BorgWarner Reports Third Quarter 2023 Results, Announces Additional eProduct Awards Across Portfolio

Auburn Hills, Michigan, November 2, 2023 – BorgWarner Inc. (NYSE: BWA) today reported third quarter results.

Charging Forward Update:

• BorgWarner expects its 2023 eProduct sales to be $2.0 billion to $2.1 billion, up from approximately $1.5 billion in 2022.
• BorgWarner has signed an agreement with a major North American OEM to supply its bidirectional 800V Onboard Charger (OBC) for use on the automaker’s premium passenger car battery electric vehicle (BEV) platforms. This marks BorgWarner’s first OBC win in North America and its first major eProduct award with this customer, with start of production expected to be in 2027.
• BorgWarner has been awarded increased business by a premium European OEM to supply additional Combined Inverter and DC/DC Converters (CIDD), for use in the customer’s allwheel-drive B- and C-segment hybrid applications. Start of production of this program is expected to be in 2025.
• BorgWarner has solidified an agreement with a major, global OEM to supply its 400V high voltage coolant heaters (HVCH) for the automaker’s European light vehicle program. Start of production of this program is expected to be in 2026.
• BorgWarner has an agreement to supply inverters for Volvo Cars’ Next-Generation Electric Vehicles. This inverter uses 750V silicon carbide MOSFET dies. BorgWarner announced that the Science Based Targets initiative (SBTi) has validated its targets to reduce absolute Scope 1 and 2 greenhouse gas (GHG) emissions 85% by 2030 from a 2021 base year and to reduce absolute Scope 3 GHG emissions 25% by 2030 from a 2021 base year.

Third Quarter Highlights (continuing operations basis):

• U.S. GAAP net sales of $3,622 million, an increase of 12% compared with third quarter 2022.
• Excluding the impact of foreign currencies and the acquisitions of Drivetek and SSE, organic sales were up 11% compared with the third quarter 2022.
• U.S. GAAP net earnings of $0.37 per diluted share.
• Excluding $(0.61) per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were $0.98 per diluted share.
• U.S. GAAP operating income of $272 million, or 7.5% of net sales.
• Excluding $77 million of pretax expenses related to non-comparable items, adjusted operating income was $349 million, or 9.6% of net sales.
• Net cash generated by operating activities of $221 million.
  
• Free cash flow of $36 million.
  

Financial Results (continuing operations basis):
The Company believes the following table is useful in highlighting non-comparable items that impacted its U.S. GAAP net 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.

Net sales were $3,622 million for the third quarter 2023, an increase of 12% compared with net sales of $3,226 million for the third quarter 2022, primarily due to increased demand for the Company’s products and recoveries from the Company’s customers of material cost inflation. Net earnings for the third quarter 2023 were $87 million, or $0.37 per diluted share, compared with net earnings of $173 million, or $0.73 per diluted share, for the third quarter 2022. Adjusted net earnings per diluted share for the third quarter 2023 were $0.98, up from adjusted net earnings per diluted share of $0.80 for the third quarter 2022.

Adjusted net earnings for the third quarter 2023 excluded net non-comparable items of $(0.61) per diluted
share, while adjusted net earnings for the third quarter 2022 excluded net non-comparable items of
$(0.07) per diluted share. These items are listed in the table above, which is provided by the Company for
comparison with other results and the most directly comparable U.S. GAAP measures. The increase in
adjusted net earnings was primarily due to the benefit of higher sales (including customer recoveries),
partially offset by higher input costs due to inflation.

Full Year 2023 Guidance: The Company has updated full year sales, margin and EPS guidance. The Company’s guidance and comparable 2022 sales reflect its continuing operations. Net sales for 2023 are expected to be in the range of $14.1 billion to $14.3 billion, compared with 2022 sales of approximately $12.6 billion. This implies a year-over-year increase in organic sales of 12% to 14%. Foreign currencies are expected to result in a year-over-year decrease in sales of approximately $110 million primarily due to the weakening of the Chinese Renminbi against the U.S. dollar, partially offset by the strengthening of theEuro against the U.S. dollar. The acquisitions of Santroll’s light vehicle eMotor business, Rhombus  Energy Solutions, Drivetek and SSE are expected to increase year-over-year sales by an aggregate of
approximately $63 million.

Operating margin for the full year is expected to be in the range of 8.1% to 8.2%. Excluding the impact of non-comparable items, adjusted operating margin is expected to be in the range of 9.4% to 9.6%. Net earnings are expected to be within a range of $2.65 to $2.81 per diluted share. Excluding the impact of non-comparable items, adjusted net earnings are expected to be within a range of $3.60 to $3.80 per diluted share. Full-year operating cash is expected to be in the range of $1,200 million to $1,250 million, while free cash flow is expected to be in the range of $400 million to $450 million.

At 9:30 a.m. ET today, a brief conference call concerning third quarter 2023 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.