BorgWarner Reports First Quarter 2024 Results and Increases Full-Year EPS Guidance, Announces Additional Share Repurchase Authorization
BorgWarner Inc. reported strong first quarter results, including an increase in net sales and adjusted earnings per diluted share compared to the previous year. The company secured contracts for electric vehicle systems with XPeng, Polestar, and a major European OEM. BorgWarner also announced a share repurchase program of up to $500 million, in addition to repurchasing $100 million of its outstanding shares during the quarter. Full-year EPS guidance has been raised, with expected net sales in the range of $14.4 to $14.9 billion. Operating margin and adjusted net earnings per diluted share are also expected to increase for the full year.
BorgWarner reported an increase in net sales of 6% to $3,595 million for the first quarter of 2024 compared to the same period in 2023.
Adjusted net earnings per diluted share for the first quarter of 2024 were $1.03, up from $0.81 in the first quarter of 2023, primarily due to higher sales, a lower effective tax rate, and a lower share count.
The company secured contracts with XPeng, Polestar, and a major European OEM for electric vehicle systems, contributing to future growth and expansion.
BorgWarner announced a $500 million share repurchase program, in addition to repurchasing $100 million of outstanding shares during the first quarter of 2024.
Full-year guidance for 2024 includes expected net sales in the range of $14.4 to $14.9 billion, with an increase in adjusted net earnings per diluted share and operating margin.
Net cash used in operating activities was $118 million, with free cash flow at $(308) million for the first quarter of 2024, indicating a negative cash flow position.
Foreign currencies had a negative impact on net sales, with a decrease of approximately $100 million due to the weakening of the Chinese Renminbi and Korean Won against the U.S. dollar.
Insights
The recent earnings report by BorgWarner Inc. showing a 6% increase in net sales to $3.595 billion in the first quarter of 2024 against the $3.383 billion in the same period of 2023 signals a healthy demand for the company's products. This growth, despite the headwinds of foreign currency impacts, is a testament to the strength of their business model and product portfolio.
Investors should note the positive trajectory in adjusted net earnings per diluted share (EPS), which grew from $0.81 to $1.03, outpacing the increase in GAAP net earnings per diluted share from $0.72 to $0.93. The exclusion of non-comparable items such as restructuring expenses and M&A activities in the adjusted figures provides a clearer picture of the company's operational performance.
The share repurchase authorization of up to $767 million, encompassing both the new $500 million program and the remaining $267 million from the prior authorization, is a move that indicates the management's confidence in the company's valuation and is typically seen as a positive signal to the market, potentially offering support for the stock price through reduced share dilution.
BorgWarner's strategic positioning within the eMobility sector should be highlighted, with notable contracts for high voltage hairpin eMotors and electric Torque Vectoring Disconnect systems. These contracts, not only with Polestar but also with a major European OEM and XPeng, a leading Chinese Smart EV manufacturer, underscore the company's competitive edge and potential for market share growth in the emerging electric vehicle market.
While the immediate financial impact of these contracts is yet to reflect in the current financials, starting production in 2025 does secure a future revenue stream. This foresight might cause a positive re-rating of the company, as the market typically values such forward-looking moves and long-term commitments, especially when they align with global trends towards electrification.
BorgWarner's new product developments and contracts in the electric vehicle (EV) components space, particularly their hairpin eMotors and eTVD systems, address the critical industry shift toward electrification. The emphasis on oil-cooling 800V systems and torque management aligns with the technological advancements required for next-generation electric SUVs, catering to the performance and efficiency demands of modern EVs.
The uptake of such systems by manufacturers like XPeng and Polestar, who are carving significant niches in the electric vehicle market, not only solidifies BorgWarner's role as an innovator but also bodes well for their long-term financial health as the automotive industry pivots away from internal combustion engines.
Charging Forward Update:
- BorgWarner has solidified two high voltage hairpin (HVH) eMotor business wins with XPeng, a leading Chinese Smart EV manufacturer, for use on two upcoming SUV models. The contracts include BorgWarner's advanced oil-cooling 800V eMotor systems, comprised of stator and rotor components. Start of production is planned for 2025.
