Good morning, and welcome to Dana Incorporated's Third Quarter 2024 Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session will be recorded for replay purposes. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest. At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Regina. Good morning, everyone. Thank you for joining us today for Dana Incorporated's Third Quarter 2024 Earnings Call. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we discuss today. For more details about the factors that could affect future results, please refer to our safe harbor statement found in our public filings and our reports with the SEC. Before we proceed, I encourage you to visit our Investor website, where you'll find this morning's press release and presentation. As a reminder, today's call is being recorded and supporting materials are the property of Dana Incorporated. They may not be recorded, copied or rebroadcast without our written consent. On the call this morning, we have Jim Kamsickas, Chairman and Chief Executive Officer; and Timothy Kraus, Senior Vice President and Chief Financial Officer. Now we'll get started. I'll turn the call over to Jim.

Good morning, and thank you for joining us today. Please turn with me to Page 4, where I'll discuss the highlights from the third quarter of 2024. Dana reported sales of $2.5 billion in the third quarter, lower than the prior year due to softening demand for electric vehicles across markets and reduced internal combustion engine vehicle sales for commercial trucks, off-highway equipment, and certain light truck programs. Adjusted EBITDA for the quarter was $232 million, down slightly from last year despite the significant and rapid sales reductions across all mobility markets. Importantly, despite the reduced sales, Dana achieved 30 basis points of profit margin expansion, delivering 9.4% in the third quarter. The strong profit performance was a direct result of outstanding operating and business system execution across all areas of the company. We continue to strengthen the business by leveraging core operations, new technology, and our exceptional people. Moving to the upper right of the slide, I'll walk you through a few key highlights for the quarter and the remainder of the year. We see further weakening demand for ICE, hybrid, and electric vehicles across most mobility markets, including commercial trucks, off-highway equipment, and certain light truck programs as a result of ongoing inflationary pressure, global uncertainty, and higher vehicle inventory levels, which have driven down production. Within our off-highway segment, specifically, we saw lower demand, particularly in Europe, especially within the construction and agriculture equipment markets. Second, yet again this quarter, the company continued to achieve company-wide efficiency improvements resulting in increased profit margin, all while overcoming the softening demand impacting our markets. Our team has done a remarkable job, efficiently flexing manufacturing-related cost drivers, and at the same time, the entire organization continues to achieve price and other fixed and variable cost improvements across Dana and throughout our value chain. Lastly, as stated in the bottom right-hand corner of the page, Dana remains within our full year profit margin and free cash flow ranges as a result of: one, profit conversion on traditional and organic sales; two, strong working capital performance; and three, prompt and efficient capital investment spending adjustments as OEMs rapidly modify vehicle development plans and timelines for future ICE, hybrid, and electric vehicles. Please turn with me to Slide 5 to review how Dana consistently improved profit margin despite the challenging operating environment. Over Dana's 120-year history, the company has been a leader in highly engineered internal combustion engine powertrain, sealing, and thermal management solutions. However, over the past several years, Dana did what many said could not be done. We disrupted ourselves by establishing industry-leading in-house hybrid and electric vehicle e-Propulsion and e-thermal capabilities. The Dana team has proven it could be done. Today, our vertically integrated ICE, PHEV, and EV strategy serves as a differentiator to winning replacement and new programs from our customers across all mobility markets. As challenging as this technological transformation was, as Slide 5 illustrates, this was accomplished while simultaneously expanding profit and facing the most volatile demand, unprecedented inflation, and supply chain disruptions that we've experienced in our lifetimes. Today, we have strong momentum due to our disciplined approach and the execution of our outstanding team. As of the end of the third quarter, we've achieved three consecutive years of consistent quarterly adjusted EBITDA margin improvement. There's work to be done, but the team is doing