With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are autos and auto parts manufacturers.

Fortune Sector Leaders: Motor Vehicles and Parts

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

Relying on high-tech innovations (think 3D printing), the automotive company supplies axles, transmissions, and other equipment for vehicles of all kinds.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-367-Dana

The provider of driveline, sealing, and thermal management products serves major manufacturers of many types of motor vehicles.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

Fortune Global 500

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Dana is one of the only suppliers serving manufacturers and the aftermarket with key drivetrain components for all road transport needs. It fosters a particularly long-standing and important relationship with Ford, its single biggest customer. In November, Dana announced the sale of its off-road operations supplying parts for agricultural, mining, and construction vehicles to focus on passenger cars and commercial vehicles where parts are more commonly shared.

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

Q3 2024

Dana (DAN): Company Profile, Stock Price, News, Rankings

legacy

Dana

dana

Good morning, and welcome to Dana Incorporated Second Quarter twenty twenty five Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q and A session, will be recorded for replay purposes. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest. There will be a question and answer period after the speakers' remarks, and we'll take questions from the telephone only.

To ensure that everyone has an opportunity to participate in today's Q and A, we ask that callers limit themselves to one question at a time. At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Barber.

Thank you. Good morning. Welcome to Dana Incorporated's earnings call for the 2025. Today's presentation includes forward looking statements about our expectations for Dana's future performance. Actual results could differ from what we discuss today.

For more details about the factors that could affect our future results, please refer to our Safe Harbor statement found in our public filings and our reports with the SEC. I also encourage you to visit our investor website where you'll find this morning's press release and presentation. As stated, today's call is being recorded and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied or rebroadcast without our written consent. With me this morning is Bruce McDonald, Dana's Chairman and Chief Executive Officer and Timothy Krausz, Senior Vice President and chief financial officer. I will now turn the call over to Bruce.

Thank you, Craig, and thank you all for joining, Craig, Tim, and myself for our second quarter earnings call. You know, there is a lot of noise in our numbers as we've got to reclassify off highway as a discontinued operation. And so in in our earnings deck and in our in our comments, we'll sort of talk intermittently between new Dana, I e, Dana from continuing operations and the full Dana, which obviously is the basis of our previous guidance and things like that. I guess I'd sort of characterize the second quarter as another quarter of date of the Dana team delivering on our commitments with a solid q two beat, double digit margins, and accelerating free cash flow. Terms of some of the highlights here on slide four, as everyone knows, we did announce in the quarter our our our agreement to sell the Off Highway business to Allison for just over 2,700,000,000.0 with net cash proceeds expected to be about 2,400,000,000.0.

That that closing is expected to occur here late in the fourth quarter. I think substantially all of the regulatory filings have been submitted. And, the teams are working hard, both ours and Allison's, on affecting a smooth transition of the business over to Allison. In terms of our use of proceeds, we previously announced that we were going to take the proceeds from the sale of the Off Highway business and return about $1,000,000,000 to our shareholders as well as reduce our overall debt by a couple of billion dollars. I'm pleased to announce this morning that as a result of strong free cash flow and our higher guide here for the year, we're raising the amount of capital return to our shareholders to 600,000,000 from what was $5.50 previously.

As as things stands now, we we anticipate using all of that to reduce our shares outstanding, and and we're forecasting that we'll end the year with a share count of around a 110,000,000, which should be about 25% year over year reduction. In the quarter, we did buy back just over 10% of our shares, returning $257,000,000 to our shareholders. And as we look here into the third quarter, we anticipate buying back another 100,000,000 to 150,000,000 shares. In terms of our cost reduction initiatives, this is where we sort of committed to a goal of 300,000,000 run rate by 2026. We're upping that to $310,000,000 as a result of some of the projects coming in better than Tim and I had expected.

