Earnings Transcript for DAN - Q4 Fiscal Year 2024

Operator: Good morning, and welcome to Dana Incorporated Fourth Quarter and Full Year 2024 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. To ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers limit themselves to one question at a time. If you would like to ask an additional question, please return to the queue. At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations, Strategic Planning and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Craig Barber: Good morning, everyone, and thank you for joining us today for Dana Incorporated 2024 Q4 and full year earnings call. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we've discussed today. For more details about the factors that could affect our future results, please refer to our safe harbor statement found in our public filings and our reports with the SEC. Find this morning's press release and presentation on our investor website. And as a reminder, today's call is being recorded and the supporting materials of the property Incorporated. May not be recorded, copied, or rebroadcast without a written consent. This call this morning is Bruce McDonald, Senior Chairman and Chief Executive Officer, and Timothy Krause, Senior Vice President and Chief Financial Officer. Now I'd like to turn the call over to Bruce to get us started.

Bruce McDonald: Alright. Thank you, Craig, and good morning, everybody. Probably a little bit less than normal for me on this call given we just spoke with the street here a month ago. But just slide four, it's a high-level perspective on our financials. For the full year sales, down about nearly $300 million, really reflecting softness, I would say, in a few key areas. One would be EV and some of our sales to the programs that we are currently in production on. And then as the year progressed, we saw increasingly weak markets in off highway. In terms of our profitability, we benefited from strong operating performance with our sales with our sort of EBITDA up $40 million on lower volumes and driving our operating margins up by 60 basis points. Again, just a little bit of color there, strong operation performance, we're starting to see the early benefits of some of our footprinting actions and plant consolidation. And really good to see here in the fourth quarter as we previously talked about, the benefits of our cost reduction, our $300 million cost reduction program. Flowing through in the quarter. $10 million in Q4 here and as I mentioned last month, about $100 million of the $300 million is actioned and you could think about in the bag. And lastly, in terms of free cash flow, big improvement getting from a slightly negative position in 2023 to $70 million in 2024. We're pleased with the improvement, but it's nowhere near where it needs to be and the guidance that we're gonna share with you later on. We have free cash flow more than tripling in 2025. Turning to slide five. Again, this is sort of a lift from the deck a month ago. Focusing on very Tim and I and the team are very heavily focused on completing the off highway divestiture. I really don't have any new information to report versus a month ago. There's a robust process with strong interest, and we continue to believe that we can execute and the legal agreements and announce a transaction somewhere early Q2 with a closing by the end of our fiscal 2025. In terms of EV, and our approach to the marketplace, that's been fully implemented and communicated. That's been critical for us. I think it derisks some of the capital that we've committed in the future. And the fact that we're taking a much more measured approach really reduces the capex intensity of our business on a go-forward basis. Little bit of more information here in terms of power technologies. Consolidation or well on underway in terms of completing that initiative. It's been kinda fully rolled out. That savings is worth somewhere in the $15 to $20 million level. That's kind of the run rate we hope to get from that initiative. And under Byron Foster's leadership, I feel good about that. In terms of financial commitments, we're fully committed to getting new Dana margins up to the 8.1% to 8.6% here in 2025. And pushing towards double digit in 2026. Really benefiting from strong continued operations performance and, of course, the benefits of the $300 million cost reduction that will be fully in our base in 2026. Terms of use of proceeds, again, committed to a strong balance sheet. Our discussions that we're having with our board would suggest we're targeting a net leverage of both one times through the cycle. That does not mean we'll be at one time is when we on day one. What will probably be lower than that, but that we wanna have a conservative balance sheet so that we're strong throughout cycle. Lastly for me on page six, just a few comments on our markets and our backlog for this year. I guess I categorized our outlook in terms of light vehicle. It's flattish year over year. That seems to be generally consistent with what other suppliers and OEs are talking about right now. And that's sort of been reflected in the releases that we that we've seen so far. In terms of commercial vehicle, a little bit of softness in the market. We do anticipate to see off I'm sorry, commercial vehicle stabilize here towards the end of this year, and look forward to start to see the beneficial impacts of pre buys associated with the 2026 emissions legislation changes. In terms of off highway, similar type weakness in the market. I guess I would say, I haven't seen our numbers for January and an early view on February. It's actually the market's actually doing a little bit better than we had talked about a month ago. So I'm not gonna call it a turnaround yet. But it seems to be holding up a little bit better than we had feared. Tim's gonna get into our quarterly phasing later on, but one thing I would point out is we are gonna have difficult comps here in Q1 and to a lesser extent in Q2. In light vehicle, obviously, last year, we benefited from volume pickup associated with the strikes in North America. And then we've got tough year over year comps in both off highway and CV. In terms of our backlog, $650 million. You can see how that flows by year. Obviously, it's down about $300 million from our backlog the year before. That really reflects I would say, largely lower volumes on the easy programs that we have in our backlog. But, nonetheless, we've got strong growth in each of the next three years. And I guess I just remind folks that 80% plus of our backlog tends to be in new Dana as opposed to off highway. So that, Tim, I'll turn it over to you to sort of deep dive in the financials.

