Q1 2024 Dana Inc Earnings Call

Participants

Craig Barber; Senior Director of IR & Strategic Planning; Dana Inc

James Kamsickas; President & CEO; Dana Inc

Timothy Kraus; Chief Financial Officer, Senior Vice President; Dana Inc

Colin Langan; Analyst; Wells Fargo Securities, LLC

James Picariello; Analyst; BNP Paribas Exane

Joseph Spak; Analyst; UBS Investment Bank

Trevor Young; Analyst; Barclays Bank PLC

Presentation

Operator

Good morning, and welcome to Dana Inc. First Quarter 2024 Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today. Both the speakers' remarks and Q&A session will be recorded for replay purposes. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in again, it will be a question-and-answer period after the speakers' remarks, and we will take questions from the telephone only to ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers limit themselves to one question at a time. If you would like to ask an additional question, please return to the queue at this time. I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Greg Barber. Please go ahead.
Mr. Barber.

Craig Barber

Thank you, Regina, and good morning, everyone on the call. Thanks for joining us today for our first quarter 2024 earnings call. You'll find this morning's press release and presentation are posted on our investor website. Today's call is being recorded and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied or rebroadcast without our written consent.
Let me remind you that today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from those suggested by our comments. Additional information about the factors that could affect future results are summarized in our Safe Harbor statements found in our public filings, including our reports to the SEC.
On the call this morning are Jim Kamsickas Chairman and Chief Executive Officer; and Timothy Cross, Senior Vice President and Chief Financial Officer. Jim?

