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BorgWarner Inc (NYSE:BWA)
Q4 2021 Earnings Call
Feb 11, 2021, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Sharon, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2020 Fourth Quarter and Full Year Results Conference Call. [Operator Instructions]

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

Thank you, Sharon, and good morning, everyone, and thank you for joining us today. We issued our earnings release this morning. It's posted on our website, borgwarner.com, on our homepage and on our Investor Relations homepage. With regard to our Investor Relations calendar, we will be attending multiple conferences between now and our next earnings release. Please see the Events section of our Investor Relations homepage 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 at 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 net M&A. We will also refer to our growth compared to our markets. When you hear us say market, that means the change in light and commercial vehicle production weighted for our geographic exposure. Our outgrowth is defined as our organic revenue change versus this market. Please note that we've posted an 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 Fred.

Frederic B. Lissalde -- President and Chief Executive Officer

Thank you, Pat, and good morning, everyone. We're very pleased to share our results for 2020 and provide an overall company update starting on Slide 5. I'm very proud with our stronger than expected top line and cash flow performance for the year. With approximately $10.2 billion in sales we were down about 11% organically. This compares to a market being down approximately 17%. So our outgrowth was about 630 basis points for the year which was ahead of our expectations going into the fourth quarter. For the full year, we saw outgrowth in all major regions. We delivered close to 15% outgrowth in China. Our European and North American operations outgrowth were both in the low single-digit range.

While our full year earnings per share declined year-over-year due to the impact of COVID-19, our decremental margin performance was in line with our expectations. Importantly, our margin performance was achieved while preserving R&D spending to support future growth. We delivered very strong free cash flow of $743 million for the year. This represents a record for free cash flow generation for the company. This is a testament to the intense focus we put on improving free cash flow generation over the last few years. While managing the operation -- the operational challenges of 2020, we successfully completed the largest acquisition in the company's history and secured numerous business award for electrified vehicles over the course of the year.

Now let's discuss some of those new business awards. First, I'm happy to announce on Slide 6 that we have secured an 800-volt electric motor award with the global commercial vehicle customer launching in 2024. This program will use four different variants of our latest European motor design. Using our 800-volts rated machine, customers can significantly reduce charging time and achieve a higher power density through the 800-volt architecture, enabling an even brighter future for electric trucks and buses. I am very pleased with this program. We will continue to focus on the electrification opportunities in commercial vehicles in addition to opportunities in our light vehicle market.

Next, I would like to highlight another inverter win on Slide 7. We are partnering with a major European OEM to supply our 400-volt silicon carbide inverter for the next-generation BEVs that are expected to launch in 2022. But I can't share the details of this program, I can tell you that this is our second largest inverter program to-date. This illustrates our ongoing innovation in power electronics as we're leading the market trend to upgrade from silicon to silicon carbide. This enables lower energy losses and drives higher efficiency.

With the latest win, I would like to give you an update of our positioning in the European inverter market on Slide 8. We've had tremendous success establishing ourselves in this market. When I think about BorgWarner's competitive advantages in power electronics, it's driven by, first, the breadth of our product portfolio. This allows us to be faster and more effective at bringing products to market. Second, our ability to innovate. We continue our innovations in part by our vertical integration strategy. We have in-house capabilities for power modules, integrated circuit developments and software. I think that the last driver is our ability to leverage the electronic scale that we already have especially in our engine control unit business. The result is that we have secured significant new business awards. On the chart on the right side of the slide, you will see the inverter programs we've secured with three large European OEs. As you can see, we expect that we'll be delivering around 1.1 million inverters in 2025. As a result of the successes we're achieving, we're increasing our R&D spending in 2021 to support our continued innovation and new business awards in our power electronics portfolio. Kevin will touch on that a little later.

Next, I would like to give you an update on the Delphi Technology integration on Slide 9. Bottom line, all is on track. Starting with Q4 results, the Delphi Technologies contribution to both revenue and operating income was ahead of our expectations. I'm seeing good progress across all the former Delphi businesses. The cost synergies related to the Delphi transaction are tracking in line with our plan, which Kevin will discuss later. And the customer feedback remains very positive. In addition to inverter wins that I just highlighted, we won new businesses across the rest of the Delphi portfolio, including awards in GDI. My overall takeaway is that the integration is on track from all perspectives.

Before I wrap up, on Slide 10, we're announcing our plan to hold an upcoming Investor Day on March 23rd. The event will be virtually broadcasted from the BorgWarner world headquarters in Auburn Hills, Michigan. It will provide insights into our technologies and into the acceleration of our positioning in an electrified world. I look forward to interacting with you during the event.

So let me summarize our 2020 results and our outlook on Slide 11. 2020 was an extremely challenging year in terms of the operating environment, and we've put the health and safety of our people first. Even in this challenging environment we delivered better than expected outgrowth and generated record free cash flow and our bookings on BEVs are accelerating. We closed on the Delphi transaction, we successfully integrating the companies and we are on track to deliver the synergies as planned. As we look ahead, we expect to deliver another record year of free cash flow in 2021, which enabled us to continue to invest in the business to successfully position the company for the future. The demand for our efficiency improving products is growing, leading to a continued increase in our content per vehicle. In fact, as Kevin will highlight, when you look at our three year backlog, 45% of it is already coming from e-products. And finally, I'm excited about our long-term positioning as we look to capitalize on the profound industry shift toward electrification. We are winning, we are ramping up R&D and focusing heavily on the acceleration of the company toward electrification.

With that, I'll turn the call over to you, Kevin.

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Thank you, Fred, and good morning, everyone. Before I review the financials in detail, I'd like to provide an overview of the three key takeaways from our fourth quarter results. First, our revenue was ahead of our guidance, driven by stronger than expected outgrowth and higher levels of sales from the Delphi Technologies acquisition. Second, our margin performance was better than expected, both in the legacy BorgWarner business and in the legacy Delphi business. And third, our free cash flow was very strong at $197 million in the quarter, which resulted in record free cash flow for the full year.

So let's turn to Slide 12. As we look at our year-over-year revenue walk for Q4, you can see the foreign currencies increased revenue by about 3.4% from a year ago. Excluding this impact, our organic sales were up more than 6% compared to a less than 2% increase in weighted average market production. That means we delivered 460 basis points of outgrowth in the quarter, which breaks down as follows. In China, we outperformed the light vehicle market by about 13%. Strong DCT demand continues to be a key contributor to our sizable outgrowth in the region. In Europe, our light vehicle organic revenue performed roughly in line with the market. In North America, we underperformed the market by approximately 3%, just as we expected, primarily due to the impact of the changeover of the Ford F-150. And finally, our commercial vehicle and off-highway businesses drove about 50 basis points of our outgrowth in the quarter as our China business more than offset decline in commercial vehicle revenue in other regions.