a remarkable job threading the needle by positioning Dana as a supplier of choice for ICE, PHEV, and EV growth while navigating risk and improving returns. The progress including increasing our adjusted EBITDA margin to 9.4% in Q3 can be directly attributed to: first, providing differentiating customer satisfaction, meaning quality delivery in the most advanced technology portfolio in the history of the company; second, leveraging synergies and scale to achieve company-wide efficiency improvements; and third, materially improving performance on every facet of the company for overall business execution. Please turn with me to Slide 6, where I'll provide a brief update in our markets. As we finish out the year, we anticipate continued softening in most of our end markets. Beginning on the left side of the slide, let's look at our off-highway segment, where we're seeing lower demand, particularly in Europe. Agriculture is down compared with last year, and demand for construction equipment softened in the third quarter and will likely continue for the remainder of the year. Furthermore, we anticipate mining equipment demand staying flat compared with 2023. While we expect light vehicle full-frame truck production volumes to remain relatively stable for key recently refreshed vehicle platforms, we are seeing softening in some programs as dealer inventories have continued to rise. Consistent with what we shared with you last quarter, we are witnessing markets for heavy vehicles being lower compared with 2023, with both medium-duty and heavy-duty truck demand softening in production throughout the remainder of the year. Moving to the right of the slide, Dana's operating priorities as we look to finish out 2024 and move into 2025 include four key priorities. Our first priority is maintaining our disciplined approach while achieving balanced growth. Dana supplies class-leading conventional and clean energy solutions to nearly every vehicle manufacturer around the world, which provides stability through market cyclicality. This, combined with our ability to flex our cost structure and generate efficiencies through the current adverse market conditions, enables us to remain focused on technology innovations that support future growth. Second, because Dana provides product, systems, and technology to customers across all end markets, we're able to leverage synergies and scale to maximize impact. Thirdly, because of the flexibility of our manufacturing capabilities and locations, we can optimize our resources across multiple markets and regions, which enables us to maintain agility to meet ICE, PHEV, and EV demand. Lastly, a prudent use of capital enables us to maximize the investment necessary to continue supporting new business growth across markets. Moving to the bottom of the slide, our early expectations for 2025 see us operating with a lower cost structure as we navigate softer end market demand, including tempered demand for electric vehicles. Please turn with me to Slide 7, where I will share some exciting news with you about a first-of-a-kind high-performance transmission system innovation from Dana Graziano that is garnering deserved attention from across our industry. As I highlighted on my previous slides, Dana is very calculated where we invest regarding technology and innovation to ensure that we achieve profitable growth while providing our customers with the most advanced capabilities they require to bring their products to market. A great example of this is Dana's modular high-performance hybrid 8-speed dual-clutch transmission, which has been selected as an Automotive News PACE Award Finalist for 2025. This state-of-the-art hybrid 8-speed DCT transmission platform is unparalleled in the market. We developed this first-of-a-kind solution to enable the highest levels of power and torque density performance in its class. As you know, supercars are defined by their performance. So electrification must enhance them, while at the same time delivering emissions improvements. And believe me, improved emissions do not take away from the performance of the all-new 2024 Lamborghini Revuelto, its first series produced plug-in hybrid. The vehicle boosts an output of just over 1,000 horsepower and goes from 0 to 60 in a remarkable 2.5 seconds. Dana's solution is novel by virtue of its segment-first modular nature that includes both transversal and longitudinal variance offerings. The technology is versatile with vehicles being able to operate in ICE-only, pure EV, or a variety of hybrid blended modes. The key being that users can switch between these modes to amplify efficiency and performance, whether the driver prioritizes fuel economy, craves exhilarating performance, or seeks a balanced approach; there is a mode to perfectly suit their needs. Thank you for your time today. Now I'd like to turn it over to Tim, who will walk you through the financials.

