BorgWarner Reports Second Quarter 2024 Results, Increases Full-Year Adjusted Operating Margin and EPS Guidance

Auburn Hills, Michigan, July 31, 2024 - BorgWarner Inc. (NYSE: BWA) today reported second quarter results.

Strong Second Quarter Margin and Free Cash Flow, Increasing Full Year Adjusted Operating Margin and EPS Guidance

• BorgWarner achieved an adjusted operating margin performance of 10.4% during the second quarter, which equated to a U.S. GAAP operating margin of 8.2%. The Company also generated net cash provided by operating activities of $462 million and $297 million in free cash flow, despite a modest decline in the Company's weighted light and commercial vehicle markets.
• The Company increased its mid-point full year adjusted operating margin guidance by 30 basis points and adjusted earnings per share guidance by approximately $0.07 per share. This is being driven by BorgWarner's technology-focused portfolio and strong cost controls. BorgWarner reduced its full year mid-point net sales guidance by $400 million primarily due to a lower market production outlook, weaker foreign currencies and slower year-over-year growth in eProduct sales.
• BorgWarner intends to repurchase $300 million of the Company's outstanding shares during the second half of 2024. After these repurchases, BorgWarner will have repurchased $577 million of its outstanding shares since the start of the fourth quarter of 2023.
  

Business Update

The Company announced a number of items that are intended to support its future long-term profitable growth including:

• Introduction of a new business unit structure that we expect to drive synergies, strengthen the Company's product and go to market strategy and improve reporting transparency for our stockholders. This new business unit structure was effective July 1st, 2024.
• Restructuring of the Company's ePropulsion segment, which is expected to align the segment's cost structure to current market dynamics while preserving its long-term profitable growth potential. This restructuring is expected to result in annual cost savings of approximately $100 million by 2026.
• Multiple new business awards across its combustion, hybrid and battery electric vehicle (BEV) portfolio. BorgWarner booked three electric cross differential, a high-voltage eFan and two exhaust gas recirculation awards. These awards are primarily expected to launch in 2026 and 2027.
  

Second Quarter Highlights (continuing operations basis):

• U.S. GAAP net sales of $3,603 million, a decrease of 2% compared with second quarter 2023.
• Excluding the impact of foreign currencies and the impact of net M&A, organic sales were down 0.3% compared with second quarter 2023.
• U.S. GAAP net earnings of $1.39 per diluted share.
• Excluding $0.20 of net gains per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were $1.19 per diluted share.
• U.S. GAAP operating income of $297 million, or 8.2% of net sales.
• Excluding $79 million of pretax expenses related to non-comparable items, adjusted operating income was $376 million, or 10.4% of net sales.
• Net cash provided by operating activities of $462 million.
• Free cash flow of $297 million.
  

Financial Results (continuing operations basis):

The Company believes the following table is useful in highlighting non-comparable items that impacted its U.S. GAAP net earnings per diluted share. The non-comparable items presented below are calculated after tax using the corresponding effective tax rate discrete to each item and the weighted average number of diluted shares for the periods presented. 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 expenses, discontinued operations, other gains and losses not reflective of the Company's ongoing operations, and related tax effects.

Net sales were $3,603 million for the second quarter 2024, a decrease of 2% compared with net sales of $3,671 million for the second quarter 2023, primarily due to declining market production volumes and the negative impact of foreign currencies. Net earnings for the second quarter 2024 were $315 million, or $1.39 per diluted share, compared with net earnings of $228 million, or $0.97 per diluted share, for the second quarter 2023. Adjusted net earnings per diluted share for the second quarter 2024 were $1.19, up from adjusted net earnings per diluted share of $1.06 for the second quarter 2023. Adjusted net earnings for the second quarter 2024 excluded net non-comparable items of $0.20 per diluted share, while adjusted net earnings for the second quarter 2023 excluded net non-comparable items of $(0.09) per diluted share. These items are listed in the table above, which is provided by the Company for comparison with other results and the most directly comparable U.S. GAAP measures. The increase in adjusted net earnings per diluted share was primarily due to higher adjusted operating margin driven by the Company's cost controls, a lower effective tax rate and a lower share count.

Full Year 2024 Guidance: The Company has updated full year sales, margin and EPS guidance. Net sales for 2024 are expected to be in the range of $14.1 billion to $14.4 billion, compared to the Company's prior guidance of $14.4 billion to $14.9 billion and 2023 sales of approximately $14.2 billion. The Company expects its weighted light and commercial vehicle markets to be in the range of down 3% to down 2% year-over-year in 2024, a decrease from the Company's prior guidance of flat to down 2.5%. The Company's sales guidance implies a year-over-year increase in organic sales of approximately 0.5% to 2.5%, or estimated outgrowth above market production of approximately 350 to 450 basis points. The Company expects its 2024 eProduct sales to be near the low-end of the Company's prior $2.5 billion to $2.8 billion guidance, up from approximately $2.0 billion in 2023. Foreign currencies are expected to result in a year-over-year decrease in sales of approximately $175 million primarily due to the weakening of the Chinese Renminbi, the Korean Won and the Euro against the U.S. dollar. The acquisitions of SSE and the Electric Hybrid Systems business segment of Eldor Corporation are expected to increase year over-year sales by approximately $30 million.

Operating margin for the full year is expected to be in the range of 8.2% to 8.3%. Excluding the impact of non-comparable items, adjusted operating margin is expected to be in the range of 9.6% to 9.8%, up from the Company's prior guidance of 9.2% to 9.6%. Net earnings are expected to be within a range of $3.88 to $4.05 per diluted share. Excluding the impact of non-comparable items, adjusted net earnings are expected to be within a range of $3.95 to $4.15 per diluted share, up from the Company's prior guidance of $3.80 to $4.15 per diluted share. The Company's full-year EPS guidance includes the expected impact of the Company's intended share repurchases of $300 million during the second half of 2024. Full-year operating cash flow is expected to be in the range of $1,325 million to $1,375 million,
while free cash flow is expected to be in the range of $475 million to $575 million.

At 9:30 a.m. ET today, a brief conference call concerning second quarter 2024 results and guidance will be webcast at: https://www.borgwarner.com/investors. Additionally, an earnings call presentation will be available at https://www.borgwarner.com/investors.

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