Phinia Inc. · NYSE:PHIN
Phinia — Investor Day (June 2023)
70 slides from Phinia's investor day presentation, Jun 6, 2023
Slide 1: PHINIA Investor Day
PHINI A INVESTOR DAY June 6th, 2023 1 1
Slide 2: Agenda
AGENDA Introductions Mike Heifler Overview of P H I N I A Brady Ericson Products & Technology Todd Anderson Aftermarket Neil Fryer Financials Chris Gropp Q&A 2
Slide 3: Today's Presenters
Today’s Presenters OVERVIEW PRODUCTS & AFTERMARKET FINANCIALS OF P H I N I A TECHNOLOGY Brady D. Ericson Todd Anderson Neil Fryer Chris Gropp Chief Executive Officer Chief Technology Officer Vice President and General Chief Financial Officer Manager, Aftermarket 3 3 3
Slide 4: Forward-Looking Statements
Forward-Looking Statements This presentation may contain forward-looking statements that are based on management’s current outlook, expectations, estimates and projections. Words such as “anticipates,” “believes,” “continues,” “could,” “designed,” “effect,” “estimates,” “evaluates,” “expects,” “fore
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Slide 6: Overview of PHINIA
OVERVIEW OF PH I N I A Brady Ericson Chief Executive Officer 6 6
Slide 7: Empowering the Transition to Carbon Neutrality
Empowering the Transition to Carbon Neutrality Market-leading systems and components that drive efficiency today, while powering towards a carbon-free tomorrow Product Stable Growth Financially Total Shareholder Leadership Strategy Disciplined Returns 7
Slide 8: Our Values Define Our Business
Our Values Define Our Business Product Leadership - Innovation that brings value to our customers Humility - Seeking out diverse perspectives and working collaboratively Inclusivity - Recognizing our differences make us stronger; we are bold and intentional Our values support our Net-Zero - Committe
Slide 9: PHINIA's Diverse Markets and Customer Base
PHINIA’s Diverse Markets and Customer Base… Diverse, Resilient End Markets Exposure – Embedded Relationship Globally Diverse Footprint Majority CV & OES / IAM* with Global OEMs (2) (2) PACCAR HYUNDAI VOLVO TRUCKS 20% 24% APAC CV & Other OE CATERPILLAR VOLKSWAGEN 41% 44% Americas LV OE DAIMLER TRUCKS
Slide 10: Expected Strong Financials for 2025 and Beyond
…Expected Strong Financials for 2025 and Beyond Appropriate Strong Margins Leverage (1) $3.7bn 14-15% >90% ~1x Revenue Adj. EBITDA Margin(2) Cash Flow Net Leverage Conversion(3) Global Scale Highly Cash with Growth Generative (1) (Does not include $95-100mm of Contract Manufacturing Revenue to BorgW
Slide 11: Answers to Sectors' Most Pressing Needs
Answers to Sectors’ Most Pressing Needs Reliable Supplier Partner Solutions that Drive Efficiency Pathway to Carbon Neutrality Global reach with scale – Innovative technology that Leading alternative engineering and manufacturing drives value for end customers fuel technologies Full system integrati
Slide 12: Large, Clearly Defined Addressable Market
Large, Clearly Defined Addressable Market Total Addressable Market ($bn) PHINIA’s Markets are expected to grow at ~2% CAGR from 2022 to 2030 97.2 91.9 7.5 New End Markets 88.5 6.4 5.4 ECU / PDCU(1) 58.6 50.9 62.3 Aftermarket 9.2 1.0 9.7 1.1 8.9 CV(2) 1.3 Hydrogen & Alternative Fuels 20.6 16.2 11.9 L
Slide 13: CV Market is Core to PHINIA
CV Market is Core to PHINIA Resilient CV Market ICE to Remain Dominant Technology Quick recovery during the Post-COVID resiliency Global Financial Crisis 98% 92% 83% 24.6% 7.0% CAGR (’09-11) CAGR (22-25) 3.9 4.0 2.9 0.3 0.7 BEV 0.1 2.8 3.5 3.3 ICE and Hybrid 2022 2026E 2030E 2008 2009 2010 2011 2020
Slide 14: LV Provides Growth Opportunity Mid-Term
LV Provides Growth Opportunity Mid-Term Core LV Technology Remains Mid-Term Tailwind… …with Opportunity to Increase Share Global LV Production (mm) 92.1 Gasoline Direct Injection Canister 82.3 Fuel Delivery Modules 1.7% CAGR 37.4 40.0 2022A 2026E GDi (ICE + Hybrid) Non-GDi (ICE + Hybrid) Electric GD
Slide 15: Flexibility to Redeploy LV Capacity to Growth Areas