James Kamsickas

Good morning and thank you for joining us today. Please turn with me to page 4, where I will discuss the highlights from the first quarter of 2024.
Starting on the left side, I'm pleased to report that Dana achieved strong sales in the first quarter of $2.7 billion, a $91 million increase over the prior year, driven by higher customer demand. The roll-on of new business backlog, including traditional ICE E hybrid and EV programs plus market share gains.
Adjusted EBITDA for the quarter was $223 million, up $19 million, driven by the strength of Dana's core business and operating system execution, which is driven by the contributions of every person and resource in the company to achieve efficiency improvements across all aspects of the organization.
Next, free cash flow which is normally used in the first quarter due to seasonality was a use of $172 million. Notably, this was a $118 million improvement over the prior year, which is reflective of multiple working capital improvements and lower capital expenditures.
Moving to the upper right of the slide under the key highlights, consistent with the past several quarters. Company-wide efficiency improvements again drove strong profit growth. As stated on the page, Dana achieved a 39% conversion rate on traditional organic sales in the first quarter. This performance is well above our historical conversion for the first quarter and positions the Company on a strong trajectory to achieve our full year targets. Achieving this level of progress is a result of very cohesive and talented Dana team systematically driving continuous improvement and synergies across all functions, geographical regions, products and end markets.
Moving to the center right of the slide, demand levels remain relatively stable across most of our end markets. And the Dana team continues to methodically and consistently grow the business.
Lastly, with efficiency improvements on track mobility markets remaining relatively stable and stronger working capital performance. Our financial outlook remains on target, and this led to us led us to raise our full year free cash flow outlook to $75 million at the midpoint in the range of 50% increase over our prior guidance. Tim will walk you through this and all other financial details and updates later in the presentation. Please turn with me to page 5 for the outlook on the business in environment for this year. As we stated, we anticipate Dana's overall business environment to continue improving due to first further stabilization of the customer production schedules as their supply chains continue to normalize.
Second, Dana's continued execution of cross-company efficiency actions. And third, the continued launch of new and refresh programs that are coming online, which drive profitable growth.
Beginning on the left side of the slide, greater stability in customer production has resulted in lower production cost, improved productivity and greater efficiency across all areas of the enterprise.
Moving to supply chain, net commodities are still expected to be a headwind to sales and profit for the remaining of the year. Steel prices have declined from the peak and are projected to be mostly flat compared with 2023. As input costs decline, we see reversal of commodity recoveries with customers driving the headwind.
Dana has a number of refreshed Conquest and new business growth by 2024, which is a contributor to driving profitable growth. This growth is well balanced across mobility markets includes market share gains in our commercial group, which, of course, require short term launch costs, unfortunately, are partially offsetting lower industry volumes in that segment. Overall, we're experiencing lower launch costs in 2024 as the Company has returned to a much more normalized number of new program launches this year compared with the unprecedented quantity and complexity of launches, the team very successfully executed throughout 2023.
Moving to the right of the page, let's take a look at our end market outlook, where we expect ag to be down compared with last year. And we're seeing some further softening in the market. Demand for construction and mining equipment should continue trending somewhat flat compared to last year, though we're watching these end markets closely as orders can shift rapidly. We continue to see light vehicle full frame production normalize and volumes trending up by low single digit percentages as customer demand remained stable for the key recently refreshed vehicle platforms in production after several years of growth, we still anticipate the market for heavy vehicles to be lower compared with last year, although we are seeing a slight improvement in third party production estimates.
Moving to the bottom of the slide, the key takeaways that we are seeing across our injury industry show cost inflation moderating despite labor cost increasing globally and we and production schedules continue to stabilize, which is driving overall improvements in production efficiency.
Lastly, while the light vehicle market overall is certainly navigating a period of electric vehicle demand fluctuation for current EV programs.
Overall, Dana is only marginally impacted because one most of the recent EV volume pullback is on passenger cars, which of course, Dana largely does not participate as we are principally light truck, commercial vehicle and off-highway mobility supplier.
