Good morning, everyone, and welcome to the Q4 and Full Year 2023 Garrett Motion Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today's event is being recorded. At this time, I would now like to turn the floor over to Eric Burge, Head of Investor Relations. Please go ahead.

Thank you, Jamie. Good morning and welcome everyone. Thank you for attending the Garrett Motion fourth quarter and full year results conference call. Before we begin, I would like to mention that today's presentation and earnings release are available on the IR section of the Garrett Motion website at investors.garrettmotion.com. There you will also find links to our SEC filings, along with other important information about our company. Turning to slide two. You will note that this presentation contains forward-looking statements within the meanings of the Securities and Exchange Act. We encourage you to read the risk contained within our filings and with the Securities and Exchange Commission. Become aware of these risks and uncertainties in our business and understand that forward-looking statements are only estimates of future performance and should be taken as such. The forward-looking statements presentation management's expectations only as of today and the company disclaims any obligation to update them. Today's presentation also includes non-GAAP measures to describe how we manage and operate our business. We reconcile each of these measures to the most directly comparable GAAP measure and you're encouraged to examine those reconciliations in the appendix to the press release and the slide presentation. Also in today's presentation and comments, we may refer to light vehicle diesel and light vehicle gasoline product by using terms diesel and gasoline only. With us on today's call is Olivier Rabiller; Garrett's President and Chief Executive Officer; and Sean Deason; Garrett's Senior Vice President and Chief Financial Officer. I will now hand the call over to Olivier.

Thank you, Eric, and thanks everyone for joining Garrett's fourth quarter and full year earnings conference call. I will begin today's remarks on slide three. I am very pleased to report today that Garrett delivered a great performance in 2023, achieving full year results above midpoint guidance across all financial metrics with record net sales of $3.9 billion and recorded adjusted EBITDA of $635 million. Our full year adjusted free cash flow came in at a very robust $422 million at a conversion rate of 66% on full year adjusted EBITDA. Our fourth quarter financials contributed to the full year results with net sales of $945 million, up 5% from the same period last year, and adjusted EBITDA of $145 million and adjusted free cash flow of $137 million. I would like to thank the entire Garrett team for their contributions and dedication to our customers and operational excellence, which continues to enable us to perform in all economic cycles. Once again, our very strong cash flow generation in 2023 has allowed us to execute a thoughtful approach to capital allocation priorities. We simplified our capital structure to welcome new equity-holders, strengthen our liquidity position and flexibility, and return value to our shareholders through our share repurchase program. In 2023, we repurchased $213 million of common stock in addition to the preferred stock redemptions, while investing more than half of our RD&E into zero-emission technologies. We also meaningfully delivered by paying down $200 million of our term loan to bring our net leverage ratio under 2.2 times and finished the year with $829 million of liquidity. Garrett's continued exceptional financial performance and cash flow generation allows us to take a similar approach to capital allocation for 2024. I am pleased to announce that our Board has authorized a new $350…

Thanks, Olivier, and welcome, everyone. I will begin my remarks on slide five. Starting with reported net sales on the upper left-hand graph, you will see net sales for the last two years with Q4 2023 at $945 million, up from Q4 of 2022 by 5% on a GAAP basis and up 3% on a constant currency basis. This increase was driven primarily by ramp-ups of small engine gasoline applications, partially offset by lower sales of commercial vehicles. Moving to the upper right-hand side of the page, the increased sales translated into higher adjusted EBITDA in the fourth quarter of $145 million, up 4% or $5 million from $140 million last year. This reflects our continued strong productivity and operational execution net of unfavorable product mix I mentioned earlier. As a result, the adjusted EBITDA margin was 15.3%, down from 15.6% last year. And on the bottom left graph, we show the Garrett-generated positive adjusted free cash flow of $137 million in Q4 of 2023, up slightly from $132 million in Q4 of 2022. Compared to last year, this increase is driven by working capital efficiency due to stronger year-end collections, partially offset by higher tax, interest, and capital expenditures. We continue to see our adjusted free cash flow conversion to adjusted EBITDA trend above 60%, which is in line with our capital allocation framework. Turning to slide six. At the top of the page, we show our Q4 net sales bridge by product category, as compared with the same period last year. As mentioned, Q4 net sales were up 5% on a GAAP basis and 3% on a constant currency basis, reflecting an increase of $47 million over Q4 of 2022. Gasoline products were up 11% at constant currency, adding $39 million in sales. And gasoline products now comprise…

Thanks, Sean. Turning to slide 11. It was a great year and once again, we delivered strong financials in a challenging macro environment. We continue to strengthen our leadership position in turbo, once again, winning greater than 50% of the available business in 2023. Additionally, interest in our zero-emission technologies and applications continues to intensify with new series production and preproduction contract -- predevelopment contracts, awarded in Q4 across multiple regions and customers. We expect to maintain our strong financial performance once again in 2024, in a flat to down industry and have taken decisive productivity actions to control fixed costs and to adapt our highly variable cost structure to these environments. We also plan to return value to our shareholders through our new $350 million share repurchase program supported by Garrett's ability to constantly generate strong cash flow even in tough times. Thank you for your time and operator, we are now ready for the Q&A session.

Ladies and gentlemen, at this time, we'll begin the question-and-answer session. [Operator Instructions] Our first question today comes from Hamed Khorsand from BWS Financial. Please go ahead with your question.

