Good morning, everyone. My name is Jamie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the American Axle & Manufacturing First Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer period. As a reminder, today’s conference call is being recorded. And at this time, I’d like to turn the floor over to Mr. David Lim, Head of Investor Relations. Please go ahead, Mr. Lim.

Thank you, and good morning. I’d like to welcome everyone who is joining us on AAM’s first quarter earnings call. Earlier this morning, we released our first quarter of 2022 earnings announcement. You can access this announcement on the Investor Relations page of our website, www.aam.com, and through the PR newswire services. You can also find supplemental slides for this conference call on the Investor page of our website as well. To listen to a replay of this call, you can dial 1-877-344-7529, replay access code 7397562. This replay will be available through May 13. Before we begin, I would like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements subject to risks and uncertainties, which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed. For additional information, we ask that you refer to our filings with the Securities and Exchange Commission. Also, during this call, we may refer to certain non-GAAP financial measures. Information regarding these non-GAAP measures as well as a reconciliation of these non-GAAP measures to GAAP financial information is available on our website. With that, let me turn things over to AAM’s Chairman and CEO, David Dauch.

Thank you, David, and good morning, everyone. Thank you for joining us today to discuss AAM’s financial results for the first quarter of 2022. Joining me on the call today are Mike Simonte, AAM’s President; and Chris May, AAM’s Vice President and Chief Financial Officer. I will review the highlights of our first quarter financial performance. Next, I will touch on some exciting news in the quarter, including our recent acquisition of Tekfor, an important win with Geely, AAM’s PACE and PACEpilot Award nominations for electrification technology, and the publication of our sustainability report. Lastly, I’ll discuss our updated 2022 financial outlook before turning things over to Chris. After Chris covers the details of our financial results, we will open up the call for any questions that you may have. So let’s begin. AAM’s first quarter 2022 financial results were affected by rising input costs and the continuing global supply chain volatility. The unprecedented operating environment that started in 2020 continues into this year. That said, we remain focused on the qualities that differentiate AAM, which are operating excellence, product quality, ensuring the continuity of supply to our customers and generating profits and free cash flow. AAM’s first quarter sales were $1.4 billion. Sales were impacted by volatile production, but schedules did improve somewhat on a quarter-over-quarter basis. We believe the OEMs will continue to prioritize their light truck schedules, which is good for AAM. However, supply chain stabilization, namely semiconductors, may not occur until 2023. Inventory levels on key programs that we support remain low, and consumer demand for these products appears resilient. OEMs cannot build their respective large SUVs and trucks fast enough. AAM’s adjusted EBITDA in the first quarter of 2022 was $196 million, or 13.7% of sales. In the quarter, we were negatively impacted by rising input costs, supply chain constraints and continued semiconductor disruptions. Material and utility inflation accounted for nearly 200 basis points of margin degradation in the quarter. These input cost headwinds will continue to be a challenge this year. The operating teams are looking into cost structure improvements and value engineering initiatives. Additionally, we are also having ongoing discussions with our OEM customers regarding offsetting this inflation. So far we have made some progress and discussions have been constructive, but are still ongoing. AAM’s earnings per share in the first quarter of 2022 was $0.01 per share. AAM’s adjusted EPS was $0.19 per share. Even with these challenges, AAM continues to deliver positive free cash flow generation in the quarter; this is a compelling view of the strength of our operating model. AAM’s first quarter 2022 adjusted free cash flow was $54 million. Our capital allocation strategy is very straightforward. We continue to advance key strategic growth initiatives and strengthen the balance sheet, and we achieved both in the first quarter of 2022. Chris will provide additional information regarding the details of our financial results in a few minutes. Now, let’s talk about