November 7, Third Quarter 2018 Results

Transcription

1 November 7, 2018 Third Quarter 2018 Results

2 Forward-looking statements This presentation, as well as other statements made by Delphi Technologies PLC (the Company ), contains forward-looking statements that reflect, when made, the Company s current views with respect to current events, certain investments and acquisitions and financial performance. Such forward-looking statements are subject to many risks, uncertainties and factors relating to the Company s operations and business environment, which may cause the actual results of the Company to be materially different from any future results. In particular, the 2019 outlook included herein is based on the Company s preliminary indications regarding 2019 and is subject to revision when the Company provides its 2019 outlook in connection with the announcement of fourth quarter results. All statements that address future operating, financial or business performance or the Company s strategies or expectations are forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements are discussed under the captions Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations in the Company s filings with the Securities and Exchange Commission. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. It should be remembered that the price of the ordinary shares and any income from them can go down as well as up. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events and/or otherwise, except as may be required by law. 1

3 Q highlights Above market growth with record bookings performance Revenue $1.2 b (-0.8% YoY 1 ) Earnings per share 2 $0.72 Operating income 2 $108 m (9.3%, down 190bps YoY 3 ) Operating cash flow $54 m $3.8 b of lifetime bookings across ICE and Electronics Robust growth in Power Electronics and Commercial Vehicle. Continued margin expansion in Aftermarket Full year 2018 outlook consistent with October 5th update 2 1. At constant foreign exchange rates, and excludes impact of certain aftermarket revenue retained by former parent 2. Adjusted for restructuring and other special items; see appendix for detail and reconciliation to US GAAP 3. Versus prior year pro-forma results; see appendix for detail and reconciliation to US GAAP

4 Market update Increasing regulatory driven demand for advanced propulsion solutions Balanced portfolio for all propulsion systems Accelerated demand for electrification GDi continues to displace diesel and PFi for passenger car Internal combustion Recent industry topics Software and controls Electrification Higher pressure systems for commercial vehicles Weaker-than-expected global production in H Unfavorable market dynamics in China WLTP in Europe Speed of transition in mix of propulsion technologies (e.g. LDD in Europe) Uncertainty in global trade, tariffs and Brexit 3

5 Bookings update Balancing strong demand with disciplined commercial strategy to drive long-term value Booked program lifetime value Adjusted bookings 1 ($ billions) Key technologies 15% CAGR $9.0 Power Electronics Gasoline Direct Injection Q3 $3.8 2 $6.1 $4.7 $6.7 $ YTD 2 Q2 $2.3 Q1 $ Electronics & Software Commercial Vehicle Systems Exceeded 2017 bookings after nine months of Bookings represent lifetime gross program revenues awarded, based upon expected volumes and pricing adjusted for FX 2. Bookings for Powertrain Segment (OEM) only

6 Accelerating investments in key technologies Focus on long-term value creation opportunity Consistent strategy to invest in key technologies: Power Electronics Gasoline direct injection Commercial vehicle systems Better-than-expected bookings momentum is driving an acceleration of engineering and capex investments Continued reallocation of investments towards key growth technologies Expected to weigh on 2019 financials but drive additional long-term growth and cash flow beyond

7 Financial Review

8 Q vs Q $ millions Q Q (pro forma 3 ) Revenue $1,159 Adjusted growth % 1 (0.8)% Operating income 2 $108 Operating margin % 2 9.3% $1,185 - $ % Q (reported) $1,205 - $ % Financial highlights 1% year-on-year growth over market Global vehicle production down ~2% Double-digit growth in Power Electronics and Commercial Vehicle Primarily offset by: lower China revenue and lower Aftermarket revenues consistent with commercial strategy 190 bps year-on-year adjusted operating margin decline Earnings per share 2 $ Operating cash flow $ Unfavorable product mix Higher engineering spend FX headwinds Higher commodity and tariff-related costs Partially offset by cost control and benefits from prior restructuring 7 1. At constant foreign exchange rates, and excludes impact of certain aftermarket revenue retained by former parent 2. Adjusted for restructuring and other special items; see appendix for detail and reconciliation to US GAAP 3. See appendix for reconciliation