In the quarter, we delivered $60,000,000 of cost nearly $60,000,000 of cost reduction and $110,000,000 to date. And so I think we can kind of tie a ribbon around cost reduction. I think we're highly, highly, highly confident in the $300,000,000 And, you know, we don't really have a long way to go to get to that run rate here by the fourth quarter. In terms of tariffs and the tariff landscape, I mean, a lot a lot moving around lately here, but I I'd say the bottom the takeaway on tariffs is we're in great shape in terms of tariff mitigation and tariff recoveries. Right now, we're we we have some headwind here in the second quarter about 80 basis points.

That's that's worse than we expect it's gonna be the impact for the full year because we have some timing related catch ups that we didn't get, customer agreements in place, by the end of the quarter. Overall, we expect over an 80% recovery for the year. More importantly is the work that the teams are doing with our customers to mitigate the impact of the tariffs. This is critical for our industry because we we don't wanna just pass these costs along. We need to we need to make them go away so that we don't have impact in the vehicle demand.

In terms of our balance of the year outlook, I think when we were on a call at the end of the first quarter, there was considerable uncertainty around the impact of tariffs in terms of volumes. I guess what we've seen is very strong schedules holding up in the light vehicle side of our business. We have seen some softening in North America CV, which has been partially offset by a bit of better volumes coming out of South America and Europe. In terms of our profit guide, and here I'm referring only to, new Dana, we're up in our profits guidance for the year by $35,000,000 And if you look at the whole company, it's up $15,000,000 because Off Highway is down 20. And, on a free cash flow basis, we're up in our our our target to by $50,000,000 to about $2.75 at the midpoint of our guidance.

So overall, a really strong quarter. I couldn't be more pleased with the results of the team. In terms of what new data looks like going forward, I mean, here's here's kind of an overall snapshot reflecting 2024 numbers, but you know, we're we're we'll be much more of a light vehicle company, be much more of a North American centric company. We we we do have a nice split between commercial and light vehicle. Within commercial, we have a very strong aftermarket business.

And, you know, we don't talk a lot about it, but our thermal and our ceiling side of our business that we integrated into light vehicle, continues to be a source of profit improvement, going forward. In terms of the full year guidance, I just want to spend a kind of a minute a few minutes on this page because this is the first time we're sort of showing our numbers with and without the discontinued operations. So our guidance and as we've talked in the end of the first quarter, we we we'd indicated our our sales were trending towards the higher end of our previous range. So we're we're saying right now on an old on a total data basis, our sales would have been about 9,900,000,000.0. You can see on the discontinued operations side, sales down one twenty five.

There, we have seen softness in terms of the, tariffs, particularly European product that's imported into United States that's bearing a tariff. We've seen those volumes drop off. However, on the continuing operations side, we see sales being up $250,000,000 In terms of the guidance for the two parts of the business, if you think about the original guide at $975,000,000 you can kind of see the split, 600,000,000 for continuing operations and $375,000,000 for Off Highway. Our revised guidance that I touched on my previous slide, up 35,000,000 for NewDana, down $20,000,000 for Off Highway for a net positive 15 And then stranded costs are just a pocket switch between discontinued operations. Those are costs that we currently allocate to Off Highway that remain with new data.

Just a point to note, that number is higher than the sort of 40,000,000 30 to 5 to 40,000,000 that we've previously guided to. The reason is in within that 60,000,000 are variable costs allocated to Off Highway that will go away upon the sale. Those are 20,000,000 to $25,000,000 and that's how you get back down to the range that we've talked about before. And then in terms of cash flow, and I've seen a few notes where there's maybe a little bit of confusion about what's the cash flow split between disc ops and contain ops. You know, under GAAP, we're required to report total cash flow inclusive of both pieces, and so that's what we're we're guiding here today.

What you will see when we publish our q is is cash flow split by operating, investing, and and earnings split between the two, and and that's that'll be for the two, you know, to the two to the year to date actual. With that, Tim, I'm going turn it over to you to go through the financials in more detail.

Thanks, Bruce. Let's begin with how we will be presenting our results in the prior periods. With the signing of the agreement to sell our Off Highway business, that business will now be considered as discontinued operations. We will be reporting continuing operations in our financial statements. Continuing operations contain our Light Vehicle and Commercial Vehicle Systems reporting segments.