Timothy Kraus: Thanks, Bruce, and good morning to everyone. Please turn to Slide eight for a review of our fourth quarter and full year results for 2024. Beginning on the left column with fourth quarter sales were $2.34 billion, $159 million below last year due to lower vehicle production and currency impacts. For the full year, sales were $10.28 billion, down $271 million driven again by end market weakness. Adjusted EBITDA was $186 million in the fourth quarter for a profit margin of 8%. That is a 170 basis point improvement over last year's fourth quarter. Full year adjusted EBITDA was $885 million, $40 million higher than the previous year, for a profit margin of 8.6%. So 60 basis points better than last year. The profit improvement is primarily due to cost saving actions and better efficiencies throughout the organization. Net loss of attributable to Dana was $80 million for the fourth quarter, $41 million lower than last year, primarily driven by $31 million higher restructuring charges this year to implement our long-term cost savings plan and divestiture expenses. Full year net loss was $57 million compared to net income of $38 million last year. The primary difference of $51 million and higher restructuring charges and the $26 million loss recorded for the planned divestiture of our non-core hydraulics business, that was announced earlier this year. The transaction did not occur in the third quarter as expected and was no longer classified as held for sale. However, this loss was recognized to adjust the carrying value of the net assets to fair value remains due to account Adjusted EPS for the quarter was $0.25 per share compared to a loss of $0.08 last year. For the full year, adjusted EPS was $0.94 per share, $0.10 better than the prior year. And finally, free cash flow was $149 million for the quarter. $70 million for the full year, a $13 million improvement for the quarter, and $95 million improvement for the year. Please turn with me now to slide nine for the drivers of the sales and profit change for the fourth quarter of 2024. Beginning on the left, organic sales were $135 million lower driven by lower OEM production of heavy vehicles. Adjusted EBITDA on organic sales was $33 million higher. This strong incremental margin was due to improved cost efficiencies across the entire company and generated 175 basis points improvement in margin. As we detailed in our business update call in January, we are showing the impact of our cost saving program in our profit walks. For the fourth quarter of 2024, cost savings added $10 million in profit through the various actions we took since we began the program in the fourth quarter. Foreign currency translation decreased sales by $15 million primarily driven by lower value of the euro and real compared to the US dollar. Profit was lowered by $1 million with no impact to margin. Finally, due to falling commodity prices, commodity cost recovery in the fourth quarter was $8 million lower than last year. The profit benefit of the lower commodity prices was offset by the timing commodity recovery agreements with our customers resulting in profit being lower by $12 million a 45 basis points decrement to margin. Next, I will turn to slide ten for the drivers of the sales and property change for the full year 2024. For the full year, organic sales were $164 million lower driven by lower end market demand in the second half of the year. Adjusted EBITDA on organic sales was $76 million higher. This strong incremental margin, again, was due to improved cost efficiency, across the organization resulting in 90 basis points improvement in margin. The cost saving program which began in the fourth quarter added the same $10 million to adjusted EBITDA as was shown in the previous page for fourth quarter. Currency translation lowered sales by $49 million and profit by $6 million with no impact to margin. Just as the fourth quarter just as in the fourth quarter, the benefit of the lower commodity prices was offset by timing cost mechanisms with our customer agreements. Commodity cost recovery was $53 million lower than last year, and profit was lowered by $40 million a 40 basis point impact