9 Q revenue growth Above market growth in all regions, with the exception of China Revenue $ millions Regional growth Adjusted 1 year-on-year growth (0.8)% 1 N. America Europe $1,185 $(15) $8 $(19) $1,159 3% Adj 1% GoM 2 5% Adj 10% GoM 2 China (12)% Adj (8)% GoM 2 S. America 15% Adj 12% GoM At constant foreign exchange rates, and excludes impact of certain aftermarket revenue retained by former parent 2. GoM = growth over market 3. See appendix for reconciliation

10 Q operating income growth Year-on-year decline due to unfavorable mix, FX headwinds and higher engineering spend Operating income 1 $ millions (190) bps 1 Financial highlights Performance driven by: 11.2% $133 $(15) $(4) $(9) $3 9.3% $108 Unfavorable mix (GDi, PE versus PC diesel) Volatile industry production (WLTP, China) Price downs (1.2%) Higher engineering spend Partially offset by disciplined cost control FX headwinds primarily due to: USD/CNY rate of 6.80 vs 6.67 in Q EUR/USD rate of 1.16 vs 1.17 in Q Adjusted for restructuring and other special items; see appendix for detail and reconciliation to US GAAP 2. See appendix for reconciliation

11 Powertrain segment highlights Strong revenue growth in PE and CV, offset by lower China and passenger car diesel sales Revenue Operating income 2 Financial highlights $ millions $ millions $1,049 (1.9)% 1 (220) bps 2 Revenue: $1,017 Q (pro forma ) Q % $ % $92 Q (pro forma ) Q Power Electronics growth of ~ 35% Commercial Vehicle growth of ~ 20% GDi decline of ~15% due to lower sales in China Passenger car diesel decline Operating margin: 220 bps year-on-year decline due to: Unfavorable mix Higher engineering spend Higher commodity and tariff-related costs FX headwinds Partially offset by operational performance At constant foreign exchange rates 2. Adjusted for restructuring and other special items; see appendix for detail and reconciliation to US GAAP 3. See appendix for reconciliation

12 Aftermarket segment highlights Continued margin expansion, consistent with focused strategy Revenue Operating income 2 Financial highlights $ millions $ millions Revenue: (0.6)% bps 2 1% year-on-year adjusted decline IAM growth more than offset by lower OES sales $224 $ % 7.4% Operating margin: 70 bps year-on-year margin expansion Focus on higher margin products and channels $15 $16 Remain on track to deliver full year margin expansion Q (pro forma ) Q Q (pro forma ) Q At constant foreign exchange rates, and excludes impact of certain aftermarket revenue retained by former parent 2. Adjusted for restructuring and other special items; see appendix for detail and reconciliation to US GAAP 3. See appendix for reconciliation

13 FY 2018 outlook Consistent with October 5 th outlook $ millions except per share amounts 2017 Pro forma 4 FY 2018 outlook Revenue $4,773 $4,850 - $4,900 Adjusted growth 1 8.5% 0% - 0.5% Operating income 2 $569 Operating income margin % 11.3% % Other outlook metrics Restructuring charges $80-$85m One-time separation costs $90-$95m Capital expenditures $290-$310m EUR/USD $1.18 Adjusted tax rate 16-17% Earnings per share 3 $ $4.30 Operating cash flow $370 - $ At constant foreign exchange rates, and excludes impact of certain aftermarket revenue retained by former parent 2. Adjusted for restructuring and other special items; see appendix for detail and reconciliation to US GAAP 3. Adjusted for restructuring and other special items 4. See appendix for reconciliation

