BorgWarner Inc. (NYSE:BWA) Q1 2024 Earnings Call Transcript

BorgWarner Inc. (NYSE:BWA) Q1 2024 Earnings Call Transcript May 2, 2024

BorgWarner Inc. beats earnings expectations. Reported EPS is $1.03, expectations were $0.87. BorgWarner Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. My name is Britney, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2024 First Quarter Results Conference Call. [Operator Instructions] I would now like to turn the call over to Patrick Nolan, Vice President of Relations. Mr. Nolan, you may begin your conference.

Patrick Nolan: Thank you, Britney. Good morning, everyone, and thank you for joining us today. We issued our earnings release earlier this morning. It is posted on our website at borgwarner.com, both on our home page and on our Investor Relations home page. With regard to our Investor Relations calendar, we will be attending multiple conferences between now and our next earnings release. Please see the Events section of our Investor Relations home page for a full list. Before we begin, I need to inform you that joining this call, we may make forward-looking statements, which involve risks and uncertainties as detailed in our 10-K. Our actual results may differ significantly from the matters discussed today. During today’s presentation, we will highlight certain non-GAAP measures in order to provide a clearer picture of how the core business performed and for comparison purposes of prior periods.

In the hearsay on a comparable basis, that means excluding the impact of FX, net M&A and other noncomparable items. When you hear us say adjusted, that means excluding the impact of FX and net M&A. We will also refer to our incremental margin performance. Our incremental margin is defined as the organic change in our adjusted operating income divided by the organic change in our sales. Our all incremental includes our planned investment in ER&D, any impact on net inflationary impacts and other cost items. Lastly, we refer to our growth compared to our market. When you hear us say market, that means the change in light and production weighted for our geographic exposure. Please note that we posted today’s earnings call presentation to the IR page of our website.

We encourage you to follow along with these slides during our discussion. With that, I’m happy to turn the call over to Fred.

Frederic Lissalde: Thank you, Pat, and good day, everyone. I’m very pleased to share our results for the first quarter of 2024 and provide an overall company update, starting on Slide 5. With approximately three billion in sales, we delivered close to 7% organic growth in the quarter despite a modest industry decline. We delivered strong incremental performance in the quarter on an all-in basis, which allowed us to achieve a 9.4% margin. This Q1 performance provides a nice start to the year, and we believe it positions us well to deliver on our full-year guidance. Additionally, we continue to take steps in the quarter to create longer value for our shareholders. We secured multiple new eProduct awards. These awards once again demonstrate our focus on taking the leading-edge technology, working closely with our customers to help support them as they transition towards electrification.

And as I will discuss, we continued to expand our product offerings for electrified vehicles. We focused on the efficient deployment of our capital by repurchasing $100 million of stock during the first quarter, as Craig will highlight, we received an increased share repurchase authorization of $500 million from our Board of Directors. Now, let’s look at some new product award on Slide 6. First, BorgWarner secured additional e-motor award with Shell Pang. These awards include BorgWarner’s 800 volts e-motor systems comprised of state and rotor components, which are customers for use on two occurring SUV models. Start of production is planned for 2025. BorgWarner’s 83H220 eMotor offers high to density, enhanced efficiency and superior durability.

We are thrilled to extend our eMotor business with Xpeng and build on our strong partnership with them. Next, I would like to highlight a new product line for electrified vehicles, which is our electric talk vectoring disconnect or EVD. BorgWarner secured new business awards with Polestar and an additional major European OEM; sub ETVD for their battery electric vehicles. ETVD is currently in production for the 4-star 3 SUV and production for the major European OEM is expected to begin later in 2024. The ETVD offers a three-in-one system, replacing the differential and featuring both talk vectoring and an on-demand disconnect functionality for and hybrids. ETVD is part of BorgWarner’s electrical management system portfolio which helps improve electrified vehicles traction and ability.

The added weight in hybrids and battery electric vehicles often results in reduced agility and safety performance. BorgWarner Systems helps overcome this by enabling a lighter feel and increasing traction, which improves safety. The ETVD is a great example of applying our foundational expertise and capabilities to develop an innovative solution to address our customers’ needs as they transition towards application. Now I want to take a few moments to remind you of the strength of our foundational portfolio on Slide 7. First, it is important to highlight BorgWarner’s estimated average content opportunity for combustion vehicle, which is approximately 550 on a global basis. You will note that this content opportunity varies by region. I would point out that our content opportunity in North America is the highest of the 3 major regions we operate in.

