February 21, 2019 Fourth Quarter 2018 Results
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. 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
CEO initial impressions Unique opportunity to build a GREAT company at Delphi Technologies Products Customers People & Footprint Aftermarket Value Creation Cutting-edge and Great momentum 21,000 employees Provides balance to Long-term profitable industry leading with LV and CV with a culture of business mix with growth and cash flow technology portfolio at customers with innovation potential to deliver potential, with the the crossroads & heart of the propulsion revolution opportunity to expand presence into new customers and geographies Potential to further optimise global footprint and structure additional margin and cashflow improvements flexibility to invest for future value creation opportunities 2
CEO priorities Improving execution and process discipline to drive operational efficiencies Complete full transition to standalone company with right cost structure Flawless launch of new programs, plants and business processes Optimize footprint and reduce overhead spending Introduce & implement true LEAN systems across global sites & supply chain 3
Q4 and FY 2018 highlights Strong momentum in key technologies with record bookings performance Revenue Q4 2018 FY 2018 $1.2 b (-4.7% YoY 1 ) $4.9 b (0.0% YoY 1 ) Record $9.8 b of lifetime bookings across ICE and Electronics in 2018 Adj. operating income 2 $125 m (10.7%, down 30bps YoY 3 ) $548 m (11.3%, down 60bps YoY 3 ) Robust growth in Power Electronics and Commercial Vehicle Adj. earnings per share 2 $1.06 $4.38 Continued margin expansion in Aftermarket Operating cash flow $126 m $419 m Operating cash flow exceeded high-end of revised outlook range 4 1. At constant foreign exchange rates, and excludes impact of certain aftermarket revenue retained by former parent 2. Adjusted for restructuring and other special items; see appendix for detail and reconciliation to US GAAP 3. Versus prior year pro-forma results; see appendix for detail and reconciliation to US GAAP
Gross bookings update Balancing accelerated demand with disciplined commercial strategy to drive long-term value Booked program lifetime value Adjusted gross bookings 1 ($ billions) Key growth technologies 38% YoY $9.8 2 Power Electronics Gasoline Direct Injection 15% CAGR $4.7 $6.1 $6.7 $7.1 2 Electronics & Software Commercial Vehicle Systems 2014 2015 2016 2017 2018 Record 2018 gross bookings of $9.8 billion 5 1. Bookings represent lifetime gross program revenues awarded, based upon expected volumes and pricing adjusted for FX 2. Bookings for Powertrain Segment (OEM) only
Q4 2018 vs Q4 2017 $ millions Except per share amounts Q4 2018 Revenue $1,171 Adjusted growth % 1 (4.7)% Adjusted operating income 2 $125 Adjusted operating margin % 2 10.7% Q4 2017 (pro forma 3 ) $1,274 - $140 11.0% Q4 2017 (reported) Adjusted earnings per share 2 $1.06 - - $1,289 - $164 12.7% Q4 financial highlights ~1% year-on-year growth over market Global vehicle production down ~6% Double-digit growth in Power Electronics and Commercial Vehicle Primarily offset by lower China and PC diesel revenue 30 bps year-on-year adj. operating margin decline Unfavorable product mix Higher engineering spend Higher commodity and tariff-related costs Partially offset by cost control, lower incentive accruals and former CEO incentive forfeiture Operating cash flow $126 - - 6 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
Q4 2018 revenue growth Above market growth in all regions, with the exception of China Revenue $ millions Regional growth Adjusted 1 year-on-year growth $1,274 $(17) (4.7)% 1 $(48) $(38) $1,171 N. America (28% of revenue 4 ) 6% Adj 4% GoM 2 Europe (44% of revenue 4 ) 3% Adj 8% GoM 2 China (18% of revenue 4 ) (24)% Adj (8)% GoM 2 S. America (3% of revenue 4 ) 16% Adj 24% GoM 2 3 7 1. 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 4. Percent of revenue as of FY 2018
Q4 2018 adj. operating income growth Year-on-year decline due to unfavorable mix, lower volume and higher engineering spend Adjusted operating income 1 $ millions (30) bps 1 Financial highlights Performance driven by: 11.0% Unfavorable mix (GDi, PE versus PC diesel) Lower industry production (China) $140 $(17) $(1) $(3) $6 10.7% $125 Price downs (1.3%) Higher engineering spend Partially offset by cost control, lower incentive accruals and former CEO incentive forfeiture 2 3 8 1. Adjusted for restructuring and other special items; see appendix for detail and reconciliation to US GAAP 2. See appendix for reconciliation 3. Other includes $9m former CEO incentive forfeiture
