Good morning, and welcome to Dana Incorporated's First Quarter 2025 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. There will be a question-and-answer period after the speakers’ remarks and we will take questions from the telephone only. 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.

Good morning, and welcome to Dana Incorporated's first quarter 2025 Earnings Call. Today's presentation includes forward-looking statements about our expectation 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. I encourage you to visit our investor website where you will find this morning's press release and presentation. And as Regina said, the 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. With me this morning is Bruce McDonald, Dana’s Chairman and Chief Executive Officer; and Timothy Kraus, Senior Vice President and Chief Financial Officer. Bruce, now I'll turn the call over to you, could you just start?

All right. Thank you, Craig, and good morning, everybody. I’ll just start on Slide 4 here in terms of some highlights for the first quarter. I know there's a lot of interest in the Off-Highway divestiture process and we're really not in a position where we can say a lot. What I would tell you is the process continues to be underway. We're pleased with the progress that we've made. It's been competitive, and we have multiple bidders. If you look at the quarter, I would say I’m pleased with Q1. Our results came in, generally speaking, in line with expectations. I would note that we did have a little bit of a headwind on tariffs of $6 million in the quarter. Absent that, we would have had comparable margins to last Q1 despite a pretty big reduction on the top line, so good result there, and we see that $6 million coming back. We just couldn't get the paperwork into our customers to get the recovery in the quarter. Real importantly for us, and we talked about this on our last earnings call is we said we're going to look at our cost reduction plans and see what we can do to bring those forward. So I'm pleased to announce that we're accelerating the realization of our cost program here in 2025 from what was $175 million to $225 million. We completed the integration of our former power technology segment into our aftermarket business into light vehicle LCV respectively. That's gone real well. Of the $300 million cost reduction, this integration is worth about $30 million to $35 million of that. I think we're going to see further benefits, not sort of SG&A related benefits as we leverage best practices across our aftermarket businesses. And I think as we bring some of the operational rigor and processes that we have in Light Vehicle and the power technologies, I see operational improvements falling through in the back half of this year, so more to come on that. Then lastly, on free cash flow, Q1 is always a seasonal outflow, but we had a good start with lower revenues and profitability on an absolute basis, our Q1 cash outflow was an improvement year-over-year of $67 million. We continue to focus on opportunities to reduce our CapEx, and I'm hoping that we can squeeze the money out of that in the back half of the year. And then, you know, not that it's in free cash flow, but we are focused on a portfolio of noncore, nonstrategic assets and things like that. We expect to deliver $50 million here in the second quarter and could see our way maybe to another $50 million in the back half of the year. Generally a good start to the year. In terms of the outlook and what we're seeing, I guess I would start with a very dynamic situation that especially on the tariff front changes significantly on a daily basis. But based on what we see right now, I guess I would just say our tariff situation is manageable. We can get into a lot more detail in some of the questions, but it's a manageable issue for Dana. Several mitigation actions have been completed. We've got recoveries into our customers with the right level of detail to support our claims being processed. And I guess the other thing I would note, if you look at steel and aluminum tariffs, we've seen North America indices move up such that we expect we’ll substantially recover the steel and aluminum through already negotiated mechanisms that we have in place with our customers. There could be some timing issues because those tend to work in a little bit of a lag, but I would say the impact of steel and aluminum tariffs with the way the indices have moved would be kind of a nonissue for us as we see things right now. In terms of what we're seeing in the market, the first I guess thing we are seeing is a reduction in schedules for our North American commercial vehicle customers. And you know, you see that in some of the calls that have come out before us with people taking their assumptions from North America down, and we've reflected that in our outlook. So that's sort of been a bit of a headwind for us. In Off-Highway, we're seeing a little bit of pre-buy interest here in the second quarter. Nothing significant, but it's nice to see we're getting a little bit of that, and we are starting to see outside of North America some green shoots in terms of improvements and orders in the second half of the year. In North America, we aren't seeing any deterioration at this point in time. If you look at the mix of vehicles that we're exposed to, you know, you guys all know where we make our money. We feel pretty good about our customers gaining share in our space and while we acknowledge there's some risk in the back half of the year, we're just being cautious right now. We don't see it reflected up in our schedules. We talked earlier about the $50 million of incremental cost reduction, and then I guess I would just say if you know, absent tariffs, we would be sitting here this morning raising our guidance by about $50 million to reflect the acceleration on the cost reduction side. We're just holding back until we get a little bit more clarity on what happens in LV, particularly in the second half. And lastly, just a little bit of something to brag about here, that we won our 10th PACE Award, quite an honor in the industry. This hybrid transmission is kind of a niche product. It is about $25 million of sales this year. It's a product that we've rolled out across the highest end of the automotive spectrum. So customers like Aston Martin, Lamborghini, McLaren, we see this as a business opportunity to grow to $200 million, $250 million, maybe even up to $300 million over the next few years and a highly accretive EBITDA margin. This product pushes 20%. So not a huge item, but it's an important, I think, margin expansion arrow in our quiver, and I congratulate the technical teams for winning the award. So with that, Tim, I'll turn it over to you.