Two, our product processes and equipment design activities over the past several years have positioned our E. mechanical electrodynamic components and need thermal assets to be quite flexible across vehicle types and mobility markets, thus enabling Dana to flex and optimize our human and equipment capital. If production timing and or volume changes occur. Three, the majority of our announced slate vehicle EV programs do not launch for another few years, allowing Dana to adjust capital equipment spending if appropriate, as you know, repositioning and transforming Dana was from a purely mechanical company to an energy source agnostic business was incredibly challenging, but strategically critical, especially when doing so simultaneously with the COVID crisis. However, today we can clearly see that was all worth. It is Dana cannot only Flex's spread its resources across numerous vehicle architectures, but we have also increased our content per vehicle potential from 3 to 5 times based on the vehicle configuration. What this means in the short term is that we expect the EV sales to be approximately $1 billion this year, and we are already generating positive contribution margins and remain on target to achieve positive EBITDA margins next year.
Let's turn to slide 6, where I will share some exciting news regarding the major industry award for Dana. We're very excited to share with you that Dana was awarded. The ninth was awarded our ninth Automotive News PACE Award at the 29th annual pace ceremony held just last night in Detroit, Michigan. Dana, once again, took home our industry's most coveted technology and product innovation award for our electro mechanical infinitely variable transmission system, which is a multi-mode drive line system solution that incorporates the Dana power split transmission with the integrated high-voltage motors and controllers with proprietary proprietary software that manages the entire drivetrain system also includes smart lubrication and actuation driven by Dana's low-voltage motor and inverter.
This first-of-a-kind solution differs from the traditional transmissions in that it can operate in and automatically shift between engine engine only hybrid and battery only mode. It provides many real-world benefits for vocational vehicles like lower fuel usage, noise and emissions, but offers the safety and redundancy of a hybrid vehicle to ensure consistent power. This is of ultimate importance in an emergency vehicle. To achieve this. We work closely with our customer in this case, Oshkosh to create the multi-mode power split solution. In addition, to the vehicles already in service. Oshkosh Oshkosh recently presented their peers Volterra truck to get together with our system at the Fire Department Instructors Conference or SDIC. in Indianapolis earlier this month, and it was received with great interest. More than 36,000 fire and rescue professionals representing 67 different countries attended the event Oshkosh's also announced recently announced that Paris Le Bourget airport. We'll be receiving units with our system, expanding the market into Europe.
The exciting thing about Dana's EMIB system is it is a whole system approach that can be rock can be replicated across numerous different product lines and mobility markets. And it's another example of Dana's ability to collaborate with our customers to meet their unique and specific needs regardless of powertrain configuration, illustrating why our complete in-house capability is significant differentiator for Dana.
Let's move to the next slide where I can talk about a variety of recognitions that illustrate Neenah's ethical Foundation, customer focus and technical expertise. And as with most years, we'd like to provide you an update on industry and customer awards. We present this information because of significant interconnection and value creation that occurs by operating a company with the highest level of ethical standards, maintaining an intense commitment to customer satisfaction and ensuring that a company continuously innovates and provides differentiated product technology for customers. Dana will not operate our Company any other way, I would like to take a few minutes to communicate some representative examples in each of these areas of importance in which Dana has been recognized over the past 12 months.
First, in the area of ethics and integrity, Dana was again recognized as one of the world's most ethical companies by Ethisphere. We are one of only 136 companies spanning 20 countries and 44 industries to be recognized were also honored to be ever to have been recognized by Newsweek as one of America's Most Responsible Companies.
Second, in the area of customer satisfaction, as you can see from the numerous customer logos on the page, we're honored to receive customer recognition across all mobility markets, geographical regions and from many of our OEM customers. But as the change of this year, we've also included recognition from non-OEM customers such as Supplier of the Year award from ideal lease, Inc. one of North America's premier full-service commercial truck leasing rental and maintenance companies. Additionally, we earned the supplier Partnership Award from fleet Pride Inc., which is America's largest independent distributor of aftermarket, heavy duty parts and services. We are also very fortunate that our customers recognize our commitment and for that reason continue to select Dana as a preferred supplier partner.
Third, in the area of technology and innovation. In addition to the base award I just announced, Dana was honored with the heavy duty trucking Magazine's 2023 top 20 products award for its Spicer Electrified Cero eight e-axles our full suite of single and tandem e-axles or does the design for full-scale adoption of both battery electric and hydrogen fuel cell applications across a wide variety for Class seven and eight vehicles.
There's a lot to be proud of here. What was most gratifying is how all the women and men of Dana are. So amazingly committed to running the company the right way.
Thank you for your time today. I'd like to turn it over to Tim, who will walk you through the financials.