- BorgWarner has secured contracts with Polestar and a major European OEM to supply electric Torque Vectoring Disconnect (eTVD) systems for battery electric vehicles (BEVs). BorgWarner's eTVD is part of the Company's electric Torque Management System (eTMS), which helps improve BEV traction and safety. BorgWarner's eTVD is currently in production for the Polestar 3 SUV. Production for the major European OEM is expected to begin later in 2024.
- BorgWarner repurchased approximately
$100 million - BorgWarner announced that its Board of Directors has authorized an additional share repurchase program of up to
$500 million $267 million $767 million
First Quarter Highlights (continuing operations basis):
U.S. GAAP net sales of$3,595 million 6% compared with first quarter 2023.- Excluding the impact of foreign currencies and the net impact of net M&A, organic sales were up
7% compared with first quarter 2023.
- Excluding the impact of foreign currencies and the net impact of net M&A, organic sales were up
U.S. GAAP net earnings of$0.93 - Excluding
$(0.10) $1.03
- Excluding
U.S. GAAP operating income of$295 million 8.2% of net sales.- Excluding
$44 million $339 million 9.4% of net sales.
- Excluding
- Net cash used in operating activities of
$118 million - Free cash flow of
$(308) million
- Free cash flow of
Financial Results (continuing operations basis):
The Company believes the following table is useful in highlighting non-comparable items that impacted its
Three Months Ended March 31, | |||
2024 | 2023 | ||
Earnings per diluted share | $ 0.93 | $ 0.72 | |
Non-comparable items: | |||
Merger and acquisition expense, net | 0.01 | 0.03 | |
Restructuring expense | 0.06 | 0.01 | |
Other non-comparable items | 0.02 | (0.01) | |
Unrealized loss on debt and equity securities | 0.01 | 0.05 | |
Corporate synergy from spin-off | — | 0.02 | |
Tax adjustments | — | (0.01) | |
Adjusted earnings per diluted share | $ 1.03 | $ 0.81 | |
Net sales were
Full Year 2024 Guidance: The Company has maintained full year sales and margin guidance, while EPS guidance has increased. Net sales for 2024 are expected to be in the range of
Operating margin for the full year is expected to be in the range of
At 9:30 a.m. ET today, a brief conference call concerning first quarter 2024 results and guidance will be webcast at: https://www.borgwarner.com/investors. Additionally, an earnings call presentation will be available at https://www.borgwarner.com/investors.
For more than 130 years, BorgWarner Inc. (NYSE: BWA) has been a transformative global product leader bringing successful mobility innovation to market. Today, we're accelerating the world's transition to eMobility -- to help build a cleaner, healthier, safer future for all.
Forward Looking Statements: This press release may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management's current outlook, expectations, estimates and projections. Words such as "anticipates," "believes," "continues," "could," "designed," "effect," "estimates," "evaluates," "expects," "forecasts," "goal," "guidance," "initiative," "intends," "may," "outlook," "plans," "potential," "predicts," "project," "pursue," "seek," "should ," "target," "when," "will," "would," and variations of such words and similar expressions are intended to identify such forward-looking statements. Further, all statements, other than statements of historical fact, contained or incorporated by reference in this press release that we expect or anticipate will or may occur in the future regarding our financial position, business strategy and measures to implement that strategy, including changes to operations, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success and other such matters, are forward-looking statements. Accounting estimates, such as those described under the heading "Critical Accounting Policies and Estimates" in Item 7 of our most recently filed Annual Report on Form 10-K ("Form 10-K"), are inherently forward-looking. All forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. Forward-looking statements are not guarantees of performance, and the Company's actual results may differ materially from those expressed, projected or implied in or by the forward-looking statements.