Thank you, Bruce and good morning to everyone. If you'd please turn to Slide 8 for a review of our first quarter results. Sales were $2.4 billion, $383 million lower than last year, driven by lower demand across all of our end markets. Adjusted EBITDA was $188 million for a profit margin of 8%, just 20 basis points lower than last year on lower sales as the benefits of our cost improvement actions begin to take hold. Net income attributable to Dana was $25 million in the first quarter of 2025, compared with $3 million last year. The difference was primarily due to the proposed divestiture of our noncore hydraulics business in 2024. A $29 million loss was recorded to adjust the carrying value of net assets to fair value in last year's first quarter. Income taxes for the first quarter of 2025 were $29 million lower due to jurisdictional mix of profits and timing of payments. Finally, operating cash flow was a use as is normally the case in the first quarter of $37 million. This was an improvement of $65 million over the first quarter of last year due to lower working capital requirements. Please turn with me now to Slide 9 for the drivers of the sales and profit change. Beginning this quarter, we have revised our walk presentation to better detail the impacts of volume, mix and performance of the operations. Previously these two drivers were combined. We continue to show the benefit of our cost saving initiative and we have added the actual impact of tariffs as part of our walk. Beginning with volume and mix on the left, we saw $345 million lower sales driven by lower demand in all of our end markets, specifically when compared to Q1 of last year when light vehicle production increased dramatically coming off of the UAW strike at the end of 2023. This year we are seeing a slowdown in production as vehicle inventories remain high. We did not see any distinct change in order patterns from our key customers on key programs related to tariffs during the quarter. Adjusted EBITDA from sales volume and mix was lower by $90 million. This was a decremental margin of about 25%. We are breaking out performance which includes efficiency gains in our manufacturing separately. Performance increased sales by $27 million mostly through commercial actions, while profit increased by $35 million due to efficiency improvements across the company. For the first quarter of 2025, cost savings added $41 million in profit through the various actions we have taken. As Bruce mentioned, we have accelerated some actions. We now expect to realize about $50 million more of our $300 million in total cost savings this year. To the left of the slide, we included a breakdown of where the permanent cost savings are coming from. You can see it's well distributed across the cost structure. The tariff impact in the quarter was just $6 million. Since our tariff recoveries will have a lag associated with them, we did not immediately recover the tariffs in the quarter, but we expect to receive recoveries throughout the year. Foreign currency translation decreased sales by $53 million, primarily driven by the lower value of the Euro, real and rupee compared to the U.S. dollar. Profit was lower by $4 million with no impact to margin. Finally, commodity cost recoveries in the first quarter was $10 million lower than last year due to the timing of cost mechanisms within the commodity recovery agreements with our customers. Profit was $11 million lower as the prices fall through to profit. Next, I will turn to Slide 10, the details of the first quarter adjusted free cash flow. Adjusted free cash flow in the first quarter of 2025 was a use of $101 million, which is $67 million higher than the first quarter last year. Lower adjusted EBITDA and higher one-time costs related to the cost saving actions and the sale of the Off-Highway business were offset by lower working capital requirements. Finally, capital spending net of proceeds of sales of fixed assets was about the same as last year. Please turn with me now to Slide 11 for our guidance for 2025. Our 2025 full year guidance ranges remain unchanged. As a reminder, our guidance includes the Off-Highway business for the full year and includes the estimated impact of disclosed tariffs. First thing you will note is that we are expecting sales to be above the midpoint of our range. The higher sales expectations are taking into account some of the softening in commercial vehicle end markets offset by the recovery of expected tariffs that will flow through sales and the improved outlook on currency translation. To date, we've not seen a change in the volume expectations of our major light vehicle programs. Our initial expectations were for slightly weaker end market demand for light trucks. If that market weakens further, we will adjust our outlook. Adjusted EBITDA is still expected to be $975 million at the midpoint of the range. This is approximately $90 million higher than 2024 and implies a profit margin of about 10%, a 140 basis points increase over 2024. Full year adjusted free cash flow is expected to be $225 million at the midpoint of the range for the year. This is approximately $155 million higher than last year. Our adjusted EPS guidance is expected to be $1.40 per share at the midpoint of the range. This is down from our previous estimate solely due to the change in expected tax defense driven by our expected regional mix of profits. Lastly, please turn with me to Slide 12 for an outlook of our adjusted free cash flow for 2025. We anticipate full year 2025 adjusted free cash flow to be about $225 million. At the midpoint of the guidance range, we expect about $90 million of higher free cash flow from increased adjusted EBITDA. One-time costs will be about $20 million higher as we invest in our cost savings program and we work to finalize the Off-Highway divestiture. Working capital requirements will be about $50 million lower, and capital spending net is expected to be about $325 million this year, which is $45 million lower than 2024.