Thank you, Jim, and good morning to everyone. Please turn to Slide 9 for a review of our third quarter and year-to-date results for 2024. Beginning with the third quarter, sales were $2.48 billion, $193 million below last year due to lower vehicle production. Year-to-date sales were $7.95 billion, lower by $119 million. Adjusted EBITDA was $232 million in the third quarter for a profit margin of 9.4%, that is a 30 basis points improvement over last year's third quarter. Year-to-date, adjusted EBITDA was $699 million, $10 million higher than the previous year for a profit margin of 8.8%, 30 basis points better than last year. Profit improvement is primarily due to cost-saving actions and better efficiencies across the company, which is more than offsetting the negative contribution margin on lower sales. Net income attributable to Dana was $4 million for the second quarter, about $15 million lower than last year, primarily due to higher income taxes. Full-year net income or year-to-date net income was $23 million compared to net income of $77 million last year. The difference is primarily due to higher taxes and the planned divestiture of a noncore hydraulics business that was announced earlier this year. This transaction did not close in the third quarter as expected, and we are no longer classifying this business as held for sale. The overall loss has been adjusted to reflect this change in classification. However, $26 million of the loss that was previously recognized to adjust the carrying value of net assets to fair value remains as per Dana's accounting policy. And finally, operating cash flow was $35 million for the quarter and $148 million year-to-date. Lower operating cash flow this year was driven by higher working capital. Please turn with me now to Slide 10 for the drivers of the sales and profit change for the third quarter of 2024. Beginning on the left, traditional organic sales were about $100 million lower driven by lower OEM production of heavy vehicles and certain light truck programs, partially offset by market share gains and new business. Adjusted EBITDA on organic sales was $22 million. This strong profit flow-through was due primarily to improved cost efficiencies across the entire company that generated a 125 basis points improvement in margin. EV organic sales declined by $54 million, driven by reduced end market demand in our driveline segments, offset by gains in battery cooling sales in Power Technologies. Adjusted EBITDA was $25 million lower, which included the impacts of both lower sales, unfavorable mix as well as higher launch costs as we ramp new EV programs. Foreign currency translation decreased by $15 million, primarily driven by lower value of the euro and real compared to the U.S. dollar. Profit was lower by $1 million with no margin impact. Finally, due to falling commodity prices, commodity cost recoveries in the second quarter were $19 million lower than last year. The profit benefit of the lower commodity prices was offset by the timing of cost mechanisms within the commodity recovery agreements with customers, resulting in profit being lower by $6 million, a 20 basis point decrement to margin. Next, I will turn to Slide 11 for the details of our third quarter free cash flow. Free cash flow was a use of $11 million in the third quarter, $6 million lower than last year. Higher net interest due to the timing of interest payments and higher taxes driven by the timing of payments and regional mix. Working capital requirements were $13 million higher than last year, primarily due to higher inventory driven by a slowdown in demand. Finally, use of cash was mostly offset by $71 million of lower capital spending, driven by a more normalized launch cadence this year and the timing of investment for future EV programs. Please turn with me now to Slide 12 for an update guidance for 2024. As we look forward to finishing the year, we are updating our outlook. We are lowering our sales expectation for this year to about $10.3 billion and $875 million in adjusted EBITDA at the midpoint of the tighter ranges. This is about $30 million higher than last year and implies a profit margin of 8.5%, a 50 basis point increase over last year. This change is due to the lower sales in the second half of the year driven by lower demand for traditional and electric vehicles as well as equipment across all our end markets. We are maintaining our guidance for full-year free cash flow at $100 million. This is approximately $125 million higher than last year at the midpoint of the range. Our GAAP EPS guidance is expected to be $0.15 per share, and adjusted EPS is approximately $0.85 per share at the midpoint of the range. Please turn with me now to Slide 13, where I'll highlight the drivers of the full-year expected sales and profit changes compared to last year. We are expecting about $115 million of lower organic sales for 2024 as new business and market share gains are more than offset by lower demand in the second half of the year. The adjusted EBITDA increase on traditional organic sales is expected to be approximately $140 million. The higher profit and margin increase of about 140 basis points due to company-wide efficiencies and aggressive cost-saving actions. Sales expectations for EV products have declined further this year due to the industry-wide pause in demand. We now expect about $35 million in lower incremental EV sales than last year. Adjusted EBITDA is expected to be about $65 million headwind and 60 basis points of margin. Foreign currency translation on sales is expected to be a headwind of approximately $40 million with a profit impact of about $5 million. Finally, our commodity outlook is expected to be a headwind to sales of about $60 million due to lower recoveries driven by falling steel and other commodity prices. We expect a $40 million profit headwind due to the true-up in pricing governed by our 2-way commodity recovery mechanisms with our customers. Lastly, please turn with me to Slide 14 for an outlook of our free cash flow for 2024. We are maintaining our full year 2024 free cash flow expectations at $100 million at the midpoint of the guidance range. This is a $125 million improvement over last year. We expect about $30 million of higher free cash flow from increased profits. Net interest will be about $35 million higher due to timing of higher interest rates and the timing of payments due to the refinancing that occurred in 2023. Working capital is expected to be a use of about $40 million that is $45 million better than last year. Capital spending to support our backlog and technology is expected to be about $375 million this year, which is $50 million lower than our prior outlook and $125 million lower than last year, as we continue to flex spending to match customer program timing. Thank you for joining us today, and I will now turn the call back over to Regina, and we will take questions.

