Earnings call transcript: BorgWarner Q3 2025 earnings beat EPS forecasts

BorgWarner Inc. reported its Q3 2025 earnings, with an earnings per share (EPS) of $1.24, surpassing analysts’ expectations of $1.17. The company generated $3.59 billion in revenue, slightly below the forecast of $3.61 billion. Following the announcement, BorgWarner’s stock rose by 3.42% to $42.83 during pre-market trading, reflecting positive investor sentiment despite the revenue miss. The stock is currently trading at $44.32, just below its 52-week high of $44.97, according to InvestingPro data.

Key Takeaways

• BorgWarner’s Q3 EPS of $1.24 exceeded forecasts by 5.98%.
• Revenue slightly missed expectations, coming in at $3.59 billion.
• The stock price increased by 3.42% in pre-market trading.
• The company secured 17 new business awards, enhancing its market position.
• Full-year EPS guidance raised to $4.60–$4.75.

Company Performance

BorgWarner demonstrated robust performance in Q3 2025, with sales reaching $3.6 billion, a 2% organic increase year-over-year. The company’s adjusted operating margin improved to 10.7%, up 60 basis points from the previous year. BorgWarner’s strategic focus on electrification and powertrain technologies continues to drive its competitive edge, particularly in the Chinese market, where the company generates 20% of its sales.

Financial Highlights

• Revenue: $3.59 billion, up 2% organically year-over-year
• Earnings per share: $1.24, beating the forecast of $1.17
• Adjusted operating margin: 10.7%, up 60 basis points
• Free cash flow: $266 million, a 32% increase from last year

Earnings vs. Forecast

BorgWarner’s EPS of $1.24 exceeded the forecast of $1.17 by 5.98%, marking a significant beat. However, the company’s revenue of $3.59 billion fell short of the $3.61 billion forecast, resulting in a -0.55% surprise. The strong EPS performance highlights the company’s effective cost management and operational efficiencies.

Market Reaction

Following the earnings release, BorgWarner’s stock price rose by 3.42% to $42.83 during pre-market trading. This upward movement reflects investor confidence in the company’s ability to exceed EPS expectations, despite the slight revenue miss. The stock’s performance remains strong, trading near its 52-week high of $44.97.

Outlook & Guidance

BorgWarner has revised its full-year adjusted EPS guidance to a range of $4.60 to $4.75, representing an 8% increase compared to 2024. The company expects continued growth through new business awards and strategic investments in electrification. BorgWarner’s full-year free cash flow guidance is set between $850 million and $950 million.

Executive Commentary

CEO Joe stated, "We continue to firmly believe in the strength of BorgWarner," emphasizing the company’s robust performance and strategic direction. CFO Craig Aaron highlighted the balanced approach to share repurchases, dividends, and potential investments, stating, "We’re finding the right balance between share repurchases, dividends, and maintaining firepower for potential investments."

Risks and Challenges

• Supply Chain Issues: Ongoing concerns about semiconductor supply could impact production.
• Market Saturation: Flat global light vehicle production could limit growth opportunities.
• Macroeconomic Pressures: Economic uncertainties may affect consumer demand.
• Tariff Recovery: Challenges in recovering tariffs could impact profitability.
• North American EV Market: Addressing challenges in this market remains a priority.

Q&A

During the earnings call, analysts inquired about the North American EV market challenges, semiconductor supply concerns, and tariff recovery expectations. BorgWarner addressed these issues, emphasizing its strategic initiatives to mitigate risks and capitalize on growth opportunities in the electrification space.

Full transcript - Borgwarner (BWA) Q3 2025:

Asia, Conference Specialist: Good morning. My name is Asia and I’ll be your conference specialist at this time. I would like to welcome everyone to the BorgWarner 2025 Third Quarter Results Conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by A0. After today’s presentation, there will be an opportunity to ask questions. If you’d like to ask a question during this time, please simply press star one on your telephone. If you would like to withdraw your question, press star two. If you’re using a speakerphone, please pick up the handset before asking your question. I would now like to turn the call over to Patrick Nolan, Vice President of Investor Relations. Mr. Nolan, you may begin your conference.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Thank you. Good morning everyone. Thank you for joining us today. We issued our earnings release earlier this morning. It posted on our website BorgWarner.com both on our homepage and on our Investor Relations homepage. With regard to our investor relations calendar, we will be attending multiple investor conferences between now and our next earnings release. Please see the Events section of our IR page for a full list. Before we begin, I need to inform you that during 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 with prior periods.

When you hear us say on a comparable basis, that means excluding the impact of FX, net, M&A, and other non-comparable items. When you hear us say adjusted, that means excluding non-comparable items. When you hear us say organic, that means excluding the impact of FX and.

