8-K: Dana Inc. Achieves Record Sales and Profit Growth in 2023, Increases New Business Backlog

Dana Incorporated reported record sales of $10.6 billion and a 21 percent profit growth for 2023, along with a significant increase in their new business sales backlog.

Summary

• Dana Incorporated announced its financial results for the fourth quarter and full year of 2023, achieving record sales of $10.6 billion for the year.
• The company's net income for 2023 was $38 million, a significant improvement from a net loss of $242 million in 2022.
• Adjusted EBITDA for the year reached $845 million, a $145 million increase compared to the previous year, with an adjusted EBITDA margin of 8 percent, a 110-basis-point improvement.
• Dana's new business sales backlog hit a record $950 million, marking the seventh consecutive year of growth in this area.
• For the fourth quarter of 2023, sales were $2.5 billion, down from $2.6 billion in the same period of 2022, primarily due to the UAW strike.
• The company reported a net loss of $39 million for the fourth quarter, compared to a net loss of $179 million in the same period of 2022.
• Operating cash flow for the full year was $476 million, while free cash flow was a use of $25 million, impacted by increased working capital requirements and higher capital spending.
• Dana anticipates a 3 percent increase in sales and a 10 percent increase in adjusted EBITDA for 2024, along with a $75 million increase in free cash flow.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to record sales, improved profitability, and a strong outlook for 2024. While there are some challenges, the overall tone is optimistic and forward-looking.

Positives

• Dana experienced a significant turnaround in profitability, moving from a net loss to a net income.
• The company achieved record sales and a substantial increase in adjusted EBITDA.
• Dana's new business backlog continues to grow, indicating strong future revenue potential.
• The company is successfully launching new programs and expanding its market presence.
• Dana is projecting further growth in sales, profit margins, and free cash flow for 2024.
• The company is seeing improved efficiency and cost savings.

Negatives

• Fourth-quarter sales were lower compared to the same period in 2022 due to the UAW strike.
• The company reported a net loss for the fourth quarter of 2023.
• Free cash flow was negative for the full year 2023, driven by increased working capital needs and capital spending.
• The UAW strike had a negative impact on sales and profitability in the fourth quarter.
• The company experienced a decrease in operating cash flow in the fourth quarter of 2023 compared to 2022.

Risks

• The UAW strike negatively impacted sales and profitability in the fourth quarter of 2023.
• Increased working capital requirements and higher capital spending led to negative free cash flow for the full year 2023.
• The company faces potential headwinds from foreign currency fluctuations.
• There is a risk of commodity cost true-ups with customers impacting profit as input costs decline.
• Labor costs are increasing which may impact profitability.
• The company is monitoring ocean freight costs which may impact profitability.

Future Outlook

Dana anticipates a 3 percent increase in sales and a 10 percent increase in adjusted EBITDA for 2024, along with a $75 million increase in free cash flow. They also expect to further expand sales and profit margin into 2024.

Management Comments

• The Dana team successfully launched a company-record number of programs across all markets we serve, while delivering substantial profit conversion on our growth, said James Kamsickas, chairman and chief executive officer.
• We are building on this strong momentum, as we expect to further expand sales and profit margin into 2024, said James Kamsickas, chairman and chief executive officer.
• Finishing 2023 with strong results has set the stage for continued profitable growth, said Timothy Kraus, Dana senior vice president and chief financial officer.
• In 2024, we expect another record sales year, further improved margins, and higher free cash flow as we leverage the improved cross-company efficiencies and begin to benefit from the record number of new and refreshed vehicle programs, said Timothy Kraus, Dana senior vice president and chief financial officer.

Industry Context

Dana's results reflect the ongoing trends in the automotive industry, including the shift towards electric vehicles and the challenges of supply chain disruptions and labor issues. The company's focus on both conventional and clean-energy solutions positions it to capitalize on the evolving market.

Comparison to Industry Standards

• Dana's 2023 sales growth of 4% is comparable to other Tier 1 automotive suppliers, but the 21% profit growth is significantly higher than many peers.
• The 110 basis point improvement in adjusted EBITDA margin is a strong performance compared to industry averages.
• The record $950 million new business backlog indicates a strong competitive position and future revenue pipeline, which is a key metric for automotive suppliers.
• Companies like BorgWarner and Magna International, which also operate in the automotive supply space, have seen similar challenges with supply chain and labor costs, but Dana's ability to improve profitability is a positive differentiator.
• Dana's focus on both ICE and EV technologies is a strategy also employed by other major suppliers, but the company's record program launches and backlog growth suggest a successful execution of this strategy.

Stakeholder Impact

• Shareholders will likely react positively to the improved financial results and future outlook.
• Employees may benefit from the company's growth and success.
• Customers will benefit from the company's continued investment in new technologies and programs.
• Suppliers may see increased business opportunities due to the company's growth.
• Creditors may view the company as a lower risk due to improved financial performance.

Next Steps

• Dana will host a conference call on February 20th to discuss the results.
• The company will focus on leveraging improved efficiencies and new programs to drive growth in 2024.
• Dana will continue to invest in both ICE and EV technologies.

Key Dates

Keywords

automotive, driveline, electric vehicles, EBITDA, sales, profit, cash flow, manufacturing, supply chain, UAW strike