Now some of the strong outgrowth we delivered in Q4 and for the full year, particularly in China, was a pull forward of 2021 outgrowth. That will have an impact on our expected 2021 year-over-year outgrowth, but on a cumulative two year basis, we're tracking right in-line with our longer term expectations. So in the end, we're pleased with the strong finish to 2020. Moving past our backlog and outgrowth, you can see that the Delphi Technologies acquisition added a little more than $1.1 billion to our fourth quarter revenue. The sum of all this was just over $3.9 billion of revenue in Q4.

Now let's look at our earnings and cash flow performance on Slide 13. Our fourth quarter adjusted operating income was $448 million compared to $340 million in the fourth quarter of 2019. This yielded an adjusted operating margin of 11.4%, which was well ahead of our margin guidance of 8.8% to 9.6% for the quarter. On a comparable basis, adjusted operating income decreased $7 million on $159 million of higher sales. Remember, we delivered outsized margin performance of 13.3% in Q4 2019, which makes for a tough year-over-year comparable. If you look at the legacy BorgWarner margin, excluding the impact of Delphi Technologies, we delivered just over 12% for the quarter, which is consistent with the company's historical top quartile margin profile. Then, the Delphi Technologies business added $109 million to adjusted operating income. This was well ahead of our expectations due to the higher than expected revenue and stronger underlying margins in the business.

Moving on to cash flow. We're proud of the fact that we generated $197 million of positive free cash flow during the fourth quarter. As a result of that, our full year 2020 free cash flow came in at $743 million, which was a record level for the company. With those strong cash flow results and with our confidence in the business looking ahead to 2021, we repurchased $216 million of our shares during the fourth quarter.

Let's now turn to Slide 14. We can see our perspectives on global industry production for 2021. First, let me point out that our market assumptions now incorporate our view of the commercial vehicle and off-highway markets given our increasing exposure to those markets. With that background in mind, we expect our global weighted light vehicle and commercial vehicle markets to increase in the range of 11% to 14% this year. Looking at this by region, we're planning for North America to be up 22% to 25%. In Europe, we expect a blended market increase of 11% to 14%. And in China, we expect the overall market to be roughly flat year-over-year as growth in light vehicle production is offset by anticipated declines in the commercial vehicle market.

Now let's talk about our full year financial outlook on Slide 15. Starting with our pro forma 2020 sales which adds back the $2.6 billion of revenue from the first three quarters of Delphi Technologies in 2020. As you know, those revenues were not part of our P&L last year, but in order to provide year-over-year comparability, we thought this pro forma revenue approach for the 2020 baseline would be useful. Building on that pro forma revenue base, you can see that our end market assumptions from the prior slide are expected to drive an increase in revenue of roughly $1.2 billion to $1.5 billion.

Next, we expect to drive market outgrowth for the full year of approximately 100 to 300 basis points. Embedded in that outgrowth range is a roughly 200 basis point headwind from declining light-duty diesel and a 40 basis point headwind from an expectation of normalized market share in our China commercial vehicle business after considering outsized market share in 2020. Based on these assumptions, we expect our 2021 organic revenue to increase 12% to 17% relative to 2020 pro forma revenue. Then, adding a $355 million benefit from stronger foreign currencies, we're projecting total 2021 revenue to be in the range of $14.7 billion to $15.3 billion.

From a margin perspective, we expect our full year adjusted operating margin to be in the range of 10% to 10.5% compared to a pro forma 2020 adjusted operating margin of 8.3%. This contemplates the business delivering full year incrementals in the low 20% range before the impact of Delphi-related cost synergies and purchase price accounting. From a cost synergy perspective, our margin guidance includes $70 million to $80 million of incremental benefit in 2021. That puts us right on track to achieve 50% of our total expected cost synergies in 2021, just as we've previously told you to expect.

One more point on our margin outlook. It's important to note that this outlook is inclusive of a planned increase in R&D spending to 5% of revenue to continue to drive the growth we're seeing in electrification opportunities. That's fully baked into the guidance. So based on this revenue and margin outlook, we're expecting full year adjusted EPS of $3.85 to $4.25 per diluted share. And finally, we have line of sight to delivering free cash flow of $800 million to $900 million, which is a significant increase over our record year in 2020. That's our 2021 outlook.

Let's turn to Slide 16 to review our medium term growth outlook. As I mentioned earlier, we expect light vehicle diesel to be a headwind to our outgrowth in 2021. The largest portion of this headwind comes from the legacy Delphi portfolio. As you can see on the left side of this slide, we expect the impact within this business to be approximately $140 million in 2021. However, you can also see that this headwind is expected to lessen each year as we head toward 2024. This is what we saw in due diligence, which simply means that it's in-line with our original planning assumptions.

Now let's move to the right side of the slide, where we profile our multi-year backlog. As you know, our backlog is a net backlog, which means it reflects increases in revenue, net of decreases in revenue. So the diesel headwinds from the left side are incorporated into this net backlog. And what you can see is that even with this headwind, we still expect to deliver 100 to 300 basis points of outgrowth in 2021. Then, as you look ahead to 2022 to 2024, we expect a combined net new business backlog inclusive of aftermarket growth to be approximately $2.8 billion. Importantly, we believe this 2022 to 2024 backlog supports our previously communicated mid-term outgrowth for the combined company in the mid-4% range. And there is one more critical point to note about this backlog. About 45% of this net backlog is driven by our e-products, 45%. We're winning business and positioning the company for continued growth in this area.

So let me summarize my financial remarks. Overall, we had a really solid year despite the headwinds resulting from COVID-19. We delivered 630 basis points of market outgrowth and $743 million of free cash flow. Not only do these results significantly exceed our most recent guidance, they also exceeded the guidance that we provided in January of last year prior to the pandemic. Now, as we head into the new year, we're focused on leveraging our financial strength to drive continued long-term profitable growth in the business. In 2021, that means we'll be keenly focused on delivering on our near-term financial commitments, successfully integrating the Delphi acquisition, and continuing to make the necessary investments to win electrification business that will secure our growth and financial strength long into the future.