Hi, good morning. Good afternoon as well. First off, could you just talk about the environment that you're going into? You talk about being flattish. Are you taking market share right now, what your expectations are there? And do you feel like there's any sort of inventory stocking or destocking happening that's also being reflected in your guidance?

So, Hamed, that's a very good question. Obviously, let me unpack a little bit what we mean by flattish to down. When we say flattish to down, we are referring to the light vehicle production worldwide. And I think we are very consistent in our forecasts with the consultants and from what I've seen from our peers reporting for the last few weeks, we are very consistent as well. In that environment, we are planning to have increased turbo penetration and increase our demand, which at the end is the reason why we are maintaining our revenue flat despite a forecasted growth of battery electric vehicle that is about 300 basis point, which also is very consistent with everyone into the industry since we have not seen yet into the predictions the impact of the so-called slowdown of battery electric vehicle. So, we are planning for 15% battery electric vehicle. Some people may say it's a bit aggressive at 15% or conservative depending on the way where you place yourself in the short term. But we'd rather plan like everyone for the timing and the results of all that is despite that expected growth on the EVs, we are having our share of the business that's growing. Yes, we are getting the share of demand gains.

Okay. Great. And as far as the battery electric goes, what is the Garrett's timing as to being able to generate revenue from there? I know you've been talking about it a lot more in recent quarters.

We have -- I think we have explained several times that we are planning to get to $1 billion revenue on zero-emission technology by 2030, which comprises of three technologies. The first one is on fuel cell compressors. So, it's for hydrogen fuel cell vehicle. It's not for battery electric vehicle, but these are zero-emission solutions as well. This is a business where we are already recording revenue. I think we've said that today that we are expecting about $20 million of revenue already on fuel cell compressors in 2024. The second technology is the high-speed electric motors coupled with a gearbox and inverter, which is a technology that is specific to us and unique to us with high-power density, where we have recorded already a number of predevelopment contracts. And obviously, there is a significant portion of that $1 billion, look, that is coming from that technology. And the last one is E compressors. The idea is to use centrifugal electric, high-speed electric compressor technology, that once again is unique to us, to provide a step change to our customers in terms of power and power density when it comes to the huge needs of coolings that you have for battery electric vehicle. So that technology once again will be applicable to a battery electric vehicle. And this is a technology where we have recorded again three more predevelopment contracts during Q4. So more to come. Today what we say is that we are confirming the trajectory that we had highlighted in October during our Investor Day.

Okay. One last question. What's the plan or allocation for free cash flows here? Is it going to do the same more about stock buyback versus debt, or any plans to reduce debt this year?

Yeah. We take a balanced approach to capital allocation. And as we stated before, first and foremost, we fund the business, which you see we're doing per our guide. And then second, we were looking to do a mix of deleveraging and share buyback. But that's subject to how the market develops and the year develops. But as you can see, we've got very good optionality and very robust cash flow generation. So, we have the ability to do both.

Okay. Great. Thank you.

Our next question comes from Michael Ward from Freedom Capital. Please go ahead with your question.

Thank you. Good morning, everyone. I just want to talk a little bit about your ability to adjust the shifting market trends. And also, as we look in the markets, hybrids are a bigger percentage of the European market. And how is the turbo content in Europe versus the U.S.? And then what impact does it have if you start to see an increased shift in the U.S. towards hybrids away from just strict ice engines?

So, Michael, that's a very good question. What we see in Europe is that the turbo penetration of that we have on hybrids is higher than the turbo penetration that we have on non-hybrid vehicle. So, you would expect the same to happen in the U.S., if there is more hybrids. Obviously, in the short-term, that should come at the expense to some level of BEV. So maybe that's an opportunity on that side. And at the same time, that's an opportunity for us for an increased turbo penetration. But more than the increased turbo penetration, it's also the increased level of technology that you have for the turbo on hybrid application which tends to be higher than what you have on non-hybrid application as well. So, it's higher turbo penetration and more technology.

So what type of -- when you look at the technology, what type of impact does that have on content? Is it a 20% to 30% increase in content per unit?

I think we published, by the way, recently the content per vehicle that we have on the different technologies. So, we can refer to that again. If we move to a variable geometry turbo charger, we are obviously increasing the content by a percentage. And then if we move to electric turbo charging or electric boosting, there is another increase that can even double the price of the turbo charging system.

Okay. And just as far as turbo penetration, I see good data on the U.S. market on where we are with turbos. And it's like 42%. How does that compare in Europe? And in Europe, you have a higher hybrid concentration, smaller vehicles. Obviously, driven by the higher gas prices in Europe, relative to the U.S. Do you have a kind of turbo penetration number for the European market and what it looks like relative to North America?

In Europe, we are between 85% and 90%.

Okay. It looks like if we start to go...

And if you look at the three regions that we are serving between -- just to make a shortcut between Europe, China and the U.S., the U.S. are lagging behind the two other regions. So the potential in the U.S. is huge.

Okay. And then in addition, you get the increase if you go to hybrids and presumably higher tech, so you get growth and then additional content. So, I'm looking at the right things.

Yeah.

Yes. You're looking at it. Absolutely.

Thanks very much.

[Operator Instructions] And ladies and gentlemen, I am showing no additional questions. I'd like to turn the floor back over to Eric Burge for any closing remarks. End of Q&A:

I want to thank everybody for the time you spent today reviewing our 2023 results and our outlook for 2024. And please contact me directly if you have any further questions. Thank you.

And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.