The majority difference between these new reporting segments and the prior reporting segments is they now incorporate certain retained operations that were not included in the Off Highway sale as well as stranded corporate costs in prior intercompany sales to Off Highway that are now treated as third party sales according to the accounting rules. The net effect of the higher sales and increased stranded cost is to temporarily lower the profit margin of continuing operations until the sale closes and transition service payments begin. Third payment party sales agreements and stranded cost reductions that should begin early next year. And finally, cash flow is the one metric that will include Off Highway as we had previously. Since the sale transaction excludes cash, all cash flow will remain with Dana until closing.

For continuing operations, sales were $2,052,000,000 lower than last year driven by lower end market demand. Adjusted EBITDA was $145,000,000 for a profit margin of 7.5%, two ten basis points higher than last year as the benefits of our cost saving and productivity improvements more than offset the lower sales and impacts from tariffs. Earnings before tax to continuing operations was a loss of $24,000,000 a $30,000,000 improvement from 2024. Please turn with me now to Slide nine for the drivers of sales and profit change. In line with the new accounting and reporting method, have we revised our walk presentation to include the impact of discontinued operations for the current and prior periods.

The $691,000,000 in sales and $136,000,000 in profit removed from 2024 represents the off highway sales perimeter and accounting treatment for discontinued operations. Moving to the right, for this year's second quarter, the change in discontinued operations lowered sales by $7,000,000 and overall volume and mix lowered sales by $173,000,000 driven by lower demand in both light vehicle and commercial vehicle end markets. Performance drove sales higher by $29,000,000 due to pricing actions in commercial vehicle and our aftermarket business, while tariff recoveries totaled $26,000,000 for the quarter. Changes in adjusted EBITDA from continuing operations was $6,000,000 for the quarter. The flow through of sales from volume mix lowered adjusted EBITDA by 52,000,000 This was a decremental margin of about 30%.

But recall that breaking out Performance now, which includes efficiency gains in manufacturing separately. Performance increased profit by $30,000,000 due to pricing and efficiency improvements in commercial and light vehicle businesses. Cost savings added $59,000,000 in profit through the various actions we have taken. This brings us to $110,000,000 to date and we are firmly on track to deliver our target of $225,000,000 in savings for the current year. The tariff impact in the quarter was just $15,000,000 Since our tariff recovery mechanisms have a lag and the landscape continues to evolve, we expect to see a continuing headwind due to the timing, but we expect to recover the majority of the impacts this year.

Next, I will turn to Slide 10 for the details of our second quarter free cash flow. As I discussed on Slide eight, the accounting for cash flow includes both continued and discontinued operations as shown on Slide 10. Adjusted free cash flow for the 2025 was a use of $5,000,000 which was $109,000,000 lower than the second quarter of last year. Higher adjusted EBITDA in continuing operations was partially offset by lower earnings in the Off Highway segment and higher one time costs related to our cost savings and other improvement actions. Taxes were $22,000,000 this year related mainly related to joint the sale of our joint venture interests as well as jurisdictional mix of income.

Working capital was a use of $115,000,000 during the second quarter as requirements normalized after unusually strong first quarter this year. Finally, capital spending net of proceeds of sales of fixed assets and contributions from our customers was $70,000,000 better than last year. Please turn with me now to slide 11 for a summary of our updated guidance for 2025. As Bruce outlined earlier, our 2025 full year guidance ranges have been updated for the impact of discontinued operations. On page 11, we are summarizing the continued operations guidance as well as showing an illustrative view of the prior guidance method for comparison.

We are expecting sales from continuing operations to be approximately $7,400,000,000 at the midpoint of the range. This is about $250,000,000 higher than our previous expectation as you can see in the column on the right. Higher sales are primarily due to expected tariff recoveries as well as tailwinds from currency rates. Adjusted EBITDA from continuing operations is expected to be about $575,000,000 at the midpoint of the range. This is approximately $35,000,000 higher than previously anticipated, driven by cost savings and performance improvements after adjusting for accounting impacts of the discontinued operations.