You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. These risks and uncertainties, among others, include: supply disruptions impacting us or our customers, commodity availability and pricing, and an inability to achieve expected levels of recoverability in commercial negotiations with customers concerning these costs; competitive challenges from existing and new competitors, including original equipment manufacturer ("OEM") customers; the challenges associated with rapidly changing technologies, particularly as they relate to electric vehicles, and our ability to innovate in response; the difficulty in forecasting demand for electric vehicles and our electric vehicles revenue growth; potential disruptions in the global economy caused by wars or other geopolitical conflicts; the ability to identify targets and consummate acquisitions on acceptable terms; failure to realize the expected benefits of acquisitions on a timely basis; the possibility that our 2023 tax-free spin-off of our former Fuel Systems and Aftermarket segments into a separate publicly traded company will not achieve its intended benefits; the failure to promptly and effectively integrate acquired businesses; the potential for unknown or inestimable liabilities relating to the acquired businesses; our dependence on automotive and truck production which is highly cyclical and subject to disruptions; our reliance on major OEM customers; impacts of any future strikes involving any of our OEM customers and any actions such OEM customers take in response; fluctuations in interest rates and foreign currency exchange rates; our dependence on information systems; the uncertainty of the global economic environment; the outcome of existing or any future legal proceedings, including litigation with respect to various claims, or governmental investigations, including related litigation; future changes in laws and regulations, including, by way of example, taxes and tariffs, in the countries in which we operate; impacts from any potential future acquisition or disposition transactions; and the other risks, noted in reports that we file with the Securities and Exchange Commission, including Item 1A, "Risk Factors" in our most recently-filed Form 10-K and/or Quarterly Report on Form 10-Q. We do not undertake any obligation to update or announce publicly any updates to or revisions to any of the forward-looking statements in this press release to reflect any change in our expectations or any change in events, conditions, circumstances, or assumptions underlying the statements.
BorgWarner Inc. | |||
Condensed Consolidated Statements of Operations (Unaudited) | |||
(in millions, except per share amounts) | |||
Three Months Ended March 31, | |||
2024 | 2023 | ||
Net sales | $ 3,595 | $ 3,383 | |
Cost of sales | 2,951 | 2,806 | |
Gross profit | 644 | 577 | |
Gross margin | 17.9 % | 17.1 % | |
Selling, general and administrative expenses | 329 | 299 | |
Restructuring expense | 19 | 3 | |
Other operating expense, net | 1 | 1 | |
Operating income | 295 | 274 | |
Equity in affiliates' earnings, net of tax | (5) | (1) | |
Unrealized loss on debt and equity securities | 2 | 15 | |
Interest expense, net | 5 | 10 | |
Other postretirement expense | 3 | 2 | |
Earnings from continuing operations before income taxes and noncontrolling interest | 290 | 248 | |
Provision for income taxes | 62 | 67 | |
Net earnings from continuing operations | 228 | 181 | |
Net (loss) earnings from discontinued operations | (7) | 49 | |
Net earnings | 221 | 230 | |
Net earnings from continuing operations attributable to noncontrolling interest | 15 | 13 | |
Net earnings attributable to BorgWarner Inc. | $ 206 | $ 217 | |
Amounts attributable to BorgWarner Inc.: | |||
Net earnings from continuing operations | $ 213 | $ 168 | |
Net (loss) earnings from discontinued operations | (7) | 49 | |
Net earnings attributable to BorgWarner Inc. | $ 206 | $ 217 | |