14 Preliminary 2019 outlook Accelerating portfolio transition ahead of stronger growth and margin expansion in 2020 and beyond FY Drivers Drivers Revenue 1 ~1-2% adj. growth Strong double-digit growth in GDi and Power Electronics ~ Flat global production assumed China customer mix (local vs global OEMs) Acceleration in passenger car diesel decline Adjusted Operating margin 2 ~9-10% Continued material & manufacturing performance improvements Benefits from prior restructuring Aftermarket margin progression Ongoing SG&A initiatives Unfavorable product mix (PE/GDi versus PC diesel) Absence of FX tailwind that benefitted FY2018 Incremental engineering spend to support long-term growth Higher D&A Full year impact of tariff-related costs Capital expenditure ~7% of sales Higher investments in GDi and PE to support bookings momentum Free cash flow ~ breakeven Lower one-time separation costs Review of UK workforce pension provision At constant foreign exchange rates 2. Adjusted for restructuring and other special items

15 Preliminary FY 2019 margin dynamics H headwinds expected to continue into 2019, partially offset by cost initiatives Adjusted operating margin % % ~9-10% Margin performance drivers: Unfavorable mix Engineering spend D&A Commodities/tariffs +/ FX + Structural cost initiatives H H Preliminary FY Adjusted for restructuring and other special items

16 Preliminary mid-term outlook Accelerating growth in key technologies Moderation of transitional headwinds Improving operating leverage with scale $ Normalizing of capex and restructuring Mid to high single-digit adj. revenue growth Operating margin expansion Significantly improved cash flow Focused on delivering long-term shareholder value 15

17 Q&A

18 Appendix

19 Non-GAAP reconciliation: Net income to Adj. op. income ($ millions) Delphi Technologies Q Q Net income attributable to Delphi Technologies $39 $78 Net income attributable to noncontrolling interest 4 9 Net income $43 $87 Equity income, net of tax - (2) Income tax expense Other expense, net 6 1 Interest expense 20 1 Operating income $81 $113 Restructuring 5 3 Separation costs Adjusted operating income $108 $ Prior to December 4, 2017 separation costs include one-time expenses related to the separation from the Company s former parent. For periods subsequent to December 4, 2017, these costs include one-time incremental expenses associated with becoming a stand-alone publicly-traded company. Adjusted Operating Income is presented as a supplemental measure of the Company's financial performance which management believes is useful to investors in assessing the Company s ongoing financial performance that, when reconciled to the corresponding U.S. GAAP measure, provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company s core operating performance and which may obscure underlying business results and trends. Our management utilizes Adjusted Operating Income in its financial decision making process to evaluate performance of the Company and for internal reporting, planning and forecasting purposes. Management also utilizes Adjusted Operating Income as the key performance measure of segment income or loss and for planning and forecasting purposes to allocate resources to our segments, as management also believes this measure is most reflective of the operational profitability or loss of our operating segments. Adjusted Operating Income is defined as net income before interest expense, other income (expense), net, income tax expense, equity income (loss), net of tax, restructuring, separation costs and asset impairments. Not all companies use identical calculations of Adjusted Operating Income, therefore this presentation may not be comparable to other similarly titled measures of other companies. The Company's 2018 and 2019 guidance was determined using a consistent manner and methodology. 18

20 Non-GAAP reconciliation: Segment Adj. operating income ($ millions) Powertrain Segment Q Q Operating income $66 $97 Restructuring 9 6 Separation costs Adjusted operating income $92 $128 Aftermarket Segment Q Q Operating income $15 $16 Restructuring (4) (3) Separation costs Adjusted operating income $16 $19 1. Prior to December 4, 2017 separation costs include one-time expenses related to the separation from the Company s former parent. For periods subsequent to December 4, 2017, these costs include one-time incremental expenses associated with becoming a stand-alone publicly-traded company. Adjusted Operating Income is presented as a supplemental measure of the Company's financial performance which management believes is useful to investors in assessing the Company s ongoing financial performance that, when reconciled to the corresponding U.S. GAAP measure, provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company s core operating performance and which may obscure underlying business results and trends. Our management utilizes Adjusted Operating Income in its financial decision making process to evaluate performance of the Company and for internal reporting, planning and forecasting purposes. Management also utilizes Adjusted Operating Income as the key performance measure of segment income or loss and for planning and forecasting purposes to allocate resources to our segments, as management also believes this measure is most reflective of the operational profitability or loss of our operating segments. Adjusted Operating Income is defined as net income before interest expense, other income (expense), net, income tax expense, equity income (loss), net of tax, restructuring, separation costs and asset impairments. Not all companies use identical calculations of Adjusted Operating Income, therefore this presentation may not be comparable to other similarly titled measures of other companies. The Company's 2018 and 2019 guidance was determined using a consistent manner and methodology. 19