Joe, CEO, BorgWarner: Any net M&A.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: 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. We will also refer to our growth compared to our market. When you hear us say market, that means the change in light and commercial vehicle 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 Joe.

Joe, CEO, BorgWarner: Thank you, Pat, and good morning, everyone. I’m very pleased to share our results for the third quarter of 2025 and provide an overall company update starting on slide 5. I wish to begin by thanking our employees, customers, and suppliers for all of their trust and efforts during the quarter and for their continued support. In the quarter, we achieved organic sales growth of just over 2% despite headwinds from downtime at one of our European customers due to a cyber-related shutdown. Excluding the decline in our CV battery and charging system segment, our organic sales were up approximately 4% year over year. I’m excited to report that the strong award activity we saw in the first half continued into the third quarter.

Today I will share eight new business awards across both foundational products and eProducts, which are just a sampling of the awards that we secured during the quarter. We believe these awards illustrate the strength of our portfolio and the demand for efficient powertrain technology around the globe. Our adjusted operating margin performance was strong in the third quarter, coming in at 10.7%, which increased 60 basis points year over year despite a 60 basis point net tariff headwind. This strong underlying operational performance was driven by capitalizing on higher sales, continuing to focus on cost controls across our business, and turning earnings into strong free cash flow. Lastly, we remain focused on the efficient deployment of our capital to drive shareholder value.

In the quarter, we returned approximately $136 million, or over 50% of our third quarter free cash flow, to shareholders through share repurchases and payment of our quarterly cash dividend. Looking back on our year-to-date performance, I’m very proud of our team and our results. As Craig will detail, our year-to-date performance remains strong and has enabled us to once again increase our adjusted margin, adjusted EPS, and free cash flow guidance for the full year. Now let’s look at some of the new foundational product awards on slide 6. First, BorgWarner has been awarded several four-wheel drive contracts with Chery to supply its on-demand transfer case with mechanical locking for their pickup truck vehicles and its all-wheel drive coupling for Chery’s SUV models. We believe the new programs further strengthen the long-term partnership between the two companies in advanced drivetrain systems.

With mass production scheduled to begin in 2027, we are honored to extend our collaboration with Chery in the drivetrain technologies field. As a global leader in this sector, BorgWarner brings a broad product portfolio, deep technical expertise, and sharp insights into international markets. Next, BorgWarner has solidified an agreement with Stellantis to supply our 50 millimeter variable turbine geometry, or VTG, turbocharger for the OEM’s GME T4EVO four cylinder gasoline engine. This turbocharger will be featured on the automaker’s 2026 Jeep Grand Cherokee. Additionally, BorgWarner will supply its electric variable cam timing, or EVCT, technology on the OEM’s Jeep Cherokee engine. We are pleased to partner with Stellantis on these exciting project launches. Our long standing relationship includes supplying Stellantis with a number of turbos for previous vehicle models, and this specific project marks our shift into the next generation of turbocharging.

The integration of BorgWarner’s EVCT into the Jeep Cherokee engine marks the first use of an EVCT on a Stellantis engine. I’m excited to see continued demand for our market leading foundational products across our portfolio. Now let’s look at some new eProduct awards on slide 7. First, BorgWarner has secured a contract to supply a 7-in-1 integrated drive module, or IDM, to a leading Chinese OEM with mass production expected to start in 2026. Exclusively designed for the customer’s hybrid SUV, BorgWarner’s IDM integrates multiple functions within a single compact unit to boost overall system performance and efficiency. BorgWarner 7-in-1 IDM combines two electric motors featuring the company’s patented high voltage hairpin winding technology, a dual inverter integrated with an onboard charger, DC to DC converter and voltage boost function, as well as an E gear transmission.

With deep expertise in electrified propulsion and full stack in house capabilities covering E motors, power electronics, and gearboxes, BorgWarner is able to provide a flexible and highly integrated solution tailored to the customer’s needs. Next, BorgWarner is strengthening its electrified propulsion collaboration with Great Wall Motor, building on two previously announced dual inverter programs. BorgWarner has secured two additional projects with this OEM with mass production scheduled by the end of 2025. We believe the extension of this partnership not only reflects recognition of our products and technologies, but also underscores our strong commitment to supporting our customers with new energy strategies. We remain dedicated to accelerating their electrified vehicle portfolio. Lastly, BorgWarner has secured a contract to supply its battery system to the all new Holon Urban, a 15 person level 4 autonomous fully electric shuttle.

The system utilizes two 57 kilowatt hour battery packs and incorporates a modular design with cylindrical NMC cells, which offer the latest generation cell chemistry and benchmark setting energy density. Additionally, BorgWarner’s NMC battery system includes a robust stainless steel battery case and uses a compact active liquid cooling system. To summarize, the takeaways from today are: first, BorgWarner’s third quarter results were strong; second, we secured multiple new business awards across our entire portfolio; and third, we continued returning capital to shareholders as we focus on a successful finish to 2025 and look towards early 2026. I expect BorgWarner to remain focused on three factors to drive value for our shareholders. First, we must continue to focus on driving strong financial performance.

