Second Quarter 2020 Earnings Conference Call August 6, 2020 NYSE: TEN
Safe Harbor Forward-Looking Statements This communication contains forward-looking statements. These forward-looking statements include, but are not limited to, (i) all statements, other than statements of historical fact, included in this communication that address activities, events or developments that we expect or anticipate will or may occur in the future or that depend on future events and (ii) statements about our future business plans and strategy and other statements that describe Tenneco’s outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. These forward-looking statements are included in various sections of this communication and the words “may,” “will,” “believe,” “should,” “could,” “plan,” “expect,” “anticipate,” “estimate,” and similar expressions (and variations thereof) are intended to identify forward-looking statements. Forward-looking statements included in this communication concern, among other things, future performance improvement plans; future financial and operating results; and other statements that are not historical facts. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from those described in the forward-looking statements, including the course of the COVID-19 pandemic and its impact on general economic, business and market conditions: our ability (or inability) to execute on our plans to respond to the COVID-19 pandemic and our previously announced Accelerate plan and to realize the anticipated benefits of these actions; our financial flexibility in addressing the impact of the COVID-19 pandemic; our ability to maintain compliance with the agreements governing our indebtedness and otherwise have sufficient liquidity through the COVID-19 pandemic; the possibility that Tenneco may not complete a separation of the Aftermarket & Ride Performance business from the Powertrain Technology business; the possibility that Tenneco will be unable to execute on its strategy and maintain compliance with the covenants in its Credit Agreement; the ability to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners; as well as the risk factors and cautionary statements included in Tenneco's periodic and current reports (Forms 10-K, 10-Q and 8-K) filed from time to time with the SEC. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Unless otherwise indicated, the forward-looking statements in this release are made as of the date of this communication, and, except as required by law, Tenneco does not undertake any obligation, and disclaims any obligation, to publicly disclose revisions or updates to any forward-looking statements. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its annual report on Form 10-K for the year ended December 31, 2019 and quarterly report on Form 10-Q for the quarter ended March 31, 2020. In addition, please see Tenneco’s press release issued August 6, 2020 for factors that could cause Tenneco’s future performance to vary from the expectations expressed or implied by the forward-looking statements herein and for certain reconciliations of GAAP to non-GAAP results. 2 TEN NEC O I N C . Q2 20 2 0 EAR N IN GS
Agenda Segment & Q&A Operations and Outlook & Balance Sheet Liquidity Update & Closing Q2 Review Review Comments Brian Kesseler Brian Kesseler Brian Kesseler Ken Trammell Chief Executive Officer Ken Trammell Interim Chief Financial Officer Non-GAAP Results: Please see the tables that reconcile GAAP results with non-GAAP results at the end of this presentation and in Tenneco’s financial results press release, which is incorporated herein by reference. EBITDA: EBITDA for purposes of this presentation means EBITDA including noncontrolling interests. 3 TEN NEC O I N C . Q2 20 2 0 EAR N IN GS
Operations and Liquidity Update Tenneco’s resilience through COVID-19 Safety and welfare of team members is top priority, including • Manufacturing facilities promoting team member health outside the workplace approaching more normal North America and Europe ramped up in May and June • operations China fully operational throughout the quarter • Value-add revenue sequentially improved across all segments • through Q2 Team responded well to adversity; Q2 decremental margin rate performance at 24% (3) YoY • cost savings are on track − Ex. temporary cost actions, decrementals would have been 500 to 600 bps better Structural cost savings building; more benefit expected in H2 • Liquidity of $1.37B at June 30, 2020 • Liquidity remains in a solid Confident in ability to support increasing customer demand through • position the next several quarters as production normalizes Good execution in quarter; prepared to handle potential demand uncertainty 4 Presentation footnotes available on page 22. TEN NEC O I N C . Q2 20 2 0 EAR N IN GS
