Slide 1: Fourth Quarter and Fiscal Year 2020 Earnings Presentation
FOURTH QUARTER AND FISCAL YEAR 2020 EARNINGS PRESENTATION Jay Craig – CEO & President Carl Anderson – Senior Vice President & CFO Chris Villavarayan – Executive Vice President & COO November 12, 2020
Slide 2: Forward-Looking Statements
FORWARD-LOOKING Statements This presentation contains statements relating to future results of the company (including certain outlooks, projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statement
Slide 3: Fiscal Year 2020 Financial Highlights
FISCAL YEAR 2020 Financial Highlights Revenue ($M) 47% $758 $514 Q3 FY20 Q4 FY20 Adj. EBITDA ($M) Conversion $60 22%2 $7 Q3 FY20 Q4 FY20 1. US GAAP net income attributable to Meritor, Inc. was $1M for Q4 FY20 and $245M for FY20. US GAAP income (loss) from continuing operations attributable to Merito
Slide 4: Fiscal Year 2020 Business Highlights Path to M2022
FISCAL YEAR 2020 BUSINESS HIGHLIGHTS Path to M2022 4
Slide 5: Daimler Contract Extension and Standard ADB Award
DAIMLER Contract Extension and Standard ADB Award ▪ DTNA contract for axles and drivelines extended through 2027 ▪ Includes supply contract for air disc brakes through 2025 ▪ Meritor EX+™ LS will be standard brake offering for Freightliner Cascadia trucks effective 2021 ▪ Other Freightliner and West
Slide 6: Electric Powertrain Production to Begin in 2021
ELECTRIC POWERTRAIN PRODUCTION to Begin in 2021 ▪ Only Class 8 commercial vehicle electric powertrain ready for production ▪ First Class 8 production contract for commercial duty electric powertrain in industry ▪ Meritor’s ePowertrain recognized with the Diesel Progress 2020 Achievement of the Year
Slide 7: Advantages of Electric Powertrain
ADVANTAGES of Electric Powertrain REMOTE MOUNT 14Xe™ ePOWERTRAIN ▪ Numerous electric drivetrain solutions to consider ▪ Meritor’s solution maximizes efficiency, performance, weight savings and space optimization ▪ Unique architecture packages electric motor and transmission inside axle ▪ Batteries i
Slide 8: Fiscal Year 2020 and Fourth Quarter Financial Results
FISCAL YEAR 2020 AND FOURTH QUARTER Financial Results Full Year FY2020 Company Results Fourth Quarter Segment Results (in millions, except per share amounts) Twelve Months Ended September 30, Commercial Truck Aftermarket and Industrial GAAP MEASURES FY20 Q4 vs. FY19 Q4 2020 2019 3 Months Ended Sept.
Slide 9: Balance Sheet Resiliency
BALANCE SHEET Resiliency Liquidity ($ millions) As of 09/30/2020 Funded Debt Maturity Profile1 ($ millions) As of 09/30/2020 $1,020 Revolver and U.S. Securitization $834 Cash Term Loan $705 Convertible Bonds $123 $726 High Yield Bonds $315 $108 FY19 FY20 As of 09/30/2020 Global Pension $450 Funded S
Slide 10: Fiscal Year 2021 Global Market Outlook
FISCAL YEAR 2021 Global Market Outlook1 (units in 000s) FY20 FY21 Production Actual Outlook Medium and 345 300 - 350 Heavy Duty FY20 FY21 FY20 FY21 Production Production Actual Outlook Actual Outlook Heavy Duty EUROPE 218 215 - 255 Medium and 99 90 - 100 NORTH Heavy Duty AMERICA SOUTH (CL8) AMERICA
Slide 11: Fiscal Year 2021 Financial Outlook
FISCAL YEAR 2021 Financial Outlook FY21 FY20 Outlook2,3 Actual Sales $3,100 - $3,350 $3,044 (in millions) Adjusted EBITDA Margin 9.2% - 10.2% 8.9% Adjusted Diluted EPS $1.10 - $1.75 $1.12 from Continuing Operations Free Cash Flow1 $60 - $100 $180 (in millions) 1. FY20 includes $265M from the termina
Slide 12: Expect to Exceed M2022 New Business Target