some recent key highlights, which you can see on Slide 4 of our slide deck. We announced that AAM entered into a definitive agreement to acquire the Tekfor Group for an enterprise value of €125 million. We’re very excited about this acquisition, as it provides strong synergy potential, diversifies both our geographic and customer mix, and enhances our portfolio in electrification components. This is a nice bolt-on acquisition for us, and we expect the deal to close in the second quarter. Additionally, we won a major program with Geely to supply independent front and rear drive axles for a premium vehicle. Our products will support both internal combustion as well as plug-in hybrid versions of this program. This win continues the theme of securing business for our traditional products while we pivot to electrification. From an electrification standpoint, our P3 2-speed electric drive technology with a 2-speed architecture in a drive axle has been nominated as a finalist for the 2022 PACE Award. This electric drive is on multiple variants for a premium European luxury automaker that is based in Germany. We are happy to say we have started production on this drive unit and we are receiving interest on this specific technology from other automakers at this time. It’s also been nominated as a PACEpilot Award finalist for our next generation 3-in-1 wheel-end electric drive unit. This assembly fully integrates the motor, gearbox and inverter into an elegant, compact and power-dense design. This technology platform can be used in wheel-ends, EDUs, eBeam axles and other applications across multiple vehicle segments. Our electric drive technology leadership and innovation are well represented with our PACE Award nominations, as well as our past wins in these areas. This is also evident with our very constructive electrification dialogues with multiple global OEMs, as manufacturers are focused on this important transformation. Our state-of-the-art technology provides a formidable value proposition as OEMs have to balance various capital needs. It’s our goal to be a key supplier and partner when it comes to electric drive units, sub-assemblies and components. These are very exciting times for AAM, as the electrification opportunities continue to grow, and now represent over 70% of AAM’s quoting activity. Finally, we’re very happy to earn the 2021 GM Overdrive Award. This is a great distinction as it is reserved for suppliers who displayed outstanding achievements across GM’s global purchasing and supply chain organizations' key priorities. AAM was recognized for our performance in the launch excellence category. From an ESG perspective, we’re also very pleased to announce that we recently published our 2021 sustainability report. Within this extensive report, we outline new goals and objectives for AAM. Our goals are to be net-zero carbon emissions by 2040, to purchase 100% renewable energy in the U.S. by 2025, and to achieve zero waste to landfill status for all facilities by 2035. These are ambitious goals but AAM desires to create a better tomorrow. Further, we also set our 2030 DEI demographic goals to increase the representation of women and minority team members at AAM. We believe diversity drives creativity, which leads to long-term value creation. We are deeply committed to properly growing our business in a way that is both sustainable and socially responsible. Now, let’s talk about our guidance on Slide 7 of our slide deck. Given the challenges in the supply chain, the geopolitical uncertainty and production schedule volatility, we have updated our 2022 financial outlook. AAM is now targeting sales of $5.6 billion to $5.8 billion, adjusted EBITDA of approximately $785 million to $830 million, and adjusted free cash flow of approximately $300 million to $350 million. From an end market perspective, we now anticipate North American production at approximately 14.3 million to 14.7 million units versus our prior year outlook of 14.8 million to 15.2 million units. Even during these uncertain times, operationally our business is running well in the areas that we can control. And we believe we are well positioned as the production environment improves, driven by strong demand and inventory replenishment. That said, our aim is on the future, and we will continue to focus on generating strong free cash flow for the business, strengthening our balance sheet, securing our traditional business, advancing our electrification product portfolio, and positioning AAM to profitably grow, especially in the area of electrification and mobility. That concludes my remarks. Let me now turn the call over to our Vice President and Chief Financial Officer, Chris May. Chris?

