Borgwarner Inc. · NYSE:BWA
Borgwarner — Q4 2019 Earnings Presentation
28 slides from Borgwarner's earnings presentation, Feb 13, 2020
Slide 1: Earnings Call Presentation Q4 2019
Earnings Call Presentation Q4 2019 February 13, 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that reflect, when made, Delphi’s or BorgWarner’s respective current views with respect to future events, including the proposed transaction, and f
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation contains information about BorgWarner’s financial results that is not presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Such non-GAAP financial measures are reconciled to their closest GAAP financial mea
Slide 4: Agenda
Agenda ▪ Fred Lissalde – Chief Executive Officer ▪ Kevin Nowlan – Chief Financial Officer ▪ Q&A © BorgWarner Inc. 4
Slide 5: Solid Finish to 2019, Positioned for Strong Future
Solid Finish to 2019, Positioned for Strong Future ▪ Organic revenue performance, Net Sales Adj. EPS* Free Cash Flow* outgrowth, EPS and free cash flow ahead of expectations Organic Sales Growth Above High End of Above High End of of 0.7% Guidance Range Guidance Range ▪ Additional restructuring meas
Slide 6: Proactive Steps to Sustain Margin Profile and Competitiveness
Proactive Steps to Sustain Margin Profile and Competitiveness ($ in millions) Restructuring Cost Savings ▪ Restructuring, closure or consolidation of manufacturing and/or technical centers in all major Announced Feb 2020 $135-$145 regions (primarily COGS) $120-$130 Announced Apr 2019 ▪ Consolidation
Slide 7: Awards Secured Across Product Portfolio
Awards Secured Across Product Portfolio Triple-clutch P2 Module & eTurbo™ Electro-Hydraulic Control Unit High Voltage Coolant Heater ▪ Award with European based OEM ▪ Award with major European premium ▪ Award with ChangAn launching in launching in 2022 2020 OEM launching in 2023 ▪ Benefits of eTurbo
Slide 8: A Propulsion Systems Leader, Well Positioned for the Future
A Propulsion Systems Leader, Well Positioned for the Future BorgWarner’s acquisition of Delphi Technologies will strengthen its propulsion systems leadership ✔ ▪ Reinforces leadership in electrified propulsion systems ✔ ▪ Increases power electronics scale, technology, talent and adds to system capab
Slide 9: Potential Revenue Synergies Support Long-term Outgrowth Opportunities
Potential Revenue Synergies Support Long-term Outgrowth Opportunities Focused Pursuit Opportunities Light Vehicle Customers Products BEV iDM >$1.3B Customer A P4 iDM ▪ Represents top 15 HV P2 opportunities identified jointly Customer B Motor + Inverter HV P4 during due diligence Customer C BEV iDM P
Slide 10: BorgWarner Q4 2019 Net Sales Walk
BorgWarner Q4 2019 Net Sales Walk $ in millions Q4 2018 net sales $2,574 ▪ 850bps of global outgrowth Thermostat divestiture $(31) ▪ LV outgrowth more than offsets commercial vehicle Q4 2018 proforma excl. Thermostat business $2,543 headwinds FX $(51) ▪ Strong double-digit outgrowth in China Backlog
Slide 11: BorgWarner Financial Results & Adj. Operating Income
BorgWarner Financial Results & Adj. Operating Income $ in millions Three months ended Q4 2018 adj. operating income* $323 (in millions, except per share amounts) December 31, GAAP & Non GAAP Financials 2018 2019 Thermostat divestiture $(2) Sales $2,574 $2,559 Adj. operating margin* $323 $340 Q4 2018
Slide 12: Expect Global Markets to Remain Under Pressure in 2020
Expect Global Markets to Remain Under Pressure in 2020 BorgWarner Global Market North America Europe China FY’19 FY’20 Est. Actual FY’19 FY’20 FY’19 FY’20 FY’19 FY’20 Actual Est. Actual Est. Actual Est. -1.0% to -2.0% -3.9% -4.4% -2.0% to -1.0% to -5.0% -5.0% -2.0% to -4.0% -4.6% -8.5% Note: 2019 li
Slide 13: 2020 Expected Sales Walk and Guidance
2020 Expected Sales Walk and Guidance $ in millions Net Sales Full-year 2020 Guidance 12.1% 2019 net sales Adj. Margin $10,168 ▪ Organic revenue change of -2.5% to +0.5% Thermostat divestiture $30 ▪ 150 to 250 basis points of outgrowth 2019 proforma excl. $10,138 Thermostat business ▪ Adj. EPS $3.85
Slide 14: Light Vehicle Net New Business Backlog
Light Vehicle Net New Business Backlog $ in millions Electrification Drives >100% of Backlog Weighted to Asia Net Light Vehicle Backlog $2,100 $400 China 50% to $530 Europe 10% 2020 2021 to 2023 Americas 20% Asia ex. China 20% Average Light Vehicle Outgrowth 2021 to 2023 ~3% ~10% ~17% Note: Data rep
Slide 15: Thank you!
