Borgwarner Inc. · NYSE:BWA
Borgwarner — Q2 2021 Earnings Presentation
28 slides from Borgwarner's earnings presentation, Aug 4, 2021
Slide 1: Earnings Call Presentation Q2 2021
Earnings Call Presentation Q2 2021 1 August 4, 2021 © BorgWarner Inc. 1
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 are based on management’s current outlook, expectations, estimates and projections. Words such as “anticipates,” “believes,” “continues,” “cou
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: Progress on Multiple Fronts During Second Quarter of 2021
Progress on Multiple Fronts During Second Quarter of 2021 ▪ Outgrowth and margin Net Sales Adj. EPS* Free Cash Flow* performance ahead of Organic Sales expectations Increase of ~72% (0.6)% 10.7% Adj. Op Margin* ▪ Increasing full year guidance Adj. Op Margin* $3,758 $133 ▪ Published 2021 Sustainabili
Slide 6: 2021 Sustainability Report Highlights Our Commitment to the Electrification Trend
2021 Sustainability Report Highlights Our Commitment to the Electrification Trend Our sustainability objectives go hand in hand with our strategy to generate financial results • Committed to carbon neutrality* by 2035 focusing on renewable and energy efficiency • Provided Scope 3 emissions commentar
Slide 7: Acquisition Finalized for Leading Battery Systems Provider
Acquisition Finalized for Leading Battery Systems Provider Expands Commercial Vehicle and Industrial Electrification Capabilities Accelerates Positioning in Fast-Growing Commercial Vehicle and Off-Highway Battery Pack Market ▪ Takeover offer completed on June 4, 2021 ▪ Current ownership now ~93% ▪ P
Slide 8: Awards for Two Dual Inverters and Integrated Drive Module
Awards for Two Dual Inverters and Integrated Drive Module Dual Inverter for Dedicated Hybrid Transmissions (DHT) Integrated Drive Module (iDM) ▪ Award with Great Wall and another major Chinese OEM ▪ Award with a leading Chinese luxury NEV brand, expected to launch in 2021 and 2023, respectively expe
Slide 9: Recently Launched Geely Award Adds Scale to High-voltage Coolant Heater Product Line
Recently Launched Geely Award Adds Scale to High-voltage Coolant Heater Product Line Estimated Annual High-voltage Coolant Heater Volumes ~4M Product Highlights ▪ Enables improved battery performance, longer range and comfortable cabin climate ▪ 400V and 800V capabilities with awarded ~600K business
Slide 10: BorgWarner Q2 2021 Net Sales Walk
BorgWarner Q2 2021 Net Sales Walk $ in millions ▪ Global vehicle markets up ~64% year Q2 2020 net sales $1,426 over year Delphi Technologies impact $628 ▪ Organic sales grew ~72%, with Q2 2020 proforma incl. Delphi Technologies* $2,054 outgrowth driven by Europe and China FX $217 ▪ Europe – Small ga
Slide 11: BorgWarner Financial Results & Adj. Operating Income
BorgWarner Financial Results & Adj. Operating Income $ in millions Q2 2020 adj. operating $(9) Three months ended income** (in millions, except per share amounts) GAAP & Non-GAAP Financials June 30, Delphi Technologies 2020 2021 pro forma impact $(43) Sales $1,426 $3,758 Q2 2020 pro forma incl. Delp
Slide 12: Moderating 2021 Industry Expectations
Moderating 2021 Industry Expectations BorgWarner Global Market North America Europe China Q2’21 FY’21 Actual Est. Q2’21 FY’21 Q2’21 FY’21 Q2’21 FY’21 Actual Est. Actual Est. Actual Est. 63.9% 127.5% 83.5% 13% to 16% (Prior Est. 17% to 20%) 8% to 10% ~8.5% to ~11% (Prior Est. (Prior Est. 9% to 12%) 9
Slide 13: 2021 Expected Sales Walk and Guidance
2021 Expected Sales Walk and Guidance $ in millions Full-year Net Sales Outlook Net Sales Highlights 2020 net sales $10,165 ▪ Organic growth of ~14% to ~17% Delphi Technologies $2,627 pro forma impact Earnings and FCF Highlights 2020 pro forma incl. 8.3% Pro forma Delphi Technologies* Adj. Operating
Slide 14: Delphi Technologies Financials Ahead of Targets
Delphi Technologies Financials Ahead of Targets Update on Estimated Synergies Update on Estimated EPS Accretion $ in millions 2021 Synergies Adj. EPS* Excl. Amort of Intangibles** Cumulative Synergies since Delphi Technologies acquisition $0.30 to $0.40 $115 to $120 $0.20 to $0.30 $100 to $105 $85 t
Slide 15: AKASOL Backlog Expected to Drive Financial Results
AKASOL Backlog Expected to Drive Financial Results Sales Outlook EPS Accretion Outlook $ in millions Adj. EPS* Excl. Amort of Intangibles** ~$500 $0.12 $0.06 ~$75 $(0.01) 2021E 2024E $(0.04) (post closing) 2021E 2024E ▪ 2021 and 2025 sales aligned with original ▪ Modest dilution in 2021 expectations
Slide 16: Thank you!