mark. Please turn with you now to slide eleven for the details of the full year free cash flow. Free cash flow for 2024 totaled $70 million, $95 million higher than last year. Higher adjusted EBITDA was partially offset by higher one-time costs related to cost saving actions and the sale of the off highway business, as well as higher net interest due to the timing of interest payments and higher taxes driven by payment timing and regional mix of income. Working capital use was $17 million lower than last year. We use was due to the timing of payables and other working capital. Finally, capital spending was $121 million lower driven by a normalized launch cadence and lower investment for EV programs. Please turn to slide twelve for a review of our 2025 guidance. Our 2025 full year guidance remains unchanged from our business. As a reminder, our guidance includes the off highway business for the full year and does not include any impact from unidentified tariffs. We are expecting sales for this year of about $9.75 billion at the midpoint of our range. That is about $500 million lower than last year driven by lower end market demand, and the delay in some EV programs as well as currency translation impact. Adjusted EBITDA is expected to be $975 million at the midpoint of the tighter ranges. This is approximately $90 million higher than 2024, and applies a profit margin of 10%. A 140 basis points increase over 2024. Full year free cash flow is expected to be $225 million at this point of the range for the year. This is approximately $155 million higher than last year. Our adjusted EPS guidance is expected to be $1.65 per share at the midpoint of the range. Turn with you now to slide thirteen where I will highlight the drivers. Of the full year expected sales and profit changes compared to 2024. We are expecting about $285 million of lower organic sales for 2025, driven by lower demand in all end markets partially offset by new business. Adjusted EBITDA change on organic sales growth is expected to be approximately $40 million for a decremental margin of just 14%. This is due to the continued manufacturing and purchasing efficiency improvements in the organization. Cost saving actions are expected to total $175 million this year increasing margin by 180 basis points. Foreign currency translation on sales is expected to be a headwind of approximately $195 million. The profit impact about $25 million. Finally, our commodity outlook is expected to be a headwind to sales of about $30 million due to lower recoveries driven by falling steel and other commodity prices. We expect a $20 million profit headwind due to the true up in pricing governed by our two-way commodity recovery mechanisms with our customers. Please turn with me now to slide fourteen for our outlook on free cash flow for 2025. We anticipate full year 2025 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 be about $20 million higher as we invest in our cost savings program and work to finalize the off highway divestiture. Working capital requirements will be about $40 million lower and capital spending is expected to be about $325 million this year which is $55 million lower than last year. Lastly, please turn with me to slide fifteen for an outlook of our quarterly phasing. And page fifteen shows our sales by quarter for 2024 and our expected sales for 2025. Are a few market drivers in 2024 that disrupted our normal quarterly cadence beginning in the first quarter where light vehicle production increased dramatically coming off the 2023 UAW strike in North America. This year, we are seeing a slowdown in production as vehicle inventories remain high for a number of programs. The back half of the year will see improved demand as we see inventories normalize and off highway markets return to growth. In the near term, the impact to Q1 will be up $500 million in lower sales than last year lower end market demand. We will see between $35 and $40 million in cost saving improvements in Q1, and are expecting about 8% adjusted EBITDA margins for the quarter. Thank you for joining us this morning, and I will now turn the call back over to Regina to start the Q&A session.