Earnings per share from continuing operations — basic | $ 0.94 | $ 0.72 | |
Earnings per share from discontinued operations — basic | (0.03) | 0.21 | |
Earnings per share attributable to BorgWarner Inc. — basic | $ 0.91 | $ 0.93 | |
Earnings per share from continuing operations — diluted | $ 0.93 | $ 0.72 | |
Earnings per share from discontinued operations — diluted | (0.03) | 0.21 | |
Earnings per share attributable to BorgWarner Inc. — diluted | $ 0.90 | $ 0.93 | |
Weighted average shares outstanding: | |||
Basic | 227.7 | 232.8 | |
Diluted | 228.3 | 234.4 | |
BorgWarner Inc. | |||
Net Sales by Reportable Segment (Unaudited) | |||
(in millions) | |||
Three Months Ended March 31, | |||
2024 | 2023 | ||
Air Management | $ 2,030 | $ 1,979 | |
Drivetrain & Battery Systems | 1,159 | 956 | |
ePropulsion | 436 | 487 | |
Inter-segment eliminations | (30) | (39) | |
Net sales | $ 3,595 | $ 3,383 | |
Segment Adjusted Operating Income (Loss) (Unaudited) | |||
(in millions) | |||
Three Months Ended March 31, | |||
2024 | 2023 | ||
Air Management | $ 308 | $ 285 | |
Drivetrain & Battery Systems | 158 | 111 | |
ePropulsion | (62) | (35) | |
Segment Adjusted Operating Income | 404 | 361 | |
Corporate, including stock-based compensation | 65 | 61 | |
Restructuring expense | 19 | 3 | |
Intangible asset amortization expense | 17 | 17 | |
Merger and acquisition expense, net | 2 | 8 | |
Other non-comparable items | 6 | (2) | |
Equity in affiliates' earnings, net of tax | (5) | (1) | |
Unrealized loss on debt and equity securities | 2 | 15 | |
Interest expense, net | 5 | 10 | |
Other postretirement expense | 3 | 2 | |
Earnings from continuing operations before income taxes and noncontrolling interest | 290 | 248 | |
Provision for income taxes | 62 | 67 | |
Net earnings from continuing operations | 228 | 181 | |
Net earnings from continuing operations attributable to noncontrolling interest | 15 | 13 | |
Net earnings from continuing operations attributable to BorgWarner Inc. | $ 213 | $ 168 | |
BorgWarner Inc. | |||
Condensed Consolidated Balance Sheets (Unaudited) | |||
(in millions) | |||
March 31, | December 31, | ||
ASSETS | |||
Cash, cash equivalents and restricted cash | $ 1,037 | $ 1,534 | |
Receivables, net | 3,289 | 3,109 | |
Inventories, net | 1,333 | 1,313 | |
Prepayments and other current assets | 298 | 261 | |
Total current assets | 5,957 | 6,217 | |
Property, plant and equipment, net | 3,766 | 3,783 | |
Other non-current assets | 4,399 | 4,453 | |
Total assets | $ 14,122 | $ 14,453 | |
LIABILITIES AND EQUITY | |||
Short-term debt | $ 445 | $ 73 | |
Accounts payable | 2,378 | 2,546 | |
Other current liabilities | 1,046 | 1,148 | |
Total current liabilities | 3,869 | 3,767 | |
Long-term debt | 3,295 | 3,707 | |
Other non-current liabilities | 916 | 913 | |
Total liabilities | 8,080 | 8,387 | |
Total BorgWarner Inc. stockholders' equity | 5,841 | 5,828 | |
Noncontrolling interest | 201 | 238 | |
Total equity | 6,042 | 6,066 | |
Total liabilities and equity | $ 14,122 | $ 14,453 | |
BorgWarner Inc. | |||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||
(in millions) | |||
Three Months Ended March 31, | |||
2024 | 2023 | ||
OPERATING ACTIVITIES OF CONTINUING OPERATIONS | |||
Net cash (used in) provided by operating activities from continuing operations | $ (118) | $ 59 | |
INVESTING ACTIVITIES OF CONTINUING OPERATIONS | |||
Capital expenditures, including tooling outlays | (190) | (239) | |
Payments for businesses acquired, net of cash acquired | — | (19) | |
Proceeds from settlement of net investment hedges, net | 12 | 13 | |
Proceeds from the sale of business, net | 3 | — | |
Proceeds from asset disposals and other, net | — | 1 | |
Net cash used in investing activities from continuing operations | (175) | (244) | |
FINANCING ACTIVITIES OF CONTINUING OPERATIONS | |||
Additions to debt | — | 1 | |
Repayments of debt, including current portion | (12) | (2) | |