Timothy Kraus

Thank you, Jim, and good morning. Please turn to Slide 9 for a review of our first quarter results. Sales were $2.7 billion, $91 million higher than last year, driven by strong end market demand for renewed vehicle programs and market share gains in commercial vehicle. Adjusted EBITDA was $223 million for a profit margin of 8.2%, $19 million and 50 basis points better than the previous year, primarily due to improved efficiencies aided by more stable customer order patterns and cost improvements across the entire company.
Net income attributable to Dana was $3 million in the first quarter of 2024 compared with $28 million last year. The difference is entirely due to the previously announced divestiture of our noncore hydraulics business from within our off-highway segment. This business is classified as held for sale and a $29 million loss was recognized to adjust the carrying value of net assets to fair value less estimated cost to sell. This transaction also triggered a $7 million tax valuation allowance in Europe.
On slide 9, you will see that $29 million above EBIT and the $7 million is on the income tax line. The combined impact of the transaction was a loss of $0.25 per share. The sale is expected to close during the second quarter of 2024.
And finally, operating cash flow was a use as normally the case in the first quarter of $102 million. This was an improvement of $68 million over the first quarter last year due to lower working capital requirements Please turn with me now to slide 10 for the drivers of the sales and product sales and profit change. The figure on the left, traditional and organic sales were $75 million higher, driven by increased demand for newly refreshed vehicle programs and market share gains in our commercial vehicle segment, partially offset by lower demand in agriculture end market of our off-highway sales.
Incremental adjusted EBITDA on organic sales growth was $29 million. This strong conversion was due primarily to our improved cost efficiencies across the entire company and yielded approximately 90 basis points benefit to margin in EV organic sales growth was $23 million, driven by increased sales for battery cooling products.
Adjusted EBITDA was $4 million lower for a 20 basis points margin headwind, higher engineering and related program investment for EV platforms drove the lower profit, offsetting the positive contribution margin of the higher sales. Foreign currency translation had minimal impact as it increased sales by $3 million and lowered profit by $1 million with no margin.
Finally, due to falling commodity prices, commodity cost recovery in the first quarter was $10 million lower than last year. The profit benefit of lower commodity prices was offset by the timing of cost mechanisms within the commodity recovery agreements with our customers resulting in profit being lower by $5 million for 20 basis points decrement to margin.
I will now turn to slide 11 for the details of the first quarter free cash flow. Free cash flow was a use of $172 million in the first quarter, which is $118 million better than the first quarter of 2023. Higher profit of $19 million, partially offset by the increase in net interest compared to the first quarter of last year due to higher rates and the timing of interest payments driven by last year's refinancing actions. Cash flow from working capital requirements were $82 million improved from last year as we remain focused on working capital efficiency, especially inventory and receivables management.
Finally, capital spending to support new business backlog was $50 million lower than last year, driven by a more normalized loss launch cadence this quarter.
Please turn with me now to slide 12. For an update updated guidance for 2024. We are affirming our sales and profit outlook for this year, and we are increasing our expectations for free cash flow. We expect 2024 sales to be approximately $10.9 billion at the midpoint of our guidance range, an increase of $345 million over 2023 adjusted EBITDA is expected to be about $925 million at the midpoint of our guidance range, which is up $80 million from last year. Profit margin is expected to be approximately 8.2% to 8.7%, 50 basis points improvement at the midpoint of that range.
Building on the strong first quarter results, we now expect free cash flow to be approximately $75 million at the midpoint of the revised range, which is a $25 million increase over our prior outlook and $100 million increase compared to last year. The increased outlook is driven by improved working capital efficiency. Our GAAP EPS guidance remains unchanged at $0.60 per share. Note that our full year guidance already included the impact of the pending divestiture.
Please turn with me now to Slide 13, where I'll highlight the drivers of the full year. Expected sales and profit changes from last year.
Before we begin, you will note that we have added investors your item to the full year walk to detail the business that is that is held for sale and would have previously been shown under traditional organic. As I mentioned previously, the transaction was included in our original guidance in February, so there is no change to our total sales per profit outlook, beginning with organic growth for 2024, we now expect about $270 million in additional sales from traditional products through new business, moderate market growth growth and market share gains.
Adjusted EBITDA increase on traditional organic sales growth is expected to be approximately $140 million to higher profit and margin increase of about 110 basis points is a continuation of the improved efficiency and cost saving actions that we began last year. The anticipated increase in the stability and predictability in our customer order patterns and our more efficient operations are allowing us to convert our higher traditional organic sales at better than typical contribution margins.
We expect about $240 million of incremental EV product sales this year for a total anticipated EV sales of about $1 billion. The EV business contribute contributes positive profit. However, we expect the change in EBIT adjusted EBITDA to be a headwind of about $20 million this year due to continued investment in engineering and associated costs for new EV programs.
Our divestiture is expected to close in the second quarter and will lower sales by $55 million and profit by $5 million. Foreign currency translation on sales is expected to be a headwind of approximately $50 million with a profit impact of about $5 million, slightly more modest than previously expected.
Finally, our commodity outlook is expected to be a headwind to sales of about $60 million due to lower recoveries driven by falling steel and other commodity prices. We expect a $30 million profit headwind due to the true up in pricing governed by our to a commodity recovery mechanisms with our customers.
Lastly, please turn with me to Slide 14 for our outlook on free cash flow for 2024. We anticipate full year 2024 free cash flow to now be about $75 million. At the midpoint of the guidance range, we expect about an $80 million of from increased profit on higher sales net interest will be about a $35 million headwind due to higher interest rates and payment timing due to the refinancing that occurred in 2023.
Working capital is now expected to be lower use of about $50 million, which is the driver of our $25 million improvement over our prior guidance and $35 million better than last year and capital spending to support our sales growth in technology is expected to be about $450 million this year, which is $50 million lower than last year as we flex spending to match customer program timing and thank you for joining us today. I will now turn the call back over to Regina, and we'll take questions at this time.