So to the extent that combustion vehicles have a longer tail in North America that could provide a positive sales, margin and cash flow tailwind for BorgWarner. We also continue to see potential opportunities for growth across our national portfolio, which add a 2023 revenue of about $12 billion. I would like to list just a few. In Turbo, we continue to see North American opportunities as penetration in the region is about 44% compared to 92% penetration in Europe and 69% penetration in China. If EV growth slows in North America, the remaining combustion vehicles may need to improve efficiency, and Turbo challenging is one of the biggest enablers to make this happen. For our EGR business, we see penetration opportunities on hybrid architectures.

The efficiency benefit of EGR and cooling and hybrid is higher than traditional combustion-only vehicles as the internal combustion engine operates in a steadier state. Our timing system business also sees penetration opportunities in plug-in hybrids and range-extended EVs as engine timing chain is the preferred technology in those hybrids due to its superior durability and strength. And finally, we see our all-wheel drive business benefiting from penetration score on combustion vehicles in Southeast Asia and from a longer tail for North American vehicles. Maximizing the value of our foundational products means capitalizing on these potential growth opportunities, while at the same time, maintaining the strong margin and cash profiles of these businesses.

Now let’s turn to Slide 8 and take a step back. Let’s discuss how we believe our foundational and eProduct portfolios are positioned for growth under various combustion, hybrid or best growth scenarios. Starting with our combustion or foundational portfolio, which are on the top left of the slide, BorgWarner has decades of experience in product leadership in these fields. We have a number one or number two market share for these products and can support our customers around the globe. This is critically important as customers potentially consolidate their supply base and look to industry leaders that have the financial strength and long-term technology leadership to support them. Let’s jump to the right side of this page where you see the breadth of our eProduct portfolio.

This portfolio has grown organically through M&A over the past several years. We have systematically built a technology-focused portfolio that supports our customers’ needs in EVs from grid to wheel. This has allowed us to establish product leadership in multiple areas of our portfolio, including inverters, e-motors, high-voltage cooler meters and we expect that our technological differentiation, scale and share leadership will continue to enable us to secure new business. Quite simply, our foundational and eProduct portfolio support hybrid propulsion since the hybrid vehicle needs both downside combustion engine as well as an electric powertrain. We can utilize the expertise of both our portfolios to support our customers which we are already doing successfully in Europe and in China.

Importantly, when we sell products for hybrid applications, we are able to utilize the same engineering resources, modular design, manufacturing footprint and sometimes even actual product lines that are utilized for beds and combustion vehicles. We believe BorgWarner is well positioned to be successful under various electrification adoption scenarios, including regional specificities. Our product has been purposefully built for this type of an environment, focus on achieving above-market growth regardless of varying levels of electrified propulsion adoption. Our focus is to convert growth into income at the mid-to-high teens level on an all-in basis. To summarize, the takeaways from today are this: BorgWarner’s first quarter results were strong.

Our sales growth once again outperformed the industry and we delivered strong conversion on an all-in basis. We secured multiple new eProduct awards in the quarter, which further demonstrate our product leadership position. We focused on efficient powertrains, and we believe that we have a resilient portfolio of products that allows us to convert mid-to-high teens wherever the incremental revenue comes from. And we continue to our shareholders through our first quarter share repurchases and increased authorization from our Board. As we look forward, we expect to continue to manage our business holistically. We plan to take the necessary steps to manage our costs while continuing to preserve our long-term profitable growth. While we cannot control the near-term volatility in propulsion mix across the globe, we can focus on BorgWarner – driving sales growth above market production through technology-focused product levers converting that growth into earnings on an all-in basis and following a balanced capital allocation strategy that creates long-term value for our shareholders.

With that, I will turn the call over to Craig.

Craig Aaron: Thank you, Fred, and good morning, everyone. Before I dive into the financials, I would like to provide a quick overview of our first quarter results. First, we reported close to 7% organic sales growth despite a modest decline in industry volume. Second, we had strong margin performance, which was driven by solid conversion on higher revenue as well as appropriately managing our costs. This led to a year-over-year incremental conversion of over 23% on an all-in basis. Now, let’s turn to Slide 9 for a look at our year-over-year sales walk for Q1. Last year’s Q1 sales from continuing operations was just under 3.4 billion. You can see that the strengthening U.S. dollar drove a year-over-year decrease in sales of almost 1% or $32 million.