To me, this means successfully launching profitable business around the globe that supports our customers’ needs for leading edge powertrain technology for combustion, hybrid, and electric vehicles, as well as continuously taking the steps to manage our overall cost structure. I expect this to support expanded earnings and cash flow. Second, we must continue to capitalize on the strong quoting environment that we’ve been seeing over the last several quarters. BorgWarner intends to remain focused on securing new business across our portfolio, which I expect to contribute to our long term top line and bottom line growth. Last, we need to stay focused on creating additional shareholder value with our strong free cash flow. I expect this to be achieved through a balanced capital allocation approach that rewards shareholders while also making inorganic investments that will grow the earnings power of BorgWarner and improve our long term positioning.

I continue to firmly believe in the strength of BorgWarner. The 17 awards we’ve announced over the last six months provides me even more confidence that our product strategy is built to drive long term profitable growth across our entire portfolio. In combination with our deep and long-standing global customer relationships and our disciplined financial approach, our talented team will continue to drive BorgWarner to the next level of success. With that, I will turn the call over to Craig.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Thank you Joe and good morning everyone. Before I dive into the financials, I’d like to provide a quick overview of our third quarter results. First, we reported just under $3.6 billion in sales, which was up 2% year over year excluding foreign exchange. This performance was modestly weaker than our market production in the quarter due to downtime at one of our European customers and a decline in our battery and charging sales. Second, we had strong adjusted operating margin performance in the quarter at 10.7%. This performance represents a 60 basis point improvement year over year despite a $17 million net tariff headwind in the quarter. This also represents the sixth quarter in a row with an adjusted operating margin at or above 10%, which we believe demonstrates the consistency of our operating performance.

Third, we had strong free cash flow in the quarter of $266 million, which was a 32% increase from a year ago. Now let’s turn to Slide 8 for a look at our year over year sales walk for the third quarter. Last year’s Q3 sales were just over $3.4 billion. You can see that stronger foreign currencies drove a year over year increase in sales of $69 million. You can see an increase in organic sales which was primarily driven by a 6% increase in light vehicle eproduct sales and a 4% increase in foundational sales partially offset by lower battery and charging sales. Sum of all this was just over $3.6 billion of sales in Q3. Turning to Slide 9 you can see our earnings and cash flow performance for the quarter.

Our third quarter adjusted operating income was $385 million equating to a strong 10.7% adjusted operating margin. This performance includes a 60 basis point headwind from net tariff cost that compares to adjusted operating income from continuing operations of $350 million or a 10.1% adjusted operating margin from a year ago. On a comparable basis, adjusted operating income increased $46 million on $73 million of higher sales. We believe this is great performance and reflects our ability to capitalize on higher sales as well as a continued focus on cost controls across our business. Our adjusted EPS from continuing operations was up $0.15 compared to a year ago as a result of higher adjusted operating income and the impact of our share repurchases during 2024 and 2025.

Finally, free cash flow from continuing operations was a generation of $266 million, which was up $65 million from a year ago as a result of higher net earnings and lower capital expenditures. Now let’s take a look at our full year outlook on slide 10. We are now projecting total 2025 sales in the range of $14.1 to $14.3 billion, which has been narrowed from our prior guidance of $14.0 to $14.4 billion. This adjusted range incorporates a higher market production outlook offset by the expected impact of a cyber-related shutdown at a European customer, the impact of supply-constrained production for a key North American platform, and global semiconductor supply concerns. On a combined basis, these customer and supplier-related factors are expected to be a 60 basis point headwind to our year-over-year sales growth. Now let’s review our year-over-year sales walk starting with foreign currencies.

Our guidance now assumes an expected full year sales benefit of $170 million compared to 2024 due to the strengthening of the Euro versus the U.S. Dollar. Within our 2025 guidance, our full year end market assumption has improved to flat to down 1% year-over-year versus down 0.5% to down 2.5% previously. This improvement is driven by stronger industry production that we saw during the third quarter and an improved production outlook in the fourth quarter compared to our prior outlook. Within this guidance, we continue to expect a tailwind from tariff-related recoveries of up to 1% of sales as this is a path to recovery of our costs to our customers.

Additionally, we expect the company’s full year sales outgrowth to be roughly flat, which reflects a 100 basis point headwind from our battery business and a 60 basis point headwind from the customer and supplier impacts I just referenced. Based on these assumptions, we expect our 2025 organic sales change to be down 1% to flat year-over-year. Now let’s switch to margin. We are increasing our full year adjusted operating margin to be in the range of 10.3% to 10.5% compared to our previous guidance range of 10.1% to 10.3%. We view this as strong underlying performance supported by our solid year-to-date operational results, which we fully expect to continue for the remainder of 2025.