Powertrain Systems segment highlights Strong revenue growth in PE and CV, offset by lower China and passenger car diesel sales Revenue Adjusted operating income 2 Q4 financial highlights $ millions $ millions $1,115 Q4 2017 (pro forma 3) (6.1)% 1 $1,018 (1.1)% 1 $4,222 $4,274 Q4 2018 FY 2017 (pro forma ) FY 2018 11.1% $124 Q4 2017 (pro forma ) 3 3 (140)bps 2 9.7% $99 12.1% $512 Q4 2018 FY 2017 (pro forma 3) (120)bps 2 10.9% $467 FY 2018 Revenue: Power Electronics growth of ~30% Commercial Vehicle growth of ~25% Passenger car diesel decline of ~25% GDi decline of ~10% due to lower sales in China Adjusted operating margin: 140 bps year-on-year decline due to: Unfavorable mix Higher engineering spend Higher commodity and tariff-related costs Partially offset by cost control and operational performance 9 1. 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
Aftermarket segment highlights Continued margin expansion, consistent with focused strategy Revenue Adjusted operating income 2 Q4 financial highlights $ millions $ millions Revenue: $235 3.0% 1 $225 0.7% 1 480bps 2 $871 $874 6.8% $16 11.6% $26 6.5% $57 280bps 2 9.3% $81 3% year-on-year adjusted growth Independent aftermarket revenue growth more than offset lower OES sales Adjusted operating margin: 480 bps year-on-year margin expansion Focus on higher margin products and channels Improvements in operational performance Q4 2017 (pro forma ) Q4 2018 FY 2017 (pro forma 3) FY 2018 Q4 2017 (pro forma ) 3 3 Q4 2018 FY 2017 (pro forma 3) FY 2018 10 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
FY 2019 outlook Transitional year with acceleration of mix and ongoing macro headwinds $ millions except per share amounts FY 2018 FY 2019 outlook Revenue $4,858 $4,650 - $4,750 Adjusted growth 1 0% (3)% (1)% Adjusted operating income 2 $548 Adjusted operating income margin 2 11.3% ~9% Adjusted earnings per share 3 $4.38 $3.00 - $3.20 Operating cash flow $419 $320 - $350 Other outlook metrics Restructuring charges $25-$35m One-time separation costs $45-$50m Capital expenditures $310-$330m Includes ~$30m of separation capex Adjusted tax rate ~18% Select macro assumptions Global production down ~2% China production down ~8% Outlook assumes no stimulus EUR/USD $1.15 USD/CNY $6.75 11 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. Adjusted for restructuring and other special items. FY2019 EPS outlook does not reflect any potential impact from share repurchases 4. See appendix for reconciliation
FY 2019 revenue dynamics Continued momentum in key technologies offset by lower production, PC diesel and customer mix Adjusted revenue growth 1 Revenue performance drivers: ~6% ~(3)% ~(1.5)% +1 2% ~(2)% ~(1.5)% (3) (1)% + Growth in key areas of the portfolio Power Electronics >50% GDi >10%, with stronger growth for 350 bar systems Commercial Vehicle up high-single digit China revenue down mid-single digit, with new launches partially offsetting local OEM and industry declines 2 Incremental headwinds since preliminary outlook: Global production 2 down ~2% vs ~0% China production 2 down ~8% vs down lowsingle digit Volume adjustments for certain programs in China and NA 12 1. At constant foreign exchange rates 2. Internal estimate
FY 2019 adjusted margin dynamics H2 2018 headwinds expected to continue into 2019, partially offset by Aftermarket and cost initiatives Adjusted operating margin 1 Adjusted margin performance drivers: 11.3% ~300bps Unfavorable mix (GDi and PE vs PC diesel) Higher D&A (250) (300)bps ~(150)bps ~(60)bps ~(20)bps ~(40)bps ~9% Full-year impact of higher commodities/tariffs Absence of FX tailwind that benefitted FY 2018 + Performance benefits from material and manufacturing improvements and prior restructuring + Continued Aftermarket margin expansion + Ongoing SG&A initiatives 13 1. Adjusted for restructuring and other special items
Q1 2019 sequential dynamics Softer Q1 margin primarily due to timing of price downs and lower QoQ production Adjusted operating margin 1 Adjusted margin performance drivers: 10.7% (170)bps 9.0% ~7.0% Expect global production down ~2% QoQ, with China down >10% Expect reduction in inventory with local OEMs in China Timing of annual price downs + Ongoing SG&A initiatives 14 1. Adjusted for restructuring and other special items