With that, I'd like to turn the call back over to Pat.

Patrick Nolan -- Vice President of Investor Relations

Thank you, Kevin. Sharon, we're ready to open up for questions.

Questions and Answers:

Operator

[Operator Instructions] First question comes from Chris McNally with Evercore.

Chris McNally -- Evercore ISI -- Analyst

Thanks, guys. Good morning. Fred, if I could ask two questions on EVs. The first is around market share. Really appreciate the color on the three big inverter wins with the unit attached. And I know you can't give explicit numbers, but sort of if we work into what that means on a market share basis assuming you have some Asian wins as well. You could be getting roughly a 20% share of the outsource business. Would just love some color about the competitive environment, because that would probably put you in the top three external suppliers, and obviously, there's a lot of players here in, not only inverters, we obviously have a heavily competitive in-source for motors and drivetrain. So if you could just talk about the competitive environment for e-business right now.

Frederic B. Lissalde -- President and Chief Executive Officer

Chris, we're definitely a leader in this field and I feel really good about the progress. I see -- I feel really good about the momentum. I feel really good about the fact that the technology that we've got with Delphi is really strong, high-voltage silicon carbide driving efficiency. And I feel really good about the combination. We bring financial strength and customer intimacy and we booking business. And so the positioning is strong, the customer feedback is positive. I'm kind of happy where the company is right now and more to come.

Chris McNally -- Evercore ISI -- Analyst

That's great. And we receive a lot of questions about the five-year sort of the legacy OEMs, right. You put maybe three European OEMs in that camp versus this next-gen of start-ups. Could you talk about just what is it like to win business on the start-ups? Are you seeing them at a similar proportion of interspersed outsource just because it's such a new environment for everyone involved?

Frederic B. Lissalde -- President and Chief Executive Officer

Yeah. We're working with both, right, both the legacy OEM, as you call them, and new start-ups. We have actually been pretty successful toward those two customer market segments. Obviously, in our business, we are in the business of long-term relationships and that solid foundation that we have and the solid customer intimacy that we have across the world is certainly matters.

Chris McNally -- Evercore ISI -- Analyst

And if I could just squeeze in one last one on the profitability ramp of EV. I mean, clearly there is a lower margin on any new business, any new backlog. But I guess everyone is very curious about -- since it's a much longer and much more aggressive ramp on EVs, could you talk about how, as this EV business starts to really flow through 2022 on, how much it may be sort of a degradation to margins or a rule of thumb for when EV business may actually reach corporate levels of profitability?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. Hey, Chris, this is Kevin. I'd say, I mean, keep in mind, as we've talked about in the past, we stay focused, whether it's a legacy, I'll call it combustion business or it's our new EV portfolios that we drive toward a return on invested capital target consistently across those types of businesses. But obviously as we're in ramp-up mode for a business like our EV portfolio, we're investing a lot more in the front end and we're not at steady state yet from a revenue perspective. So those ROIC targets are over the life of the program, but the cost tends to come in at the front end, particularly from an R&D perspective. And so just as you saw, we talked about today, ramping up our R&D to 5%. Some of that is contemplating. It's really contemplating the increased investments we're making in that EV portfolio as we're securing new business wins.

So that does become a headwind to margin in the near-term on a discrete basis, but overall, we're managing that within our portfolio and you can see that in our margin guide. I mean, the 10% to 10.5% contemplates that increase in R&D and you see our backlog is getting skewed more and more toward e-products, which is great. We feel great about that. And we still remain on track for our 2023 margin target with all that considered of delivering over 11% operating margin. So it's obviously a business we're investing in. It creates a little pressure on margins, but we're managing that across the portfolio and right on track to deliver it with our long-term margin targets. Great. Thanks, guys.

Operator

Next question comes from John Murphy with Bank of America.

John Murphy -- Bank of America Merrill Lynch -- Analyst

Good morning, guys. Just a first question on the change in segmentation. I'm just curious, as you look at the new four segments, if now that you've carved off or identified fuel injection in aftermarket as separate segments, are those maybe more separable and potentially could be up for sale over time as there might be much slower growth than the other two segments?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. I guess that's not how we're thinking about it. I mean, we look at those businesses. They are businesses that, from an accounting perspective, needed to be reported separately and that's part of the reason that they're reported that way and our focus is really on growing the profitability of those two portfolios. As you look at the FIS business, as Fred talked about in his remarks, we're seeing wins in GDI and we see some real growth prospects in that business along with the leading positions that that business already has. I think as we look at it, we see opportunity to improve the profit -- profitability of that portfolio and that's really the focus there. And from an aftermarket perspective, we feel good about the margin progress that we saw in that business in the fourth quarter and we would expect to continue to drive margin performance in that business. So that's really how we look at those right now.

John Murphy -- Bank of America Merrill Lynch -- Analyst

Okay. And then just a follow-up, Kevin. If we think about -- I just wondering if you can give us some color on what you think about what's going on with the chip disruption? What it means shortage and the disruption in production is a result of that, should we think about any kind of lost sales at a 20% decremental? And then also, just on the outlook, I may think you're being very humble in the performance in the fourth quarter, because the F-150 being down really matters. Just how do you think about sort of the bounce back up as that gets up and running and the impact of mix on the F-150 and maybe more generally the industry remain pretty positive through 2021?

Frederic B. Lissalde -- President and Chief Executive Officer

John, the -- what we see is certainly some kind of disruption mostly in the first half. The second half recoveries is currently unknown. What we have put in the low-end of our guidance, John, is a net production impact greater than the 1 million vehicle and that's reflected in the low-end of the guide, that's for the full year.

John Murphy -- Bank of America Merrill Lynch -- Analyst

That's helpful. And then on the mix, particularly around the F-150?

Frederic B. Lissalde -- President and Chief Executive Officer

What's your question on the mix?

John Murphy -- Bank of America Merrill Lynch -- Analyst

No, it's -- I mean it was a benefit for most in the industry in the fourth quarter and through most of 2020, but obviously you got dinged a bit with the F-150 being down in the fourth quarter. So your performance was probably even better than it looked. I'm just curious if you think about mix going forward in the 2021 guidance, how strong is mix going to remain and particularly with the ramp back up in the F-150, how big a benefit will that be?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. I mean F-150 will definitely help us from just an overall revenue outgrowth perspective. It is the reason that we underperformed in North America in the fourth quarter. I want to say it was probably around the $25 million to $30 million type of revenue impact on us. So we would expect obviously that headwind to abate and not become -- not be an overhang on outgrowth as we look ahead to 2021.