Thank you, David, and good morning, everyone. I will cover the financial details of our first quarter results with you today. I will also refer to the earnings slide deck as part of my prepared comments. So let’s begin with sales. In the first quarter of 2022, AAM sales were $1.44 billion, compared to $1.43 billion in the first quarter of 2021. Slide 9 shows a walk of first quarter 2021 sales to the first quarter of 2022 sales. First, we account for the unfavorable impact of the semiconductor shortage, which we estimate to be approximately $31 million on a year-over-year basis for the first quarter of 2022. Annual contractual pricing was approximately $8 million and metal market pass-throughs and FX added approximately $39 million to sales. During the last several quarters, we have continued to see an increase in the primary index-related inputs to metal base materials that we purchase. You may recall, we mitigate a portion of this risk with our customers by passing through the majority of index-related changes. The metal portion of this column reflects these elevated pass-throughs on a year-over-year basis. Now, let’s move on to profitability. Gross profit was $187 million or 13% of sales in the first quarter of 2022, compared to $227 million in the first quarter of 2021. Adjusted EBITDA was $196.1 million in the first quarter of 2022 or 13.7% of sales, versus $262.9 million or 18.4% of sales last year. Please refer to our adjusted EBITDA walk down on Slide 10. During the quarter, semiconductor sales disruptions had a negative impact of approximately $7 million. Annual contractual pricing had an impact of $8 million and net material, freight, utility inflation lowered EBITDA by approximately $28 million. Our R&D spending in the quarter increased $3 million year-over-year driven by launches and electrification development. The performance in other column reflects an increase in project expense, and some inefficiencies caused by volatility in production schedules versus a year ago. We continue to experience increases in index-related metal market costs, and the retained portion impacting us this quarter was approximately $7 million. Let me now cover SG&A. SG&A expense, which includes R&D in the first quarter of 2022 was $86.1 million or 6% of sales. This compares to 6.3% of sales in the first quarter of 2021. AAM’s R&D spending in the first quarter of 2022 was approximately $35 million compared to $32 million last year. We will continue to control our SG&A costs, while investing in and increasing our R&D spend to advance our next generation electric drive technology platforms. Let’s move on to interest and taxes. Net interest expense was $41.7 million in the first quarter of 2022 compared to $48.2 million in the first quarter of 2021. We continue to benefit from debt reduction and refinancing actions in the form of lower interest costs. In the first quarter of 2022, we recorded income tax expense of $3 million, compared to an expense of $8.8 million in the first quarter of 2021. For 2022, we expect our effective tax rate to be approximately 15% to 20%. We would expect cash taxes to be in the $50 million to $60 million range. Taking all these sales and cost drivers into account, our GAAP net income was $1 million or $0.01 per share in the first quarter of 2022 compared to $38.6 million or $0.33 per share in the first quarter of 2021. Adjusted earnings per share, which excludes the impact of items noted in our earnings press release was $0.19 per share in the first quarter of 2022, compared to $0.57 per share in the first quarter of 2021. Let’s now move to cash flow and the balance sheet. Net cash provided by operating activities for the first quarter of 2022 was $68.5 million. Capital expenditures net proceeds from the sale of property, plant and equipment for the first quarter of 2022 were $24.4 million. Cash payments for restructuring and acquisition-related activity for the first quarter of 2022 were $8.4 million. The net cash outflow related to the recovery from the Malvern fire we experienced in September of 2020 was $1.4 million in the quarter. In total, we expect approximately $20 million to $30 million in restructuring and acquisition related costs in 2022. Reflecting the impact of this activity, AAM generated adjusted free cash flow of $54 million in the first quarter of 2022. From a debt leverage perspective, we ended the quarter with net debt of $2.6 billion and LTM adjusted EBITDA of $767 million, calculating a net leverage ratio of 3.3 times at March 31. We expect to continue to strengthen AAM’s balance sheet by reducing our gross debt and lowering future interest payments. In the first quarter of 2022, we conducted significant refinancing to further reduce interest costs and extend maturities. We also continue with our debt reduction initiatives by paying down $25 million of Term Loan B in the quarter. Before we move on to the Q&A portion of the call, let me close my comments with some thoughts on a revised 2022 financial outlook. As you can see from our press release, we’ve updated our outlook to $5.6 billion to $5.8 billion of sales, $785 million to $830 million of adjusted EBITDA, and adjusted free cash flow of $300 million to $350 million. We’ve updated our outlook based on the latest best information we have regarding customer production schedules and operating environment, including inflation headwinds and projected recoveries. Our North American production assumption for 2022 is 14.3 million to 14.7 million units. And we expect the cadence of sales and related profitability to align with industry estimates of a stronger second half volume timing versus the first half of the year. We continue to assume our customers will prioritize full-size pickups and SUVs. But volatility remains across the entire spectrum of activities in our industry. That said, we will focus on what we can control, which are cost discipline, optimizing our operations, delivering high quality products on time and maximizing our cash flow conversion. We will navigate through the near-term challenges, and also in the meantime continue to provide compelling high value products and customer diversification as evidenced by the new Geely business award we announced today. We continue to invest in electrification and bolt-on high value acquisitions like Tekfor to position us for future profitable growth that is aligned with our strengths and capital allocation priorities. And lastly, we will continue to develop highly advanced electric drive units, sub-assemblies and components. Those efforts were recently recognized as PACE Award finalist, as David mentioned in his remarks. Thank you for your time today, and your participation on the call. I’m going to stop here, turn the call back over to David, so we can start the Q&A. Thank you.