Then you can see the increase in our organic sales which was up roughly 7% year-over-year driven by growth in China and in Europe. Finally, the acquisitions of Eldor and SSE added $11 million to sales year-over-year. Some of all this was just under 3.6 million of sales in Q1. Turning to Slide 10. You can see our earnings and cash flow performance for the quarter. Our first quarter adjusted operating income was 339 million, equating to a 9.4% margin. That compares to adjusted operating income from continuing operations of 305 million or a 9% margin from a year-ago. On a comparable basis, excluding the impact of foreign exchange and M&A, adjusted operating income increased 54 million on 233 million of higher sales. That translates to an all-in incremental margin of roughly 23%, driven by our higher year-over-year sales and strong cost controls.

The net impact of M&A was a 12 million drag on operating income year-over-year. Our adjusted EPS from continuing operations was up $0.22 compared to a year-ago as a result of higher adjusted operating income, a decline in our effective tax rate and the impact of our recent share repurchases on our share count. And finally, free cash flow from continuing operations was a usage of 308 million during the first quarter, which was a higher usage than a year-ago as our working capital performance was impacted by the timing of customer collections due to the Easter holiday as well as the timing of tax payments. Now let’s take a look at our full-year outlook on Slide 11. Starting with foreign currencies. Our guidance now assumes an expected full-year sales headwind from weaker foreign currencies of 100 million compared to 2023.

This also is a sales headwind of 100 million versus our prior guidance with the Chinese RMB and Korean Won being the largest drivers of the change in our outlook. Next, we expect organic growth of approximately 2% to 5% year-over-year compared to our prior guidance of 1% to 5%. This increase is predominantly driven by strong sales growth in the first quarter. Within this guidance, our full-year end market assumptions led to down 2.5% is unchanged. Additionally, we continue to expect to deliver between 2.5 billion to 2.8 billion eProduct sales, which is up significantly from approximately two billion in 2023. Finally, the Eldor and SSC acquisitions are expected to add approximately 30 million to 2024 sales. Based on these expectations, we are projecting total 2024 sales in the range of 14.4 billion to 14.9 billion, which is in line with our prior guidance despite the additional FX headwinds.

Now let’s switch to margin. We continue to expect our full-year adjusted operating margin to be in the range of 9.2% to 9.6%. Excluding the impact of Eldor related losses in 2024, our outlook content to business delivering full-year incrementals in mid-to-high teens on an all-in basis. We believe this margin performance reflects the underlying earnings power of our company and our focus on delivering strong conversion on higher sales also appropriately managing costs. Based on this sales and margin outlook, we are expecting full-year adjusted EPS in the range of 3.80, 4.15 per diluted share. This increase compared to our prior outlook is being driven by the impact of our share repurchases and full-year share count and a reduction in our tax rate outlook compared to our prior guidance.

Turning to free cash flow. We continue to expect that we will deliver free cash flow of 475 million to 575 million for the full-year. Let’s turn to Slide 12 and discuss our recently increased share repose authorization. As Fred highlighted in his opening remarks, we repurchased approximately 100 million in BorgWarner stock during the first quarter. This brings our share repurchases since 2020 to approximately 733 million. In addition, our Board of Directors approved an increase in our share repurchase authorization of up to 500 million over the next three years. When combined with the 267 million remaining under our prior authorization, management has the ability to repurchase up to 767 million of the company’s outstanding shares. In addition to the share repurchases I just highlighted, we have also returned about 623 million to shareholders in dividends since the start of 2020.

We also completed the tax-free spin-off Affinion, which returned roughly 1.7 billion of additional capital to shareholders. Adding this all together, BorgWarner has distributed roughly 3.1 billion of capital to shareholders since 2020, while also investing in the company’s future. Our return of capital to shareholders has been a significant area of focus over the past several years. We believe our ability to return capital to shareholders while also investing in the business demonstrates the underlying strength of the company and the importance of a balanced capital allocation approach that is focused on maximizing shareholder value. The 500 million increase in our share repurchase authorization is simply another example of our commitment towards a balanced capital allocation approach.

So let me summarize my financial remarks. Overall, we delivered a solid first quarter. Our revenue growth was ahead of our expectations. And importantly, we delivered strong conversion on this revenue growth on an all-in basis. As this is my first call as BorgWarner’s CFO, I wanted to share how I think about the key financial goals for BorgWarner for the remainder of 2024 and beyond. As we move forward, I expect the company to first, deliver organic growth despite volatility in the global BEV and hybrid markets. Second, drive strong incremental margin performance on an all-in basis. And third, generates strong operating cash flow that allows the company to make organic and inorganic investments to support our long-term profitable growth while also returning capital to shareholders through a consistent quarterly dividend and opportunistic share repurchases.