Flexibility to Redeploy LV Capacity to Growth Areas Longer-Term Decline in LV ICE Mitigated by… Continued LV Share Gains to Retain Overall Volumes Longer Global LV Production (mm) Plan Plan to to gain gain G/GDi / LV market LV market shareshare as sector as sector resources resources are increasingl
Slide 16: Aftermarket Business Provides Stability
Aftermarket Business Provides Stability… 07 - ’09 Global Financial Crisis: Significant Outperformance Indexed to 2005 ’07 – ’09 ∆% Exceptionally resilient through past Aftermarket Industry Sales macroeconomic cycles 1 0 (1%) 1 0 100 (2%) GDP 0 Long track record of 0 (35%) New Car Sales consistent, s
Slide 17: As Well As Longevity and Growth
…As Well As Longevity and Growth Long Life Cycle Globally Rising Vehicle Age and Vehicle Parc(1) Average vehicle age (years) OE Production Vehicles in operation (bn) 0-6 years 12.0 10.8 11.0 10.4 10.6 10.2 OES Part Sales 1.72 1.49 1.53 1.56 0-15 years 1.43 1.46 AFM Sweet Spot Part Sales | | | | | |
Slide 18: Strategic Focus on Growing CV & OES / IAM
Strategic Focus on Growing CV & OES / IAM 2022 2030 Target 24% CV and Other >35% <30% OE LV 44% CV and Other LV OE 32% >35% OES / IAM OES / IAM 56% CV & OES / IAM >70% CV & OES / IAM These figures exclude contract manufacturing revenue OES – Original equipment suppliers 18 IAM – Independent Aftermar
Slide 19: Financially Disciplined
Financially Disciplined Prudent Capital Spending Efficient Operations Leveraging existing assets with Benefiting from previous only modest capex required to rationalization and ongoing serve customers’ needs efficiency initiatives & & Allocating capital to right-to-win Continuous drive to optimize t
Slide 20: Delivered Successful Transformation
Delivered Successful Transformation Operational Transformation Americas Europe APAC Troy, Michigan Broad-based objectives Yantai, China accomplished: Juarez, Mexico Chihuahua, Mexico Saltillo, Mexico • 5 manufacturing sites and San Luis Potosi, Mexico Buckingham, UK Sudbury, UK Blonie, Poland Shangh
Slide 21: Most Manufacturing in Best-Cost Countries
Most Manufacturing in Best-Cost Countries Americas Europe APAC 6 8 3 Manufacturing Sites Manufacturing Sites Manufacturing Sites (1) 1 3 3 Technical Center Technical Centers Technical Centers 90% from 52% from 100% from Revenue $1.3bn Best-Cost $1.3bn Best-Cost $0.7bn Best-Cost Countries Countries C
Slide 22: Clear, Viable Path to Deliver Consistent Growth
Clear, Viable Path to Deliver Consistent Growth Fuel Systems Aftermarket 1 Growth in CV 1 Increase market and wallet share 2 Market share gain 2 Growing and aging vehicle parc 3 Leadership in alternative fuels 3 Launch new value-added products 4 Expand into new end markets and ECUs / PDCU 4 All prod
Slide 23: Vision for Long-Term Value Creation
Vision for Long-Term Value Creation Product Stable Growth Financially Total Shareholder Leadership Strategy Disciplined Returns Investment Competitive (1) Value-based innovation Attractive, resilient end market Strong, high-quality margins For Growth Capital Return and product expansion and cash flo
Slide 24: Products & Technology
PRODUCTS & TECHNOLOGY Todd Anderson Chief Technology Officer 24 24
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Slide 26: Innovative Systems at Forefront of Fuel Efficiency
Innovative Systems at Forefront of Fuel Efficiency 1 Market-leading integrated fuel systems featuring value-added software and calibration 2 Customer partnership approach for comprehensive and customized solutions 3 Delivering innovative solutions to meet increasing customer and industry demands 4 A
Slide 27: Leading, Integrated Fuel Systems and Components
Leading, Integrated Fuel Systems and Components… Gasoline / Hydrogen Diesel Injection System Fuel Delivery Module Canister Injection System Global Capability Description High-efficiency pump system Recirculates fuel vapors and Inject fuel at precise intervals for optimal efficiency delivers fuel to
Slide 28: And Starters & Alternators Focused on CV
