American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) Q4 2022 Earnings Call Transcript

Ryan Brinkman: Good morning. How should we think about R&D and CapEx trending as a percentage of sales beyond 2023? And as we drill down to the impact on like EBITDA or FCF over a multi-year period, do you expect that the earnings and cash flow headwind from higher electrification spending is more of a like multi-year timing issue given that spending is taking place in advance of product launches and that the contribution margin when these products do launch will offset the higher cost over time? Or I guess said differently, like while dilutive initially is the pivot toward electrification accretive, dilutive or neutral to EBITDA margin and free cash conversion over the medium and long-term?

Christopher May: Yes. From a cycle €“ from a cash perspective, as you point out, and David mentioned in one of the previous questions, our R&D spend would be elevated as we’re building out our product portfolio. That would then decline and then you have some potential program specific R&D as you step into launches. But we would see some opportunity over an extended period of time, as you mentioned, in the future, we would expect this then to at some point pivot and decline down. From a CapEx perspective, we’re coming off of 2022, which was, I think, the lowest percent of sales for CapEx in the company’s history. Our guide here this year, which continues to have program launches, also electrification element of it, still quite low by our historical standards to 3.5% to 4%.

But our commentary around this has been to try to maintain our CapEx on the near and mid-term at less than 5% of sales. We have been very focused on capital efficiency and effectiveness. And even as we’re pivoting into electrification, continuing to maintain a good, healthy control and balance over our CapEx spend is a top priority for the company. Now where could you see a different solution is when you win a significant amount of new and incremental business inside of the company where you would have to spend some extra dollars, we think that would be a great investment to make.

Ryan Brinkman: Okay. Thank you very much.

Christopher May: Yep.

David Dauch: Great. Thank you, Ryan. And we want to thank all of you who have participated on this call and appreciate your interest in AAM. We certainly look forward to talking with you in the future.

Operator: Ladies and gentlemen, with that, we’ll conclude today’s conference call and presentation. We do thank you for joining. You may now disconnect your lines.