Operator: Ensure that everyone has an opportunity to participate, we ask that you limit yourself to one question at a time. We'll take our first question from the line of Tom Narayan with RBC Capital Markets. Please go ahead.

Tom Narayan: Hi. Thanks for taking the question. I'll try to keep it to one. I just have a quick follow-up, if that's okay. So the robust process and strong interest and I know a lot of this is covered on the January 25 call, it just it just it would appear that signing in Q2, that's only, like, two months away. So I guess, is this timeline based on just a prediction of interest or is this something farther along, you know, specific interest from one or two bidders, and then I just have a quick follow-up.

Timothy Kraus: Yeah, Tom. So, you know, as we mentioned, we have a very robust process with a number of interested parties. I'm not gonna get into the specific numbers, but we are well along in the process, and we expect to be able to sign a transaction here in the early in the second quarter.

Tom Narayan: Okay. If it's okay to follow-up, so on the 2025 guidance, yeah. The market for light vehicle flat. We have heard some from some other suppliers noting kinda get down mid single digits. Is this specific to your light vehicle OEM exposure or perhaps to your graphics? And then on the backlog that you guys have, the $150 million is that could you split that out on across the segments just so we can know, just understand how that works with off highway. Thanks.

Timothy Kraus: Yeah. I saw on your first the light vehicle our light vehicle view is really related to our programs. Not to the overall market. If you you gotta remember, one, we really only play in full frame truck. And even within full frame truck, you know, we have a disproportionate number of our amount of our sales in a number of key programs. With Ford and Stellantis in particularly. And on the backlog question, the vast majority of the predominant of that is not off or is LV and PT. So it still the majority of that is in the light vehicle driveline parts of the business.

Tom Narayan: Got it. Thanks. I'll turn it over.

Operator: Our next question comes from the line of Colin Langan with Wells Fargo.

Colin Langan: Oh, great. Thanks for taking my questions. Just a basic question here, but what is going on with the tax and guidance? It seems like EPS is moving a lot more than the EBITDA guide. Is there a change in the valuation allowances that we should be thinking about? Why it seems like I assume that's the big driver why UPS is jumping a lot more.

Timothy Kraus: Yeah. I mean, Colin, this is Tim. So yeah. I mean, because we have the value US, you know, you don't get a normalized rate, right, as mix changes, you know, if a lot more of income comes into the US, it ends up being taxed essentially at a zero rate because of the evaluation allowance. So it and until we kinda get through this and through this period and on the other side of the off highway sale, we're gonna continue to see a fair amount of volatility around the rate and it's also a bit more difficult to sort of predict and, you know, just due to the mix of income especially from year to year or quarter to quarter.

Colin Langan: Yeah. And I guess this this column is following up on that. I guess after we get through the other side of Selena off Highway deleveraging our balance sheet, and we get the benefit of the $300 million that we're road mapping. We'll be back to sort of, like, a normal company in terms of a tax rate.

Timothy Kraus: Yeah. I would agree. I mean, we would anticipate we obviously won't know till we get there. But, you know, given the changes in interest expense as well as the cost saving program, we would anticipate that we could probably be able to relieve the valuation allowance at some point after that.

Colin Langan: And start talking about EPS being more normal flowing. Correct.

Timothy Kraus: Yes. So this would be a sign though that your US operations have went from unprofitable and are turning profitable and that those profits no longer have a tax I'm not.

Timothy Kraus: Yeah. That's correct. And, obviously, a big chunk of our cost saving program is predominantly or disproportionately in North America and specifically in the US, so that should help as well.

Colin Langan: Yeah. And then so you think about why it's high now. It's like we have losses in the US that are not tax benefited.

Timothy Kraus: Correct.

Colin Langan: Yep. Okay. And then just to follow-up on the prior question about customer mix, because S and P has, like, the super duty down double digits. Are you assuming a similar assumption there? Because that is a pretty big platform for you guys if I'm right. And then so if the that's the case, what what is offsetting that to keep it only? Know, flat.

Timothy Kraus: Yeah. So you I mean, the way we're way our forecast is built is based on the mix of models that we're seeing. And so even within Super Duty, there's a pretty big difference between the mix. And so even though overall super duty could be down single digits or even double digits depending on that mix, it will have a different impact to us. We do most of the super duty, but not all. So some of the still done in house, especially the low end two fifties that are generally gasoline powered.