Full year adjusted free cash flow is anticipated at $275,000,000 at the midpoint of the range for the year. This is approximately $50,000,000 higher than previously expected driven by higher profit and working capital efficiencies. Please turn with me now to slide 12 for the drivers of sales and profit change for our full year guidance. As with the quarterly walk, we showed earlier our full year guidance walk adjusts 2024 for discontinued operations and walks forward our guidance for continuing operations. Beginning on the left, discontinued operations reduced 2024 sales by approximately $2,500,000,000 So we begin with 2024 at $7,700,000,000 in sales for continuing operations. Adjusted EBITDA from discontinued operations was $498,000,000 reducing 2024 adjusted EBITDA to $387,000,000 resulting in about a 5% margin on sales. Discontinued operations this year is expected to further reduce sales by $10,000,000 or excuse me $100,000,000 due to lower sales between discontinued and continuing operation, but adds approximately $15,000,000 to adjusted EBITDA due to lower unallocated costs. Volume and mix are expected to lower sales by $425,000,000 driven by lower demand across both Light Vehicle and Commercial Vehicle markets. Adjusted EBITDA from volume mix is expected to be lower by about $90,000,000 a decremental margin of about 20%.

Performance is anticipated to increase sales by approximately $80,000,000 with $90,000,000 in EBITDA impacts, mostly through pricing and efficiency improvements. Cost savings will add two twenty five million dollars in profit as I mentioned earlier. The tariff impact for the full year is expected to add about $150,000,000 to sales and lower profit by about $300 excuse me, 35,000,000. The majority of this profit headwind will be recovered next year. Foreign currency translation is still expected to decrease sales by $45,000,000 driven by a mix of currencies with no margin impact.

Finally, commodity cost recovery should be about $10,000,000 higher in sales and an equal amount headwind to profit. The net result will be about a two eighty basis points margin improvement in continuing operations when compared to last year's as performance and cost saving actions overcome the headwinds we are experiencing in the business. Next, I will turn to slide 13 for the details of free cash flow guidance. We anticipate full year 2025 adjusted free cash flow to now be about $275,000,000 at the midpoint of the guidance range, dollars 50,000,000 higher than our previous guidance. We expect about $105,000,000 of higher free cash flow from increased adjusted EBITDA when compared to 2024.

One time costs will be about $70,000,000 $25,000,000 higher than last year as we invest in our cost saving program and other restructuring actions. Working capital will be about $30,000,000 source of cash, about $100,000,000 better than last year as we continue to lower the requirements in the back half of the year for working capital. And capital spending net is expected to be about $325,000,000 this year, which will be $45,000,000 better than last year. And lastly, please turn with me to Slide 14 for a look at our balance sheet and capital allocation priorities. On the left side of the page, you will see that we have ample liquidity of about $1,350,000,000 at the end of the second quarter.

During the second quarter, we returned over $250,000,000 to shareholders through share repurchases in addition to our regular dividend. As we look to the end of the year, we expect to close the Off Highway sale in the fourth quarter and expect our net debt leverage to be about 0.7 times expected EBITDA. We will we expect to continue to execute on our $1,000,000,000 capital return authorization and repurchase a total of $600,000,000 of our stock this year, which could result in having about 110,000,000 shares outstanding at the end of the year at the current share price. As we look forward, our capital allocation priorities are first to drive organic growth as we will continue to be selective with where we spend capital to drive proper growth within the Light Vehicle and Commercial Vehicle segments. We will aggressively lower debt as we look to achieve our one times net leverage target over the business cycle.

And as we have demonstrated this quarter, we will return cash to shareholders while increasing the overall value of the company. Thank you for listening, and I will now turn the call back over to Bruce for his final comments.

Thank you. Thank you, Tim. In terms of 2026, again, a fair bit of comments I've seen from the street around how do we get to 10% for next year. So I just wanted to sort of focus on the way that we're looking at it. So start off with our cost reduction savings plan.

