BorgWarner — Third Quarter 2026 Earnings Summary

Financial Performance:

• U.S. GAAP net sales for the third quarter of 2026 were $3,487 million, a decrease of approximately 2.9% compared to the third quarter of 2025; organic net sales decreased 3.1% excluding foreign currency impacts.
• U.S. GAAP net earnings were $221 million ($1.08 per diluted share), an increase of 47.9% compared to $158 million ($0.73 per diluted share) in the third quarter of 2025.
• Adjusted net earnings were $284 million ($1.39 per diluted share), an increase of 12.1% compared to $266 million ($1.24 per diluted share) in the third quarter of 2025.
• U.S. GAAP operating income was $302 million (8.7% operating margin), an increase of 180 basis points compared to the third quarter of 2025.
• Adjusted operating income was $381 million (10.9% adjusted operating margin), an increase of 20 basis points compared to the third quarter of 2025.
• Net cash provided by operating activities was $320 million for the quarter; free cash flow was $195 million.
• Gross debt balance was reduced by $864 million during the third quarter via a debt tender and make-whole redemption.
• The Company repurchased approximately $175 million of outstanding shares and paid a $35 million cash dividend during the third quarter.
• Nine-month net sales were $10,668 million; nine-month net earnings attributable to BorgWarner Inc. were $740 million ($3.59 per diluted share).
• Nine-month adjusted net earnings were $835 million ($4.05 per diluted share).
• Nine-month operating income was $1,008 million; nine-month adjusted operating income was $1,166 million.
• Nine-month net cash provided by operating activities was $1,058 million; nine-month free cash flow was $700 million.
• Nine-month capital expenditures were $364 million.
• Nine-month cash used in financing activities was $1,446 million, including $425 million for treasury stock purchases and $104 million in dividends paid to stockholders.

Guidance and Future Outlook:

• The Company increased its full-year 2026 adjusted earnings per share guidance to a range of $5.20 to $5.35, compared to the previous range of $5.05 to $5.30.
• Full-year 2026 net sales guidance is $14.0 billion to $14.2 billion, compared to 2025 net sales of approximately $14.3 billion.
• The guidance implies a year-over-year organic net sales decline of 4% to 2.5%.
• Full-year 2026 U.S. GAAP operating margin is expected to be 9.3% to 9.6%; adjusted operating margin is expected to be 10.7% to 10.9%.
• Full-year 2026 U.S. GAAP net earnings are expected to be $4.65 to $4.84 per diluted share.
• Full-year 2026 operating cash flow is expected to be $1,600 million to $1,700 million; free cash flow is expected to be $900 million to $1,100 million.
• The Company expects the weighted light vehicle market to decline 2% to 1% in 2026.
• The Company expects a $250 million year-over-year sales decline in the Battery Energy Systems segment, representing a 1.7% headwind to organic net sales growth.
• Foreign currency is expected to result in a year-over-year sales increase of approximately $250 million.
• The Company plans a $10 million to $15 million industrial R&D investment to support long-term profitable growth.

Business Segments and Product Lines:

• Turbos & Thermal Technologies segment net sales were $1,372 million for the quarter, a decrease of 4.4% organically.
• Drivetrain & Morse Systems segment net sales were $1,346 million for the quarter, a decrease of 7.4% organically.
• PowerDrive Systems segment net sales were $705 million for the quarter, an increase of 19.6% organically.
• Battery Energy Systems segment net sales were $78 million for the quarter, a decrease of 40.9% organically.
• The Company secured an engine control module award with a global OEM for a new internal combustion engine pickup truck platform, with production expected to begin in 2029.
• The Company secured three conquest turbocharger awards with a global powertrain leader for light vehicle gasoline platforms in South America and Europe, with production expected to begin in 2027.
• The Company secured its first aluminum-wire eMotor program award with a major Chinese OEM for hybrid vehicles, with production expected to begin in 2026.
• The Company secured three eMotor awards with leading OEMs in China for range-extended, battery-electric, and hybrid vehicle applications, with production expected to begin between 2027 and 2028.
• The Company secured a high-voltage inverter award with a global OEM for next-generation battery-electric vehicle programs.
• The Company continues to make progress in product readiness for the data center and industrial markets and has accelerated quoting activity for industrial solutions.

Market and Competitive Landscape:

• The Company operates in a lower industry production environment, which contributed to the decline in net sales.
• The weighted light vehicle market is expected to decline 2% to 1% globally in 2026.
• Regional light vehicle production expectations for 2026 include a decline of 2.5% to 1.5% in North America, a decline of 8% to 6% in China, and growth of 0.5% to 1% in Europe.
• The Company faces challenges from rapidly changing technologies and the difficulty in forecasting demand for electric vehicles.

Risks and Challenges:

• Risks include supply disruptions, commodity availability and pricing, and the inability to achieve expected recoverability in commercial negotiations.
• Challenges include conditions in the automotive industry, competitive challenges from existing and new competitors, and dependence on major OEM customers.
• Risks include potential future changes in laws and regulations, geopolitical conflicts, and fluctuations in interest rates and foreign currency exchange rates.
• The Company faces risks related to the exit of the charging business and the integration of acquired businesses.
• Risks include the uncertainty of global trade policies, tariffs, and export restrictions.

Management Commentary and Tone:

• Management highlighted that continued focus on cost controls allowed the Company to deliver strong performance despite a lower industry production environment.
• The increase in adjusted net earnings per diluted share was attributed to a lower full-year effective tax rate and the impact of a lower share count resulting from share repurchases.
• The Company expressed confidence in delivering another year of adjusted operating margin expansion and adjusted earnings per share growth in 2026.

Other Key Points:

• The Company announced nine awards across its portfolio to support long-term profitable growth.
• The Company successfully executed a debt tender and make-whole redemption to reduce gross debt by $864 million.
• The Company repurchased approximately $175 million of shares and paid a $35 million cash dividend in the third quarter.
• The Company's net sales guidance range was narrowed from $14.0 billion to $14.3 billion to $14.0 billion to $14.2 billion due to lower industry production expectations.
• The Company webcast a conference call regarding third quarter 2026 results and full-year guidance.