Based on this sales and margin outlook, we’re expecting full year adjusted EPS in the range of $4.60 to $4.75 per diluted share, which is a 3% increase versus our prior guidance or an 8% increase versus 2024 at the midpoint of our range. Additionally, we are increasing our full year free cash flow guidance to a range of $850 million to $950 million, which is a $150 million increase from our prior guidance. With that, that’s our 2025 outlook. Let me summarize my financial remarks. Overall, we were very pleased with our third quarter results. Our adjusted margin, adjusted EPS, and free cash flow performance were strong despite net tariff cost headwinds in the quarter.

Our third quarter performance allowed us to increase our margin, EPS, and free cash flow guidance, and on top of that, we returned $136 million of cash to shareholders, or over 50% of our free cash flow in the quarter, through our share repurchases and dividends. As I look towards the end of the year, we’re focused on delivering the improved financial performance outlined in our guidance. We now expect our adjusted operating margin to be up 20 to 40 basis points year over year despite tariff headwinds and second half volume challenges. The midpoint of our revised adjusted EPS guidance represents more than an 8% increase year over year, which demonstrates our focus on consistently growing earnings, and finally, we expect to have another year of strong free cash flow of $900 million at the midpoint of our guidance, which is more than a 23% increase versus 2024.

By continuing to focus on near term execution, growing the long term earnings power of the company through organic and inorganic investments, and following a balanced deployment of our capital, we believe BorgWarner will create significant shareholder value for years to come. With that, I’d like to turn the call back over to Pat. Thank you. Craig Aaron. We’re ready to open it up for questions.

Asia, Conference Specialist: At this time I would like to remind everyone, if you would like to ask a question, press Star one on your telephone keypad. If you’re using a speakerphone, please pick up the handset before asking your question. To withdraw your question, please press Star two. In the interest of time, please limit yourself to one question and one follow up question. The first question comes from Christopher Patrick McNally with Evercore. Please go ahead. Chris.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Chris, can you hear us?

Joe, CEO, BorgWarner: Sorry, I was on mute. There we go. Joe and Craig, impressive results, particularly we know that the Q4 Oswego impact is obviously material to BorgWarner given the high content on the F series. In the prepared remarks, I just want to make sure you talked about 60 basis points. Could you just dive in a little bit to the visibility you have on Q4 specifically for that single large kind of impact? Because whether it’s 60 basis points, $80 to $100 million revenue impact, that’s like $0.07 to $0.08 for the full year. That’s my first question. Thanks so much. Thanks, Chris.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Appreciate the comments about the quarter in our guide. What we’ve included for that North American program is $50 to $100 million impact in the fourth.

Joe, CEO, BorgWarner: Okay, perfect. The second question, it’s really around your divisional margins, which were also very impressive. The only questionable area I saw was around PowerDrive Systems or PDS. Obviously, we are going to see a pickup in the European NEV volumes in the second half, and that should start to flow nicely to margins. I know the year-over-year compare in that one division is not easy. I think you had a $20 million one-time recovery last year, so the incrementals look more like high single digits. Can you talk about how you walk us, Craig, from sort of a minus 6% margin here to something better as we exit the year, and think about could incrementals start to get back to that sort of mid to high teens next year, which will close the gap to, you know, ultimately getting close to break even?

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Yeah. Thanks, Chris. When you look at PowerDrive Systems sales for the quarter coming in a little over $580 million, it’s about 12% growth, excluding foreign exchange year over year, led by growth in China. That was really nice to see. As you mentioned, the conversion was a little bit upside down. You did reference a customer-related recovery last year that we talked about; it was about a $24 million recovery. Pricing was definitely an impact in the quarter year over year. As we look into the fourth quarter and for the full year, our expectations remain intact, which is on that extra growth in PowerDrive Systems. We expect to convert in the mid-teens. That’s success for us, and we’re focused on executing that for the full year. Q3 was really just a timing impact related to customer pricing between Q3 and Q4.

Joe, CEO, BorgWarner: Okay, excellent, Craig. That’s great detail. Thanks so much, team.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Thank you.

Asia, Conference Specialist: The next question comes from Colin M. Langan with Wells Fargo. Please go ahead.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Oh great.

Joe, CEO, BorgWarner: Thanks for taking my question.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Is there anything unusual in Q3’s margin? It’s obviously very strong. If I look at it year over.

Joe, CEO, BorgWarner: Year, it’s above that sort of mid.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Team conversion and even sequentially sales are down, and it’s up. Any one-time items that we should?

Joe, CEO, BorgWarner: Be thinking about as maybe not reoccurring?