Thank you! © BorgWarner Inc. 15
Slide 16: Appendix
Appendix © BorgWarner Inc. 16
Slide 17: Segment Net Sales & Adj. EBIT Margin
Segment Net Sales & Adj. EBIT Margin* $ in millions Net Sales Q4 2018 proforma excl. ▪ Outgrowth in China and Europe 15.7% ENGINE Thermostat business* Adj. Margin $1,510 partially offset by lower North America FX $(30) industry volumes Market growth, price and net new business $53 17.2% ▪ Benefit of
Slide 18: Fourth Quarter and Full Year Reconciliation to US GAAP
Fourth Quarter and Full Year Reconciliation to US GAAP Adjusted Operating Income The Company defines adjusted operating income as operating income adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expenses, discontinued operations, and
Slide 19: Fourth Quarter Segment Reconciliation to US GAAP
Fourth Quarter Segment Reconciliation to US GAAP Adjusted EBIT The Company defines adjusted EBIT as EBIT adjusted to eliminate the impact of merger, acquisition and divestiture expense. Three Months Ended December 31, $ in millions 2019 2018 Engine Net sales $ 1,533 $ 1,541 Thermostat divestiture -
Slide 20: Fourth Quarter and Full Year Reconciliation to US GAAP
Fourth Quarter and Full Year Reconciliation to US GAAP Adjusted Earnings Per Share The Company defines adjusted earnings per diluted share as earnings per diluted share adjusted for the items above and related tax effects. Three Months Ended Year Ended December 31, December 31, 2019 2018 2019 2018 E
Slide 21: Fourth Quarter Adj. EBIT to US GAAP Reconciliation
Fourth Quarter Adj. EBIT to US GAAP Reconciliation Adjusted EBIT is comprised of earnings before interest, income taxes and noncontrolling interest (“EBIT") adjusted for restructuring, goodwill impairment charges, affiliates' earnings and other items not reflective of on-going operating income or lo
Slide 22: 2020 Planning Assumptions
2020 Planning Assumptions ▪ CapEx $525 to $575 million ▪ Share repurchases $200+ million ▪ R&D spending 4.3% to 4.5% of sales ▪ Tax rate for ongoing operations ~26% to ~27% © BorgWarner Inc. 22
Slide 23: FY'20 Adj. Operating Income to US GAAP Reconciliation
FY’20 Adj. Operating Income to US GAAP Reconciliation FY 2020 Guidance FY 2019 Low High Net Sales $ 10,168 $ 9,750 $ 10,075 Operating income $ 1,303 $ 975 $ 1,110 Operating margin 12.8% 10.0% 11.0% Non-comparable items Restructuring expense $ 72 $ 115 $ 65 Merger, acquisition and divestiture expense
Slide 24: Adj. EPS Guidance to US GAAP Reconciliation
Adj. EPS Guidance to US GAAP Reconciliation The Company defines Adjusted earnings per share as Adjusted net income divided by diluted shares. Because not all companies use identical calculations, this presentation of Adjusted operating income and Adjusted earnings per share may not be comparable to
Slide 25: Adj. Free Cash Flow to US GAAP
Adj. Free Cash Flow to US GAAP The Company defines Adj. free cash flow as net cash provided by operating activities plus the derecognition of subsidiary minus capital expenditures. The measure is useful to both management and investors in evaluating the Company’s ability to service and repay its deb
Slide 26: Key Definitions
Key Definitions Key Definitions: The terms below are commonly used by management and investors in assessing ongoing financial performance. ▪ Organic Revenue Change – Revenue change year over year excluding the estimated impact of FX and net M&A ▪ Market – The change in light vehicle production weigh
Slide 27: No Offer or Solicitation
No Offer or Solicitation This communication is being made in respect of the proposed acquisition (the “proposed transaction”) of Delphi Technologies PLC (“Delphi”) by BorgWarner Inc. (“BorgWarner”). This communication is not intended to and does not constitute an offer to sell or the solicitation of
Slide 28: Additional Information and Where to Find It
Additional Information and Where to Find It This presentation may be deemed solicitation material in respect of the proposed acquisition of Delphi Technologies by BorgWarner (the “proposed transaction”). In connection with the proposed transaction, Delphi Technologies will file with the Securities a