John Murphy -- Bank of America Merrill Lynch -- Analyst

Great. Thank you very much.

Operator

Next question comes from James Picariello with KeyBanc Capital.

James Picariello -- KeyBanc Capital Markets -- Analyst

Hey, good morning, guys.

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Good morning.

James Picariello -- KeyBanc Capital Markets -- Analyst

Just on Delphi upside in the quarter. What were the primary drivers of that relative to your outlook? And because cost synergies and purchase accounting obviously came in as expected. So just curious what drove that? And then can you dimension at all what's baked in for the full year guide related to Delphi's inorganic contribution?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. On the fourth quarter, I mean, we are pleased with the results that came in from Delphi, both from a top-line perspective and from a margin perspective. And the biggest upside that we saw in terms of revenue being up effectively from the midpoint of our guide by about $145 million really came in the fuel injection and the legacy powertrain products portfolio. And so we are pleased with that performance, because that also actually helps from a margin perspective, because those are two of the stronger portions of the business from a margin contribution perspective. So that's a big driver of what caused us to generate some upside. I'd say also it's probably fair to say we were one month into the owning Delphi and just starting to really get our hands around some of the top-line and bottom-line drivers in the business. And so we did make some cautious assumptions as we gave Q4 guidance with respect to the Delphi portfolio and those proved to be too conservative at the end of the day.

James Picariello -- KeyBanc Capital Markets -- Analyst

Does that conservatism carry through to this year and related to the accretion framework that you laid out a few months ago?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. I think with respect to 2021 we feel really good about our ability to deliver on the guidance that we're giving with the outgrowth of 100 to 300 basis points in totality, which basically assumes that Delphi's outgrowth is flat to actually slightly negative because of that diesel headwind. So we feel good about our ability to deliver on that outgrowth for the year to deliver on that improving margin profile to 10% to 10.5% in totality for the company and delivering strong cash flow. And in terms of what that means for us as we look to 2021 and even beyond, we think we're right on track to deliver the greater than 11% operating margin as we progress toward 2023.

James Picariello -- KeyBanc Capital Markets -- Analyst

Okay, got it. And then just to clarify, the 45% of your $2.8 billion backlog tied to e-products that excludes hybrid, correct? That's just battery electric. And then for the free cash flow strength, clearly apparent in the guide. The company already repurchased $250 million this past quarter. I mean how should we be thinking about the buyback effort for this year? Thanks.

Frederic B. Lissalde -- President and Chief Executive Officer

So, it includes a little bit of hybrid when it comes to high voltage plug-in hybrids that are new energy vehicle -- under the new energy vehicle credits in China. That's a very small portion of the 45%. Kevin, do you want to take that?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. In terms of, I mean, as we look ahead to capital allocation priorities in 2021, I would tell you that we are actively exploring several M&A opportunities that we think accelerate our position in growth in electrification and I would say that is a priority for us as we look into 2021. From there, we'll assess our buyback capacity through the course of the year based on how those M&A opportunities materialize. But our focus is definitely shifting toward more aggressively deploying capital to support growth initiatives and positioning in electrification. You can see that both in our R&D investments, stepping up to 5% this year. And you'll see it as we continue to pursue M&A opportunities.

James Picariello -- KeyBanc Capital Markets -- Analyst

Would that supplement some of the $1 billion buyback target?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

I'm sorry, say that again.

James Picariello -- KeyBanc Capital Markets -- Analyst

With the potential M&A that would supplement the $1 billion targeted buybacks or?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

It doesn't supplement it. It's just -- it's how we look at deploying the $800 million to $900 million of free cash flow this year that we expect to generate in 2021. Our priority is going to be really focused on some of these M&A opportunities that improve our positioning and growth in electrification. In terms of the $1 billion program, we remain committed to the program as you can see by the evidence of what we did in our Q4 repurchase activity. But as it relates to how we're looking ahead in '21 and beyond, we're definitely focused on exploring some of these key M&A opportunities that we're pursuing.

James Picariello -- KeyBanc Capital Markets -- Analyst

Understood. Thanks.

Operator

[Operator Instructions] Next question comes from Rod Lache with Wolfe Research.

Rod Lache -- Wolfe Research, LLC -- Analyst

Good morning, everybody. Had, yeah, I wanted to first ask you about the backlog data that you show on Slide 16. Have you historically included the aftermarket in that backlog forecast? I know that last year you had over a four year period, $2.5 billion to $2.6 billion prospectively, now is $3.2 billion to $3.4 billion. I was hoping you can give us some of the pluses and minuses as you look out as far as how much Delphi contributed, what backlog contributed and what kind of headwind you've got from combustion technologies?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. I guess that, I mean, the backlog has always included all of our revenue relative to the measurement of our market performance. And so as you look at this as well, it's included on the same basis. I mean it's a much smaller piece of the backlog than the rest of it on the OE side, primarily because our focus in the aftermarket business isn't necessarily driving rapid growth, it's making sure we sustain strong levels of profitability.

Rod Lache -- Wolfe Research, LLC -- Analyst

Okay. And how much did Delphi contribute to this backlog?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

We don't have it broken down. I think by -- we're trying to get away from the idea of Delphi versus not Delphi. But overall when you look at this, 4.5% outgrowth is what's effectively implied by this 2022 to 2024 backlog, which I would tell you is directionally consistent with what we provided a year ago when we talked about 4.5% or mid-4% outgrowth across the combined portfolio, which had the legacy BorgWarner more in that 5% zip code and the legacy Delphi with some of those near-term headwinds in diesel more in that 3%. I'd say, we're not breaking it anymore, but directionally, I'd say that's a fair way to think about it. But as you look ahead, Delphi is probably a little bit more of that backlog because now we're looking at '22 to '24 as opposed to '21 to '23 where there was a little bit more of that diesel headwind.