Patrick Nolan, Vice President of Investor Relations, BorgWarner: No, no one time items. When you look at our performance, it was fantastic, pretty much across the board. Adjusted operating income increasing $29 million on a little over $70 million of sales. That’s a 40% incremental conversion. Company was really able to capitalize on the higher sales environment in the quarter. On top of that, Colin, we’ve been focused on cost controls for the last several quarters. Items like supply chain savings, productivity, lower cost of poor quality, all really, really important items to deliver in my opinion. A fantastic result. We’re really pleased with the performance.

Joe, CEO, BorgWarner: Got it.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: As we look into 2026, is this quarter rate the right.

Joe, CEO, BorgWarner: Sort of jump off point into next year, or is that just too optimistic? Thanks.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: We’re going to continue to focus in 2026 just how we executed in 2025. We’re going to focus on capitalizing on that extra sales growth. We’re going to plan to convert in the mid teens like we’ve talked about many times, and we’re going to use all the levers within our control to do that, meaning focus on cost controls again, supply chain savings, restructuring productivity, lower cost to poor quality. We’re going to use all of those levers to continue to expand margins as we move forward. Got it.

Joe, CEO, BorgWarner: All right, thanks for taking my question.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Thank you, Tom.

Asia, Conference Specialist: The next question comes from Joseph Fadool with UBS. Please go ahead.

Joe, CEO, BorgWarner: Thanks. Good morning everyone. Wanted to focus on battery and charging a little bit. Wanted to get a sense from you if you thought this low $100 million a quarter level of sales is a good run rate going forward, and then despite those lower sales, clearly good work on the cost side because the loss went down. Do you think the actions you’ve taken today properly right size that now or is there more opportunity to take costs out and right size that business? Yeah. Good morning Joe. We do continue to see sales headwind in the battery business, mainly due to the adoption challenges in this market, but to a lesser degree in Europe. We expect the decline in the battery and charging sales to be that 100 basis point headwind in the overall outgrowth of 2025. In the near term, these trends are difficult to predict.

However, I’m pleased with the cost actions, as you’ve referenced, that the team has taken in the business. I think an important note is that in 2025 the business is expected to be slightly EBITDA and free cash flow positive. Therefore, we’re positioning the business for profitable growth in the future. While we navigate these uncertain times on the sales in the short term, we do still strongly believe in the long term outlook for this business.

Asia, Conference Specialist: Thank you.

Joe, CEO, BorgWarner: Second question, just wanted to focus on the triple T segment for a second here. You know, if you look in the market, there’s obviously been a lot of demand for stationary generators given some of the data center build out. Those are diesel engines, typically have a turbo. I just wanted to sort of get a sense of from you guys, whether you’ve been participating in that opportunity, how much it’s maybe helped growth this year and what you see as an outlook for that business going forward. You obviously had some excess diesel turbo capacity from engines coming down, so you’ve just been able to repurpose that or had that been changed over to gas. Yes, we do supply turbos for the stationary power stations in support of the industrial and specifically data center market.

Although we haven’t disclosed specific sales, just to provide broader context here, about 17% of BorgWarner sales is commercial vehicle and off highway, which includes stationary power. We’re excited about the potential there. Thank you.

Asia, Conference Specialist: The next question comes from James Albert Picariello with BMO Capital Markets. Please go ahead.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Hi, good morning everybody. I just want to return to PDS, to PowerDrive Systems, and you know, curious what the backlog and the sales trajectory by region looks like. You know, how would you assess the growth for this year thus far, and then just high level how you foresee the regional trajectories, North America, Europe, Asia, playing out into next year. Thanks.

Joe, CEO, BorgWarner: Yeah, thanks for the question. Specifically in the third quarter, the light vehicle E product growth year over year is about 7%. More broadly on the full year, that business is up year to date, 27% versus last year. We’re really excited to see those sales start to pull through. As Craig referenced on the incrementals, we expect for the full year to achieve our goals of mid to high teen incrementals on that business. We do see in this particular market, EV sales were strong through the third quarter. In the fourth quarter and beyond, we expect those market sales to subside. Remember, we’re not participating in a lot of those sales where customers are insourcing the product. Where we do see excellent growth is in China. That’s where a lot of the music is playing on new energy vehicles.

Our teams are performing well there, and that’s where you see the pull through of much of our backlog. To a lesser degree, there is growth in Europe and we expect that to continue into 2026. Got it.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: That’s really helpful. Apologies if I missed this, but for tariffs regarding the $38 million net headwind the company has incurred year to date, what’s embedded for the fourth quarter, recovery of that within the guide, and any color or thoughts on the M&A pipeline and how you’re balancing that view against IBEX.