Payments for purchase of treasury stock | (100) | — | |
Payments for stock-based compensation items | (23) | (25) | |
Dividends paid to BorgWarner stockholders | (25) | (39) | |
Dividends paid to noncontrolling stockholders | (23) | (25) | |
Net cash used in financing activities from continuing operations | (183) | (90) | |
CASH FLOWS FROM DISCONTINUED OPERATIONS | |||
Operating activities of discontinued operations | (10) | (71) | |
Investing activities of discontinued operations | — | (38) | |
Net cash used in discontinued operations | (10) | (109) | |
Effect of exchange rate changes on cash | (11) | (4) | |
Net decrease in cash, cash equivalents and restricted cash | (497) | (388) | |
Cash, cash equivalents and restricted cash at beginning of year | 1,534 | 1,338 | |
Cash, cash equivalents and restricted cash at end of period | $ 1,037 | $ 950 | |
Less: Cash, cash equivalents and restricted cash of discontinued operations at end of period | $ — | $ 181 | |
Cash, cash equivalents and restricted cash of continuing operations at end of period | $ 1,037 | $ 769 | |
Supplemental Information (Unaudited) | |||
(in millions) | |||
Three Months Ended March 31, | |||
2024 | 2023 | ||
Depreciation and tooling amortization | $ 133 | $ 125 | |
Intangible asset amortization | $ 17 | $ 17 | |
Non-GAAP Financial Measures
This press release contains information about BorgWarner's financial results that is not presented in accordance with accounting principles generally accepted in
Management believes that these non-GAAP financial measures are useful to management, investors, and banking institutions in their analysis of the Company's business and operating performance. Management also uses this information for operational planning and decision-making purposes.
Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, because not all companies use identical calculations, the non-GAAP financial measures as presented by BorgWarner may not be comparable to similarly titled measures reported by other companies.
Adjusted Operating Income and Adjusted Operating Margin
The Company defines adjusted operating income as operating income adjusted to exclude the impact of restructuring expense, merger, acquisition and divestiture expense, intangible asset amortization expense, other net expenses, discontinued operations, and other gains and losses not reflective of the Company's ongoing operations. Adjusted operating margin is defined as adjusted operating income divided by net sales.
Adjusted Net Earnings
The Company defines adjusted net earnings as net earnings attributable to BorgWarner Inc. adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expenses, discontinued operations, and other gains and losses not reflective of the Company's ongoing operations, and related tax effects. The impact of intangible asset amortization expense will continue to be included in adjusted net earnings.
Adjusted Earnings per Diluted Share
The Company defines adjusted earnings per diluted share as earnings per diluted share adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expenses, discontinued operations, other gains and losses not reflective of the Company's ongoing operations, and related tax effects. The impact of intangible asset amortization expense continues to be included in adjusted earnings per share.
Free Cash Flow
The Company defines free cash flow as net cash provided by operating activities minus capital expenditures and is useful to both management and investors in evaluating the Company's ability to service and repay its debt.
Organic Net Sales Change
The Company defines organic net sales changes as net sales change year over year excluding the estimated impact of foreign exchange (FX) and the acquisitions of the smart grid and smart energy businesses of Hubei Surpass Sun Electric and the Electric Hybrid Systems business segment of Eldor Corporation.
