions that may linger through the course of the year? Is it just a function of lapping easier year-over-year comps, particularly in the second quarter? Or is there something from an operational perspective that you think is going to be resolved on a relative basis in the back half of the year?

Yeah, it's two things. You hit one of them. It's the comp in Q2. So Q2 of last year obviously was just approaching breakeven on a dramatic sales decline. But you also touched on the second one, which is in the second half of the year we've indicated we do see some of these premium costs abating. And in the second half of last year, we saw a pretty significant impact from those parts of the business for premium costs, really across all of them. And then the other factor that really is outside of the organic, but helps the overall margin profile is the catch-up in raw material costs from a recovery standpoint, but just isolated to organic, it's those two items.

Hey, good morning, guys.

Thanks for your patience James. Go ahead.

No problem. Just back to the cadence for the year, it sounds as though you have decent visibility for the second quarter. So if we just think back to your prior guidance, right, which had a pretty even first half per second half split for both revenue and EBITDA. Can you provide any color on how we should be thinking about that first half-second half breakout now within your current framework?

Yeah, I mean, I think the upside would follow - any potential upside we had in the second half would follow a comparable phasing where we're going to see typically based on workdays, higher sales towards the middle of the year, the second and the third quarter, which yields a better margin. Seasonally, Q4 is usually a little bit lighter on sales and on profits. So that's kind of how we're thinking about it. And obviously, once we get through the next couple of months and have greater clarity on the chip shortage, we'll be in a better position to give a better outlook for the second half of the year. Moving to Slide 14 where I will highlight the drivers of our expected sales and profit changes for the full year. As with our earlier comparison, this chart highlights the key factors driving the change in expected sales and profit for 2021 compared to last year. First, organic growth is now expected to add nearly 1.5 billion in sales, including our new business backlog of a half a billion, and the end market volume increase, which is approaching 1 billion. Incremental margins are expected to remain strong in the mid-20s, providing more than 300 basis points of margin expansion.

Good morning, everybody. I wanted to ask about electrification, a number of light vehicle OEMs, even the ones that are in sourcing electric drive lines, like the GMs and Fords of the world seem to be aligning themselves with certain power electronics suppliers. And I'm wondering if you could just maybe talk a little bit about whether that has any longer-term implications for Dana or whether you think there's going to ultimately be multiple power electronics suppliers that would be separate from other aspects of their driveline procurement strategy?

Yeah, I think it's an interesting observation Rod. We're certainly seeing a broad range of sourcing models in electrification from component sourcing at customers to full system sourcing. We've been engaged in conversations across all of our end markets in the ability to supply certain components or a complete system. We think it's going to continue to create content upside. So we now have offerings in the electrodynamic or in power electronics and electric motors that we didn't have just a couple of years ago. So that's a growth opportunity for us. But clearly, a lot of our early wins that are in our backlog are for the full system. But the market you highlight, light vehicle is the one that's moving the slowest for our three, because they focused on the smaller and lighter vehicles. But we're encouraged by the engagement that we have with our customers across all end markets and are looking forward to this unfolding in the next year or two.

Okay. And maybe if you could just clarify for us the degree of confidence that you have, or visibility that you have on the decline in premium costs, and improving incrementals in the back half. Can you size up what sort of the delta might be and whether you think that has any implications as we think about the bridges into 2022 as that recovers?

