Visteon Corporation

At this time, I would like to turn the call over to Mr. Chris Doyle, Vice President of Investor Relations. Please go ahead.

Good morning. I'm Chris Doyle, Vice President of Investor Relations and FP&A. Welcome to our earnings call for the first quarter of 2025. Before we begin this morning's call, I'd like to remind you that today's presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to various risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed. Please refer to the page titled Forward-Looking Information in our earnings material for more detail. Presentation materials for today's call were posted this morning on the investor section of Vistion's website. You can download them at investors.vistion.com if you haven't already done so. Joining us today are Sachin Malande, President and Chief Executive Officer, and Jerome Ruke, Senior Vice President and Chief Financial Officer. We schedule the call for one hour, and we'll open the lines for questions after Sachin's and Jerome's prepared remarks. Please limit your participation to one question and one follow-up. Thank you again for joining us. Now I'll turn the call over to Sachin.

Thank you, Chris, and welcome back to Investor Relations. Good morning, everyone, and thank you for joining our first quarter 2025 earnings call. Vistion delivered another quarter of strong operating and financial results, illustrating the strength of our business and long-term strategy. Net sales of $934 million were essentially flat to prior year, but outperformed underlying customer production volumes, equating to a growth over market of 10%. Adjusted EBITDA was $129 million, representing a margin of 13.8%, another record for us. And adjusted free cash flow was $38 million. Our performance in this key financial metrics represents an outstanding start to the year. The performance of our display product line was a standout in the quarter, both in terms of sales and new business wins. Our multi-year investments in building best-in-class display capabilities for automotive are paying off, and Viztion has emerged as a top supplier of large displays to the industry. Our introduction of new cockpit technologies at the Consumer Electronics Show in Las Vegas in January was well received. In particular, our industry-first solution for AI for the cockpit generated significant customer interest. And while we're laying the base for a solid long-term future, we also had significant traction in the near term. New business wins came in at $1.9 billion for the quarter, which is a great start to the year. led by displays and digital cluster product wins with car makers in Asia and U.S. Operationally, Q1 was also a strong quarter. On a year-over-year basis, we grew margins by 290 basis points despite a muted production environment. And lastly, we ended the quarter maintaining one of the strongest balance sheets in the industry, positioning us well to navigate potential tariff-related industry headwinds. Turning to page three, the company did very well in executing our strategy for long-term growth in the first quarter. Just as a reminder, our strategy is based on product and customer expansion with a focus on faster-growing technology domains in automotive supported by an industry-leading cost structure. This page highlights some proof points of the progress we made in Q1 in executing our strategy. The trend of software-defined vehicles continues to evolve, with AI driving the next round of innovation in voice and vision technologies for the cockpit. In addition to high-performance electronics, this trend is also driving the need for larger displays to render content. With the increasing number of sensors such as cameras, radar, and LiDAR in and around the vehicle, displays are the primary interface to show safety, convenience, and entertainment content to the driver. In Q1, we capitalized on this trend and made meaningful progress in growing our displays business, both in sales and in new business wins. Moreover, our growing capabilities in design and industrialization of large and complex displays are now recognized as industry leading. We also made progress on our customer and market expansion. We have built a strong book of business with Toyota over the past couple of years, and in Q1, we extended our collaboration with this customer. We won a new digital cluster business that will launch on five different vehicle models, plus a displaced business for the luxury brand. And reinforcing our strategy of expanding our business with targeted growth customers in rest of Asia outside of China, we won new business with six different OEMs in that region in the first quarter. For China, we secured our first business win with Cherry, one of the fastest growing domestic OEMs for a large cockpit display. With the slowing domestic market, Chinese OEMs are increasingly looking for opportunities outside of China, and Visteon is well positioned to support them. They're also carefully expanding our business with Chinese OEMs to offset the decline in market share of global OEMs while ensuring profitable growth. We also made progress on our expansion in the two-wheeler market. In Q1, we secured digital cluster wins with Hero Motor Corp and Royal Enfield, two large two-wheeler OEMs in India. These wins illustrate the growing trend of digitalization, transforming the two-wheeler market, offering incremental growth opportunity for Visteon. As we advance a growth strategy, we're doing it in a disciplined way. We continue to leverage our platform-based product development and best cost global footprint to drive margin expansion and cash flow generation. As noted previously, a strong balance sheet differentiates us from many of the suppliers and allows us flexibility in our capital allocation approach. Turning to page four, industry production volumes increased 1% in Q1 while production at our top customers decreased 4% on a revenue-weighted basis. The largest decreases were in North America and Europe, where customer production was down approximately 6% in