H2 2019 vs H1 2019 adj. margin profile Stronger expected performance driven by operational improvements and timing of cost initiatives Adjusted operating margin 1 7 8% 10 11% Adjusted margin performance drivers: + Performance benefits from material and manufacturing improvements + H2 reduction in engineering spend and spin-related costs (e.g. TSAs) as well as ongoing SG&A initiatives + Incremental volume and operational improvements in GDi and Power Electronics + Aftermarket margin expansion Seasonal decrease in global production Higher D&A H1 2019 outlook H2 2019 outlook 15 1. Adjusted for restructuring and other special items
Q&A
Appendix
FY 2019 operating cash dynamics Lower EBITDA and higher pension contribution, partially offset by lower restructuring and cost initiatives Operating cash flow $ millions Operating cash performance drivers: Lower earnings $419 ~$(105) (90) ~$(35) (30) ~$20 25 ~$15 20 $320 350 Incremental contribution to mitigate future UK defined benefit pension liabilities and address current funding requirements + Lower restructuring costs + Lower separation costs + Continued cost control 18
Non-GAAP reconciliation: Net income to Adj. op. income ($ millions) Delphi Technologies Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q4 2017 2018 2017 Net income attributable to Delphi Technologies $98 $86 $39 $135 $56 $358 $285 Net income attributable to noncontrolling interest 7 4 4 7 9 22 34 Net income $105 $90 $43 $142 $65 $380 $319 Equity income, net of tax (3) (3) - (1) (3) (7) (5) Income tax (benefit) expense 22 20 12 (63) 27 (9) 106 Other (income) expense, net (6) (4) 6 (5) 4 (9) 11 Interest expense 20 19 20 20 13 79 15 Operating income $138 $122 $81 $93 $106 $434 $446 Restructuring 11 12 5 7 19 35 98 Separation costs 1 10 21 22 25 35 78 81 Asset impairments - 1 - - 4 1 12 Adjusted operating income $159 $156 $108 $125 $164 $548 $637 1. Prior to December 4, 2017 separation costs include one-time expenses related to the separation from the Company s former parent. For periods subsequent to December 4, 2017, these costs include one-time incremental expenses associated with becoming a stand-alone publicly-traded company. Adjusted Operating Income is presented as a supplemental measure of the Company's financial performance which management believes is useful to investors in assessing the Company s ongoing financial performance that, when reconciled to the corresponding U.S. GAAP measure, provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company s core operating performance and which may obscure underlying business results and trends. Our management utilizes Adjusted Operating Income in its financial decision making process to evaluate performance of the Company and for internal reporting, planning and forecasting purposes. Management also utilizes Adjusted Operating Income as the key performance measure of segment income or loss and for planning and forecasting purposes to allocate resources to our segments, as management also believes this measure is most reflective of the operational profitability or loss of our operating segments. Adjusted Operating Income is defined as net income before interest expense, other income (expense), net, income tax benefit (expense), equity income, net of tax, restructuring, separation costs and asset impairments. Not all companies use identical calculations of Adjusted Operating Income, therefore this presentation may not be comparable to other similarly titled measures of other companies. The Company's 2019 guidance was determined using a consistent manner and methodology. 19
Non-GAAP reconciliation: Segment Adj. operating income ($ millions) Powertrain Segment Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q4 2017 2018 2017 Operating income $123 $105 $66 $74 $92 $368 $392 Restructuring 11 11 9 6 18 37 92 Separation costs 1 8 17 17 19 29 61 66 Asset Impairments - 1 - - 4 1 12 Adjusted operating income $142 $134 $92 $99 $143 $467 $562 Aftermarket Segment Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q4 2017 2018 2017 Operating income $15 $17 $15 $19 $14 $66 $54 Restructuring - 1 (4) 1 1 (2) 6 Separation costs 1 2 4 5 6 6 17 15 Adjusted operating income $17 $22 $16 $26 $21 $81 $75 1. Prior to December 4, 2017 separation costs include one-time expenses related to the separation from the Company s former parent. For periods subsequent to December 4, 2017, these costs include one-time incremental expenses associated with becoming a stand-alone publicly-traded company. Adjusted Operating Income is presented as a supplemental measure of the Company's financial performance which management believes is useful to investors in assessing the Company s ongoing