EXPECT TO EXCEED M2022 New Business Target 1 Significant Outperformance ▪ Expect to exceed new business target by >$150M ▪ Expansion in key off-highway and defense markets through recent acquisitions >$450M ▪ Additional business wins in air disc brakes, $300M drivelines and axles ▪ Electrification r
Slide 13: Path to M2022 Margin, EPS and FCF Conversion
1 PATH TO M2022 Margin, EPS and FCF Conversion $3.40- Adj. EPS and Adj. EBITDA Margin $3.60 Free Cash Flow Conversion3 $1.10- $1.75 12.5% Normalized Global Markets Operational Performance M2022 9.2% - Business Wins 10.2% 212% >20% conversion2 75% 75% 46% FY21 Guidance FY22 FY19 FY20 4 FY21 FY22 1. C
Slide 14: Focused on Achieving M2022
FOCUSED ON ACHIEVING M2022 ▪ Generating significant new business wins ▪ Structural cost reduction programs in process with significant savings in M2022 cycle ▪ Anticipate conversion above 20 percent on higher market volumes ▪ Balance sheet remains strong ▪ Production of electric powertrains to begin
Slide 15: Appendix
MERITOR RUN WITH THE BULL APPENDIX
Slide 16: Non-GAAP Financial Information
NON-GAAP Financial Information In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information regarding non-GAAP financial measures. These non-GAAP financial measures include adjusted income (loss) from cont
Slide 17: Fiscal Year 2021 Planning Assumptions
FISCAL YEAR 2021 Planning Assumptions Continuing Operations (in millions) FY21 Estimate Capital Expenditures ~$85 Interest Expense ~$80 Cash Interest ~$70 Cash Taxes ~$25 17
Slide 18: Non-GAAP Financial Information
NON-GAAP Financial Information Adjusted Income from Continuing Operations Reconciliation (in millions, except per share amounts) Three Months Twelve Months Ended Ended September 30, September 30, 2020 2019 2020 2019 Income from Continuing Operations Attributable to the Company $ 1 $ 42 $ 244 $ 290 A
Slide 19: Non-GAAP Financial Information
NON-GAAP Financial Information Adjusted EBITDA and Segment Adjusted EBITDA Reconciliations (in millions) Three Months Ended Twelve Months Ended September 30, September 30, 2020 2019 2020 2019 Net Income Attributable to Meritor, Inc. $1 $43 $245 $291 Income from Discontinued Operations, net of tax, a
Slide 20: Non-GAAP Financial Information
NON-GAAP Financial Information Adjusted EBITDA Reconciliation (in millions) Three Months Ended June 30, 2020 Loss Attributable to Meritor, Inc. ($36) Income from Discontinued Operations, net of tax, attributable to Meritor, Inc. - Loss From Continuing Operations Attributable to Meritor, Inc. ($36) I
Slide 21: Non-GAAP Financial Information
NON-GAAP Financial Information Free Cash Flow Reconciliation (in millions) Three Months Ended Twelve Months Ended September 30, September 30, 2020 2019 2020 2019 Cash Provided by Operating Activities $ 77 $ 62 $ 265 $ 256 Capital Expenditures (40) (40) (85) (103) Free Cash Flow $ 37 $ 22 $ 180 $ 153
Slide 22: Non-GAAP Financial Information
NON-GAAP Financial Information (In millions, except per share amounts) Fiscal Year (1) 2021 Outlook Net Income Attributable to Meritor, Inc. ~$ 45 - 75 Loss from Discontinued Operations - Income from Continuing Operations Attributable to Meritor, Inc. ~$ 45 - 75 Interest Expense, Net ~80 Provision f
Slide 23: Non-GAAP Financial Information
NON-GAAP Financial Information Free Cash Flow Outlook (In millions) Fiscal Year 2021 Outlook(1) Free Cash Flow: Cash Provided By Operating Activities ~$ 145 - 185 Capital Expenditures ~(85) Free Cash Flow ~$ 60 - 100 Adjusted Income from Continuing Operations Outlook (In millions) Fiscal Year 2021 O
Slide 24: Meritor - Run with the Bull
2} MERITOR RUN WITH THE BULL