Colin Langan: Yeah. They're really glorified f one fifties, you know, with a few extra. Yeah. And it's also somewhat offset, the super duty by the fact that we don't not expecting the inventory correction on some of the Jeep products to occur in that a second lot of second shift coming on. I think it's for Gladiator.

Colin Langan: Got it. Okay. Alright. Thanks for taking my questions.

Operator: Our next question comes from the line of Edison Yu with Deutsche Bank. Please go ahead.

Edison Yu: Hey, good morning. Thanks for taking our questions. I just wanted to come back to commercial vehicle. It seemed the quarter was a bit weak. And, I mean, just thinking more high level about it, when could we start seeing that kind of turnaround?

Timothy Kraus: Yeah. Edison to talk with you. Hey. This is Tim. So couple of things in the quarter for CD. I think that your last part of your question, you should start seeing that in the first quarter. There's a couple of one-time items that really impacted fourth quarter. So we did end up taking some adjustments for easy bad debt and inventory in the quarter given where that business has gone. And then we did have an inventory or a warranty item that we ended up recording as well. So and they're they don't. There's gonna be significant cost savings coming through in CV as part of the three My dog program.

Edison Yu: Got it. And just a quick follow-up. Gotcha. Just quick follow-up on that. Contracting there. Right? Light vehicle was quite strong. Is that a good kind of jumping off point for twenty five?

Timothy Kraus: Yeah. I think we're gonna continue to see strong improvement, you know, really across all the markets for all of our end markets as we go in. But, yes, we do expect there to be continued growth in both core profit and the margin in light vehicle as, you know, sort of see production stabilize and we start seeing the benefits of the cost savings flow through.

Edison Yu: Yeah. And I maybe just add the we do tend to see a bit of lumpiness, though, in timing of custom recovery. We incur costs in some quarters and get sort of catch up recoveries in different quarters. So that business is always sort of lumpy and things like that.

Timothy Kraus: Yeah. Some of that. But yeah. I mean, if you think about the first quarter, sales are you know, we would anticipate sales being down quarter over quarter given how strong first quarter twenty four was coming off of the strike. So even despite that, I still believe that we'll have a strong margin that we can turn in on first quarter given the work we're doing on the cost side of the business.

Edison Yu: Got it. Thank you.

Operator: Our next question comes from the line of James Picariello with DNP Paribas. Please go ahead.

Jake Scholl: Guys. This is Jake on from James. Hey, Jake. As we think about I have to think about the discussions with Hydro Quebec. Around their TM four foot option. Can you just provide any clarity on the timing or the magnitude of potential payment you're expecting?

Timothy Kraus: Yeah. I so I don't wanna into anything specific, but we continue to work through that with Hydro Quebec. But I'm pretty confident we'll be able to get something done here this year at some point.

Jake Scholl: Alright. Thank you. And then just one housekeeping. When do you guys expect to actually implement, the resegmentation with, Powertec getting folded in light vehicle and commercial vehicle. Thank you.

Timothy Kraus: Yeah. We'll be doing that during, you know, here in Q1. So when we report first quarter, you'll see Power Tech having been folded into LVCD.

Jake Scholl: Alright. Thanks, guys.

Operator: Our next question comes from the line of Ryan Brinkman with JPMorgan. Please go ahead.

Ryan Brinkman: Hi. Thank you. Thanks for taking my questions. I know that consistent with every other supplier this quarter, your guidance excludes the impact of obviously difficult to predict tariffs. I'm curious though what you know, early scenario planning you may be doing around tariffs. On Canada, an excellent one for particular, Mexico especially, and, you know, what your exposure there might be how you're thinking about the ability to either mitigate or pass control tariff costs aligned to customers?

Timothy Kraus: So I think the you know, we're obviously, you know, looking at the impacts, you know, across the business. You know, it's hard to predict, as we said, what they ultimately will be or really what the impacts will be. What I can tell you is that, you know, we have put all of our customers formally on notice that we intend to pass every dollar of any tariff impacts through to them. And that that's our position, and we're not planning to waiver from it.