financial performance that, when reconciled to the corresponding U.S. GAAP measure, provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company s core operating performance and which may obscure underlying business results and trends. Our management utilizes Adjusted Operating Income in its financial decision making process to evaluate performance of the Company and for internal reporting, planning and forecasting purposes. Management also utilizes Adjusted Operating Income as the key performance measure of segment income or loss and for planning and forecasting purposes to allocate resources to our segments, as management also believes this measure is most reflective of the operational profitability or loss of our operating segments. Adjusted Operating Income is defined as net income before interest expense, other income (expense), net, income tax benefit (expense), equity income, net of tax, restructuring, separation costs and asset impairments. Not all companies use identical calculations of Adjusted Operating Income, therefore this presentation may not be comparable to other similarly titled measures of other companies. The Company's 2019 guidance was determined using a consistent manner and methodology. 20
Non-GAAP reconciliation: Adjusted net income ($ millions, except per share amounts) 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. 2. Represents the adjustment to income tax expense related to changes in tax law recognized at the date of enactment and adjustments to provisional amounts recorded related to the U.S. Tax Cuts and Jobs Act, the adjustments to income tax expense recorded in the period as a result of changes in estimates regarding the realizability of deferred tax assets and the tax transaction expense of an internal restructuring. 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 2019 guidance was determined using a consistent manner and methodology. 21 Delphi Technologies Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q4 2017 2018 2017 Net income attributable to Delphi Technologies 98 86 39 $135 $56 $358 $285 Adjusting items: Restructuring 11 12 5 7 19 35 98 Asset impairments - 1 - - 4 1 12 Separation costs 1 10 21 22 25 35 78 81 Tax adjustments 2 - - 2 (82) 7 (80) 7 Tax impact of adjusting items 3 (3) (5) (4) 9 (4) (3) (19) Adjusted net income attributable to Delphi Technologies $116 $115 $64 $94 $117 $389 $464 Weighted average number of diluted shares outstanding 88.92 89.05 88.97 88.63 88.79 88.89 88.66 Diluted net income per share attributable to Delphi Technologies $1.10 $0.97 $0.44 $1.52 $0.63 $4.03 $3.21 Adjusted net income per share $1.30 $1.29 $0.72 $1.06 $1.32 $4.38 $5.23
Pro forma financial schedules ($ millions) Delphi Technologies - Revenue Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Revenue Reported 1,2 $1,168 $1,187 $1,205 $1,289 $4,849 Spin-Related Adjustments 3 N/A N/A N/A $5 $5 Historical Comparable 4 $1,168 $1,187 $1,205 $1,294 $4,854 Pro forma Adjustments 5 ($20) ($21) ($20) ($20) ($81) Revenue Pro forma $1,148 $1,166 $1,185 $1,274 $4,773 22 Delphi Technologies - Adjusted Operating Income Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Adjusted Operating Income 1 $162 $164 $147 $164 $637 % to sales 13.9% 13.8% 12.2% 12.7% 13.1% Spin-Related Adjustments 3 N/A N/A N/A $4 $4 Historical Comparable 4 $162 $164 $147 $168 $641 % to sales 13.9% 13.8% 12.2% 13.0% 13.2% Pro forma Adjustments 5 ($13) ($17) ($14) ($28) ($72) Adjusted Operating Income Pro forma $149 $147 $133 $140 $569 % to sales 13.0% 12.6% 11.2% 11.0% 11.9% 1. Results for periods prior to December 4, 2017 prepared on a stand-alone combined basis derived from the former parent s accounting records and results for periods subsequent to December 4, 2017 are presented on a consolidated basis. 2. Revenues related to inter-segment transactions have been eliminated. 3. Adjustments to present results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during 2017. Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation. 4. Represents results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during 2017. 5. Adjustments to present results for the year ended December 31, 2017 on a comparable basis to expected future period results. Financial information for periods prior to December 4, 2017 was prepared on a stand-alone combined basis derived from the former parent s accounting records and is not necessarily indicative of results that will be achieved as a stand-alone publicly-traded company. Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation.
