BorgWarner Reports Full Year 2023 Results, Expects 2024 eProduct Sales to Grow Approximately 25% to 40%

Auburn Hills, Michigan, February 8, 2024 – BorgWarner Inc. (NYSE: BWA) today reported fourth quarter and full-year results.

Charging Forward Update:

• BorgWarner has announced a strategic relationship agreement with FinDreams Battery, a subsidiary of BYD Company Limited. Under this agreement, BorgWarner will be the only non-OEM localized manufacturer, unaffiliated with FinDreams Battery, with rights to localize LFP battery packs for commercial vehicles utilizing FinDreams Battery blade cells in Europe, the Americas, and select regions of Asia Pacific.
• BorgWarner has announced a joint venture with Shaanxi Fast Auto Drive Group to develop a high-voltage inverter application for the Chinese electric commercial vehicle market. This high-voltage inverter for commercial vehicles is expected to strengthen BorgWarner’s commercial vehicle product portfolio.
• BorgWarner has completed its acquisition of the Electric Hybrid Systems business segment of Eldor Corporation (“Eldor”). The acquisition is an important complement to the ePropulsion portfolio, especially as it relates to expansion in high-voltage power electronics beyond the inverter.
• BorgWarner announced multiple new eProduct awards including:
• A contract with a major global OEM to extend its existing business supplying 400V high-voltage coolant heaters (HVCH) for the automaker’s battery-electric light-vehicle platforms, specifically truck and SUV programs.
• A contract with Xpeng Motors, a leading Chinese Smart EV company to supply its eMotor rotor and stator for the X9 MPV as well as XPeng’s next electric B-class sedan.
• A contract with a major Chinese OEM to supply its 90kW boost dual inverter on a series of the automaker’s plug-in hybrid (PHEV) and range extended (REEV) electric vehicle passenger car platforms.

Fourth Quarter Highlights (continuing operations basis):

• U.S. GAAP net sales of $3,522 million, an increase of 6.2% compared with fourth quarter 2022.
• Excluding the impact of foreign currencies and the net impact of net M&A, organic sales were up 4.4% compared with fourth quarter 2022.
• U.S. GAAP net earnings of $0.64 per diluted share.
• Excluding the $0.26 of net losses per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were $0.90 per diluted share.
• U.S. GAAP operating income of $281 million, or 8.0% of net sales.
• Excluding $51 million of net pretax expense related to non-comparable items, adjusted operating income was $332 million, or 9.4% of net sales.
• Net cash provided by operating activities of $887 million.
• Free cash flow of $679 million.

Full Year Highlights (continuing operations basis):

• U.S. GAAP net sales of $14,198 million, an increase of 12.4% when compared with 2022.
• Excluding the impact of foreign currencies and the net impact of M&A, organic sales were up 12.5% compared with 2022.
• U.S. GAAP net earnings of $2.70 per diluted share.
• Excluding $1.05 of net losses per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were $3.75 per diluted share.
• U.S. GAAP operating income of $1,160 million, or 8.2% of net sales.
• Excluding $198 million of net pretax expense related to non-comparable items, adjusted operating income was $1,358 million, or 9.6% of net sales.
• Net cash provided by operating activities of $1,397 million.
• Free cash flow of $565 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 non-comparable items presented below are calculated after tax using the corresponding effective tax rate discrete to each item and the weighted average number of diluted shares for the periods presented. 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 $3,522 million for the fourth quarter 2023, an increase of 6.2% from $3,317 million for the fourth quarter 2022, primarily due to increased demand for the Company’s products and higher industry production compared to the prior year. Net earnings for the fourth quarter 2023 were $149 million, or $0.64 per diluted share, compared with net earnings of $172 million, or $0.73 per diluted share, for the fourth quarter 2022. Adjusted net earnings per diluted share for the fourth quarter 2023 were $0.90, down from adjusted net earnings per diluted share of $0.94 for the fourth quarter 2022. Adjusted net earnings for the fourth quarter 2023 excluded net non-comparable items of $(0.26) per diluted share, while adjusted net earnings for the fourth quarter 2022 excluded net non-comparable items of $(0.21) 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. Adjusted net earnings per diluted share was flat, primarily due to the impact of higher adjusted operating income, which was offset by a higher effective tax rate.

Full Year 2024 Guidance: The Company has provided 2024 full year guidance. Net sales are expected to be in the range of $14.4 billion to $14.9 billion, compared with 2023 sales of $14.2 billion. This implies a year-over-year organic increase in sales of 1% to 5%. The Company expects its 2024 eProduct sales to be $2.5 billion to $2.8 billion, up from approximately $2.0 billion in 2023. The Company expects its weighted light and commercial vehicle markets to be in the range of down (2.5)% to roughly flat in 2024. Foreign currencies are expected to have a minimal year-over-year impact on full-year 2024 sales.

Operating margin is expected to be in the range of 8.5% to 8.9%. Excluding the impact of noncomparable items and the add back of intangible asset amortization expense, adjusted operating margin is expected to be in the range of 9.2% to 9.6%. This guidance includes an expected negative adjusted operating income impact due to the acquisition of the electric hybrid systems business segment of Eldor Corporation. Excluding the impact of the Eldor acquisition, adjusted operating margin is expected to be in the range of 9.6% to 9.9%. Net earnings are expected to be within a range of $3.56 to $3.88 per diluted share. Excluding the impact of non-comparable items, adjusted net earnings are expected to be within a range of $3.65 to $4.00 per diluted share. Full-year operating cash flow is expected to be in the range of $1,325 million to $1,375 million, while free cash flow is expected to be in the range of $475 million to $575 million.

At 9:30 a.m. ET today, a brief conference call concerning fourth quarter and full year 2023 results and 2024 guidance will be webcast at: https://www.borgwarner.com/investors. Additionally, an earnings call presentation will be available at https://www.borgwarner.com/investors.