AXL 2026 Q3 Earnings Call

Thank you, and good morning. I'd like to welcome everyone who is joining us on Dauch Corporation's Third Quarter Earnings Call. Earlier this morning, we released our third quarter of 2026 earnings announcement. You can access this announcement on the Investor Relations page of our website, www.dauch.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. A replay of this call will be available through November 13. Replay details are in today's press release. In addition, I want to remind the investment community that we will be hosting a Capital Markets Day on November 17 in New York City. At the event, the leadership team will discuss what differentiates Dauch Corporation and share our vision. The formal presentation will begin at 9:00 A.M. Eastern Time, and it will be webcasted. Please mark your calendars. Now, before we begin, I would like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements that are 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, please reference slide two of our investor presentation or the press release that was issued today. 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 the non-GAAP measures to GAAP financial information, is available in the presentation. With that, let me turn things over to our Chairman and CEO, David Dauch.

Thank you, David, and good morning, everyone. Thank you for joining us today to discuss Dauch's financial reports for the third quarter of 2026. Joining me on the call today is Chris May, our Executive Vice President and Chief Financial Officer, and Senior Vice President Nathan Iles, who will assume the role of CFO on December the 1st. Let's begin. Despite production volatility and rising input costs, we generated strong cash flow in the quarter while supporting new program launches. At the same time, we are making excellent progress on our synergy realization. Nine months into the combination, it is increasingly clear that we have created a stronger company. We have greater scale, broader customer relationships, a more diversified geographic footprint, and a significantly expanded product portfolio. These advantages are helping us navigate market volatility while positioning us to create substantial long-term value for stakeholders.

As for today's agenda, I will review the highlights of our third quarter financial performance. Next, I will touch on our synergy progress, some business updates, and commentary about the industry, and provide guidance, which we announced last week. I will then turn the call over to Chris to cover the details of our financial results, after which we will take any questions that you all may have. Now for the details. The company's third quarter of 2026 sales were approximately $2.9 billion, and adjusted earnings per share was $0.22 per share. Adjusted free cash flow was approximately $127 million. In the third quarter, global production declined approximately 2%, and North American production declined approximately 5% year-over-year. However, Europe increased approximately 1%. Against that backdrop, we did benefit from good performance on key GM crossover and Land Rover utility vehicle programs.

That stated, we experienced lowered Ram heavy-duty volumes, which declined approximately 15% year-over-year in the third quarter, as well as the impact of major launch activity underway at GM for its large pickup truck program, with planned downtime realized both in September and in early October. From a profitability perspective, our adjusted EBITDA in the third quarter was $358 million, or 12.3% of sales, driven by performance and Dauch contribution. Chris will provide more details about our overall financial performance during the prepared remarks. Next, on slide five, I would like to share an update on our synergy and value capture progress. We have now been operating for nearly three full quarters as a combined company, and we have already realized $100 million of run rate synergies and savings to date.

As such, we will clearly deliver on our goal or more than $100 million of run rate synergies by year end. We have made excellent progress in optimizing our SG&A, and we have reduced duplicative corporate costs, and we continue to capture global engineering efficiencies. We continue to gain positive momentum on our operational synergies while we are navigating purchasing opportunities in today's challenged macro environment. As communicated earlier, these two categories, by nature, will take more time to realize their full potential from a synergy standpoint. Turning to business development. Among the businesses that we won in the quarter, I want to particularly highlight two important wins that reflect the strength of our product technologies, but also our more diverse customer base.

Secure the next generation business for propshafts, sideshafts, electronic limited slip differentials on a premier European luxury SUV program that is expected to run deep into the 2030 period of time. Winning next generation business remains a core strategy, reflecting the strength of our customer relationships, the competitive value proposition, and our proven execution. Beyond our incumbent positions, we will continue to aggressively pursue new and incremental conquest opportunities to drive profitable growth. In addition, we also secured sideshaft content for an Infantry Squad Vehicle program, demonstrating our technology portfolio extends well beyond traditional passenger vehicles. The sideshaft product on this platform is a very unique product because it is engineered to provide power to the wheels under extreme drive angles and conditions.

We are very proud to be on this program to deliver high-quality, highly engineered products that can support traditional automotive markets as well as adjacent markets. Now let's talk about the industry. in the third quarter, we began to experience additional inflationary pressures across the supply chain, driven in part by significantly higher fuel prices versus last year. As you all know, energy is an important driver for our industry, both as an input cost, but also consumer demand. Production volatility has increased across select customers, and supply chain challenges are beginning to become more apparent, especially with some of the tier 2 and tier 3 suppliers. That stated, we can't control these factors and do not know when they will abate, but we can control how we respond.

We've managed through challenging environments before, and we'll continue to do so by flexing our variable cost structure, driving productivity, and optimizing our operations. In addition, we'll work to mitigate these inflationary costs. Shifting to our full year guidance, which we provided on October 30th, here's the update. Sales now in the range of $10.8 billion-$10.875 billion, adjusted EBITDA in the range of $1.35 billion-$1.375 billion, and adjusted free cash flow of approximately $270 million-$310 million. In summary, we had a solid quarter and delivered strong operating cash flow. The Dowlais integration is on track and making good progress. We are ahead of schedule in achieving our year one synergy target of greater than $100 million. While near-term industry headwinds exist, we are confident in our ability to navigate these challenges and even more confident in the long-term strength and cash-generating power of our business.

Now let me turn the call over to our Executive Vice President and Chief Financial Officer, Chris May, for the financial details.

Chris? Thank you, David, and good morning, everyone.

I will cover the financial details of our third quarter 2026 results and our updated guidance with you today. I will also refer to the earnings slide deck as part of my prepared comments. In the third quarter of 2026, our sales were $2.91 billion as compared to $1.51 billion in the third quarter of 2025. Slide eight shows a walk of third quarter 2025 sales to third quarter 2026 sales. For legacy Dauch, sales were up slightly year-over-year to $1.52 billion from $1.51 billion last year. Volume, mix, and other was lower by approximately $15 million. However, this was more than offset by metal market pass-throughs and FX, which increased sales by approximately $33 million, driven primarily by increasing metal market pass-throughs. Dowlais contributed $1.41 billion in gross sales for the third quarter.

Versus last year, volume, mix, and other decreased sales by approximately $26 million. The sale of certain businesses decreased sales by approximately $35 million, and metal markets and FX decreased sales by approximately $8 million. Overall, we experienced lower production on the Ram heavy-duty program on both a year-over-year and sequential basis, and also on certain other Stellantis crossover programs versus last year. These were partially offset by GM's full-size light-duty truck volumes and Land Rover programs that we support. Now, let's move on to adjusted EBITDA. For the third quarter of 2026, adjusted EBITDA was $358.5 million, and adjusted EBITDA margin was 12.3% versus $195.7 million and 13.0% last year. You can see a year-over-year walkdown of adjusted EBITDA on slide nine. In the quarter, adjusted EBITDA for legacy Dauch was $193 million versus $196 million last year.