21 Non-GAAP reconciliation: Adjusted net income ($ millions, except per share amounts) Delphi Technologies Q Q Net income attributable to Delphi Technologies $39 $78 Adjusting items: Restructuring 5 3 Separation costs Change in tax law Tax impact of adjusting items 3 (4) (1) Adjusted net income attributable to Delphi Technologies $64 $111 Weighted average number of diluted shares outstanding Diluted net income per share attributable to Delphi Technologies $0.44 $0.88 Adjusted net income per share $0.72 $ Prior to December 4, 2017 separation costs include one-time expenses related to the separation from the Company s former parent. For periods subsequent to December 4, 2017, these costs include one-time incremental expenses associated with becoming a stand-alone publicly-traded company. 2. Represents an adjustment to income tax expense related to changes in tax law recognized at the date of enactment and adjustments to provisional amounts recorded in 2017 related to the U.S. Tax Cuts and Jobs Act. 3. Represents the income tax impacts of the adjustments made for restructuring and other special items by calculating the income tax impact of these items using the appropriate tax rate for the jurisdiction where the charges were incurred. Adjusted Net Income and Adjusted Net Income Per Share, which are non-gaap measures, are presented as supplemental measures of the Company's financial performance which management believes are useful to investors in assessing the Company s ongoing financial performance that, when reconciled to the corresponding U.S. GAAP measure, provide improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company s core operating performance and which may obscure underlying business results and trends. Management utilizes Adjusted Net Income and Adjusted Net Income Per Share in its financial decision making process to evaluate performance of the Company and for internal reporting, planning and forecasting purposes. Adjusted Net Income is defined as net income attributable to Delphi Technologies before restructuring and other special items, including the tax impact thereon. Adjusted Net Income Per Share is defined as Adjusted Net Income divided by the weighted average number of diluted shares outstanding for the period. Not all companies use identical calculations of Adjusted Net Income and Adjusted Net Income Per Share, therefore this presentation may not be comparable to other similarly titled measures of other companies. The Company's 2018 and 2019 guidance was determined using a consistent manner and methodology. 20

22 Pro forma financial schedules ($ millions) Delphi Technologies - Revenue Q Q Q Q Revenue Reported 1 $1,168 $1,187 $1,205 $1,289 $4,849 Spin-Related Adjustments 2 N/A N/A N/A $5 $5 Historical Comparable 3 $1,168 $1,187 $1,205 $1,294 $4,854 Pro forma Adjustments 4 ($20) ($21) ($20) ($20) ($81) Revenue Pro forma $1,148 $1,166 $1,185 $1,274 $4, Delphi Technologies - Adjusted Operating Income Q Q Q Q Adjusted Operating Income 1 $162 $164 $147 $164 $637 % to sales 13.9% 13.8% 12.2% 12.7% 13.1% Spin-Related Adjustments 2 N/A N/A N/A $4 $4 Historical Comparable 3 $162 $164 $147 $168 $641 % to sales 13.9% 13.8% 12.2% 13.0% 13.2% Pro forma Adjustments 4 ($13) ($17) ($14) N/A ($72) Adjusted Operating Income Pro forma $149 $147 $133 N/A $569 % to sales 13.0% 12.6% 11.2% N/A 11.9% 1. Results for periods prior to December 4, 2017 prepared on a stand-alone combined basis derived from the former parent s accounting records and results for periods subsequent to December 4, 2017 are presented on a consolidated basis. 2. Adjustments to present results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation. 3. Represents results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during Adjustments to present results for the year ended December 31, 2017 on a comparable basis to expected future period results. Financial information for periods prior to December 4, 2017 was prepared on a stand-alone combined basis derived from the former parent s accounting records and is not necessarily indicative of results that will be achieved as a stand-alone publicly-traded company. Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation.