Our first question will come from Tom Narayan with RBC.

My question has to do with the guidance slide for 2024. If I look at that and compare to the one from last quarter, two things stand out. Traditional organic, you have revenue down $345 million, but EBITDA only down $5 million. I know you talked about company-wide efficiencies and cost cutting. Just would love to double-click on that to get what exactly that is? And then the EV side, obviously, it's coming down by $45 million on EBITDA, would just love to hear how that works logistically, like presumably, you have a line of sight from last quarter of the order book and is it that OEM customers are deferring these orders to later? And if so, wouldn't they have to compensate you? Just trying to understand the mechanics of why that would change so dramatically given you have a line of sight.

Tom, this is Tim. Sure. Good questions. So on the traditional side, if you think about where the falloff is coming from. It’s in the heavy vehicle markets. Those markets tend to move more quickly than others. Our customers can drop out orders or expected deliveries on a relatively quick basis. So that’s why you’re seeing such a large falloff from the second quarter guide to now; it's really just the nature of those businesses. And of course, it depends on which of the markets we're playing in and how quickly that demand falls off. When you think about, obviously, the lower EBITDA, much of that the non-flow-through of the expected contribution margin is really a combination of better cost efficiencies and our ability to take those costs out. Additionally, we have some mix-related factors; in some of the places where we’re seeing a lower sales volume, we have lower margins, so that mix differential is flowing through as well. So that’s on the traditional side. On the EV side, we’ve seen a pretty dramatic falloff in demand. There’s a pretty strong mix change in terms of where those sales are coming from. And then we’re in the middle of ramping up in PT on battery cooling, so we’re continuing to have launch-related costs in that business. If you look at the segment walk, you’ll see the sales up in PT, but the flow-through is not quite where we would expect it to be, which is typically around that launch and the impacts that we're seeing.

Our next question comes from the line of Colin Langan with Wells Fargo.

There have been some pretty clear media reports about you considering selling your off-highway division. Any comments there? Would that be something that's on the table? Is there a valuation you might consider that would make that sort of palatable to you? Additionally, is it possible to split out one of the divisions? Because I think in the past, you've talked about how all these segments are sharing things like EV technology.

Colin, this is Jim. The first answer I'm going to give you is that we don’t respond to media reports, so on and so forth. I would also just say don’t believe everything you hear. From our standpoint, we focus the entire team and everything we're doing on executing; that’s where we're moving.

Could you address whether it is possible to spin off a division? Because you have talked about how you share EV technology? Or is that something that you can do, even if you wanted to?

Not to get pedestrian on you, I guess, from my answer, but maybe this is my 18th year as a CEO; I would say anybody says you can't spin off any division in any company is just making a reckless comment to say that they couldn't. So I'd say anything is always possible in any business.

If I look quarter-over-quarter, you have sales down 5% and pretty high conversion of 45% on those lower sales. How should we think about the puts and takes quarter-over-quarter? What is driving that above-average conversion into Q4 at the midpoint of your guidance?

Yes, I mean, Colin, this is Tim. I think it's really the company-wide efficiencies and cost actions. We have been talking about this over the last couple of years as we get more normalized OEM production schedules. We're able to drive those efficiencies through the plant floor, which is certainly showing through. Additionally, I think there’s ongoing efforts on the overhead side, ensuring that we're spending what we need to when we need to support our technology and growth perspective while being careful about what we're spending.

Okay. So the higher decremental is that more of the last item, the one-timers that are in Q3?

No, it's a mix. When you think about the quarter, you’re seeing it and you’ve seen it all year in terms of our ability to continue to convert at a pretty high rate in the first two quarters of the year as well, and that’s continued on.

Our next question comes from the line of James Picariello with BNP Paribas.

Can you just provide any context that you could share on what happened to the off-highway business sale, the European hydraulics business? Why has that fallen through now?

James, this is Tim. Yes, I can cover that. We had the agreement, and the buyer was not able to finalize due to their financing falling through.

Understood. Can you also provide color on what you're seeing within off-highway in terms of the end market weakness? We can see read-throughs on construction, agriculture, access equipment seems to be in decline with backlogs certainly coming in for OshKosh and Terex. What are your high-level thoughts for Q4? Based on your history, how long might this downturn last?