Sure, Rod, good morning. I'll let Jonathan touch on the backside of that question if he can, without going too far into the details or weeds. But in the big picture and confidence, I want to reiterate, part of it, besides going into supply chain piece of it is just the recoveries. I don't think in my 30 plus years of being in supply manufacturing that I've seen anything like it in terms of a run-up. We've seen run-ups, but not like this one. So I mean it is what it is. As it relates to the supply chain, it is starting to - the world is starting to come back together a little bit. So I don't know that I can give you a direct answer. But those of you that are out there that maybe don't follow it as closely as certainly, you need to if you're leading a manufacturing company, is when you talk about sea container delays, when everybody talked about the ship, they get stuck in port, that was small potatoes compared to all of the other sea container delays that were at port in Los Angeles or Norfolk, et cetera, etc. And so that jam which ultimately turned into a delay of returning of containers and vessels back to other countries of origin was a massive issue that's starting to sort itself out. So to quantify it exactly Rod, that's very, very difficult. There is a million moving parts out there between obviously, it's the labor supply issues that any one of your calls you're going to have this quarter, you're going to hear about that from the Tier 1s, Tier 2s, Tier 3s to the supply of sea containers and vessels to so and so forth, very difficult to quantify. I will only say to you and you know this. Now this isn't per se my first rodeo on being an operations guy first and something else second, I don't know what is that we're - I Feel comfortable that it's getting better on a day-to-day basis. But for sure, this is not something that's going to be fixed in a day or a week. It's going to take its time.

Yeah, and just in terms of the margin profile Rod, we're indicating - we think Q2 is going to be better than Q1. But we wouldn't expect it to be such that the first half of the year would be at 11%. So we're certainly expecting most of the improvement in the cost to happen in the second half of the year. As Jim indicated, we've still got months, not days or weeks to work through some of these issues. But we are expecting an improvement this year to get us to that 11% margin.

Thanks for taking the questions. First, I just want to - and I think you sort of addressed this in the questions. But the dynamics in light vehicle, particularly where you obviously had very good revenue contribution, your core platforms, I think were quite good, but the contribution margin only 16%. Is that - that's just purely a function of having this outside North America exposure. And that's where the supply chain issues were much more magnified. That's what underscores that lower contribution margin by vehicle, despite good core programs.

You got it. Yeah. It's these premium costs that we're incurring, not only on the logistics side, but also the operating implications in our factories due to not getting deliveries when they're needed. So you're right. And then obviously, LV's overall margin was affected by commodities in the first quarter as well too, but just on the organic conversion you hit the key items.

Okay. And then sort of just a quick follow up on that, when your customers are seeing the same sets of pressures what is the - how did the tone or tenor of the commercial discussions with them shape up? Because they're seeing the same pressures as well and they're trying to do what they can to mitigate the pressures on their margin side, so how does that shape the commercial discussion?

A good question a little bit will be redundant to my answer, so I apologize, but - or somebody else's question earlier, which is, I think you need to dimension into two different buckets. First of all, to talk about commodity costs, those are generally formulaic. And if they're not formulaic, there's precedents that both us and our customers are pretty familiar with. And we just roll down that path and we collectively work together. As it relates to the other associated costs on it, I would say that it hasn't reached a pinnacle that it's become a pressure point or that, but I would say that they do have the ability, I would call it this, not saying it's easy, but they do have the ability to move price on vehicle sales. And so in some - to some degree and some fashion, they're going to have a recognition that the supplier, the Tier 1 supplier can't be the ham and the sandwich. And I think you can visualize the visual I'm trying to paint there, and they'll work with us on that, and so on and so forth. And I would even say it all depending on market there's already some flexibility for extraordinary costs. And I'll just be more blunt about it on the off-highway side of the business for a multiple different reasons that I won't get into. But we're doing some I'll call it extraordinary things beyond extraordinary things to ensure that our customers are protected. And they've been very fair with us. Let's put it that way.

Great and then second question. I wanted to follow up on the EV sourcing question and specifically on the commercial vehicle side. We just saw some news of Volvo Trucks investing in a company that's doing some work on batteries and mobile charging technology. So maybe we can just revisit the interesting questions specifically on the EV side, because I know in the past that's where you had different dynamic versus light vehicle where there's maybe more in sourcing efforts, commercial vehicle, maybe there's more of a reliance working on suppliers. Is that evolving at all? Are you seeing that shift at all in terms of how your customers on the commercial vehicle side are looking at their sourcing decision?