Thank you! 16 August 4, 2021 © BorgWarner Inc. 16
Slide 17: Appendix
Appendix © BorgWarner Inc. 17
Slide 18: 2021 Planning Assumptions
2021 Planning Assumptions ▪ CapEx $725 to $775 million ▪ R&D spending ~$725 million ▪ Tax rate for ongoing operations ~30% © BorgWarner Inc. 18
Slide 19: Pro Forma Description
Pro Forma Description On October 1, 2020 BorgWarner completed its acquisition of Delphi Technologies PLC (Delphi Technologies). The 2020 pro forma unaudited quarterly financial information included herein includes the pro forma combined results of BorgWarner and Delphi Technologies for periods prior
Slide 20: Pro Forma 2020 Quarterly Sales and Adj. Operating Income (Unaudited)
Pro Forma 2020 Quarterly Sales and Adj. Operating Income (Unaudited) Pro forma Pro forma Pro forma As Reported Pro forma Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Air Management Net sales $ 1,683 $ 961 $ 1,750 $ 1,942 $ 6,336 Adj. EBIT 241 34 278 301 854 Adj. EBIT Margin 14.3% 3.5% 15.9% 15.5% 13.5% e
Slide 21: BorgWarner Global Production Outlook (2021 vs. 2020)
BorgWarner Global Production Outlook (2021 vs. 2020) Year-over-Year Change in Production North America Europe China Total Light Vehicle Production 11% to 13% 7% to 9% 5% to 7% 8% to 10% Commercial Vehicle Production 27% to 36% 14% to 16% -16% to -18% -1% to 2% BorgWarner-Weighted Production 13% to 1
Slide 22: Second Quarter and Year-to-Date Reconciliation to US GAAP
Second Quarter and Year-to-Date Reconciliation to US GAAP Adjusted Operating Income and Adjusted Operating Margin The Company defines adjusted operating income as operating income adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expens
Slide 23: Second Quarter and Year-to-Date Reconciliation to US GAAP
Second Quarter and Year-to-Date Reconciliation to US GAAP Adjusted Earnings Per Diluted Share The Company defines adjusted earnings per diluted share as earnings per diluted share adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expens
Slide 24: Second Quarter Organic Net Sales Change
Second Quarter Organic Net Sales Change Organic Net Sales Change BorgWarner net sales change year over year excluding the estimated impact of foreign exchange (FX) and net M&A. Q2 2020 Delphi Technologies Market Impact, Q2 2020 Net Pro Forma Pricing & Q2 2021 Net Organic Net $ in millions Sales FX I
Slide 25: FY'21 Adj. Operating Income and Adj. Operating Margin
FY’21 Adj. Operating Income and Adj. Operating Margin Guidance Reconciliation to US GAAP Full Year 2021 Guidance $ in millions Low High Net Sales $ 15,200 $ 15,600 Operating income $ 1,317 $ 1,452 Operating margin 8.7% 9.3% Non-comparable items Restructuring expense $ 200 $ 150 Merger, acquisition a
Slide 26: FY'21 Adj. Earnings per Diluted Share Guidance
FY’21 Adj. Earnings per Diluted Share Guidance Reconciliation to US GAAP Full Year 2021 Guidance Low High Earnings per diluted share $ 2.80 $ 3.21 Non-comparable items: Restructuring expense 0.66 0.50 Merger, acquisition and divestiture expense 0.10 0.10 Loss on sale 0.03 0.03 Loss on debt extinguis
Slide 27: Q2'21, YTD'21 and FY'21 Free Cash Flow Reconciliation to US GAAP
Q2’21, YTD’21 and FY’21 Free Cash Flow to Reconciliation to US GAAP The Company defines free cash flow as net cash provided by operating activities minus capital expenditures, including tooling outlays. The measure is useful to both management and investors in evaluating the Company’s ability to ser
Slide 28: Key Definitions
Key Definitions The terms below are commonly used by management and investors in assessing ongoing financial performance: ▪ Organic Net Sales Change. BorgWarner net sales change year over year excluding the estimated impact of foreign exchange (FX) and net M&A. ▪ Market. Light and commercial vehicle