Pro forma financial schedules ($ millions) Powertrain Segment - Revenue Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Revenue Reported 1,2 $1,023 $1,035 $1,049 $1,115 $4,222 Spin-Related Adjustments 3 N/A N/A N/A N/A N/A Historical Comparable 4 $1,023 $1,035 $1,049 $1,115 $4,222 Pro forma Adjustments 5 N/A N/A N/A N/A N/A Revenue Pro forma $1,023 $1,035 $1,049 $1,115 $4,222 23 Powertrain Segment - Adjusted Operating Income Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Adjusted Operating Income 1 $150 $141 $128 $143 $562 % to sales 14.7% 13.6% 12.2% 12.8% 13.3% Spin-Related Adjustments 3 N/A N/A N/A $3 $3 Historical Comparable 4 $150 $141 $128 $146 $565 % to sales 14.7% 13.6% 12.2% 13.1% 13.4% Pro forma Adjustments 5 ($9) ($12) ($10) ($22) ($53) Adjusted Operating Income Pro forma $141 $129 $118 $124 $512 % to sales 13.8% 12.5% 11.2% 11.1% 12.1% 1. Results for periods prior to December 4, 2017 prepared on a stand-alone combined basis derived from the former parent s accounting records and results for periods subsequent to December 4, 2017 are presented on a consolidated basis. 2. Includes revenues related to inter-segment transactions. 3. Adjustments to present results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during 2017. Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation. 4. Represents results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during 2017. 5. Adjustments to present results for the year ended December 31, 2017 on a comparable basis to expected future period results. Financial information for periods prior to December 4, 2017 was prepared on a stand-alone combined basis derived from the former parent s accounting records and is not necessarily indicative of results that will be achieved as a stand-alone publicly-traded company. Adjustments include: (1) impact of the original equipment services business that remained with the former parent, (2) incremental costs and inefficiencies associated with being a stand-alone publicly-traded company for periods subsequent to December 4, 2017, and (3) costs associated with the Transition Services Agreement and Contract Manufacturing Services Agreement entered with our former parent in connection with the separation.
Pro forma financial schedules ($ millions) Aftermarket Segment - Revenue Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Revenue Reported 1,2 $222 $232 $243 $250 $947 Spin-Related Adjustments 3 N/A N/A N/A $5 $5 Historical Comparable 4 $222 $232 $243 $255 $952 Pro forma Adjustments 5 ($20) ($21) ($20) ($20) ($81) Revenue Pro forma $202 $211 $223 $235 $871 24 Aftermarket Segment - Adjusted Operating Income Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Adjusted Operating Income 1 $12 $23 $19 $21 $75 % to sales 5.4% 9.9% 7.8% 8.4% 7.9% Spin-Related Adjustments 3 N/A N/A N/A $1 $1 Historical Comparable 4 $12 $23 $19 $22 $76 % to sales 5.4% 9.9% 7.8% 8.6% 8.0% Pro forma Adjustments 5 ($4) ($5) ($4) ($6) ($19) Adjusted Operating Income Pro forma $8 $18 $15 $16 $57 % to sales 4.0% 8.5% 6.7% 6.8% 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. Includes revenues related to inter-segment transactions. 3. 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 2017. 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. 4. Represents results for the year ended December 31, 2017 on a comparable basis to historical periods, as though the separation did not occur during 2017. 5. 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.