Question and Answer Session

Operator

I'd like to remind everyone in order to ask a question, press star, followed by the number one on your telephone keypad. Our first question will come from the line of Colin Langan with Wells Fargo. Please go ahead.

Colin Langan

Thanks for taking my question. Can you just clarify the $0.25 drag from divestitures in earnings that was actually contemplated in the original guidance of $0.60 or?

Timothy Kraus

Yes, you can't miss, Tim, it was we didn't call it out specifically because we hadn't announced and if you remember that the timing was a little wonky in the first quarter, we ended up announcing it the following day was in the Q we filed late in the day, but we didn't want to muddy the waters in the first quarter, but we did include it in the in both of the walk. But as I mentioned, it was in the traditional organic column and some and it was included in the EPS, our guide that we gave.

Colin Langan

Got it. Sir, when I think of this year's numbers, I know you're not giving adjusted. I mean this is very one-time in nature so the non-repeat guidance for the year is more like {$0.85}

Timothy Kraus

Correct? Absolutely.

Colin Langan

Sure. Just as a follow-up, the the off-highway margins held up very good. If I look at the walk, organic sales were down $46 million, but the organic EBITDA impact was positive $6 million. And what's really driving that? Why how is the lower sales and how sustainable is this? And how should we think about it trending through the year, considering it seems like the most of those end we're going to be flat to slightly down for the rest?

Timothy Kraus

Yes, so on. So it's two drivers. One is mix. So we're losing some more Ad sales and gaining and others. And so that mix ag is typically our lowest margin sector within that segment. And the other is really that the teams did a great job on flexing cost and taking cost out of the out of the plants and out of the BU to so to adjust to the lower sales environment.

Colin Langan

All right. Thanks for taking my questions.

Timothy Kraus

Thank you.

Operator

Your next question comes from the line of Noah Kaye with Oppenheimer. Please go ahead.

Hi, this is Lydia on for Noah. Thanks for taking your question on. First, could you discuss the moving parts around the traditional core outlook versus prior guidance, it looks like stronger organic sales, lower incrementals. Could you just give us some color on the drivers?

Timothy Kraus

Yes. So some of it is that we've pulled out the divestiture out of it. And then the rest is really just a driving driving difference in mix that's coming through that line.

Got it. And then I guess for my follow-up, could you discuss overall demand trends for the EV programs you're on and how you're expecting commercial EV sales to ramp through the balance of the year?

Timothy Kraus

Sure. So obviously, we're continuing to watch this there. They're pretty much in line with where we had them, which is why you're not seeing a large change in our outlook. And obviously, there's some softness in EV demand, and we're seeing that across the end markets.
But again, we had some of this baked into our plan. So right now, we're on track for the year.

Operator

Your next question will come from the line of James Picariello with BNP Paribas. Please go ahead.

James Picariello

Good morning, everybody. Just want to ask on the commercial vehicle segment. Tom, what your expectation or what your visibility is into the remainder of the year, specifically around North America truck production?
And what's the influence of your ramping EV volumes might have on the profitability for that segment?

Timothy Kraus

Sure. So so see the North American volumes. So our Class five to Class seven were seen 245 to 255 for the year. And on the heavy-duty side on the Class eight, the 300 to 310. So still pretty healthy overall, um, and then in terms of EV, so we continue to see sales, obviously in that segment down a little bit as customers react to the changing landscape and end customer demand patterns. But we're adjusting to it and continue to deliver the products that our customers need and to deliver what they need for their customers.