We’re seeing market weakness across all sectors you mentioned: agriculture, construction, material handling, and mining. It depends on the specific mix; while they are coming in weaker, not all our customers are in the same situation. We are maintaining caution about end markets as we approach the end of the year. The markets tend to move quickly, so while we’ve seen downturns previously, we’re just being cautious about inventories and what our customers project.

Our next question comes from the line of Bruno Dossena with Wolfe Research.

I wanted to return to the cost performance you showed in Q3, which I believe is implied in fourth-quarter guidance as well. Specifically, does this commendable cost performance represent changes to the underlying capital base that would indicate higher profitability and free cash flow in the long term, regardless of industry volume?

Yes, Bruno. This is Tim. There are indeed real structural cost changes in the business that highlight our commitment to continually improve across our organization, whether in our purchasing, back office, or plant floor operations. We expect these cost savings and margin improvements to be enduring as we move forward.

On a similar line regarding the capital base. The expectations for EV volumes have diminished over the years. It makes sense if the pace of EV investment was anchored to unfulfilled volume assumptions. Can you provide context around how these EV investments have impacted the underlying capital base and how it might affect returns going forward?

Generally speaking, we have been able to flex our capital base according to market demand. Although we have capacities built for electrodynamic components like motors and inverters, we continue to utilize these investments while matching additional capacity with market trends. As such, we’re cautious about expectations and future investments, adjusting accordingly based on customer demands.

Our next question comes from the line of Joe Spak with UBS.

The guidance implies some strong free cash flow in Q4. I want to better understand the seasonality here. Also, as we think about 2025, I know you didn't give much color, but if we assume a certain EBITDA, what else should we consider regarding free cash flow in '25, such as working capital, taxes, CapEx? Is there any expected residual payment for TM4 next year?

We expect strong cash flow in Q4, which is typical for our business seasonality since cash generally flows in this period due to timing dynamics. Regarding 2025, I can't provide specific details, but we believe there are further opportunities around working capital, especially given the rapid change in market demands for which we will focus on efficiency.

And anything on TM4?

We continue to engage in discussions and negotiations with TM4. However, there are no updates at this point.

Just refresh us on some of the synergies that exist between off-highway and your other businesses. For instance, regarding Graziano, which you previously mentioned had ties to off-highway. How does the technology and capabilities from off-highway translate to your other lines?

Thanks for the question, this is Jim. Graziano, which was a part of the Oerlikon acquisition, has good capabilities in both off-highway and light vehicle super sports car transmission arenas. The brand supports multiple segments, providing ample opportunity for cross-market synergy. Dana operates as a multi-business unit organization where the Power Techs Group supports all three sectors, be it thermal management, sealing, or electrification. Each operation benefits from shared capabilities. Thus, it's challenging to identify specific benefits due to interconnectedness, but rest assured, we gain synergies across our divisions.

Our final question will come from the line of Dan Levy with Barclays.

First, could you articulate more about your efficiency and cost-saving actions? How much runway is there? Given the soft end markets, how much more can you flex it down? Please remind us about the potential for inflation reversals?

Good question. This is the day of broad inquiries that are tough to give direct answers to because of the numerous moving parts in any business. As I mentioned earlier, we can continue to reduce our breakeven point while expanding margins even with reduced sales due to our focus on material costs, conversion costs, and pricing actions. The approach is driven by processes rather than sheer effort, meaning our standardized processes across the organization will continue to yield incremental improvements. We expect to sustain these improvements.

As a follow-up, when do we anticipate seeing a lower CapEx outlook or reduced R&D given some recoveries from customers, or as we notice less tooling activity due to slowed programs?

Currently, you're observing the trends where our CapEx forecast has significantly decreased compared to early expectations. A large portion of this is regarding flex on EV spending according to program timing. We will continually push for efficiency and ensure that we only incur expenses when necessary to maximize resource use.

Okay, this is Jim. Thanks, everybody, for attending the call. We appreciate your interest in Dana and your thoughtful questions. I'd like to conclude with a brief note: Dana is robustly positioned across varied markets. Some markets respond rapidly to demand fluctuations, which can be beneficial or challenging. Our read-through is our flexibility. The company can adapt quickly to both increases and decreases in demand. Thanks for your attention today.

That will conclude today's call. Thank you all for joining. You may now disconnect.