Executing towards these goals is how we measure financial success at BorgWarner, and how we hope to create long-term value for our shareholders for years to come. With that, I would like to turn the call back over to Pat.

Patrick Nolan: Thank you, Craig. Britney, we are ready to open up for questions.

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Q&A Session

Operator: [Operator Instructions] Your first question comes from Colin Langan with Wells Fargo.

Colin Langan: Started off very strong here, I think, something like 8% growth over market in Q1. Your margins seem to be in the midpoint of your full-year guidance. But the guide for the year is implied sort of growth of the market, but actually moderate a bit and maybe at the midpoint, margins wouldn’t change. anything sort of onetime in nature we should be thinking about in Q1 that kind of boosted results and then any reasons we should be thinking about things moderating a bit as we go through the rest of the year?

Frederic Lissalde: Thanks, Colin, for the question. Nothing in the quarter. It was just a really strong operational performance for our business units. They did an exceptional job. As you think about our full-year guide, it implies a 13% to 16% incremental conversion, 13% on the low end, 16% on the high end. We feel really good about our first quarter performance sets us up quite well for the remainder of the year. We are just focused on executing towards the near term, and we are going to keep doing that as we into the second quarter. It is just a really good operational performance for the company.

Colin Langan: Okay. That sounds good. It was pretty helpful. Maybe you could talk a little about your bug in EV opportunity. The content there, how much of your sales today are there and have you seen any change yet, I guess, quite early on interest in that given the EPA rules seem to be more favorable towards PHEV?

Frederic Lissalde: Colin, that the PHEV is one architecture where we have our foundational products coming in and also most of our eProducts coming in. I don’t think we have given the granularity of our per plugging hybrid content. Overall full hybrid, plug-in hybrid and Range extending EV, about 40% of our light vehicle eProduct, which is guided at the midpoint at $1.9 billion this year is going into those hybrids.

Colin Langan: Got it. And have you seen any interest in PHEV improve or is it still just too early?

Frederic Lissalde: So globally, the interest of PHEV has always been there. In the U.S., I would say that it is a little bit early to see Quest for quotes from some of the American OEMs. But outside of the U.S., plug-in hybrids and advanced hybrids are part of new energy vehicles and we have our fair share of those.

Operator: Your next question comes from John Murphy with Bank of America.

John Murphy: I just wanted to follow-up on that question that Colin asked on hybrid is there any increase in schedules that you are seeing for hybrids at the moment? I know you said you mentioned 40% of the eProducts is – the $1 billion is on the hybrid side, and you are not seeing any new activity necessarily, but is there any step-up in schedules for hybrids at the moment that you are seeing that might provide some upside there?

Frederic Lissalde: Yes. In China and in Europe, we see upticks in hybrids. Actually, if you look at the share of growth of new energy vehicle in China, actually, hybrids are growing faster than that over the past few months and we are part of those. So the answer to your question is, on a global basis, yes. And in North America, it is too early to say.

John Murphy: Okay. And then a second question. I mean you debate whether it is stalling, whether it is short term, whether it is long term on EVs. But the reality is some of your customers, particularly in China and Europe are heading in that direction, maybe less so in the U.S. than we may have thought. I’m just curious, as you think about your investment, whether it be on the R&D or the capital invested side, do you have the ability to pull back and maybe spend at a slightly more measured pace, or is it just because there is such a push in China and Europe that you can’t pull back. And there is nothing you can really – you do here other than service your clients as best you can and try to cut costs to keep it down as much as possible. And maybe you could comment on really what you might think about doing on the R&D side and then also sort of on the CapEx or capacity add side?

Frederic Lissalde: Yes. We are managing our costs holistically in line with the current sales outlook. As Craig and I mentioned in our prepared remarks, we are setting up the company to convert mid-to-high teens no matter where the incremental revenue comes from. What I would say is try not to box BorgWarner into a player or a hybrid player or combustion player. We are focused on efficient powertrain. And we are now having scale in all those architectures in order to convert mid-to-high teens no matter what.

John Murphy: And on the capacity side, is there any way to potentially be a little bit more capital efficient or is that possible and I would certainly box you into a powertrain tech company across the board. That is where a boxed didn’t mean to put you in one direction or the other.