I'll now ask Regina to open the call for questions.

Thanks. Good morning everyone. Maybe just to start on the guidance, I know you listed a number of things, some tariff headwinds and some negative market assumptions in what is I guess going to be new Dana, but then cost savings and then in Off-Highway business you mentioned some of that pre-buy commentary. I guess the question is back in the beginning of the year you provided some guidance for new Dana versus the Off-Highway and with all those factors you listed, is there any meaningful change to those assumptions we should consider?

Yes, so commercial vehicle is going to be a bit lower than what we had seen just a couple of months ago, that's largely being offset by amounts in light vehicle and a little bit in Off-Highway. And then obviously the balance of that is coming from what we believe will be additional revenue from tariff offsets.

Yes, and I guess maybe just a couple other things, like obviously the three incremental cost reduction target is all relates to corporate, so it gets sort of smeared based on sales. I would say, you know, in Off-Highway in our outlook we are picking up some translation on the euro. So that would be disproportionate to Off-Highway.

Correct.

And, but I mean, generally speaking, if you sort of, you know, the $50 million cost reduction is a pull for, but if you think about when we gave sort of guidance around new Dana post Off-Highway sale in 2026, I think the message is, look, Q1 new Dana is up year-over-year in margins and Off-Highways on a year-over-year basis down. So the path to get new Dana in 2026 to the type of number that we commit to the 10.5 is thoroughly on track.

Okay. And then just for 2025 again, I know you provided some ranges and it seems like some moving parts, but generally those ranges are still valid?

Yes, they're generally valid. I mean, the sales are going to move around as Bruce mentioned. Right. Between tariffs and translation, we're going to have some tailwind on the top line and that's largely going to offset the headwinds that we're seeing in commercial vehicle from a volume perspective.

Okay, that business is primarily European. We do have a bit of business here in North America, but that's a relatively small portion of the overall business.

Okay. And then Bruce, I appreciate you are limited in what you could say about the process. I think you have some relatively encouraging commentary, but maybe you could just sort of indicate to us if sort of any of this market uncertainty has had any impact on the process, even in terms of sort of potential management distraction for potential buyers or anything there or are things sort of mostly on track with what you thought?

Yes, I would say that if you look at the last 90 days, the tariff situation is becoming clearer. It was quite unpredictable during the recent developments in the IPA and the situation in China. Now, with some rules in place, we have seen a bit more stability and clarification regarding how to approach USMCA and non-USMCA matters. We have faced significant uncertainty, which understandably makes people nervous and prompts them to seek more information, so we've been spending additional time with our teams. I can't share too much at this moment, but we previously mentioned that we would be in a position to communicate some resolutions early in the second quarter. However, I would say our timeline is now likely to extend to late in the quarter.

Okay, I appreciate that.

Hi, thank you for taking our questions. I just want to come back on the tariffs. Can you share, I guess what is the exposure at the moment and in terms of the timing of recovery, how long do you think that will take on average?

So I don't want to get into the overall exposure, mostly because I don't really want to negotiate with my customers in public. But what I can say is from a recovery perspective, we expect it's probably going to be less than a quarter on a lag. And of course that depends on, on the customer and the end market that we're dealing with. But most of our largest customers have set up a regimented process, so and as Bruce mentioned, we've already started to provide invoices and the detail backup that's required by our customers in order to obtain recovery. So that process is well underway and we see it working well given the level of detail that we're providing the customer. But I'm guessing it's probably when they get through it, obviously the customers are going to be pretty inundated. We're looking at somewhere probably not longer than a quarter, but I think it will end up being a little bit less given the impact that this will have across the supply base.