Rod Lache -- Wolfe Research, LLC -- Analyst

Okay. And just secondly, you did north of 11% margin in the quarter and I'm wondering if that says anything about your longer term 2023 target of 11%. I think that you'd be annualizing it more than the $15.5 billion or so that you annualized that in Q4. So, is that starting to look conservative? And if you could just repeat, did you say that inorganic or strategic actions might include divestitures as well or you simply looking at more acquisitions?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. I guess on the -- when you look at the Q4 performance, we're obviously really pleased with the fact that we delivered 11.4%. Now that's on an annualized revenue of $15.7 billion. So obviously higher than the run rate that we're walking into here in 2021, where the midpoint of our guide $15 billion and actually $300 million of that's even driven by currency. So Q4 is really about $1 billion higher annualized revenue than where 2021 is ex-foreign currency. But I think directionally, you're looking at it the right way. We feel that between the incremental synergies that we expect to deliver even beyond 2021, which is another $85 million with the additional margin improvement that we're driving in certain portions of the legacy Delphi businesses in particular and with revenue growth inclusive of that backlog we just highlighted in our ability to convert on that, we feel very comfortable with our ability to deliver on that greater than 11% margin in 2023.

And then on the other question you asked around M&A, I was actually speaking more to the acquisition side. But we do have an active portfolio management process and I would say we're spending a lot of time thinking about that as we look ahead, because I think you should expect that that will be a more active part of what we're looking at on a go-forward basis. But my comments really were focused on some M&A activities -- opportunities that we're looking at that could utilize cash flow that we're generating this year.

Rod Lache -- Wolfe Research, LLC -- Analyst

Understood. Thank you.

Operator

Next question comes from Dan Levy with Credit Suisse.

Dan Levy -- Credit Suisse -- Analyst

Hey, good morning, everyone. Thanks for taking the question. First, I wanted to ask on Delphi. You've had Delphi result, I believe the margin they just posted in the quarter was the best quarterly operating margin for Delphi since 2018. Maybe you could just walk us through some of the moving pieces that drove the recovered margin in Delphi, was it restructuring paying off, was it the mix, any color would be helpful on the Delphi piece which obviously came in much better, not only versus what you were talking about in your guidance, but versus what we've seen in some recent years?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. I mean, I think the first thing you look at, when you look at the Q4 performance, which was in the upper 9% margin range for that -- the stand-alone business, I mean, keep in mind, Q4 was a really strong revenue quarter going back to the highest levels relative to maybe a couple of years ago. So $1.1 billion in the quarter on an annualized basis almost $4.5 billion. So that's a pretty strong level of revenue and part of the upside that the business was seeing there came in some of the portions of the portfolio that have had historically stronger margins. So I think that's an important piece to keep in mind.

That said, I think the restructuring actions that the company had been taking pre-closing and that we're continuing on a post-closing basis, we'll continue to support that margin profile. But remember, we're continuing to offset that headwind that's coming from that legacy diesel business. And you see from my slides that, in 2021 that's expected to be about $140 million revenue decline and that comes with some outsized margin, because it's a strong margin performing piece of the portfolio and that's where the restructuring actions that we're continuing to execute that legacy project pioneer are helping to mitigate the impact of those headwinds. But overall, when you look at it, the strong margin and getting some tailwind from some of the cost performance actions that the business has been executing over the last couple of years.

Dan Levy -- Credit Suisse -- Analyst

Okay, thanks. And then, just another follow-up on Delphi. You've had now Delphi under your roof for a quarter, maybe you could just give us an update, I guess, similar and I was following the line of questions from some of the prior folks, an update on your restructuring programs. You have your own core structuring program. This is being run in parallel with Delphi's restructuring program pioneer. How long before we could see maybe incremental restructuring actions that contemplate maybe -- you've talked about there is an ongoing portfolio process, but more on head-count, footprint, etc. I mean, how long before I guess, we start to really see, I guess, a steady-state BorgWarner with everything fully cleaned up?

Frederic B. Lissalde -- President and Chief Executive Officer

Well...

Patrick Nolan -- Vice President of Investor Relations

You're running out of time here.

Frederic B. Lissalde -- President and Chief Executive Officer

So what I would say is restructuring is part of what we do and we always want to do that in a position of strength. We did restructuring. We are on track. Delphi did Pioneer. We are continuing that. We are on track. And on top of that, we have the synergies and also we are on track.

Dan Levy -- Credit Suisse -- Analyst

Any potential for additional actions or?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. I think we're really focused on completing the actions that we're already in the midst, Dan. The restructuring program that we announced about a year ago on the legacy BorgWarner side is going well and we have more actions that we're executing on as we go through '21 and '22. So we're focused on executing that. Project pioneer still have some more work to do predominantly in '21 and we're going to continue to execute that program through '21 and a little bit into '22. And then we have the cost synergies that we're executing on. So we have a lot on our plate right now already that we're really focused on delivering on and we would expect those to be completed over the next couple of years. And then we'll take stock of where we are and if there is anything else we need to do at that point.

Dan Levy -- Credit Suisse -- Analyst

Okay. Thank you.

Operator

Next question comes from Emmanuel Rosner with Deutsche Bank.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Hi, good morning. I was hoping to follow up a couple of questions on -- again on the backlog. So maybe taking at it from a different angle. What I'm trying to understand is really what pieces are growing through of like at what pace and what pieces of the business are either slowing down or fading. So if I take last year's backlog, which was on a BorgWarner stand-alone basis, I think for the out-year, three-year period, it was $2.1 billion, which was about $700 million a year. Now your search for the out-year talking still about $700 million a year or so, $2.8 billion over four years. But obviously, in the meantime, light vehicle production has gone worse in terms of the outlook, but we also integrated Delphi within it. And so could you please give us a sense of within your backlog, how do you sort of shake out with a similar level of, I guess, revenue outgrowth, what are the puts and takes within that?

Frederic B. Lissalde -- President and Chief Executive Officer

I would say, Emmanuel, that the backlog is in line with what we discussed over the past quarter, leading to an outgrowth just south of 500 basis points. I'm very, very happy with the fact that as I -- as we discussed before, 45% of that backlog is on e-products and the rest is all-wheel drive, and robos, and a little bit of emissions, but 45% pure E except those products that go in high voltage BEV in China which is more within that 45%. This is a very, very good performance. I think it speaks volume to our ability to win on E and it speaks volume to our ability to deliver growth in this growing segment, leading to additional content per vehicle in this E segment. So pretty -- feel pretty, pretty good about where we are.

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

And just one thing to correct here, Emmanuel, the $2.8 billion we display is a three-year number, just 2022 to 2024.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Okay, yeah. No, that makes sense. And then I guess when we used to break it down as well the backlog was, maybe ICE versus hybrid versus EVs, I guess across technologies though. Would you have a similar breakdown for your current backlog?