We expect that to be $310,000,000 run rate for 2026. So that's a good news story for us and gives us a strong tailwind as start the next fiscal year. Just starting off in terms of a walk, you know, if you use Tim's guidance at the midpoint, we're at about 7.8% for for new data as as we're going to report our numbers here in 2025. First item is the the the annualization of the cost savings. So this just basically is reflecting the fact that in q one and two, particularly, we we weren't tracking to a $310,000,000 annual cost rate savings.

That number you can kind of think about it in the bag, and just annualizing that would take our 7.8 up to 8.8. If I just look at the flow through of our our backlog, we expect that to add about 60 basis points. In terms of stranded costs, you know, to get this extra 50 basis points, we have to eliminate the variable costs that go away on day one, which is a gimme. And then we're assuming we're gonna offset 50% of the stranded costs here. I I would tell you that I'd be highly disappointed if that's where we end up.

I would expect a combination of TSAs and continued focus on those stranded costs that we should be able to do much better than that. And then lastly, operational performance, we're factoring 40 basis points to get there. And I guess what I would just point out on that one is that's about half of the operational performance benefit that we've delivered in 2025. So I I I don't I really don't look at the 2020, six target here of 10 to 10 and a half percent as being a stretch. I I think it is the commitment that I have just as much confidence in delivering as I as I did when we committed to the $300,000,000 cost savings.

When you when you take that margin and apply it to our sales for next year, you factor in lower cash taxes and interest that we've talked about for some time as as that we will benefit from once the off highway business is gone. We see free cash flow being in the 4% of sales range, which if you do the math is higher than this year. In terms of our share authorization, the capital return of 1,000,000,000 We will continue as cash flow improves as we focus on sale of non core assets, expanding the timing of that to deliver more quickly to our shareholders in addition to our existing dividend. Then lastly, you know, we we we probably haven't done ourselves a disservice here in terms of our top line story. I I do think Dana has an underappreciated growth story here.

We we have a solid back log that we'll be reporting next year and we continue to be have been very productive with the discussions with both our light vehicle and commercial vehicle customers on gaining share and winning new business. And with that, I'll open it up to Q and A.

Our first question will come from the line of Joseph Spak with UBS. Please go ahead.

Hey team, this is Rob Saltzman on for Joe today. Just on the 2026 outlook, you mentioned you'd expect 60 basis points of margin from that accretive new business backlog. Can you just provide some color on what's driving that those new business wins and kind of where the wins are coming from in core Dane? That's my first question. Thanks.

Yes. So I mean if you just look at our look back, right, we incremental backlog when we reported in February. So in large part that's coming in. It's a mix of both on the commercial vehicle side as well as on the light vehicle side. We have some significant programs. So we have a program with JLR that's launching next year.

We've got volume uplift and additional amounts on a number of big Ford programs including the Super Duty. And then we have a number of smaller programs across a number of customers in across the world that will be being updated and driving that backlog with additional content for those vehicles.

Thanks. And just my last follow-up here. Just maybe on the cost reduction side. So you increased the goal to $310,000,000 $10,000,000 higher versus prior, but and you've kind of continued to increase that target over the course of this year. But how much room would you say you have to run here on finding incremental cost savings to kind of pull out of the business from the current levels?

Yes. I think the big driver so most of our cost saving programs here for the $310,000,000 is really above the plants. Most of what we have left is really going to be around operating improvements, largely in the plant. Those would naturally flow through what we're calling performance, and we do that today. Look, we'll continue to look at the cost structure as we move into 2026 and I'm sure there'll be some opportunities, especially as we push forward and find ways to increase efficiencies.

But in terms of the big driver on cost reductions, I think the largest and the lowest hanging fruit has been done. I think our real focus next year on those types of things will be around taking the stranded costs out. A lot of those are semi variable or fixed. So that's where we're going to be concentrating. I mean the accounting has us at 60,000,000 that's really more like 35,000,000 or 40,000,000 when you adjust for some of the nuances on how we have to account for them with discontinued ops rules.

But we do believe that we can get the at least half if not more than that 40,000,000 out before the end of end of next year. So, we we think we're in really good shape to to deliver the the 10% 1010.5% margins for next year.