Thank you, Chris and David. We have reserved some time to take questions. I would ask that you please limit your questions to no more than two. So at this time, please feel free to proceed with any questions you may have.

And our first question today comes from John Murphy from Bank of America. Please go ahead with your question.

Good morning, guys.

Good morning, John.

Thanks for the detail this morning. If we look at Slide 10, I think about your comments about the discussions you’re having with your automaker customers potentially getting some recoveries or greater recoveries. I’m just curious where the greatest opportunity is, because you traditionally have metals market pass-throughs and other agreements. On the raw side, you’re not too exposed, so it’s the untraditional costs or the costs that aren’t typically pass-through that you might be discussing with them. So, as we look at this, it’s really that $28 million that would be sort of a new area of discussion or focus. I’m just curious what the opportunity set is there and how far along your discussions are and what you think the potential success is?

Yeah, John, this is Chris. Good morning. Just to frame up that $28 million, about two-thirds of that relates to net material cost increases that we’ve experienced. We reset a lot of the purchasing prices with our supply base on January 1. The balance of that, the remaining one-third, is freight and utility related. In terms of how we’re addressing this with our customers, it’s a very sensitive topic. We’ve continued to make good progress with them. We benefited from some progress in the first quarter, and I would expect progress in this discussion to yield ultimately a reasonable recovery of some of these costs over the course of the second quarter and the early part of the third quarter.

Okay. So you think a reasonable portion of the $28 million is likely to be recovered in the coming second and third quarters?

Yeah. From a perspective basis, as we have reset a lot of our pricing with our supply base, we are in active discussions with our customers regarding compensation-related elements for some of those increases that we already began to experience in the first quarter.

Okay, that’s encouraging. And then just a second question on Slide 4. Obviously, you could argue that the Geely contract is sort of outsourcing traditional products, but it kind of spans both areas. I’m just curious, if you think about the new quotes that you’re winning, how much opportunity is there for some traditional products, and maybe even potential outsourcing from incumbents? If you juxtapose that opportunity set on traditional products with your view of acquisitions like Tekfor integrating into your traditional product base, how should we think about that?

Yeah, John. First and foremost, our objective was to secure our next generation business on our traditional products, and we’ve made tremendous progress as we’ve announced previously. So we feel very good about the cash generation that we can realize going forward for an extended period of time. At the same time, there are other opportunities presenting themselves, including new program opportunities and potential outsourcing opportunities that fit into our wheelhouse and existing equipment. We’re very pleased with the opportunity; Geely is one of the latest ones. It does have a plug-in hybrid application associated with it, so depending on how you view it — electrification versus conventional — we’re happy to support either. We also see a significant amount of electrification opportunities presenting themselves; each quarter those opportunities grow in our backlog and now represent over 70% of what we’re quoting. So we will continue to grow in our conventional products and in electrification, especially since electrification makes up the majority of our quoting activity today. We also believe additional opportunities will present themselves as OEMs evaluate their strategies, and we’re here to help.

Great. Thank you very much.

Thanks, John.

Our next question comes from Ryan Brinkman from JPMorgan. Please go ahead with your question. Mr. Brinkman, is it possible your phone is on mute?

Oh, I’m sorry about that. Thanks for taking my question. As we model Tekfor, what can you tell us at this stage about the margin profile of that business? In the press release you highlighted the pivot toward electrification; I understand Tekfor is being brought into your electrification product portfolio. Is there anything you can say about what percentage of Tekfor’s revenue or backlog stems from electrified vehicles?

Hey, Ryan, this is Chris. In our press release we disclosed Tekfor’s size: last year’s revenues for Tekfor were approximately €285 million, and we’re looking to close in the second quarter. We have not disclosed a specific margin profile, but one of the key elements of this transaction is that it’s a high-synergy deal for us. By 2023 estimates, we think of the purchase price around three times our synergized EBITDA, which gives a framework of how we think about transforming this business over the next 18 to 24 months. In terms of revenue profile, we project by 2025 that approximately 40% of Tekfor’s revenue will be propulsion agnostic, meaning it serves both conventional and electric vehicles. This was an attractive element of the transaction: it brings us new components on our metal form side to support the best business, and a lot that’s agnostic in terms of propulsion, fitting into our overall strategy.

Okay. That helps. Maybe just finally on Tekfor: when you purchased MPG, some sales were intercompany and impacted how revenue and EBITDA flowed. I noticed Tekfor had been a supplier to you in Brazil. What percentage of Tekfor’s revenue was coming from American Axle, as we think about the Malvern implications and intercompany sales?

Ryan, a small percentage of their revenue comes from American Axle, although they are a good supplier to us out of our Brazilian operations. As Chris indicated, we will use operational excellence to focus on synergistic opportunities to drive margin enhancement into the business. We’ll look at plant loading initiatives, buying power initiatives and other steps to achieve those synergies. We’re very excited about this acquisition; it shows we can continue to do tactical acquisitions while growing our business and pivoting to support electrification in the future.

Okay. Very helpful. Thank you.

Thanks, Ryan.

And our next question comes from Joe Spak from RBC Capital Markets. Please go ahead with your question.

Thanks. Good morning, everyone.

Good morning.

Chris, I was wondering if you could help us on the updated guide versus prior. Previously, you were looking for metal markets to be $150 million to $200 million plus, and about a $30 million negative on EBITDA. What’s the updated contribution to the new guidance from that on both the top-line and EBITDA?