Frederic B. Lissalde -- President and Chief Executive Officer

So we don't. Again 45% is in E, OK. And the rest is either in C or in H. 45% of the backlog of products that translate into BEV.

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

And then on a net basis, if you're referring to how we broken it out a little bit, electrification with including hybrid, over 100% of that net backlog on a net basis is coming from hybrid and electric, but we're really starting to focus more and more as we talk to you about the e-products to make sure you have visibility on the e-products that are really truly applicable to the battery electric vehicles and that's the point of this 45% of the backlog that we're really focused on. But over 100% of the net backlog is effectively hybrid and electric vehicles.

Frederic B. Lissalde -- President and Chief Executive Officer

That's right.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Okay, great. And then as a follow-up, the R&D needs toward electrification going through 5% of revenue. Do you view this as a sort of new steady-state or multi-year state or is it sort of like an initial larger investment?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yes. I -- we expect as we look ahead that our R&D is going to be at that level, 5%, maybe even a little bit higher than that 5% to the low-5s as we look out over the next couple of years and still in line with our ability to deliver on our margin targets as we look ahead to 2023. So I think you should think from a planning perspective because of the momentum that we have and the wins that we're seeing in the marketplace in electrification, that we're going to continue to invest more aggressively probably in that 5% to even upwards of 5.5% range over the coming years.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Great. Thank you.

Operator

Next question comes from Noah Kaye with Oppenheimer.

Noah Kaye -- Oppenheimer & Co. -- Analyst

Thanks, good morning. I'm glad we got to touch a little bit already on cash flow, because the free cash flow performance was very strong and the guide is obviously very strong compared to consensus. So can we talk a little bit about the capex components of that 4.5% of sales? I guess, near the low end of the historical range after you can conserve capex in 2020. Can you give us a little bit color on what drives a sort of this relatively low capex level, are there fewer product launches this year? When, if at all, would you see that reverting back toward sort of the 5% or 5.5% level?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

As you look at us over the last few years, I mean, I know we've talked about being in that 5.5% range or even progressing toward 5%. I think you can see over the last few years, we've actually been more in that mid to high 4% range. And as we really scrubbed our planning and looked at that on a go-forward basis, I think we're probably going to be in that 5%-ish range on a go forward basis. This year a little bit lighter, but it's actually pretty comparable to the types of capex investment we've been investing over the last few years. So I think for this year, you could see it's kind of in the 4.5%, maybe it will trend up a little bit higher toward the upper end of that guidance range we will see. But I think as you think about planning ahead for the coming year, it's probably in that 5% ZIP code is the right way to think about us.

Noah Kaye -- Oppenheimer & Co. -- Analyst

Thanks very much. And then maybe a follow-up question on the M&A landscape opportunity really what you're looking for here. And I think the company has talked in the past and particularly after announcing Delphi about the pretty unmatched capabilities around integration and a broad portfolio for powertrain electrification. So at this point, as you look at M&A needs, would it be more about competencies or about scale? Can you help us understand what the priorities might be?

Frederic B. Lissalde -- President and Chief Executive Officer

So, Noah, the Delphi -- we're very happy with Delphi. Delphi was done to gain scale in power electronics, electronic software predominantly. And now we can think about -- and the combination is on track. You heard me saying that, the team is really strong. Now it's time with this new base, with this new portfolio and technology breadth, it's time to accelerate. And as I mentioned, the strategy will be shared at Investor Day. We're not looking for -- we don't want to disturb the Delphi integration and we will focus into technologies that allows us to be stronger in all the elements that were electrons go in a battery electric vehicle being Pascal commercial vehicle, that's the -- that would be the clear target around technology and the Delphi integration is a key focus and we're not going to disturb that.

Noah Kaye -- Oppenheimer & Co. -- Analyst

Free cash flow...

Frederic B. Lissalde -- President and Chief Executive Officer

Yeah. And those two things -- the two questions are linked to each other. Free cash flow is strong enabler of us being able to do what I just said. And our focus on free cash flow since about three, four years ago, it's been the right thing to do with that strategy in mind.

Noah Kaye -- Oppenheimer & Co. -- Analyst

Very helpful and looking forward to more details at the Analyst Day.

Frederic B. Lissalde -- President and Chief Executive Officer

Thank you, Noah.

Operator

Our next question comes from Ryan Brinkman with JP Morgan.

Ryan Brinkman -- J.P. Morgan -- Analyst

Hi, thanks for taking my question. Regarding the announcement of the 800-volt electric motor for commercial vehicles, can you talk about the four different variants and could they have different use cases? What kind of commercial vehicles will the motor be used in? And how are you thinking about the potential for other commercial vehicle OEMs to potentially use this motor? Are you able to provide an overview of the different products that you supply into or could supply into commercial vehicles to facilitate electrification? So there is this motor. I think there is some thermal management. But are your silicon carbide inverters or other products for the light vehicle industry also applicable for the commercial industry?

Frederic B. Lissalde -- President and Chief Executive Officer

All the products that we do for past car are available for commercial vehicle. The different variants are going to be used for different power demands and functional demand from our customers. It is a family of product that can be translated into other types of commercial vehicle demands. On top of those motors, we have motor controller. You know that we are also into the commercial vehicle battery pack area. And so we are -- this market segment is really important for us. The electrification of those vehicles will also we think be profound and we are ready.

Ryan Brinkman -- J.P. Morgan -- Analyst

Okay, thanks. And I see you are incorporate in your guidance global light in commercial vehicle production up 11% to 14% in '21 weighted for your geographies, which is seemingly more conservative at the midpoint versus IHS as mid-January expectation for plus 14% for light vehicles globally. But at the same time, maybe a bit more optimistic than some supplier peers have assumed given the semiconductor shortage issue, which I thought I heard you quantified about 1 million units. Are you able to tell us what your outlook is for global light vehicle production that rolls up into that 11% to 14% across light and commercial end markets weighted for your geographies? And I'd be interested to know too if you expect any direct exposure to the semiconductor issue,

I don't know, in your power electronics or/and your other components or if you're just looking at it from more of a indirect impact from lower customer production at this point.

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Yeah. Ryan with respect to the specific market assumptions that we're using in the breakdown by geography even of light vehicle commercial vehicle and in total, we actually included a slide in our back-up, it's Slide 21 in the appendix materials to help you have that visibility. So our global weighted light vehicle market range is 12.5% to 15.5% growth in 2021, which that's the portion for light vehicle. Commercial vehicle global weighted is 3.5% to 6.5%. That blend gets you to the 11% to 14%.

