Dana (DAN) Q2 Margin Jumps 2.1%

Dana (DAN 5.94%), a leading supplier of axles, driveshafts, transmissions, and electrified powertrain systems for light- and commercial-vehicle markets, released its latest earnings on August 5, 2025, reporting results for the second quarter of fiscal 2025. The report focused on continued operations following a planned sale of its Off-Highway business. The most notable news was an improvement in margins despite a drop in sales, alongside accelerated cost-saving measures, a major business divestiture, and a boost in full-year guidance. Revenue (GAAP, continuing operations) fell to $1.95 billion in Q2 2025, compared to $2.05 billion in Q2 2024. Adjusted EBITDA (non-GAAP) and margin both improved, with management crediting aggressive cost-cutting and operating discipline. Reported revenue (GAAP) for continuing operations was $2,612 million, exceeding the analyst estimate of $2,557.86 million, but margins and cash savings allowed the company to raise forecasts for 2025. Overall, the period was marked by a pivot toward a more focused core business and strengthened capital position, even as sales volumes remained under pressure.

Source: Analyst estimates for the quarter provided by FactSet.

About Dana and Key Business Drivers

Dana is an established manufacturer of powertrain components including axles, driveshafts, conventional and battery electric vehicle (BEV) transmissions, and vehicle control software. Its products serve major global automakers, from light vehicles to heavy-duty commercial trucks. The company’s global reach spans 26 countries, with 55% of 2024 sales generated outside the United States and a deep focus on technical innovation and customer collaboration.

Dana's recent strategic priorities center on innovation in electrification, streamlining its portfolio, and capturing efficiency gains. Electrification and advanced powertrain solutions remain key growth areas, while effective supply chain management and cost reduction are vital to offsetting raw material and tariff headwinds. Due to high customer concentration—especially with large automakers such as Ford and Stellantis—maintaining strong customer ties and diversifying revenue are critical to stability and growth.

Quarterly Highlights: Financial Results and Strategic Moves

The second quarter brought significant operating changes. Dana entered a definitive agreement to sell its Off-Highway business for $2.7 billion, with the transaction set to close at the end of the year. This move represents a major pivot to focus on serving the on-highway light- and commercial-vehicle markets. Proceeds of $2.4 billion in net cash from the sale, expected upon closing projected for Q4 2025, will reinforce Dana’s balance sheet, supporting a $1 billion capital return authorization and substantial share repurchases through 2027. Dana repurchased 14.6 million shares, or about 10% of its outstanding share count in Q2 2025, and announced plans to reduce total shares by roughly 25% by year-end 2025. The company also advanced its debt reduction efforts, targeting net leverage of around 0.7x by year-end 2025. It ended the quarter with $486 million in cash and $865 million in available credit facilities, positioning itself for future flexibility.

Financially, the report showed year-over-year sales declines in both the Light Vehicle and Commercial Vehicle segments. Light Vehicle sales fell 4.7% year-over-year, while Commercial Vehicle sales slipped 7.1%. Despite these lower figures, both segments realized notable growth in adjusted EBITDA (non-GAAP)—up 24.4% and 20.5%, respectively—driven by aggressive cost savings and operational efficiency. The cost-reduction program delivered $59 million, raising the year-to-date achievement to $110 million and prompting the company to increase its overall savings goal to $310 million by 2026. These measures directly lifted the adjusted EBITDA margin (non-GAAP) to 7.5%, up from 5.4% in Q2 2024. Management highlighted continued efficiency actions and pricing discipline as key factors preserving margins in the face of weaker market demand and ongoing tariff costs. Operating cash flow, which includes results from discontinued operations, was $36 million, reflecting increased working capital and tax outflows. Adjusted free cash flow (non-GAAP) swung negative, largely due to temporary timing and increased tax payments.

The quarter showcased ongoing innovation efforts. Dana invests in developing and enhancing products spanning axles, electric motors, e-axles (systems integrating motor, transmission, and axle for electric vehicles), inverters, and control software. While specific figures for electrification growth this period were not detailed, long-term investment in technologies for hybrid and battery electric drivetrains remains a top focus, positioning Dana to capture future industry shifts.

Customer concentration and global exposure remain important themes. About 23% of fiscal year 2024 sales came from Ford, while the top 10 customers comprised approximately 58% of 2024 revenue, indicating a dependence on a few major automakers. Meanwhile, the international segment contributed 55% of company-wide revenue in 2024, maintaining both diversified growth potential and exposure to geopolitical shifts, currency risks, and market-specific volatility. Tariff costs and inflation pressured profitability, but Dana reported that it is actively working to recover most tariff expenses from customers within the calendar year.

Looking Forward: Financial Guidance and Areas to Watch

Management raised full-year guidance across key metrics. Sales for FY2025 from continuing operations are now expected to reach about $7.4 billion, an increase of $250 million over previous estimates. Adjusted EBITDA (non-GAAP) guidance for continuing operations was raised to approximately $575 million for full-year 2025, $35 million higher than prior forecasts, with the anticipated adjusted EBITDA margin range for continuing operations now at 7.4% to 8.1% for full-year 2025. Projected adjusted free cash flow (non-GAAP) for FY2025 rose to about $275 million, a $50 million increase. These revisions rest on several assumptions: recovering most tariff costs from customers, continued efficiency and cost gains, and stable supply-chain conditions. Dana is also targeting adjusted EBITDA margins of 10% to 10.5% for 2026. Management cautioned that volume pressure remains, especially in commercial vehicles, and emphasized that persistent customer concentration and global exposure introduce ongoing risks.

Key areas for investors to monitor going forward include progress on electrification, the pace and impact of cost savings, and any material swings in customer or product mix. Execution of the Off-Highway divestiture will be critical; Dana’s ability to deliver against its ambitious capital return and leverage targets will depend on timely deal closure and ongoing operational discipline. Integration of innovation-driven products and successful mitigation of tariff and raw material costs are expected to remain central to the company’s strategy.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.