Joe, CEO, BorgWarner: Thank you.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Sure. I’ll handle the tariff question. Through the first three quarters, tariffs have been a negative recovery for us. Lack of recovery as we move into the fourth quarter, we expect that to flip. We expect it to be a benefit for us in that $25 million range.

Joe, CEO, BorgWarner: Regarding M&A activity, we still remain active and we’re very disciplined in our approach. We continue to believe there’s some compelling opportunities for companies with BorgWarner’s financial and operational strength. As we’ve mentioned in the past, we’re really focused on three priorities when we consider potential acquisitions. The first one is inorganic investments must have strong industrial logic. We want to leverage the many core competencies that BorgWarner has. The second is really around near term accretiveness. We want to see near term profitability. Why is that? Because we want to grow the earnings power of the company. We’re in a much better position now than if you look five or six years ago. We like our portfolio, but this is a question about strengthening the portfolio and expanding our earnings power. Finally, we need to ensure we pay a fair price for any asset.

I continue to see inorganic investment as an opportunity to grow BorgWarner’s earning power and improve our long term positioning. Thank you.

Asia, Conference Specialist: The next question comes from Luke L. Junk with Baird. Please go ahead.

Joe, CEO, BorgWarner: Good morning.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Thanks for taking the questions, Craig. Maybe to start with the operating margin range relative to implied 4Q even as you’re tightening the revenue range, keeping a couple hundred bps of room there, that’s not dissimilar from prior years. I guess I’m just thinking with additional variables in the macro, the tariff recovery that you mentioned, customer production impacts, this superior chip situation. Just any way to scale those factors that you haven’t spoken to and you think kind of within the range, maybe some of the sensitivity. Thank you.

Joe, CEO, BorgWarner: Sure.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Thanks, Luke. I’ll talk about the fourth quarter guide in the context of our year to date average. When you think about our year to date average from a sales perspective, sales coming in right around $3.6 billion per quarter and our operating margin right around 10.3% for the year. As you go to the high end of the fourth quarter, we would expect revenue to come in pretty similar to our year to date average. If that’s the case, we expect our margin to come in right around 10.8%. What you’re seeing is that tariff benefit really coming through the P&L, that $25 million I spoke about earlier.

At the low end of the range, we would have revenue coming in quite a bit lower, around $3.35 billion, and we would decrement on that, but also have that tariff benefit which would hold us at that 10.3%, that year to date average.

Joe, CEO, BorgWarner: Got it.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Thank you for that. For my follow up, Joe, just relative to flattish outgrowth this year, just at a high level, what are some of the major moving pieces you’re thinking about going into next year? Obviously you’re going to be lapping the charging exit in North America post tax credit. I think the reversion to combustion helps to some extent. The awards that you walked us through this morning, those China awards, especially some quick turns and the awards, even with some 2026 launches that you’re announcing today, just how do you think about those elements and maybe anything key that I’ve missed. Thank you.

Joe, CEO, BorgWarner: Sure. In 2025 we are seeing some downtime at a European customer due to a cyber attack on their operations, which I referenced in my remarks. As we’ve spoken about, the North American customer that had a fire issue is affecting their operations. Those two things pulled down our outgrowth in addition to the battery business. With that said, I’m really pleased with the improved year over year performance that we expect to deliver in 2025. At the midpoint of our guide, we expect a 30 basis point improvement in margins, 8% growth in EPS, and more than 20% increase in free cash flow. Craig and I are focused really on growing the earnings power of the company. 2025 is a great example of, despite the flattish sales and outgrowth, our ability to deliver on that objective.

Asia, Conference Specialist: The next question comes from Dan Meir Levy with Barclays. Please go ahead.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Hi, good morning.

Joe, CEO, BorgWarner: Thank you for taking questions.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Wanted to start first with a question on your exposure to the North America EV market. I know that North America is.

Joe, CEO, BorgWarner: A smaller piece of PowerDrive, but.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: With all the headlines here now of maybe some impairments that some of the OEMs are taking or program cancellations, maybe you could just remind us we see the current revenue. Were there other further maybe bookings that now have to be reconsidered?

Joe, CEO, BorgWarner: May dampen the pace of growth within.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Systems division or some of the margin considerations there as well, and what recoveries you may need from automakers?

Joe, CEO, BorgWarner: Yeah, good question. First, as I look back on 2024 and 2025, it’s clear that our outgrowth was impacted by EV programs that we booked several years ago. As you mentioned, the volume of many of these programs, at least in the Western world and specifically this market, has been lower than expected. I would expect this dynamic will continue into 2026. I can tell you though, we’re not satisfied with that outgrowth that we’re seeing in 2025. What I am pleased with is our booking strength. We referenced 17 bookings that we’ve shared with you. It’s just a representative of the strong booking year we’re having. I expect these bookings to support our midterm goal for our foundational and E product businesses to outgrow their respective markets. We will start to see the benefit of that in the top line in 2027 and beyond. Okay, great. Thank you.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: As a follow-up, wanted to ask.