…and Starters & Alternators Focused on CV Starters Alternators Description Conventional and Long-Life Conventional and High-Efficiency Brushless Output 3.3 KW – 10 KW Output 50A – 430A Highlights 12V and 24V 12V & 24V New and remanufactured New and remanufactured Bringing Customer Value via Tailored
Slide 29: Engineering Support Close to Customer
Engineering Support Close to Customer Americas Europe APAC Embedded with Customers Local team close to the Yantai, China customer for tight collaboration Juarez, Mexico and bespoke solutions Yong-in, Korea ~1,500-person science & Gillingham, UK Shanghai, China engineering team Krakow, Poland San Lui
Slide 30: Delivering Integrated, Turnkey Solutions
Delivering Integrated, Turnkey Solutions From Component… …to System Supply Trend Towards More Integrated, Turnkey Solutions Optimal Solution Calibration / Services Software Software (for add'l features) (for add'l features) PHINIA No longer a main ECU + basic ECU + basic ECU + basic focused on sourc
Slide 31: Case Study in Trusted Partnership
Case Study in Trusted Partnership Partnership Initial Interaction Platform Development Full System Stage Project Relationship Established Strengthened Partnership Partnering with Future Engine 2000 – 2009 2010 – 2022 from 2023 and beyond Core Technology Supplied / Electronic control fuel system to m
Slide 32: Hydrogen Demonstration Vehicle
Hydrogen Demonstration Vehicle 32
Slide 33: Delivering Innovation to Address OEMs' Needs
Delivering Innovation to Address OEMs’ Needs Current Systems Future Systems Alternative Fuels CV Current technology meeting the world’s most Next-gen technology enhances fuel efficiency, reduces stringent emission standards particulates to meet stringent Euro 7 emission standards 350 bar Direct Inje
Slide 34: Hydrogen Injection Leverages GDi Technology
Hydrogen Injection Leverages GDi Technology… Injector Injector Shared core capabilities • Hydrogen Injector based on GDi injector construct Hydrogen • Leverages design expertise, process GDi knowledge and equipment assets • Leverages ECU and software knowledge ECU / ECU base PDCU • Benefits design p
Slide 35: And is Right-to-Win Growth Category for PHINIA
Initiations …And is Right-to-Win Growth Category for PHINIA Hydrogen Tailwinds Boost Appeal as BEV Alternative 50 Partners / Projects Engaged Last Year “Premiere: Volvo Trucks tests hydrogen-powered Since 2021 electric trucks on public roads” - May 8, 2023 50 Opportunities “Honda teaming up with GM
Slide 36: Growth Opportunity from End Market Expansion
Growth Opportunity from End Market Expansion Existing Applications Existing Areas Industrial Applications Opportunity unaffected by BEV transition Linear Power Generation Leverages core capabilities and skills Benefit from strong demand for fuel system performance Heavy-Duty Stationary Power Aerospa
Slide 37: Aftermarket
AFTERMARKET Neil Fryer Vice President & General Manager, Aftermarket 37 37
Slide 38: Aftermarket Segment is a Platform for Growth
Aftermarket Segment is a Platform for Growth 1 Our approach combines OE credibility & synergies with aftermarket specialist agility 2 Serves global market with broad product portfolio leveraging powerful brands 3 Significant growth opportunities with strong margins and cash flow 38
Slide 39: Holistic Approach to Winning in the Aftermarket
Holistic Approach to Winning in the Aftermarket Gasoline Fuel Chassis & Maintenance Systems Dedicated Solutions Fuel delivery modules Services & Braking | Steering & Suspension Fuel pumps | GDI injection Systems Workshop Solutions CV Starters & Alternators PFI Injections Diagnostics Test equipment T
Slide 40: Synergistic Sourcing Model Leverages OE Products
Synergistic Sourcing Model Leverages OE products Aftermarket Manufacturing(1) Fuel Systems Third Party Manufacturing Suppliers OE Manufacturer Channel Independent Aftermarket Channel OEM Dealers | OEM Workshop Chains Wholesale | Retail | Online (1) AFM produces Starters & Alternators, O2 Sensors, Re
Slide 41: Cleaner. Better. Further.