Frederic Lissalde: I think from a facility standpoint, we are flexible for some of the products that I alluded to in the prepared remarks; we have the same engineering, sometimes in a production equipment, sometimes actually the same product. Let me give you an example. We have talked about the past few years of dual inverters for hybrids. And we have talked about inverters for bets. All those are the same; they might not look exactly the same from a space and form perspective. But all the inside of the guts of those things are similar. So it is difficult to answer without a specific program. But overall, we are quite flexible across all different elements that both go in bags and hybrids.

Operator: Your next question comes from Dan Levy with Barclays.

Dan Levy: Maybe in the quarter, you could just break out what was the split of revenue between eProducts and foundational? And then foundational, I assume, is still putting up pretty solid growth of the market. Maybe you could just talk about some of the dynamics driving that, please?

Craig Aaron: Yes. So Dan, the breakout of eProducts and foundational in the quarter was about $500 million, a little over $500 million eProducts. The rest was foundational. And I’m sorry; your other question just was growth in the quarter?

Dan Levy: Yes. Within the growth over market, do you have a sense of what the growth of the market was for foundational and what regions or products were driving that?

Craig Aaron: Yes. So I would say overall, the growth was both in China and in Europe. And that includes both the growth that you saw on the foundational side of the business as well as the new product side of the business.

Dan Levy: And the outgrowth within foundational was any sense on where that one?

Craig Aaron: You can see a lot of it in the drivetrain side of our business.

Dan Levy: Great. And then a second question on margins. And I know you have noted that you are aiming for mid-to-high teens incrementals across the business. But maybe if you could just give us a sense of within the foundational product, is it possible that we actually are seeing higher incremental margin simply because there is less R&D that you have incurred less application engineering, more that you are leveraging, getting a sense whether there is some split in that contribution margin between eProduct versus foundational.

Frederic Lissalde: I would say that we are balancing all those costs in order to get to the mid-to-high teens. And we are taking that business holistically and taking cost actions so that all product lines are being able over time to deliver those incrementals.

Operator: Next question comes from Noah Kaye with Oppenheimer.

Noah Kaye: Craig, after the dividend and the repurchases you have done year-to-date, kind of leads me around $250 million, $300 million in deployable free cash flow based off of the guide for the year. And I think we would certainly say that shares are trading below intrinsic value. So how are you thinking about the pace of buybacks for the rest of the year? Is this going to be more ratable? Or are you remaining opportunistic?

Craig Aaron: Yes. Thanks for the question, Noah. So I just want to take a step back. We repurchased $277 million of the company’s shares over the last two quarters. So $177 million in the fourth quarter of last year. $100 million in the first quarter of this year. Obviously, pleased with our Board of Directors. We got that additional authorization, takes our total authorization up to a little over $760 million. We are going to continue to repurchase opportunistically, just like we did in Q4 and just like we did in Q1. I would say as we think about capital allocation, we take a holistic approach to it. So we look at liquidity. We look at leverage. We look at is there any short-term funding for M&A that is needed. Obviously, as you mentioned, we have a dividend that is a fixed obligation.

We don’t want to turn that on and turn that off. And we look at stock buybacks as a lever as well. So I think as we move forward, continue to think about it, and we will do it opportunistically. That is how should think about it.

Noah Kaye: Okay. Helpful. And then good to get the housekeeping on eProduct sales in the first quarter. Just can you give us some guideposts – even getting to the midpoint of guide for the year around how you are thinking about the cadence of ramp? I know you have some capacity coming online for battery. But is this a fairly ratable ramp? Is it really have really weighted to 3Q or 4Q, any particular quarter? Can you just help us think through how the ramp should proceed over the course of the year?

Frederic Lissalde: Yes. Noah, so in Q1, our products revenue went up 25%, and this is in line with our full-year outlook of 25% to 40% for the year. And you are right, in the next quarter; in our ePropulsion segment we are launching numerous programs with VW Group with Daimler, HMC, BYD and others. We are ramping up our battery pack capacity in Seneca later in the year in Europe. We are launching in other areas of eProducts. So you are right, it is going to increase over the next quarters.

Operator: Your next question comes from Joe Spak with UBS.

Joseph Spak: Fred, I know you sort of already touched on plug-ins a little bit in Q&A. In your comments, you also sort of talked about turbos and other sort of core BorgWarner technology that can help with what is seemingly an increasingly choppy powertrain transition. But presumably, your customers would need to do at least some engineering, and it is going to take time to sort of have a greater adoption. So what is the conversations like the customers on some of the traditional sort of core foundational products? And how quickly can we really see potentially greater levels of adoption there?