James Picariello

Got it. And then just on on light vehicle and what's what's your view on the handful of key programs that Dana is on in terms of the build schedules for this year and how inventory levels at dealers are trending for those key programs? Just your high-level color on the light vehicle segment?

James Kamsickas

Good morning, James, it's Jim. I don't have a lot to add that you probably don't already know given some of the OEM announcements over the last week or so. But from a high level standpoint, remember that most of our programs I mentioned in my prepared remarks, most of our line stuff is going to be more in the out years for because basically fulfilling some comes later. But as it relates to our programs with Mary Marriott came out with last week in terms of I would argue pretty pretty bullish on how things are going over there. We see that coming through, as you know, the as supplier of the Ultium battery cooling, so on and so forth. I think volumes taken other programs such as the Ford Lightning a pretty consistent with what they've been communicating at Ford. So I would say, right down the middle of the fairway to use a golf analogy to what you've seen or heard come from the OEMs.

James Picariello

Just have it on the ice on the asset?

James Kamsickas

I said again real estate, I would say stable from there. So I wish I had a better word for it, but it's really just stable. I think we've seen I think we've all seen there's different. We use obviously the days and days on hand calculations like many people do. And there's been some ebbs and flows on that. But from our production outlook, as it relates to material releases coming and so on so forth, we see a pretty stable outlook.

James Picariello

Akshay.

Operator

Our next question comes from the line of Joseph Spak with UBS. Please go ahead.

Joseph Spak

Thanks. Good morning, everyone. I just want to make sure I'm going to make a call on this question that I have a sense for the moving pieces versus sort of just how you bucketed things, I guess prior so before the divestiture was in the guidance, but it wasn't broken out. So So then if we just look at sales now, if we sort of add investors back into attrition, organic, you get 215 versus 240 prior. So organic is lower interest of business, but then the convert, if you do the same thing on EBITDA, the conversions actually higher. So I guess I just wanted us and the conversion that's that's performance or or some segment mix related factors that are driving that?

Timothy Kraus

Hey, Joe, it's Tim. It's both. So obviously, there's some mix in there that the easiest one to think about is ag, right, with ag being further down, right? We're picking it up and then it is between segments as well. But but yes, there's also performance in there as we continue to drive the efficiencies and performance across the Company.

Joseph Spak

Okay. And the lower the lower organic is what you mentioned earlier about some softening in ag?

Timothy Kraus

Yes, yes, it's a big chunk of it.

Joseph Spak

Okay. And I'm sorry, just to clarify you that you're assuming this is Tom pay a second quarter closing, so that $55 million top line impact is a back half number effectively, correct?

Timothy Kraus

Yes, tobacco.

Joseph Spak

Okay. And just on power technologies in the quarter, I think revenue and EBITDA both looked a little bit stronger than we thought it looks like in your walk in with EV driven. So is in I think as you're maybe we were just alluding to, that's I think the one area where you do have some light vehicle EV exposure. So can you just talk about how you expect that to progress through the year?

Timothy Kraus

Sure. So you're talking about on the investment side or just on the current production side?

Joseph Spak

Well, I guess I guess just the EV business within Power attack both on a revenue and EBITDA basis?

Timothy Kraus

Yes. So we see it continuing to grow to be stable to up from ours is our biggest program is the is the beds three. So the encouraging remarks from from GM, they had a good fourth or first quarter around some EV and battery production. So that's obviously reflected when you look at the power tech walk on EV, we continue to see I'm spoke of better than last year, so up on in terms of volume. And we think that'll they'll convert through on the bottom line.