Yeah. I I I maybe just to add on a little bit. If if you look at the cost reduction where we got the 300,000,000, and if I think about new data, our tow our total costs are in the just under 7,000,000,000. And and we the 300,000,000, we went hunting in about a billion dollars of that. And and if you think about it, was quick wins, things that we could do quickly without significant investment, and things like that.

I would tell you that in in that remaining bucket, in terms of what we can do longer term and where we can make some investments, there's still enormous opportunity. I would also tell you on the 6,000,000,000 where we didn't go hunting, which is, I would say, the plant cost, again, an enormous opportunity for us. So so it's not stuff that we we will bang into, like, a huge number in 2026, but I think over the next three to four years, it is a significant opportunity for us to expand our margins.

Our next question comes from the line of Tom Narayan with RBC. Please go ahead.

Hey, guys. Thanks for taking the question. Not a lot to nitpick here, as you guys pointed out. But I guess if I had to ask, the Off Highway guidance obviously coming down, it's on tariffs. But I guess this would be different maybe then from what Austin would have known.

I guess, is there any risk or anything we should know about in terms of how that guidance cut could potentially impact deal closing timing? And then I have a follow-up. Thanks.

Yes. No, it won't impact deal close timing. There's no covenants other than the typical running the business in the ordinary course. The one thing I will say, although the top line guidance is coming down and there's obviously some degradation around the base or the dollar EBITDA number, The Off Highway team has done what they always do, which is maintaining their or improving their margins despite the lower top line revenue. So they've done an incredible job of flexing their cost structure to support and maintain their quality of earnings.

So that's really the power that's in the business, and it should not or will not have any impact on timing.

Yes. I would just maybe add to that. If you think about where we were at the end of the first quarter, you know, prior to signing this deal, we we all had some concerns around volumes from tariffs, and and we we knew we knew we had some issues in front of us, particularly on off highway. On a small percentage of their business, which is product that they manufacture in Europe that they import into The US, you know, that that's, you know, facing a fairly significant price increase, and and we're the volume. So nothing that we're seeing in terms of business performance is any different than, I would say, the time, we closed. Signed.

And then, for my for my follow-up, I said, the the cost outs, Q2 looks like it was a 32,000,000 across LV and CV, I think, 22 for LV, 10 for CV out of the 59 total. What was the remainder of the cost out? So is that just kind of overhead?

It's it's it's in corporate. It's in it would be corporate. Yeah. I mean, it gets reallocated. So but but yeah.

I mean, what you're seeing is the is the the cost outs on the corporate side that then get reallocated back into the businesses. Correct.

Okay. And and then I had thought that maybe, CV would have seen more because of the EV, side, you know, with the cost out. So I thought

CV would of that a lot of that does sit from a from a from a engineering side in corporate. So that's probably where you're seeing the disconnect.

next question comes from the line of Edison Yu with Deutsche Bank. Please go ahead.

Hi, thank you. This is Wendy on for Edison. I was wondering if you can comment a bit on what you're seeing in the end markets now for light vehicles, especially from some of your top customers? And then also on the commercial vehicles? And what kind of maybe marketing conditions are you betting into the second half?

Sure. I mean, from a light vehicle and Bruce mentioned this, pretty stable from a light vehicle perspective. Now for us, you have to look specifically into the light truck market in North America, as that's the majority of our where our revenue is generated and particularly on four large programs. So there's not you got to be careful not to read across the entire SAAR for the light vehicle business in North America to Dana, just given the concentration we have on a number of large heavy truck programs. On Commercial Vehicle, we are seeing softness in North America largely around sort of some of the tariff uncertainty.

We're starting we've seen that impact sales both in the first half of the year and we expect that softness to continue into the second. Offsetting that is some moderate strength in South America, particularly Brazil and then in Europe. Those are a bit smaller businesses for us, but but certainly, are helpful in terms of mitigating some of the some of the weakness we're seeing or softness we're seeing in North American CV market.