Ryan Brinkman -- J.P. Morgan -- Analyst

I see. Super helpful. Thank you. And on the semiconductor issue, you think it's just indirect or any direct exposure?

Frederic B. Lissalde -- President and Chief Executive Officer

So we have direct exposure since we are delivering a vast amount of electronics systems and sub-systems. We've been jumping through hoops over the past two, three months to keep everything going. So far so good I would say from a direct exposure. And overall, we are including in the low end of our guide an impact of slightly more than a 1 million vehicle for the full year. That's the exposure that we see on the low end of the guide being direct or indirect.

Ryan Brinkman -- J.P. Morgan -- Analyst

Very helpful. Thanks a lot.

Operator

Next question comes from Luke Junk with Baird.

Luke Junk -- Robert W. Baird & Co. -- Analyst

Yeah, good morning. Wanted to ask first about post Delphi customer conversations. So I assume based in the timeline that you've put out, you've probably completed most of those meetings at this point. And, Fred, just wondering if there is any additional color you can provide on the tone of those conversations versus your expectations going into the process. You said the customer feedback is very positive. And yeah, just wondering if you could expand on that.

Frederic B. Lissalde -- President and Chief Executive Officer

Yeah. It's very positive. I would -- I -- so, yes, we've covered more than 75% of all customers on the planet being car and CV. I see three areas of synergies. First, when Delphi brings technology that we didn't have, for example, silicon carbide, BorgWarner is booking. When BorgWarner brings financial strength and customer intimacy, which is an example of one of the product that I alluded to in my prepared remarks, BorgWarner's booking. And the last combination that exist are product combination, a system combination and obviously this will take a little bit more time, but BorgWarner will be booking.

Luke Junk -- Robert W. Baird & Co. -- Analyst

Great. And then if I could ask another customer related question specifically regarding U.S. emission standards. Now that the Biden administration has been in place for a month, we're seeing so the last auto makers back away from their support for the Trump emissions rules and I'm just wondering, has that changed yet at least your conversations around turbochargers, GDI, etc. specific to the U.S.?

Frederic B. Lissalde -- President and Chief Executive Officer

We're not seeing any impact to our discussion with our North American customers. And from a product portfolio perspective, from a technology perspective, we are ready to accelerate at the pace they would like to accelerate. We are ready with great technologies leading to very, very good efficiency gains in battery electric vehicles.

Luke Junk -- Robert W. Baird & Co. -- Analyst

Great. And I'll leave it there. Thank you.

Operator

Next question comes from Joseph Spak with RBC Capital Markets.

Joseph Spak -- RBC Capital Markets -- Analyst

Thanks. Good morning, everyone. One more maybe crack at the backlog. I think previously you talked about 3% combustion outgrowth, 10% on hybrid, 17% on electric, what does that look like now under the new backlog recognizing there is a bunch of moving pieces, both with customer plans on hybrids, but also the integration of Delphi?

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

For today's meeting, we weren't going to through that in detail. We wanted to give a profile that make sure you understood how we're tracking toward our mid-term outgrowth performance and we still expect to be in that mid-4.5% range, just as we talked about a year ago. I think the big picture items that we wanted to make sure you're aware of coming out of today are the fact that 45% plus on an e-products and we continue to have the greater than 100% of the backlog on a net basis in hybrid and electric. But we -- today, we're not going to be breaking down anything further than that from a combustion, hybrid or electric perspective.

Joseph Spak -- RBC Capital Markets -- Analyst

Okay. Maybe just then as the follow-up and recognizing we will probably hear more about that later. Like, one thing you did sort of update right was the addressable content, because I think the last time you gave those numbers were pre-Delphi. So, now it looks like on electric it's like 2.4K and before was I think just under 2K and on combustion, it's a little bit over 900 and it was 600 before. So a couple of hundred bucks higher on each. You also used to give like an average CPV content and I think that assumed your participation rate of about a third on electric. Can you let us know if that has changed at all? Is that still roughly what you think you can get post-Delphi or has -- have the numbers changed, especially with some of the inverter stuff you were talking about earlier today?

Frederic B. Lissalde -- President and Chief Executive Officer

Yeah. I think back on the content per vehicle opportunity that we talked about on the earlier slide, we'd actually put those numbers out here a couple of months ago. So they're consistent with what we've been sharing for the last couple of months, which contemplated basically combining the legacy BorgWarner and Delphi content opportunities. When you look at the electric side, you can obviously see the number has increased quite a bit before we did have inverters in there, because we had capability inverters -- in inverters even prior to Delph, but we didn't have it at scale and with the technological leadership precision in light vehicle that Delphi has. So I think the probability of us delivering on that content opportunity has increased. And then the dollar amount actually increased because of some of the other power electronics capabilities in particular that Delphi brings to the table. And so as we talk about possibly peeling back the onion here, giving a little bit more data, I think you should be on the watch for Investor Day and we'll give more color to how we expect the business to be evolving over the coming years.

Joseph Spak -- RBC Capital Markets -- Analyst

Thanks. I'll leave it there. Thank you.

Operator

Next question comes from Brian Johnson with Barclays.

Brian Johnson -- Barclays -- Analyst

Yes. Rather than doing some random housekeeping questions, just want to, [Technical Issues] I'm not going to ask you, although, I'd love to hear within your back how much is e-motors versus inverters? But you put out some interesting slides in December after our inverter discussion about what's in-sourced, what outsourced in e-motors versus inverters. So in the e-motor world, you talked about 50% being in-sourced, 50% outsourced, kind of couple of questions. Do you have any update on that based on what you're seeing in the market? And then second, with the CV win and obviously with Kevin's background in CV, is that where -- and given most if not all of CV motors are going to be outsourced, do you see more pivot to the commercial vehicle sector? And then kind of third, within that Meritor and Dana talk a lot about integrating the mothers into actual set. This looks like something you could put under the hood of a freight line or something and just drive through traditional transmission. So just maybe technically how that product works to be helpful as well?

Frederic B. Lissalde -- President and Chief Executive Officer

Brian, our view of in-sourcing versus outsourcing has not changed from what we presented in December. And our view that our family of motors can be applicable in both fast car and CV has not changed either. And so we started booking some CV business a few years ago and this one is certainly getting it to another dimension, but we've always spend our product portfolio across fast car and CV and learned from those two market segment to be at the forefront of technology and reliability.