Frederic Lissalde: And Joe, I guess you were thinking about North America and your question, are you?

Joseph Spak: Yes, yes, yes.

Frederic Lissalde: Okay. Yes, because in the rest of the world, as I alluded to before, it is happening, right? I think we have all the building blocks to support our customers here in North America as they also want to have those advanced hybrids. I feel that it is still a little bit early to get into the specific cities, they need from BorgWarner. We are in the early phases of discussions about architecture. So I think it is going to take a little bit more time.

Joseph Spak: And Craig, obviously, great job sort of managing to the incrementals. You talked about continuing to manage to that. I think in the past, you talked about on the foundational side, right, if things continue to go you look to restructuring or some pricing actions. But I’m curious on the other side, just given not what is a still mid to long-term sort of trajectory towards lubrication, but certainly, a lot of volatility on the programs within that. Is there an opportunity – not this year because it is probably locked, but is there an opportunity as you think about R&D for next year to maybe push some of that or is there even a pricing opportunity on some of the product stuff if the volumes don’t hit certain thresholds?

Frederic Lissalde: Joe, you may have seen that our ePropulsion segment is running at about 30% incremental, and we are not satisfied with that. So we will take some steps to improve the margin performance. And again, we have a strategy to adjust costs to wherever the market is going. And we are doing that wherever it is necessary, and this is what we are looking at right now.

Joseph Spak: One follow-up on the decrementals, I guess, in – well, I guess the battery stuff is not in eProducts. So never mind correct question.

Operator: Your next question comes from Douglas Dutton with Evercore ISI.

Douglas Dutton: Just a quick one here and then one follow-up. Can you maybe tell us the percentage of your orders from those Chinese domestics? And how that compares to the percentage of anticipated recognized revenue from that same group for 2024?

Frederic Lissalde: You are talking about eProducts?

Douglas Dutton: Correct, yes.

Frederic Lissalde: So on eProducts for 2024, about 45% of the $1.9 billion in light vehicle is for China. Within that, 95% is for the Chinese OEMs.

Douglas Dutton: Okay. Great. And then just on a more granular note, can you maybe quantify the exposure you have to some of those newer growers in China, the BYD’s Xpengs, Xiaomis of the world?

Frederic Lissalde: I unfortunately can’t disclose some of those names, and I can’t disclose which product we have with those names in particular. So not that I would love to do it, but I just can’t.

Operator: Your next question comes from Alex Potter with Piper Sandler.

Alexander Potter: Great. So first, maybe following on that question from China. I’m interested in, I guess, here in your opinion regarding the degree to which China that market can serve as maybe foreshadowing or a harbinger of the way the rest of the world will evolve. Obviously, China has been moving much more quickly toward electrification. There is a lot of dynamism regarding the architectures that those new companies are pursuing. Do you think that China represents the way the rest of the world will eventually evolve or do you see those markets sort of trending in different directions with China doing its own thing and the rest of the world doing their own thing?

Frederic Lissalde: In China, under the umbrella of new energy vehicle, you will see that hybrids, essentially the advanced hybrids are having about 40% shares in China. And actually growing faster within that segment or growing the fastest within that segment. That is also our ratio of eProducts versus eProducts within hybrids and devs. For us, I wouldn’t say that it doesn’t matter, but it kind of doesn’t matter. We have the right product portfolio to support customers around the globe. And we were not attached to any regional specificities. We are resilient to any propulsion scenarios through combustion, hybrids or beds. So I don’t have a crystal ball. I won’t I can tell you, China is a good proxy for the rest of the world. But we believe that you will see a variety of electrified propulsion architecture, and we are ready to support those on a global basis

Alexander Potter: Okay. Yes. Good. Very clear. Maybe the other question, more of a near-term tactical question on another call this morning, one of your peers noted particularly over the last couple of weeks or several weeks in the month of April, some real volatility and generally downward adjustments to production schedules at the OEMs. Have you seen anything similar to that? I know that your overall market projections haven’t changed versus last quarter, but anything you would be willing to say regarding near term or back half production schedules would be helpful.

Frederic Lissalde: Yes. I don’t have the granularity of what happened over the past two weeks, but overall for the full-year, our view of the market is already below companies like IHS. But we will adjust to whatever comes to us.

Operator: Your next question comes from James Picariello with BNP Paribas.