Strong Aftermarket Positioning and Powerful Brands Cleaner. Better. Further. 41
Slide 42: Global Reach with Recurring and Stable Revenue
Global Reach with Recurring and Stable Revenue Strong in Americas with Opportunity Recurring and Stable Revenue Base Given Non-Discretionary Nature of Replacement Products to Expand in Europe and Asia Diagnostics Asia Engine & Testing mgmt. 5% 2% Europe 10% Diverse Customer Base 31% Gas fuel 35% CV
Slide 43: Large Market Opportunity with Sustained Tailwinds
Large Market Opportunity with Sustained Tailwinds $36bn Core Offered Market Market Drivers Existing core products in existing geographies Growing number of vehicles in operation $51bn Increasing vehicle age and miles travelled Saleable Market (SAM) Existing products in all geographies Saleable marke
Slide 44: Well-Defined Growth Opportunities
Well-Defined Growth Opportunities Market Expansion Extend Product Offer Acquisitions Sell existing programs in new Remanufacture competitor Bolt-on acquisitions as market geographies products consolidates Grow market share by Leverage global sourcing Vertical integration expanding coverage to >95% c
Slide 45: Proven Strategy Execution Capability
Proven Strategy Execution Capability Category Sales Growth Since Launch Steering and Suspension Launch in North America 66% CAGR European program extended to North America, leveraging existing supply base and Delphi brand Launched 8,000 SKU’s in 24 months to build program 2019 2020 2021 2022 45
Slide 46: Remanufacturing: Sustainability in our DNA
Remanufacturing: Sustainability in our DNA Sustainability Global Capability Growth Opportunity ~900 remanufactured SKUs 5 Remanufacturing locations ~ 10% of Aftermarket revenue in offer from remanufactured products Remanufactured ~10,000 mt Invested in Capacity to Diesel Fuel Injection of material s
Slide 47: Technician-Driven Digital Marketing Driving Demand
Technician-Driven Digital Marketing Driving Demand “Masters of Motion” now live with global expansion planned Expert-led content across ‘How To’ videos and handy infographics, multiple channels need-to-know information, tips and advice 47
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Slide 49: PHINIA
—PHINIA
Slide 50: Financials
FINANCIALS Chris Gropp Chief Financial Officer 50 50
Slide 51: Summary of Financial Highlights
Summary of Financial Highlights 1 Consistent revenue growth 2 Best-in-class margin profile reflective of high-quality business 3 Strong Free Cash Flow generation & conversion 4 Disciplined capital allocation while maintaining strong balance sheet 51
Slide 52: Historical Financial Performance
Historical Financial Performance Revenue ($mm) Commentary $3,227 $3,348 $3,445 $97 $1,218 $1,284 $1,284 YoY Revenue Growth $2,233 $2,293 $2,293 Fuel Systems growth driven by higher production and customer pricing ($224) ($229) ($229) 2021 2022 PF 2022 Aftermarket growth driven by higher demand and i
Slide 53: High-Return Story with Modest Spend Intensity
High-Return Story with Modest Spend Intensity Historically Low Capex Intensity… …Combined with Incremental R&D Leverage Capex as % of Revenue R&D as % of Revenue ~4.0% 3.9% 3.0% ~3.0% Average (‘21-22) Normalized Average (‘21-22) Normalized Leveraging Financial Capacity and Technological Expertise fo
Slide 54: 2023 Full Year Outlook
2023 Full Year Outlook Metric FY23 Guidance YoY revenue increase of ~2%, in addition to ~2.4% of Revenue $3,550 - $3,650mm inflationary adjustments Volume increases related to CV & Aftermarket in Adj. EBITDA(1)(2) $485 - $505mm Europe and GDi in the Americas, offset by CV softness in China Adj. EBIT
Slide 55: 2023E Revenue Reconciliation
2023E Revenue Reconciliation $mm ~70% customer recovery $70 - $90 $3,550 - $3,650 $35 - $115 ~$100 $3,445 $97 $3,450 - $3,550 $3,348 2022A Pro Forma Revenue Volume / Mix Inflation Pass-Through 2023E Revenue Third-Party Revenue Contract Mfg. to BorgWarner 55
Slide 56: 2023E Adj. EBITDA Reconciliation
2023E Adj. EBITDA Reconciliation CMA provides $110mm of Lower inflationary costs, Benefit from negligible partially offset by incremental supplier EBITDA $80mm of additional margin due to cost recovery re-alignment contribution of mix and China (~70% recovery on and $1- $3mm per CV softness non-cont
Slide 57: Sustainable Growth and Margin Profile