23 Pro forma financial schedules ($ millions) Powertrain Segment - Revenue Q Q Q Q Revenue Reported 1 $1,023 $1,035 $1,049 $1,115 $4,222 Spin-Related Adjustments 2 N/A N/A N/A N/A N/A Historical Comparable 3 $1,023 $1,035 $1,049 $1,115 $4,222 Pro forma Adjustments 4 N/A N/A N/A N/A N/A Revenue Pro forma $1,023 $1,035 $1,049 $1,115 $4, Powertrain Segment - Adjusted Operating Income Q Q Q Q Adjusted Operating Income 1 $150 $141 $128 $143 $562 % to sales 14.7% 13.6% 12.2% 12.8% 13.3% Spin-Related Adjustments 2 N/A N/A N/A $3 $3 Historical Comparable 3 $150 $141 $128 $146 $565 % to sales 14.7% 13.6% 12.2% 13.1% 13.4% Pro forma Adjustments 4 ($9) ($12) ($10) N/A ($53) Adjusted Operating Income Pro forma $141 $129 $118 N/A $512 % to sales 13.8% 12.5% 11.2% N/A 12.1% 1. Results for periods prior to December 4, 2017 prepared on a stand-alone combined basis derived from the former parent s accounting records and results for periods subsequent to December 4, 2017 are presented on a consolidated basis. 2. Adjustments to present results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation. 3. Represents results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during Adjustments to present results for the year ended December 31, 2017 on a comparable basis to expected future period results. Financial information for periods prior to December 4, 2017 was prepared on a stand-alone combined basis derived from the former parent s accounting records and is not necessarily indicative of results that will be achieved as a stand-alone publicly-traded company. Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation.

24 Pro forma financial schedules ($ millions) Aftermarket Segment - Revenue Q Q Q Q Revenue Reported 1 $222 $232 $243 $250 $947 Spin-Related Adjustments 2 N/A N/A N/A $5 $5 Historical Comparable 3 $222 $232 $243 $255 $952 Pro forma Adjustments 4 ($20) ($21) ($20) ($20) ($81) Revenue Pro forma $202 $212 $224 $235 $ Aftermarket Segment - Adjusted Operating Income Q Q Q Q Adjusted Operating Income 1 $12 $23 $19 $21 $75 % to sales 5.4% 9.9% 7.8% 8.4% 7.9% Spin-Related Adjustments 2 N/A N/A N/A $1 $1 Historical Comparable 3 $12 $23 $19 $22 $76 % to sales 5.4% 9.9% 7.8% 8.6% 8.0% Pro forma Adjustments 4 ($4) ($5) ($4) N/A ($19) Adjusted Operating Income Pro forma $8 $18 $15 N/A $57 % to sales 4.0% 8.5% 6.7% N/A 6.5% 1. Results for periods prior to December 4, 2017 prepared on a stand-alone combined basis derived from the former parent s accounting records and results for periods subsequent to December 4, 2017 are presented on a consolidated basis. 2. Adjustments to present results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation. 3. Represents results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during Adjustments to present results for the year ended December 31, 2017 on a comparable basis to expected future period results. Financial information for periods prior to December 4, 2017 was prepared on a stand-alone combined basis derived from the former parent s accounting records and is not necessarily indicative of results that will be achieved as a stand-alone publicly-traded company. Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation.

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