Brian Johnson -- Barclays -- Analyst

And in terms of being in the axle versus away from the axle?

Frederic B. Lissalde -- President and Chief Executive Officer

For us it doesn't really matter if the motor is away from the axle or in the axle. You will always need for very high power density motor with a very smart controller attached to it. What we are saying is that more and more customers not wanting to be in the middle of the motor on the motor controller and I think those synergies are going to make our customers' life easier going forward as we are able to have a great motor and a great motor controller supplied -- developed and supplied together.

Brian Johnson -- Barclays -- Analyst

Okay. Thank you.

Operator

Next question comes from Adam Jonas with Morgan Stanley.

Adam Jonas -- Morgan Stanley -- Analyst

Hey, thanks, everybody. One question, one follow-up. First on asset write downs. Auto companies have been announcing plans to aggressively decommission ICE tech and some are planning outright stop sales in the next 15 years. So I'm wondering if you see scope for this to trigger some asset impairment or write down of some of your long-lived IP and assets to reflect the curtailment of their useful lives. Are we at a point where you could run such tests past your auditors? Could we see potential write downs in the next year or two? And at the same time, could BorgWarner be compensated by OEMs for the curtailments given the upfront R&D investments you made that may not -- and all the advanced ICE tech might not get the full engineering cycle behind it?

Frederic B. Lissalde -- President and Chief Executive Officer

Yeah. I think as we look at it at the moment, we don't see the -- any sort of accelerated asset write down. I mean, the bulk of the investment we make when it comes to capex for instance is depreciated over the life of the programs. And so we're really supporting programs and amortizing on that basis. And then, just keep in mind, some of our core businesses are continuing to grow even in the I space as we see some movement toward hybrids whether you think of turbos and VCT and EGR, but again the basis of the way we depreciate assets is predominantly over the life of the programs of those assets are there to support. And then when you think of footprint, remember we are predominantly an assembly model business in terms of our manufacturing footprint. And so we actually can leverage using that footprint in different ways as we look ahead if we need to pivot.

Adam Jonas -- Morgan Stanley -- Analyst

Great. And just a follow-up, when I go back to Slide 16 again, and it's a pretty simple question, but the previous way you describe that backlog. It just said net light vehicle. Here, it's a bit more of an elaborate definition, light vehicle, CV, net backlog plus aftermarket. I just want to confirm because I wasn't -- I think I know the answer, but just wasn't quite clear that there was no definitional or scope change from the previous way you described the backlog to now. And then I'm curious how much aftermarket growth contributes to the mid-4% range? What would that be if it didn't have that extra part to the right of the Ampersand? Thanks.

Frederic B. Lissalde -- President and Chief Executive Officer

Yeah. Good questions, Adam. I mean the -- in terms of the way that we're calculating the backlog, the one thing that's changed is the way we're measuring market, because commercial vehicle has become a much bigger part of our portfolio, especially with the Delphi acquisition. We're now using market assumptions for commercial vehicle in addition to light vehicle and then comparing our organic revenue growth against that weighted market. So that is one change that we have in the measurement. The backlog then is always included aftermarket as it from a dollar perspective, in totality, measured against those markets. When we measure the outgrowth though what we do is, we're measuring the outgrowth, but we're excluding aftermarket as a measure of that outgrowth against the markets, because we're really measuring against the OE markets and we're measuring the OE revenue that we're generating. So when you see that mid-4% range, the math actually doesn't include any tailwind from aftermarket in the mid-4% range, but the backlog is comprehensive.

Adam Jonas -- Morgan Stanley -- Analyst

That's very clear. Appreciate the clarification. Thanks.

Operator

We have time for one final question and that question comes from David Kelley with Jefferies.

David Kelley -- Jefferies -- Analyst

Hi, good morning, everyone. Thanks for squeezing me in. Maybe just a follow-up on the inverter discussion. I believe you have previously noted a $4 billion or $4 plus billion addressable inverter market by 2025. We were just curious as to how much of that in your view is likely to be tied directly to silicon carbide? And also curious to hear your thoughts on how the competitive landscape might shift as the inverter market appears to be transitioning to silicon carbide?

Frederic B. Lissalde -- President and Chief Executive Officer

So there is -- we are leading the market with high voltage and silicon carbide. And in our world, it's all about efficiency. And it's certainly a fact that high voltage and silicon carbide enables lower losses and higher efficiency. We're laser focused into enhancing this technology to the highest possible level and I'm very happy with what we're seeing. The fact that we have vertically integrated power module, ASIC, software development is also an advantage that we have that the customer also values quite a bit.

David Kelley -- Jefferies -- Analyst

Okay. Got it. Thank you. And then maybe just one quick follow-up. I believe Delphi had established a partnership with Cree as the silicon supplier for 800-volt silicon carbide inverters that was prior to your acquisition. So, I guess, A, is that partnership still at play here? And also, are they -- the supplier for the 400-volt transition you referenced that should be a big part of some of the growth go forward?

Frederic B. Lissalde -- President and Chief Executive Officer

The relationship still exist. I will not comment about sourcing of the silicon carbide, but the partnership with Cree has not changed and is being nurtured.

David Kelley -- Jefferies -- Analyst

Okay, great. Thank you.

Frederic B. Lissalde -- President and Chief Executive Officer

Thank you.

Patrick Nolan -- Vice President of Investor Relations

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 ready. With that, Sharon, you can close the call.

Operator

[Operator Closing Remarks]

Duration: 71 minutes

Call participants:

Patrick Nolan -- Vice President of Investor Relations

Frederic B. Lissalde -- President and Chief Executive Officer

Kevin Nowlan -- Executive Vice President and Chief Financial Officer

Chris McNally -- Evercore ISI -- Analyst

John Murphy -- Bank of America Merrill Lynch -- Analyst

James Picariello -- KeyBanc Capital Markets -- Analyst

Rod Lache -- Wolfe Research, LLC -- Analyst

Dan Levy -- Credit Suisse -- Analyst

Emmanuel Rosner -- Deutsche Bank -- Analyst

Noah Kaye -- Oppenheimer & Co. -- Analyst

Ryan Brinkman -- J.P. Morgan -- Analyst

Luke Junk -- Robert W. Baird & Co. -- Analyst

Joseph Spak -- RBC Capital Markets -- Analyst

Brian Johnson -- Barclays -- Analyst

Adam Jonas -- Morgan Stanley -- Analyst

David Kelley -- Jefferies -- Analyst

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