BorgWarner Inc. Q3 FY2025 earnings call

• BorgWarner achieved organic sales growth of just over 2% in the quarter despite headwinds from a European customer's cyber-related shutdown. - Secured 8 new business awards across foundational and e-products, illustrating strength of portfolio and demand for efficient powertrain tech. - Adjusted operating margin was 10.7% in the third quarter, increasing 60 basis points year-over-year despite a 60 basis point net tariff headwind. - Returned approximately $136 million to shareholders in the quarter through share repurchases and dividend, with focus on driving strong financial performance, securing new business, and creating shareholder value.

BorgWarner's third quarter performance included various segment details. The CV Battery and Charging Systems segment saw a decline in sales, contributing to a 100 basis point headwind to overall outgrowth. Foundational Products segment secured new business awards such as 4-wheel drive contracts with Chery (scheduled for mass production in 2027) and supply of 50-millimeter variable turbine geometry turbochargers and electric variable cam timing technology to Stellantis. e-Products segment had wins like a 7-in-1 integrated drive module contract with a Chinese OEM (mass production in 2026), extension of electrified propulsion collaboration with Great Wall Motor, and battery system supply to the HOLON Urban autonomous shuttle.

• 2025 sales projected in the range of $14.1 billion to $14.3 billion, narrowed from prior guidance. - Adjusted operating margin expected to be in the range of 10.3% to 10.5%, up from previous guidance. - Adjusted EPS expected in the range of $4.60 to $4.75 per diluted share, up from prior. - Free cash flow guidance increased to $850 million to $950 million.

• Cyber-related shutdown at a European customer impacted sales. - Semiconductor supply concerns, including Nexperia chip issues affecting industry volumes. - Downtime at North American customers due to fire and other operational issues, affecting outgrowth.

Q: Chris McNally asks about Q4 Oswego impact and divisional margins.

A: Craig Aaron responds that there's a $50 million to $100 million impact in Q4 for the North American program and discusses PDS margins, noting sales growth in China and mid-teens conversion expected.

Q: Colin Langan asks about unusual elements in Q3 margin and onetime items.

A: Joseph Fadool states no onetime items, attributes strong performance to capitalizing on higher sales and cost controls.

Q: Joseph Spak asks about battery and charging sales and TTT segment opportunities.

A: Joseph Fadool mentions sales headwinds in battery business but business is positioned for profitable growth, and TTT segment supplies turbos for stationary power stations.

Q: James Picariello asks about PDS backlog and regional trajectories.

A: Joseph Fadool talks about PDS sales growth, mid- to high-teen incrementals expected, and growth in China.

Q: Luke Junk asks about operating margin range and macro factors.

A: Craig Aaron discusses fourth quarter margin expectations based on revenue and tariff benefits.

Q: Dan Levy asks about capital allocation and North America EV market.

A: Joseph Fadool talks about capital allocation, returning $420 million to shareholders, and North America EV market dynamics.

Q: Emmanuel Rosner asks about free cash flow drivers.

A: Joseph Fadool mentions lower CapEx as a driver of free cash flow improvement.

Q: Mark Delaney asks about Nexperia chip situation and nonautomotive business.

A: Joseph Fadool discusses Nexperia exposure and nonautomotive business, including trucking and on-highway markets.

Q: Alex Potter asks about supply chain and China business.

A: Joseph Fadool talks about supply chain management and China business alignment with domestic players.

Q: Edison Yu asks about HOLON Urban vehicle win context.

A: Joseph Fadool provides context on the HOLON Urban vehicle win but details on volume and content are not fully shared.