Ryan Brinkman: Good to hear. Thank you. And then regarding the $175 million of targeted cost saves, in 2025, is a very impressive amount. How much of this end of the $55 million of lower CapEx how much would you say relates to the change ED strategy or you know, maybe less percent of other future revenue opportunities versus more simply fifteen and greater efficiency on your part.

Timothy Kraus: Yeah. I mean, there's a sizable piece of the $175 that's related to ED. I don't wanna get into all the specifics, but there's a large portion of the total $300 related to the change in our EV's strategy that's going through. So you would have expected that. I think the know, when you think about the $175 as Bruce mentioned, we've already actioned $100 million of that number. And if you look at where we think we're gonna end up first quarter between $35 and $40 million, you know, our ability to hit that $175 for the full year is you know, we think is very, very, very certain.

Bruce McDonald: Yeah. And then just on your question about capital, I guess I would say is you know, we'll get be able to return back to, you know, the sort of roughly 4% type capital reinvestment. In the business. You know, obviously, we were significantly higher than that last few years. In the next couple of years, we still have a few programs that we have that will require some capital expenditure, and we expect you'll see a little bit of change in the balance sheet, but what we do expect suppliers sorry, customers providing us with offsets to the capital expenditure beginning this fiscal year.

Ryan Brinkman: Okay. Thanks. And then just lastly, you know, I think one of the reasons why there's been such a positive shift as reactions here multiyear cost savings plan is that it comes at the same time as the off highway sale, and it sounds like it's maybe been catalyzed by the sale. Given the simpler corporate structure that it can allow. But, you know, earlier, I remember management highlighting the cost synergies of supplying across multiple end markets, and you will still be supplying across the light in commercial market course, but just wanted to check-in on that and what you think you know, there may be from a dissynergies perspective or are most of those synergies between, you know, the light and the commercial sort of, you know, in between say, fair class, you know, four or five, etcetera? Just curious.

Bruce McDonald: Yeah. I'll do a few things maybe to this. I guess, first of all, know, there definitely dissynergy associated stranded costs, and we've talked about that. You know, we're continuing to chip away. But, basically, it's our corporate cost to get allocated to off highway and how some of them are very variable. Some of our corporate cuss would go, with the sale, but that is a dissynergy that we have to chip away at. Secondly, you know, if you think about we buy steel and a lot of common components. And we do similar things like make gears and things like that. So yeah, for sure, there is a benefit of having the off highway in terms of purchasing scale and maybe leveraging our footprint. But in the scheme of things, you know, it's manageable. And to your point about so, you know, all things being equal, you know, we're not we're certainly not doing it to capture synergies. We're doing it. You know, the driver for the off highway business is very straightforward. It's what's the value of that business in terms of the multiple it trades at. It will sell for. Versus the value that's reflected in our stock price. It's just not being recognized at the market. And the market has spoken. Our stock price has reacted very favorably because we're gonna encapture that delta. Tim, you may have a few other.

Timothy Kraus: Yeah. You know, I think the CV and LV businesses certainly are much more aligned in terms of both process and product, but also geography. So those are just two businesses that are primarily North American businesses. So there are certainly more synergies there than between those and the off highway business. But the other thing to think about here is, like, we any of those dis synergies, we've taken those into consideration as we've thought about, you know, how the value unlock happens and where new data, you know, margins end up. So when we think about new data margins in the you know, the ten, ten and a half, you know, when we get on the other side of this thing, that already has those impacts. So and as Bruce mentioned, we are currently showing that we have $40 million where the stranded costs related to the transaction that, you know, we are fully focused on actioning and reducing as we, you know, after we get through the sale.

Ryan Brinkman: Very helpful. Thank you.

Operator: Our next question will come from the line of Joseph Spak with UBS. Please go ahead.

Alejandro: Good morning. It's Alejandro on for Joe. Maybe just following up on the backlog question I think you highlighted sort of roughly 20% will be an off highway. So should I be thinking about the sort of the major or the remaining 80% in LV, or how should I think about that LV and CV split?