Sustainable Growth and Margin Profile Revenue Outlook Adj. EBITDA Margin(1) Outlook ~$3.7bn 14 - 15% ~13.8% ~$3.6bn ~$3.5bn 2023E Market Market Share New Markets/ 2025E 2023E Market Market Share New Markets/ 2025E Regions Regions Third Party Revenue Contract Mfg. to BorgWarner Growth Decline Growth
Slide 58: High Quality Industrial Financial Profile
High Quality Industrial Financial Profile Outstanding Margin and Cash Flow Conversion Financial Framework for 2025 Other Peers(1) Expected FCF Conversion(5) >90% 78% 73% 65% 14-15% 15.2% Adj. EBITDA Margin (6) 11.6% 10.8% Core Peers(1)(2) LV Powertrain / Driveline(3) Other Tier 1 (4) (1) Reflects pe
Slide 59: Strong Balance Sheet and Liquidity
Strong Balance Sheet and Liquidity $mm Term Loan A (5Y) 300 Long maturity Strong liquidity runway Term Loan B (7Y) 500 and prudent Secured Debt 800 leverage supports Other Debt 24 business stability Total Debt 824 and optionality Cash (300)) Net Debt 524 Total Debt / Adj. EBITDA(1) (LTM) 1.5x) Conse
Slide 60: Disciplined Capital Allocation
Disciplined Capital Allocation >$200mm Free Cash Flow (1) per Year Investment for Growth Competitive Capital Return(2) Disciplined, ROIC-focused reinvestment: achieve Expect competitive dividend with initial target of >15% ROI ~$50mm per year, translating to 20-25% of FCF(1) Expand alternative fuel
Slide 61: Empowering the Transition to Carbon Neutrality
Empowering the Transition to Carbon Neutrality Market-leading systems and components that drive efficiency today, while powering towards a carbon-free tomorrow Product Stable Growth Financially Total Shareholder Leadership Strategy Disciplined Returns Technology expert and partner Pursue attractive
Slide 62: Appendix
62 —>PHINIA APPENDIX
Slide 63: Fuel Systems' Core Leading Market Position
Fuel Systems’ Core Leading Market Position Leading provider of comprehensive and integrated (3) fuel system solutions Fuel Injection Fuel Delivery Canister ECU / PDCU System Modules Focused on segments where we have product leadership and natural right-to-win Significant opportunity to win share ove
Slide 64: Aftermarket Operational Profile
Aftermarket Operational Profile Broad product coverage Starters & Test & Fuel Maintenance Engine Alternators Diagnostic Systems Solutions Mgmt. Committed to keeping vehicles and industrial Electronics applications running efficiently over their lifetime Meaningful revenue from sustainable remanufact
Slide 65: Aftermarket Structure Serving ~4,500 Customers
Aftermarket Structure Serving ~4,500 Customers 56% of Revenue 3 Sales Locations 2 Distribution Centers 5% of Revenue ~1,500 employees 5 Sales Locations 1 Manufacturing Site South EMEA 2 Distribution Centers 1 Reman Location America ~100 Employees 1 Technical Center 1 Reman location 8% of Revenue 31%
Slide 66: Management Team with a Track Record of Success
Management Team with a Track Record of Success Joined BWA in 2000 Joined BWA in 2001 Deep BorgWarner DNA; building a 30+ years of experience 30+ years of experience culture of excellence Previously President & Previously VP, Finance of GM of Morse Systems and Transmission Systems and Highly skilled
Slide 67: Strong Board to Drive Shareholder Value
Strong Board to Drive Shareholder Value Previously served as Previously served as President Director at CIRCOR, Corporate Secretary & and General Manager of PerkinElmer and O-I Glass General Counsel of BorgWarner’s Fuel Systems and Citigroup, Inc. Aftermarket Business (now Formerly Executive Vice PH
Slide 68: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation ($mm) 2021 2022 PF 2022 Key Adjustments Operating Income $174 $318 $285 Operating Margin% 5.4% 9.5% 8.3% 1 (+) Merger, Acquisition and Divestiture Expense 7 31 31 1 Add-back of non-recurring M&A expenses primarily related to professional fees associated 2 (+) Restructu
Slide 69: Adjusted Net Earnings Reconciliation
Adjusted Net Earnings Reconciliation ($mm) 2021 2022 PF 2022 Key Adjustments Net Earnings (Loss) Attributable $152 $262 $186 to PHINIA (Per Form 10) Add-back of non-recurring M&A expenses 1 primarily related to professional fees associated with the Spin-Off and the Delphi acquisition 1 (+) Merger, A
Slide 70: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation ($mm) 2021 2022 Net Cash (Used In) Provided By Operating Activities $147 $303 (-) Capital Expenditures, Including Tooling Outlays 146 107 Free Cash Flow $1 $196 70