Yeah. And I I think I think softness might be too kind to work. I mean, if you look at the class a market, you know, we've talked to a few of our customers. I mean, right now, you know, order ordering like, book to build is is dropping fast. Orders are, like, running half of last year.

So it's it's just not looking good, and and that's that's a combination of, obviously, the impact of tariffs. But but more importantly, it's the uncertainty associated with the business climate here, and people are just deferring purchases, when they can. So so we we factored in, in terms of our outlook, pretty pessimistic view on North America. But it's it's it's we don't and we're not and and it's sort of our 2026 guidance. We're not we're not factoring in any cyclical upturn in in in the in the commercial vehicle market in terms of getting to our numbers.

Okay. Great. That's that's very helpful to to know. And then just on the on the quarter itself, because I just look at the the bridge on slide nine, you know, the decrement the decrementals on the volume mix bucket seems to be about, you know, 30% or so. I know in your prepared remarks, you talked about splitting the performance bucket out.

But if I just look at the the full year bridge, the implied decremental is about 20%. So I'm just curious of the the difference here and what you, expect for the full year, what's occurred in in the second half. And then how do we think about that on a go forward basis since performance is sort of a a strip out bucket? Thank you.

Yeah. No. So so we we had a a a fairly unfavorable mix in in the in the in the second quarter. Particularly, you know, we we lost, you know, we had some some relatively high margin sales from a CV perspective, especially in the EV side of the business that continues to impact the business. A lot of that around sort of some of the issues in terms of being able to export out of China.

So that's impacting the business. So just being able to get magnets and those sorts of things and rare earth material. So and those are high higher margin business than the rest. And then even on the light vehicle side, we had a pretty strange mix of some of the sales differences that drove a decrement of the year that's a lot different than what we would normally see. When you look in the back half of the year, we're seeing a much better or more favorable mix. We're not seeing quite as much of the downturn from a CV perspective in the EV part of the market. And then our sales mix around Light Vehicle is more normalized. So it's unfortunately just a mix issue within the quarter for us, given just the sales side.

Yes. As we get into Q3 and Q4, the volume mix bar changes color here on us. So we've been fighting year over year negative on on the volume mix side of things as we get into q three, q four, especially as we just focus on new data. We that that that turns from a a headwind to a tailwind. So so, again, some of the comments around first half, second half comps, a lot of, I think, is addressed by the fact that we we don't have the volume headwinds in the second half of the year that we had in the first half.

Got it. Thank you so much. I'll pass it on.

Our next question comes from the line of Dan Levy with Barclays. Please go ahead.

Hi, good morning. Thanks for taking the question. Wanted to first just unpack the free cash flow. And maybe you could just help us understand. And we look at to try to bridge the free cash flow you've provided, which includes Off Highway this year, which is, call it, 2.8% of sales, and you're saying next year is 4% of sales for RemainCo.

Maybe you could just help us understand the rough bridge there. I understand part of it is going to be improved EBITDA, part of it is going to be lower interest expense. But maybe help us understand what the adjusted number this year would be for just RemainCo as opposed to including Off Highway, you know, and what that bridges to next year? Then maybe some color on some what these adjustments are that are cash items but are being excluded from the adjusted free cash flow number? Thanks.

Yeah. So in terms of being able to to to give you a a 25 pro form a number, it's really tough given that, you know, the all the debt sits outside of the off highway perimeter and then you have sort of the tax impact. We've called out about $200,000,000 between those two lines as you bridge from this year to next that's going to come out as a result of the transaction. But like trying to do a complete pro form a is a bit difficult. As you hit it, right, we'll get help from an EBITDA perspective.

Also, the onetime cost, right, dollars 70,000,000 in onetime cost should come down significantly just given that there's a bunch of costs sitting in there related to the restructuring program and the cost out program at this point. The other is we'll continue to see more efficiency coming through working capital. So that should be an additional tailwind for us on getting to the 4% free cash flow.