Adjusted Operating Income and Adjusted Operating Margin (Unaudited) | |||
Three Months Ended March 31, | |||
(in millions) | 2024 | 2023 | |
Net sales | $ 3,595 | $ 3,383 | |
Operating income | $ 295 | $ 274 | |
Operating margin | 8.2 % | 8.1 % | |
Non-comparable items: | |||
Restructuring expense | $ 19 | $ 3 | |
Intangible asset amortization expense | 17 | 17 | |
Merger and acquisition expense, net | 2 | 8 | |
Corporate synergy from spin-off | — | 5 | |
Other non-comparable items | 6 | (2) | |
Adjusted operating income | $ 339 | $ 305 | |
Adjusted operating margin | 9.4 % | 9.0 % | |
Free Cash Flow Reconciliation (Unaudited) | |||
Three Months Ended March 31, | |||
(in millions) | 2024 | 2023 | |
Net cash (used in) provided by operating activities from continuing operations | $ (118) | $ 59 | |
Capital expenditures, including tooling outlays | (190) | (239) | |
Free cash flow | $ (308) | $ (180) | |
First Quarter 2024 Organic Net Sales Change (Unaudited) | |||||||||||
(in millions) | Q1 2023 | FX | Acquisition | Organic | Q1 2024 | Organic | |||||
Air Management | $ 1,979 | $ (9) | $ 5 | $ 55 | $ 2,030 | 2.8 % | |||||
Drivetrain & Battery Systems | 956 | (13) | — | 216 | 1,159 | 22.6 % | |||||
ePropulsion | 487 | (10) | 6 | (47) | 436 | (9.7) % | |||||
Inter-segment eliminations | (39) | — | — | 9 | (30) | (23.1) % | |||||
Net sales | $ 3,383 | $ (32) | $ 11 | $ 233 | $ 3,595 | 6.9 % | |||||
Adjusted Operating Income and Adjusted Operating Margin Guidance Reconciliation (Unaudited) | |||
Full-Year 2024 Guidance | |||
(in millions) | Low | High | |
Net sales | $ 14,400 | $ 14,900 | |
Operating income | 1,177 | 1,272 | |
Operating margin | 8.2 % | 8.5 % | |
Non-comparable items: | |||
Restructuring expense | $ 70 | $ 80 | |
Intangible asset amortization expense | 70 | 70 | |
Merger and acquisition expense, net | 2 | 2 | |
Other non-comparable items | 6 | 6 | |
Adjusted operating income | $ 1,325 | $ 1,430 | |
Adjusted operating margin | 9.2 % | 9.6 % | |
Adjusted Earnings Per Diluted Share Guidance Reconciliation (Unaudited) | |||
Full-Year 2024 Guidance | |||
Low | High | ||
Earnings per Diluted Share from Continuing Operations | $ 3.54 | $ 3.86 | |
Non-comparable items: | |||
Merger and acquisition expense, net | 0.22 | 0.25 | |
Restructuring expense | 0.01 | 0.01 | |
Unrealized loss on debt and equity securities | 0.01 | 0.01 | |
Other non-comparable items | 0.02 | 0.02 | |
Adjusted Earnings per Diluted Share from Continuing Operations | $ 3.80 | $ 4.15 | |
Free Cash Flow Guidance Reconciliation (Unaudited) | ||||
Full-Year 2024 Guidance | ||||
(in millions) | Low | High | ||
Net cash provided by operating activities | $ 1,325 | $ 1,375 | ||
Capital expenditures, including tooling outlays | (850) | (800) | ||
Free cash flow | $ 475 | $ 575 | ||
Full Year 2024 Organic Net Sales Change Guidance Reconciliation From Continuing Operations (Unaudited) | |||||||||||
(in millions) | FY 2023 | FX | FY 2024 | Organic Net | FY 2024 Net | Organic Net | |||||
Low | $ 14,198 | $ (100) | $ 30 | $ 272 | $ 14,400 | 1.9 % | |||||
High | $ 14,198 | $ (100) | $ 30 | $ 772 | $ 14,900 | 5.4 % | |||||
View original content to download multimedia:https://www.prnewswire.com/news-releases/borgwarner-reports-first-quarter-2024-results-and-increases-full-year-eps-guidance-announces-additional-share-repurchase-authorization-302133678.html
SOURCE BorgWarner
FAQ
What were BorgWarner's net sales for the first quarter of 2024?
BorgWarner reported net sales of $3,595 million for the first quarter of 2024, reflecting a 6% increase over the same period in 2023.
What contracts did BorgWarner secure with XPeng, Polestar, and a major European OEM?
BorgWarner secured contracts with XPeng for high voltage eMotor systems, Polestar for electric Torque Vectoring Disconnect systems, and a major European OEM for eTVD systems for battery electric vehicles.
What share repurchase program did BorgWarner announce?
BorgWarner announced a share repurchase program of up to $500 million, in addition to repurchasing $100 million of its outstanding shares during the first quarter of 2024.
What is BorgWarner's full-year EPS guidance for 2024?
BorgWarner expects full-year adjusted net earnings per diluted share to be within a range of $3.80 to $4.15 for 2024.
