Visteon Corporation

Good morning. I'm Ryan Wendling, Vice President of Investor Relations and Treasurer. Welcome to our earnings call for the second quarter of 2024. Please note this call is being recorded and all lines have been placed on listen-only mode to prevent background noise. Before we begin this morning's call, I'd like to remind you this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various factors, risks, and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Please refer to the page entitled Forward-looking information for additional details. Presentation materials for today's call were posted on the investor section of Vistion's website this morning. Please visit investors.vesteon.com to download the material if you have not already done so. Joining us today are Sachin Lawande, President and Chief Executive Officer, and Jerome Roque, Senior Vice President and Chief Financial Officer. We have scheduled the call for one hour and will open the lines for your questions after Sachin's and Jerome's remarks. Please limit your questions to one question and one follow-up. Thank you for joining us. Now I will turn the call over to Sachin.

Thank you, Ryan, and good morning, everyone. Thank you for joining our second quarter 2024 earnings call. I would like to start with a summary of our second quarter performance as outlined on page two. Visteon delivered another quarter of strong execution with top-line growth, margin expansion, and free cash flow generation. We reported records for both quarterly base sales and adjusted EBITDA and delivered high single-digit growth over market. This level of growth over market is impressive considering the market headwinds this quarter. Sales were slightly over $1 billion, driven by strong demand for both digital cockpit and electrification products. We saw double-digit year-over-year increases for digital clusters and displays, while electrification grew due to ramp-up of GM's EV production. Adjusted EBITDA increased to $136 million On higher volumes, strong operational execution and focus on cost. Adjusted EBITDA margin was 13.4%, which is a 270 basis point improvement year over year when removing the impact of last year's recall charge. Adjusted free cash flow was $28 million in the quarter. We also strengthened our foundation for future growth. We launched 15 new products in the quarter and won $1.7 billion of new business. We continue to diversify our customer base with new product launches and business wins with OEMs in Japan and India. Car makers in Japan and Korea are currently underrepresented in our current customer base, and we believe there are significant opportunities to expand our business with them. Overall, I'm pleased with our second quarter performance, which was in line with our expectations and puts us in a solid position entering the second half of the year. Turning to page three. Demand for our digital cockpit and electrification products was strong in the quarter. The powertrain agnostic nature of our digital cockpit products helped drive sales growth as strength in ice and hybrids helped offset slower EV growth. Displays were our best performing digital cockpit product, growing high teens year over year. This is a critical inflection after the declines in recent quarters due to the end of the BMW display program that we have mentioned in prior quarters. The growth was driven by programs with Ford, Nissan, and Stellantis, and we anticipate this growth to continue in the coming quarters as these programs ramp up and as we launch additional display products. Car makers continue to prioritize larger and more sophisticated displays in the cockpit, and Visteon is positioned very well to take advantage of this trend. Digital clusters grew double digits in the quarter, benefiting from the ramp-up of recently launched clusters at multiple customers, including Ford, Volkswagen, and Nissan. We remain the market leader in digital clusters and expect a long runway of growth as digital clusters extend into the mass market and value segments of the automotive market. Smart core sales continue to grow in the second quarter, with ramp up of recently launched products at multiple OEMs, including Harley-Davidson, Mahindra, and Scania. The smart core launch with Scania is the first cockpit domain controller introduction in the commercial vehicle market, and we see significant opportunity to develop further in the segment. Sales of electrification products were strong in Q2, driven by the ramp-up of production of electric vehicle models by GM and the start of BMS production for our second customer. It was a significant contributor of our market outperformance, coming in stronger than we originally anticipated in the first half of the year. Even with the lower market expectations for the growth of electric vehicles, sales of our electrification products are delivering incremental sales growth for Visteon on a year-over-year basis. From a regional perspective, our market outperformance was driven by strength in Americas, Europe, and Asia, excluding China. Our sales in China were weaker than expected due to the ongoing market dynamics in that region, which muted our overall market outperformance in the quarter. Our sales in Americas benefited from the significant growth of electrification sales that I just mentioned. We also saw double-digit growth in digital clusters driven by ongoing ramp-up of programs with Ford, which were partially offset by lower than anticipated sales of cockpit products on electric vehicles. In Europe, market outgrowth was driven by digital cluster and display programs with Volkswagen, JLR, and Mercedes. This was primarily due to the ongoing ramp-up of new product launches, which more than offset the lower than anticipated sales of products on electric vehicles. As you may recall, Ford delayed several launches in the first quarter to improve launch quality controls. The vehicles have subsequently been launched and were not a headwind to our second quarter results. Our sales in Asia outside of China outperformed the market due to the roll on of smart core programs with Mahindra and ramp up of digital cluster programs with Hyundai and Royal Enfield. This region provides significant potential for both passenger vehicles and two-wheelers, providing further customer and end market diversification. China was a weak spot for us on account of the ongoing decline of market share for global OEMs and the unfavorable vehicle mix with our largest domestic customer, Geely, where we have most of our business on premium, high-value brands that are not doing as well in the market as we had expected. Our sales in China declined compared to prior year and reduced our overall growth over market by about three percentage points. Overall, we delivered solid top line growth and high single digit growth over market performance in the second quarter, overcoming market headwinds from China and lower EV sales. This performance demonstrates the resiliency of our product portfolio and the benefits of our diversification across customers, geographies, and powertrains as well as our expansion into the two-wheeler and commercial vehicle markets.

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