Joe, CEO, BorgWarner: On the capital allocation, and I know you talked about the M&A.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Framework before, but how are you in the interim thinking about, and I know you’ve done some share repurchases, is there opportunity, especially with the strength in your free cash flow, to accelerate the share repurchases, or are you just sort of opportunistically waiting for M&A activity and.

Joe, CEO, BorgWarner: If not, then you’ll pursue share repurchases. Thank you.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Yeah, thanks for the question, Dan. First, I wanted just to reemphasize Q3. Really happy about the strength of our balance sheet. Currently really pleased with the $136 million that was returned to shareholders in the quarter: $100 million in share repurchases, $36 million in dividends. As we look into the fourth quarter, we’re expecting a similar level to be returned to shareholders, right around that $135 million mark. Taking a big step backward, we’re going to return $420 million to shareholders this year. I think we’re finding the right balance. Our plan to return $135 million in the fourth quarter, but also just returning $420 million allows us to not only take advantage of share repurchases and dividends, but also have the firepower that we need when an organic investment presents itself.

Joe, CEO, BorgWarner: Thank you.

Asia, Conference Specialist: The next question comes from Emmanuel Rosner with Wolfe. Please go ahead.

Joe, CEO, BorgWarner: Great. Thank you so much.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Good question on the free cash flow.

Joe, CEO, BorgWarner: Good to see a large improvement in guidance. Seems like about maybe half of it comes from lower CapEx. Apologies if I missed it, but what are the drivers of the lower?

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Yeah. First, I want to congratulate our team. We’ve delivered over $700 million of free cash flow through the first nine months. That’s great to see. You did reference it. 3% of sales is our current CapEx number for the first nine months. That’s lower than we’ve traditionally seen. I think our teams are doing a great job of effectively managing our capital. Where we have underutilized equipment, we’re using it. That’s a great trend that we’re seeing. When we look at the full year, CapEx should come in right around 4% of sales. That’s lower than we’ve been historically. We’re usually in that 4.5% to 5% range. That’s what we should expect as we move into 2026 and beyond.

Joe, CEO, BorgWarner: Thank you.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: I just wanted to follow up.

Joe, CEO, BorgWarner: On the earlier question around the outgrowth and on the go forward basis, it sounded like from your comments, a.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: lot of the recent wins will support.

Joe, CEO, BorgWarner: A return to more outgrowth in 2027 and beyond. I think in 2026 you have some.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Of the more recent trends continue, can you maybe speak a little bit about sort of like the puts and takes?

Joe, CEO, BorgWarner: I understand for 2026 some of these old EV programs and some of these volumes coming down and cancellation. Are there any positive offsets, I guess, on the, on the I side either, you know, programs that are continuing for longer or where the volume can now be higher than previously anticipated? Yeah, as you mentioned, we do expect a little bit of overhang into 2026, but with all the new bookings that we’ve been announcing across the entire portfolio, we do expect that to contribute to our top line in 2027 and beyond. What can we expect in 2026? I want to reference back to some of the awards we had earlier in the year, which included some extension of programs. It included some uplifts in addition to new programs, including Conquest.

There’s still a very strong demand for our combustion products in the market and especially in North America. We feel we’re in a great position. Thank you.

Asia, Conference Specialist: The next question comes from Mark Delaney with Goldman Sachs. Please go ahead.

Joe, CEO, BorgWarner: Yes, good morning. Thank you for taking my questions and congratulations on the good 3Q results. I was hoping first you could double click a bit more on what you’re seeing with respect to the Nexperia chip situation and if you could speak a bit more on any direct exposure BorgWarner has with its own sourcing to that chip company. I think you said you assumed some degree of negative impact to industry volumes in the fourth quarter, if I understood that correctly. Could you be potentially a bit more specific around how much incremental context conservatism you’ve included from market factors from Nexperia? Yeah, I’ll take the Nexperia topic. As you know, Nexperia had some incidents in Europe and in China. Although we haven’t shut any customers down, we do expect there to be some shutdowns based on this, especially in Europe and China.

We’re managing it well, like we have in the past crisis for semiconductor topics. We’ve reflected what we know in our full year guide. We’ll continue to manage it as we learn more and find ways to mitigate it. Does BorgWarner have its own direct exposure or is this more about just broader market effects? It’s both. We have exposure to it directly where our teams are working to secure product on the open market through spot buys, but also find other mitigating ways to make sure it doesn’t impact our customers. There is a broader market exposure, as you mentioned, both in Europe and China. Okay, my other question is just on the non-automotive business which you spoke about being 17% of revenue. You spoke on some of the opportunities such as in industrial and data center.