Joseph Spak

And just because you're providing to the pack and obviously, they've had some some challenges on that pack. And I guess really a lot of automakers had is that a longer lead time shipment and revenue for you versus like if we're looking at production of heavy vehicles or <unk>? Or how should we especially sort of relative to maybe some other products in that in that business?

James Kamsickas

Very good question. This is Jim. Good morning. This is Jim. That's a really good question. I know the lead times aren't any longer I would call it is it is very much precision stamping and precision Fluid Management fluid, you include engineering that SaaS side of it, but it doesn't extend the lead times. So very good question. It's not tied to the battery like we like Rob's associated with.
So to further Tim's point, though, we did that construct our business or the way we've designed engineered the product and therefore also established our processes and equipment. They're quite flexible for not just the battery cooling that we tend to talk about on calls such as this, but also our electronics cooling.
So just for the audience to consider, there's more to that business. You're mentioning electrification. So I'll talk about that. But if you think about all of the electrification cooling that's required with IGBTs and other things associated with inverters. So on and so forth. So we're flexing the capital. And like Tim said, and I think we've put into the numbers, we feel like it's relatively stable from an outlook this year.

Joseph Spak

Okay.
Thanks for the color.

James Kamsickas

Thank you.

Operator

Our final question will come from the line of Dan Levy with Barclays. Please go ahead.

Trevor Young

Hi, Trevor Young on for Dan today. Thanks for taking the questions. First, I guess I wanted to ask just a little bit more clarity on what you mean here with the what's going on with the TruPS around commodities. I guess just conceptually, it's a little confusing to me that the lower lower steel prices are leading to a bigger commodities tail. When I get that it would reduce recoveries. But I'm just in in general, is that the contracts that you're in that are holding your steel prices higher than spot rates would imply? Or is there anything else going on there that I'm that I'm missing fix?

Timothy Kraus

Yes. So there's two things you got to remember when you think about how the commodity mechanisms work, typically, we're only we're only covered for 75% so on the way up, we tend to get hit on the way down. We tend to recover some of that and then there's a lag in that. So as we see commodity prices come down, we tend to have and these tend to be three to six months difference between when we have to give that back to the customers. So you're seeing a combination of the two, which is why we're having higher givebacks right now on the top line. But you're not seeing all of that flow through on the bottom line. So it's a combination of just the timing of it and then the fact that we're only giving back 75% of those commodity costs.

Trevor Young

Okay. That's helpful. Thank you. And then as a follow-up, you on your CapEx guide for $450 million in the year, assumes that $50 million year over year decline, it looks like you fully realize this in 1Q. And so I guess I was curious why we shouldn't expect the CapEx spend declines in 1Q that you noted to be related to lower launch costs? Why we shouldn't expect that to continue throughout the year, at least to some extent?

Timothy Kraus

Yes. Yes. I mean so it's it's obviously a lot of it has time is timing both on what we spent last year relative to the programs, but but also how the program timing and payment schedule. Whereas this year, I wouldn't read too much into the full $50 million being already realized because there's a lot of timing elements in there from quarter to quarter.
So you can appreciate we're still we're still comfortable.
We're still comfortable with the $450 million for the full year.

Trevor Young

Got it. Thanks.

Yes.

James Kamsickas

Okay, Bridgepoint emphasis, go ahead and wrap it up. So I'll wrap it up very briefly today. And first of all, as I always do, thank you very much for your time and attendance. And for your time, I would say that to use a sports analogy, sports analogy, it's a four quarter game. We just got through the first quarter. I think the collective team of Dana did an excellent job getting off to a fast start or at least a good start. And that doesn't happen by accident it happens by having really strong business and operating systems that you allow your systems to run your business and then you go execute. You heard, as you've heard me recently, and many other times say it's all about company-wide efficiencies and continued benefits from customers running more stable schedules, having differentiating and eTag technology and a focus on your customer. It continues to execute on that, and that leads to the.

Operator

Ladies and gentlemen, that does conclude today's call, and thank you all for joining. You may now disconnect.