Okay. Thank you. And then the second question is on the outlook into next year. And I recognize the end markets are going to move around, but one of the things we've obviously been hearing from the OEMs is with EV and emission standards easing considerably, there is an opportunity for them to have much richer mix. In fact, Ford was talking about this on their earnings call.

Is this the type of thing that is sort of not currently considered in in the schedules and and the outlook, but once we we see the standards easing and mix starts to enrich that that is something that could help you. There are certain variants of board trucks that that could be richer mix for you. So just how much mix could get better using emission standards even outside of just less EVs?

Yes. I mean, obviously, I don't want to get into get ahead of our customers as to what their build mix might be. But certainly, anything from a market perspective that drives higher heavy truck and pickup purchases is good for data. I mean, just think about the main programs, Super Duty, Ranger, Bronco, and and Wrangler. Right?

Those are four, you know, obviously, very popular brands of vehicle. And if if the customer builds more of them that's instead of building an EV or a passenger car or a crossover that's better for Dana clearly.

As our lower gas prices in those vehicles, right? So yeah. And and, you know, in in our accretive new business line, we we do have volume uplift on Super Duty is is in there. You know, Ford announced that they're gonna start to manufacture additional volume next year in another plant, and that's flowing through in the back half of next year.

Yes. We would consider that to be backlog because that's incremental volume from an added plant. So that would end up in our when you think about Bruce's comments about backlog and the incremental contribution margin that comes from it.

Our next question comes from the line of James Picariello with BNP Paribas. Please go ahead.

Buybacks will account for the full $600,000,000 in this year's targeted shareholder returns. The remaining $400,000,000 commitment, should we consider any special dividend? Or has the company fully committed to share repurchases? And just to clarify, does last week's bridge loan just essentially help the company fund buybacks until the off highway proceeds are received? Thanks.

Yes. So on your second question, yes, I mean obviously we drew down the revolver to make the purchases in the second quarter. We just wanted to put some liquidity back in to bridge us through the cash flow we're going to generate through the end of the year and then the closing of the transaction. So if you look at it, the bridge falls away at the earlier of basically a year or the closing So that's exactly why we put it in, just to make sure that there's sufficient liquidity and we have the flexibility to go ahead and do what we need to do between now and closing. On your first question, I think, look, it remains to be seen.

We will remain flexible in terms of what we do. But at the current level that the stock is trading at, if we don't think that there's a recognition in the market for the value, the intrinsic value within the stock then our choices made easier for us. And we're trading sub-sixteen. I do believe that the company is undervalued on an intrinsic Yeah.

I I I I'd maybe even stay a bit stronger than that. I mean, I I think that our board, you know, we continue to believe our shares are extremely undervalued right now. If you you know, our confidence level in the margins that we're talking about here for next year is extremely high, higher than, I I guess, you could say consensus is. And therefore, if you do the math using our margins for next year and you look at the, share count that we expect to have at the end of the year and the debt level, we see it being significantly undervalued, and we will be looking to, as we generate more cash flow, buy back more faster.

Got it. That's helpful. And my follow-up, are the $60,000,000 in stranded costs mainly reflected in the higher corporate expense now? And the $310,000,000 in cost savings through next year include the recovery of stranded costs. Is that correct?

So on your first question, we are showing the stranded costs just separated into corporate. We typically have very less than $10,000,000 in corporate costs, you'll see those be significantly higher. That's where those are being sort of parked in terms of the walks when you think through it. In terms of your $310,000,000 the $3.10 is without the recovery. We assume we'll the $40,000,000 would come off of that.

But to our point, we believe we'll be able to get at least half, if not more of that $40,000,000 out of the business next year. And then when we go into 2027, we'll have largely mitigated the entire stranded cost item. So because our our the view on stranded cost for us is it's 40. The accounting rules have have us at 60 only because, if if a if a cost that's allocated is not actually going with the business, even if it's going to go away, you you can't put it in in discontinued ops. It has to go back and be shown in continuing ops.

So that's the the disconnect in terms of the accounting versus the the reality of what it's gonna look like when we get to new Dana for 2026.

Dana (DAN) Q2 2025 Earnings Call Transcript

Company Participants