I was hoping you could maybe speak on the trucking business and on highway. There’s been some pretty weak numbers for the industry, especially with Class 8 in North America. Maybe speak a bit more on what you’re seeing in the Class 8 trucking market and anything assumed from that in your outlook for the fourth quarter and thoughts on the go forward potential? Thank you. Yeah, as you mentioned, that market’s been soft, especially in this country. If I step back and look globally, those CV and off-highway markets, they’re roughly flat. You do have some choppiness depending on which market you’re playing in. All that knowledge is fully into our full year guide. We don’t expect a lot of noise by year end in those markets. Thank you.

Asia, Conference Specialist: The next question comes from Alex Porter with Cypress Handler. Please go ahead.

Joe, CEO, BorgWarner: Hi guys.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Great job, McNally.

Joe, CEO, BorgWarner: I guess I have a couple higher level questions. You talk about stranded capital with EV programs going away and this. Obviously you guys have been able to manage this really, really well. That’s not apparently the case for everyone. Potentially smaller suppliers upstream of you. To what extent does that impact you? Could it impact you from a supply chain sort of reliability standpoint if some of your upstream suppliers, tier 2, tier 3 type players, experience financial difficulty and I guess a follow on to that if something like that occurs. Is that a potential M&A opportunity for you guys if you have sort of motivated sellers on the upstream or is that something you’re not thinking about? Yeah, as you mentioned, our teams have been really good about redeploying some of the stranded capital we had and that’s resulting in our lower capital expenditures this year.

There are always disruptions in the supply base due to capitalization of the tier 2s and tier 3s. We have dedicated teams that manage that on an ongoing basis. We don’t see anything out of the ordinary that would take us off our plan. It’s something we have to continuously monitor. Obviously with volume strong still in most of the markets, we don’t anticipate any new or major issues here, but as they pop up, that’s our job to manage those. Okay, perfect. I guess one final question on China. Good to see this continuing alignment with Chinese domestic players. Presumably some of that business is in support of those companies’ objectives to go global with their own brands. I’m curious to hear what you think in terms of the net impact to a company like BorgWarner.

It’s exciting to talk about new wins, new bookings with companies like that, but presumably if they’re going to Europe, they’re going to South America, they’re going elsewhere and winning share, they could potentially be winning share from your existing European or North American or Japanese OEMs. Does it end up being a wash for you? Is it a net positive headwind? How do you think about basically Chinese customers going global? Thanks. Yeah, maybe it’s important to mention 20% of our sales are in China and out of those sales, 75% are with the Chinese domestics. We’re a little bit overweight with the domestics, which puts us into a really strong position with them as they go global. You know, what we’re seeing is some of the products that we’ve mentioned, like the 7-in-1 integrated drive module that we’re launching with a leading Chinese OEM.

This is not only going to make a difference in China, but we expect these types of technologies will enable us to support them as they go to Europe, South America, Brazil. We think we’re in a great position with the locals. For us, we don’t tend to think too much about customer mix. It’s actually one of our strengths. There will be winners and losers. As I mentioned, we’re in a great position with the leading Chinese OEMs, and these are the ones that are looking to do more export and more localization as they grow in those markets. Great, thanks a lot.

Asia, Conference Specialist: The last question comes from Edison Yu with Deutsche Bank. Please go ahead.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Hey, thanks for squeezing us in.

Joe, CEO, BorgWarner: Just one topic wanted to ask about.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: You did announce this Holon Urban.

Joe, CEO, BorgWarner: Vehicle wind and I’m wondering if you can provide a little bit more context around that. Either the lifetime volume, the kind of content level this kind of award would be worth per vehicle, any context would be great. Yeah, no, thanks for the question. I mean, we’re really excited that our battery technology is finding its way into some of these new use cases, especially around autonomous driving. Long term, we feel autonomous driving will continue to grow in the market, especially in this type of use case that Holon is using it for. We’re not ready to share yet the sales volumes or revenues associated with that. We do see it’s going to go into production not too far in the future, so we’re excited about that. Any sense on the content per vehicle? I know you’re not sharing the volume.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: How much more content this would.

Joe, CEO, BorgWarner: Be compared to normal. You could probably do some backward math. We announced that it’s over 100 kilowatt hours of, you know, content per vehicle using the NMC cell technology. That might be something we can share with you offline. Off the top of my head, I don’t have that number.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: Great.

Asia, Conference Specialist: Thank you.

Patrick Nolan, Vice President of Investor Relations, BorgWarner: With that, I’d like to thank you all for your great questions today. If you have any follow-ups, feel free to reach out to me or my team. With that, you can go ahead and conclude today’s call.

Asia, Conference Specialist: This concludes the BorgWarner 2025 Third Quarter Results Conference call. You may now disconnect.

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