Joe, from a metal market pass-through perspective, that remains very similar. You can see that run rate flowing through our first quarter. So from a metal perspective, not a lot different from where our guide was 90 days ago. The top end of our revenue range is down because North American markets are down about 3% versus our previous volume estimates. Half our business is full-size truck related and that view has been stable over the last 90 days. So the reduction is primarily volume-based, and metal is relatively similar to where we were 90 days ago.

Okay. So the reduction is pretty much volume-based. If metal holds at spot, is there still an impact into 2023? Or would 2023 be more neutral on both counts?

If metal holds at these levels — and they reset every 30 days — we saw metal start to trend down in the first quarter and then spike up in May, so it’s difficult to predict. But if they hold at these levels for the bulk of this year, on a year-over-year basis stepping into 2023 it would be relatively neutral. There are many factors, but that is a reasonable macro perspective.

Perfect. And then David, maybe this ties to your sustainability comments. Functionally, when you sell a 3-in-1 electric drive unit that has a motor, you’re not making the motors, and motors have sensitive commodities like rare earths. One, have you audited your suppliers to ensure sufficient supply of rare earths and to meet your goals and sourcing expectations? And two, when there is a change in those prices, who ultimately bears those increases?

A couple points. From a motor and inverter standpoint, we are buying some of those today. We have agreements in place with those suppliers and agreements with our customers. Regarding rare earths, we, along with OEMs and Tier 1s, are asking for supply chain visibility and transparency to understand where suppliers source their materials and what risks exist. Suppliers are being asked to provide robust supply chain plans to protect continuity of supply. This has become a major issue over the last 18 months. We’re also looking at alternatives that reduce dependence on rare earth materials and the countries that supply them. Regarding material price increases, that’s negotiated case by case with our customers. We are not going to absorb all of those increases in the future; we need the ability to pass adjustments on to our customer base, but those are individual negotiations.

Thanks.

Our next question comes from Dan Levy from Credit Suisse. Please go ahead with your question.

Hi, thank you for taking the questions. I’m sorry if I missed it earlier, but could you provide an update on the cost guidance, which was $40 million initially? Could you talk broadly about the types of costs you’re seeing — labor, freight, utilities — and what piece might be sticky versus temporary?

Good morning, Dan. The guidance we released in our previous earnings call showed a net $40 million increase for purchased materials; with the updated guidance you see today that has increased in terms of net cost. We still have active negotiations with our customers to mitigate some of that increase, but work remains. Regarding stickiness: freight will ebb and flow with market conditions — we saw increases in freight in the first quarter and in the back half of last year — and productivity initiatives can mitigate that. Utilities are another large element and may ebb and flow with the macro environment; we are at a peak for a variety of reasons, so direction could change. From a labor perspective, we face labor inflation pressures similar to the rest of the industry, and I expect those to be relatively sticky. Our focus is leveraging our operating system to improve efficiencies, productivity and automation to mitigate inflation over time. That’s how we think about our different cost elements.

Great. Even if some of this cost is sticky, there’s no reason to believe that your incremental margins on any volume recovery wouldn’t be similar to the past, call it that 25% plus contribution margin. Is that correct?

When you think of the pure impact of volume changes, you are correct.

Okay, great. And then as a second question, given the more uncertain environment and the timeline for reaching 2x net debt-to-EBITDA likely pushed out, how does the balance sheet playbook change? You just did an acquisition, which shows confidence. How do things change with an elongated timeline to reaching 2x?

From a balance sheet perspective, our operations are set up to generate strong cash flow. We continue to take action on the gross debt side, reducing it; we paid additional debt down in the first quarter and announced Tekfor. We’ll continue to strengthen the balance sheet by reducing gross debt. Net leverage will adjust over time; we are confident in our ability to generate cash flow and to execute our capital allocation playbook appropriately.

Dan, we’ve been consistent regarding capital allocation: we will support organic growth of our booked business — which is over $700 million over the next three years — continue to pay down debt, as we have every quarter, and focus on tactical acquisitions that fit within our capital structure and make sense, as with Tekfor. We will balance those three priorities; quarter-by-quarter emphasis may vary, but those are our main directions for capital allocation.

Great. Thank you very much.

Thank you.

And ladies and gentlemen, there are no further questions at this time and I’d like to turn the floor back over to Mr. Lim.

Great. We thank all of you who have participated on this call and appreciate your interest in AAM. We certainly look forward to talking with you in the future. Thank you.

And ladies and gentlemen, with that, we’ll conclude today’s presentation. We do thank you for joining. You may now disconnect your lines.