Timothy Kraus: Yeah. I mean, look, I think those are rough numbers in terms of, you know, 20% or whatever they move around. You gotta remember the backlog number we're looking at there is typically through the three years. But yeah. I mean, there isn't a lot of backlog in the CV business, you know, it's a catalog based business, and it's usually market share based not backlog. There is a little bit of backlog in there, but it's not significant.

Alejandro: Got it. Okay. And maybe as a follow-up, you mentioned some weakness in Q2 in your prepared remarks. You maybe just give us some additional color on that?

Timothy Kraus: Yeah. It won't be as dramatic as first quarter, but we'll see a little bit of additional weakness across the end markets in Q2. And then we'll see that recovery start to really come through in Q3 and Q4. And I think if you look at page fifteen of the deck, you can see the bars reflect sort of that cadence.

Alejandro: Great. Thank you.

Operator: Our final will come from the line of Dan Levy with Barclays. Please go ahead.

Dan Levy: Hi. Good morning. Thank you for taking the questions. I'm doing late, so I apologize if it's mentioned earlier. But if you could just talk to the backlog within the light vehicle side, how much of that is, reflecting extensions of current light vehicle programs. And given this idea of there could be a potential super cycle here as automakers see the longer tail of it. How much incremental activity could we see, you know, added to the backlog in subsequent period?

Timothy Kraus: Yeah. Hey, Dan. So couple things. Remember, the way we calculate backlog is it's truly incremental. So, you know, we don't count additional vehicle volume on our programs in the backlog. So you should be able if you will hold were to hold FX commodity and volume constant across the three-year period, you should be able to just you will just add the amounts in the backlog to our sales to get what our resulting sales would be in twenty five, twenty six, twenty seven. So the idea that, hey. There's gonna be a lot more volume on our current programs, that would not be in our backlog. It would be in our market outlook but it won't. Now if they bring out a brand new variant, or something like that, that would go to backlog, something we haven't previously made or sold to the automakers, but not pure volume.

Dan Levy: Great. Okay. Thank you. And then just as a follow-up, with the news of potential tariffs on steel and aluminum, can you just remind us of how this played out? When we saw this in 2018 and just what the timing effects are of you passing this onto your customers.

Timothy Kraus: Yeah. So I know you're I we this came up a little bit earlier. What we you know, we've obviously looking at what the impacts are likely to be on the business, and we continue to kinda through that. And as we know more about, like, how they're gonna deal with and some of the other, you know, the other nuances within the supply chain. We'll know more, but one thing we have done is we have put all of our customers on formal notice. So we formally notified them that it is our intention to pass through every dollar of tariff that comes through as a result of and that we expect them that they're going to pay.

Bruce McDonald: Yeah. I guess I'd maybe add to that, Dan, is if you think about the light vehicle business, we're far more indexed now than we would have been back then. So to the extent that tariffs drive up the cost, the recovery mechanism through indexes, we already have places. Higher than it was back in 2018. Yeah. And that at least gets you seventy five. But our view is we're not gonna eat the twenty five. The twenty five percent that doesn't get recovered in our current commodity agreements.

Timothy Kraus: Alright. We also don't know if it'll be reflected in the indexes or not and maybe surcharge. We just don't know, but at the end of the day, our intention and our expectation is that our customers will pay every dollar.

Dan Levy: Got it. Thank you.

Bruce McDonald: Okay. Maybe just and a few concluding remarks, I guess, first of all, I'd like to thank the Dana team and our leaders for delivering our improved financial results. You know, for me, personally, I feel really good about the progress the team is making in actioning the $300 million cost reduction road map that we have. 2025 for us is gonna be it's a transformational year for Dana. The sale of our off highway business is gonna unlock significant shareholder value while at the same time enabling us to return capital to our shareholders and be left with a best-in-class balance sheet in our space. I'm really excited to be here, and I look forward to sharing our progress three months' time. Thank you, everyone.

Operator: That will conclude today's call. Thank you all for joining. You may now disconnect.