Yeah. Dan, well, that's a fair characterization. Our experience is that it's been pretty consistent over the past 12 to 18 months. So on the CV side, some of these early vehicles that are coming to market, they are looking for very broad system solutions. And we've been in a great position to help provide those. But as that matures, we think that it's going to take on a lot of different forms as volumes increase of some total system, some subsystems and even some component level sourcing. So lots of opportunity out there and we're engaged with our customers in all of those different models within the commercial vehicle space.

Great, thanks for taking my question. There's been a lot of discussion regarding the Biden administration support for light vehicle electrification, including more funding for consumer tax credits, support for charging stations, etc. And I think a lot of the details have yet to be fleshed out. Maybe we'll hear more tonight, but just curious if you're seeing, hearing or expecting any incremental support or subsidy for electrification on the commercial side of the business, where maybe the math on cost benefit of subsidies might even be greater given high number of miles driven per vehicle, etc.

Good question. I don't want to speak on behalf of the government or the administration or anything like that because who am I to know number one, number two? If I did, I'd be kind of crazy for saying anything. But number two is I don't think they're going to isolate light vehicle to commercial vehicle and anything else. I think it's more of a green solution, emission sustainability and the focus on overall, where's our world tomorrow? Not today. So I don't, although it may seem like it in the big bold print that it's more in light vehicle for obvious reasons. I don't think that that's going to be the case moving forward. I think you're going to make sure you're going to hear a lot more about end markets across the board.

Okay, great. Thanks. And then just finally, maybe on the flip side of the higher raw material input cost that you're seeing, which have been discussed at length. I'm just curious what might be happening on the ag or mining sides of the off-highway market? What sort of - what demand might look like there or how you think it might track going forward, just in light of the increase in revenue for the farmers and the miners around the world?

Yeah, we certainly think that that's been one of the demand catalysts in ag performing so strong in the early part of this year. And it could be a great leading indicator of better performance in the mining segment as well too. So that's a catalyst that we're keeping a careful eye on. And part of the reason we think there's continued opportunity for the markets to strengthen throughout the year.

Okay, and then just final follow up there, you did mention that Brazilian commercial truck might have been a little bit softer. And I know that sometimes the commercial truck down there can sort of benefit second derivative from mining and ag as they transport it around the country. Just curious, I don't know if that's due to some of the headlines around COVID down there, or what you're seeing with the Brazilian commercial truck market, and how that might track going forward.

Yeah, it's a good point. The demand - the underlying demand fundamentals are strong. So we should see a better performance there. The best indication we get from our local team and from our customers is you're right, the pandemic containment measures have affected that country and have had a bit of a cap on the output. So we're hopeful that as they work through that and people are more safe, one of the other benefits will be a better demand for our products and services later in the year.

Okay, well, thanks everyone for joining the call today. As always, I guess I put a quick stamp or summary on this one that I'm super encouraged. The business is growing. Profits are returning to normal levels. I'd almost put it into the phrase of this is what we've been waiting for. This is what we've been preparing for. And I think the team has done a remarkable job. We're a bit of a - a bit of the tip of the spear here in earnings season as many of you obviously are aware of. So I feel like we're might be explaining this the unexplainable to a degree. This is a bit of - also falls into the umbrella of a once in every 100 year global pandemic and all the moving parts to go along with it. So besides the fact I hope we gave the audience some clarity on the craziness that are out there in whatever you got is dealing with. I just take this opportunity to thank our customers for working with us as we go through things. Thank our employees for everything they're doing to navigate through the challenges of what they're doing to protect their people as well as support our customers and the list goes on and on. It is nothing like any of us have ever saw before. I will tell you this it is dramatically tougher in my view anyway than anything we dealt with back in '08 and '09. So thank you everybody for your support. We look forward to giving you an update next quarter.

This concludes today's conference call. Thanks for participating. You may now disconnect.