Yes, I mean, I'd expect us to be a cash flow timing issue in the quarter. I think by the time we're here, three months time, we will know what our recoveries and have that process nailed down sufficiently, so will be accruing the impact. But the cash associated with it, like we have to pay that out much sooner than we're going to get it back. I don't think that's going to be a major bridge item for us, but I feel pretty comfortable that it's not going to be a problem for us.

And in terms of the amount, is it baked in that you would recover essentially 100% or is there some like wiggle room or haircut to the recovery?

Our view is that we're going to be recovering 100% of the tariffs.

Yes, yes. I think maybe just a little bit of help there is, first of all, if you think about our commercial vehicle business and our Off-Highway business, we have very little risk of 100% recovery. So that part of it we're not worried about at all. I mentioned that the aluminum and steel will be recovered through normal indices that we already have in place. So once you sort of back out, those three things and some mitigation actions that we've taken where we were the importer of record of finished goods, so like we bring some axles up from Mexico to North America, and they're picked up at a warehouse in Laredo, we re-negotiate those exposures away. So now you're left with a fairly minor amount in the scheme of a $10 billion company. We have all the documentation submitted to our light vehicle customers and they have, they've brought in external resources to process our claims. And in one case, we know our claim has been processed and approved, but I haven't seen the check yet. So we'll see where we end up.

Understood. And just one last thing to clarify, so is the I really know they are quantifying the exposure, but in terms of the mechanics, is it basically the non-USMCA part that you're assuming that gets exempt or are you assuming that there's more than that or the USMCA actually goes away?

Well, so what we've put out in terms of our guidance now is based on what we see coming out of Washington as of today and that will change tomorrow. I have no doubt it changed last night. So but the way that the mechanisms are working with our customers is that we need to be able to prove the actual amount of tariffs that we've incurred and be able to trace them back by part number and that's the documentation that we're providing. Our expectation is that level of detail will allow us to recover the tariffs from our customers.

And it's a little bit more nuanced than your question. Let me just give you an example. So everything that we're talking about is for auto parts. It does not include our part the way the definition and the HTS codes are written. It does not include things like our Off-Highway and commercial vehicle products. Nor does it even include some of our super duty business. So they aren't in this whole 232 switch that happened yesterday. They're still into the other buckets, IEPA reciprocals, things like.

Gotcha. I very much appreciate it. Thank you.

Oh, great. Thanks for taking my questions. Any way to frame, what are you assuming for light vehicle production, is it very in line with the recent S&P forecast? Is there any way to frame that? Because obviously a lot of uncertainty with tariffs.

Sure, yes. I think the way, you know, obviously, when you think about the light vehicle outlook, we try to steer everybody back to the light truck production. We currently aren't seeing any substantial change from where we were when we came out in February. So that's what's currently baked into our forecast for North American Light Truck. And if that changes in any material way, we'll have to revisit our outlook. But right now we haven't seen anything and don't have anything from our customers on the horizon. That doesn't mean it won't change. But at this point, that's currently we're looking at it largely the same as we did two months ago.

And the only thing I'd add to that, Colin is, we acknowledge there's a risk there and that's why we are not upping our guide.

Got it. But on the S&P side, I mean, is it consistent with what S&P just provided or more optimistic, less optimistic?

I would say the latest S&P data, which we don't think is accurate, especially here in the short-term in some of it. But if you looked at the latest S&P information and we were to factor that in, we'd have more than enough coverage in the extra cost saved to hold our guide.

Got it. That's helpful. And then, you know, if I look at, I think you said earlier you didn't want to provide like a number on the tariff impact, but I mean, in the EBIT walk, it's $6 million. I mean, is that not a run-rate we should think about?

Well, you have to. I mean, the tariffs were not for the entire quarter. They were staged in. You know, you can't use the first quarter as sort of a viewpoint for the tariffs. They've also changed from week-to-week. And so depending on when we imported the material and how it was classified determines what we ended up, what the impact was in the quarter. That's going to be different going forward. So you cannot use the first quarter and try to do some sort of extrapolation. The rules and how these things are classified have changed dramatically from week-to-week. $4 million of the $6 million, Colin, is related to where Dana was the import of record, the example I gave in the previous caller and we've already remediated that and built it and we're not at all worried about getting that $4 million back. But yes, like Tim said, there's things that have come on and come off. There's bucketing issues, et cetera.

Yes, you have to remember, right, that a lot of this stuff is coming out in either an executive order or in a press release or a press conference. It then gets published in the commercial register and then that's then translated by the Commerce Department and at the customs and border to determine how and what HTS codes are going to collect? What tariffs on which? So it is, exceedingly complex and is changing as both the rules get more clarification and the rules change.