Update on Cost Actions Accelerate+ program on track • Structural cost actions with long-term benefit • Continue to expect $265M annual savings run-rate by end of 2021 ‒ In 2020, $165M run rate savings by end of year with no expected change to the $150M cost to achieve • $250M working capital improvement expected; half in 2020 Q2 temporary actions taken to mitigate COVID-19 impacts • Q2 salary costs reduced at least 25% ‒ Programs in all regions (unpaid furloughs, net pay decreases, etc.) ‒ Executive leadership team reduced salaries 50-100% • Board of Directors retainer fees reduced 25% for the rest of 2020 Salary reductions continue into Q3 but at a reduced level of 10% to 20% Largely variable cost base; ~75% of Cost of Goods Sold is materials and labor 5 TENNECO INC. Q2 2020 EARNINGS
Continuing to strengthen the leadership team Kevin Baird named chief operating officer, adding automotive industry, global operations management, and private equity background to the deep experience and strength of our executive leadership team. Proven track record of delivering strong top and bottom • line results, driving cash flow and increasing return on invested capital Effective August 3, 2020 • Matti Masanovich appointed chief financial officer, bringing original equipment and aftermarket experience including a history of driving turnaround initiatives for private equity sponsors. Experienced in leading business and financial strategy, • capital allocation planning, margin expansion, cash generation and value creation for shareholders Effective August 10, 2020 • 6 TEN NEC O I N C . Q2 20 2 0 EAR N IN GS
Tenneco Q2 Overview Decline in financial results largely related to COVID-19 impact REVENUE Down 39% (1) , excluding $2.6B Aftermarket China currency impact of ($108)M & OES (2) Light 21% Substrates $623M 39% North Vehicle 40% 46% America Q2 VA REVENUE Q2 Down 43% (1) , excluding ROW VA Revenue $2.0B 6% VA Revenue currency impact of ($93)M by Product by Region Global LV production -45% (4) Application 33% Europe Adjusted EBITDA VA adjusted $8M 15% EBITDA margin 0.4% CTOH, Decremental margin 24% (3) Industrial & Other Adjusted EPS ($2.15) Noncontrolling interest Scale and diversification in product lines, end expense $10M markets and regions benefits financial performance 7 Presentation footnotes available on page 22. TEN NEC O I N C . Q2 20 2 0 EAR N IN GS
Tenneco Q2 VA Revenue and Adjusted EBITDA Performance VA REVENUE (1) Ride $ millions Performance Clean Air Q2 20 Substrate revenue $623M $336M $517M Q2 VA Revenue by Segment Motorparts Volume Other Powertrain $559M Currency & Mix $602M Q2 20 Q2 19 VA revenue $2.0B, -43% (1) YoY ADJUSTED EBITDA Declines largely driven by COVID-19 • $414 Light Vehicle -53% (1) • CTOH, Industrial & Other -37% (1) • Aftermarket & OES (2) -31% (1) • Adjusted EBITDA $8M, -98% YoY 11.1% • Aggressive cost flexing, including both structural and temporary 0.4% cost reductions Q2 20 Q2 19 Currency ‒ Temporary actions (salary cuts, furloughs, government programs, 16.0% 7.4% Operating etc.) saved ~$100M in Q2 Volume Performance • Corporate costs of $39M, improved 19% YoY & Mix 8 Presentation footnotes available on page 22. TEN NEC O I N C . Q2 20 2 0 EAR N IN GS
Segment Details 9
Clean Air – Q2 Segment Performance VA REVENUE (1) Q2 20 Substrate revenue $623M $ millions OES 4% CTOH & 26% Other Q2 2020 Light 70% VA Revenue Vehicle By Product Application Volume Other Currency & Mix Q2 19 Q2 20 ADJUSTED EBITDA $168 VA revenue $517M, -49% (1) YoY Light Vehicle -56% (1) • CTOH & Other -24% (1) • OE Service (OES) -17% (1) • Adjusted EBITDA $38M, -77% YoY Operating Currency VA adj. EBITDA margin 7.4% vs. 16.0% in Q2 2019 • 16.0% Volume Performance 7.4% & Mix Q2 19 Q2 20 10 Presentation footnotes available on page 22. TEN NEC O I N C . Q2 20 2 0 EAR N IN GS
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