Maybe just like a few sort of scene setters on it that kind of get, you feel, get your understanding a bit better. Overall, our flow of goods from Mexico back up here to the United States is MXN700 million to MXN800 million and our Canada flow of goods is like $100 million. And so you know that that split 55%-ish is USMC compliant. Some of that is also doesn't have anything to do with its $232 million because it relates to our commercial vehicle business. Our other exposure that we have is reciprocal tariffs on castings and things like that that us like everybody else buys from Korea and particularly India. So those are the headlines of where our exposures come from and kind of magnitude.

Yes, and also point out that some of the material that's coming in that's non-USMCA compliant is directed sourced by the customer. So we don't have a choice on where we're bringing in some of the parts based on the customer requirements. So again, that is recovered $1 right away because we don't have any choice.

And you said MXN700 million to MXN800 million Mexico, CAD$100 million. Any number on what's from the rest of the world brought into the United States?

Yes, we're talking a few hundred millions more. I mean it obviously depends on production and where we're at, but largely those sorts of numbers.

Got it. All right, thank you very much.

Thank you.

Good morning everybody. Just as we think about the Off-Highway sale and if we just consider the tariff exposure, the tariff exposure for the Off-Highway business, we know Off-Highway as was mentioned, does not fall under the Section 232 autos tariffs. It would be subject to the broader liberation day tariffs. That's a question, just to confirm. And then just regarding Off-Highway’s regional sales mix, right. We know about 65% of total sales get produced in Europe. Can you just size up what portion of that or what portion properly constitutes North America, U.S. sales for Off-Highway and what portion gets imported to understand the trade flow there? Thanks.

Yes, the North American is a few hundred million dollars, a portion of that gets imported. I mean I'd have to go look at the specifics and we can get you that. But the tariff, overall U.S. tariff exposure for Off-Highway is very small and is 100% recoverable from the customer. We've already proactively actioned with those customers to get recovery. So the tariff impact is not the issue around Off-Highway. I think the broader issue, and this is true for tariff generally is how does this affect the macroeconomic environment and how might it affect volume in all the end markets at the end of the day? Especially for Off-Highway, that's probably the bigger issue, right. As they pass these things through, how is it going to affect the various end markets within Off-Highway? To date we're not seeing, we haven't seen anything and we've seen a little bit of pre-buy and when we look out at the back half of the year, we are starting to see the green shoots we were expecting. So right now, things are holding up pretty well, but it's a pretty fluid situation and we're monitoring it pretty closely.

That's very helpful. As a follow-up, I understand this might be a sensitive topic. The previous timeline for the Off-Highway sale suggested it might occur around the second quarter. Could you share any insights on that? Additionally, regarding the revenue guidance, can you clarify the assumptions and updates that are not related to tariffs and commodities? Thank you.

So I won't, I'm not going to provide the update because then you can sort of back into what the tariff assumptions are. But they're in terms of commodities we would expect to be up a little bit and obviously the FX is going to be an additional tailwind, but I don't want to get into specifics. We'll obviously be able to show that to you when we bring out second quarter. On the Off-Highway sales, as Bruce mentioned earlier, we were expecting early to mid-second quarter, given the amount of work that's being done by the bidders. We would expect that to move a little bit and probably be later in the second quarter.

Great, guys, thanks for letting me in the last question here. I really appreciate it. Bondholders have been pretty excited about the future of debt reduction and leverage coming down. I know we can't talk about the sale of Off-Highway. Could you just refresh us or just reconfirm that balance sheet de-levering is still a focus and we could see a meaningful reduction in debt. Is that still the game plan?

That is absolutely.

All right, that's helpful for us. And I think the last target we had was leverage being in the like the one to two turn kind of range through the cycle. I'm not going to pin you down on that. But is that still kind of directionally?

Yes, we've been talking about sort of one turn through the cycle on a net basis.

And I mean, again, just to help you, we believe that upon the sale of off I would be required to tender our bonds. I just couldn't be prouder of the results our teams have delivered in the environment that we're in here. We feel really good about the things that we have control on. We're 100% certain on our cost reduction savings that we can bring those forward. I think from an overall point of view, the things that we can control and manage. Our teams are doing a great job and we look forward to sharing further progress on things in 90-days. Thank you, everybody.

Thanks, guys.

This will conclude today's meeting. Thank you all for joining. You may now disconnect.