both regions. Sales for Visteon were up $1 million compared to prior year, with all regions increasing except for China. We saw strong performance in the Americas and Europe driven by the ramp up of recently launched display and infotainment products that drove significant market or performance. In Europe, we also benefited from the continued growth of our commercial vehicle business. In Asia, our footprint in India continues to expand driven by the success of our partnership with Mahindra and the growth of our two-wheeler business. Finally, the launch of a digital cluster program with Toyota also contributed to the growth of our market in both Americas and rest of Asia. In China, as expected, we saw a year-over-year decline mainly due to the market share loss of global OEMs and the lower sales with the domestic OEM due to lower export volumes. On a sequential basis, our sales in China declined due to seasonality in line with industry production. It was encouraging, however, to see that in Q1, the market share for global OEMs didn't decline further on a sequential basis and, in fact, modestly improved. Overall, our Q1 sales performance underscores strong demand for our technology, our ability to execute successful launches, and meaningful progress against our strategic priorities with target growth customers, commercial vehicles, and two-wheelers. Turning to page five. We booked $1.9 billion in new business in Q1 led by displays and digital cluster product wins. The right-hand side of the page highlights some of the key wins in the quarter. We won a 12-inch digital cluster for a key large SUV platform for Toyota that I mentioned earlier. This digital cluster will be equipped on several mass market and luxury brand vehicles with that OEM. We also won a separate 12-inch driver display business for a luxury brand vehicle with Toyota, illustrating the growing relationship with this important customer for Visteon. Next been highlighted is for a 12-inch driver side display and a 16-inch center display for the electric SUV and trucks platform with the Scout brand of VW Group. This platform will initially launch with two vehicle models in the U.S. in 2027, and adds a new customer logo to our portfolio. As mentioned earlier in the presentation, part of our strategy in China is to support domestic OEMs with their expansion outside of China. We won a 25-inch curved display module business with Cherry for two SUV models that will be sold in different regions of the world. Cherry is a large domestic OEM in China with vehicle production estimated to cross 3 million units this year as they continue to expand globally. We expect to leverage this first win into a bigger business with this OEM over time. The two-wheeler wins were with two major Indian OEMs, including one program for the premium segment and another mass market program. The mass market program is for a multicolor LCD cluster with integrated connectivity and will be used on three high selling models. The last thing highlighted on the page is for a BMS system with a luxury OEM in Germany, our fourth customer for this product line and second in Europe. This BMS system is for a new EV platform that's expected to launch in 2028 and will support 400 and 800 volt systems for maximum flexibility. The first quarter provided a great start for our new business bookings for the year, highlighting the market fit of our products and technologies. The pipeline of new opportunities for the rest of the year also looks robust. Turning to page six. The first quarter was also strong in terms of new product launches with our digital cockpit and BMS products launching on 16 vehicle models across the world. This page highlights some of the key launches. It's notable that 10 of the 16 launches were on mass market vehicles and included a mix of powertrains with hybrid electric gaining momentum. In addition, our launch of BMS on the Buick JL8 was for a hybrid electric vehicle, and the customer also launched two all-electric models in the quarter with the same product, illustrating the flexible nature of our BMS technology. With $1.9 billion in new business wins and 16 new product launches in the quarter, they're well positioned to drive continued growth of the business in the future. Turning to page seven, I would like to provide a perspective on tariffs and the impact to the automotive industry and to Visteon. Our manufacturing plants that supply parts to auto customers in North America are in Mexico. As of today, USMCA compliant parts are not subject to tariffs when crossing the Mexico-U.S. border, and nearly all our products brought into the U.S. from Mexico, approximately 97%, are USMCA compliant. Thus far, the 25% tariffs on cars imported from Mexico and Canada and other non-auto tariffs have had a minimal impact on the industry and on Visteon. However, while our customers have not updated their production schedules as yet, they're starting to see industry production forecasts for the remainder of the year being revised downwards. In addition, the executive order of April 3rd directs the Secretary of Commerce and the CBP to establish a process to apply 25% tariff to non-U.S. content of auto parts that are currently exempt under USMCA. These tariffs are expected to go into effect on or after the 3rd of May. This proposed tariff would impact approximately $10 million of Viztion products imported from Mexico into the U.S. on a weekly basis. And depending on the final definition and scope of this tariff, it could equate to a weekly cost of approximately $2.5 million. However, more recently, the administration has indicated that they are evaluating options to reduce the disruption to the auto industry. In the event the administration allows USMCA-compliant automotive components to be exempt from tariffs as they are today, we would not incur the additional weekly costs. We anticipate that tariffs on currently exempt automotive parts will add to the uncertainty in the industry and will further impact industry production volumes and vehicle and product mix. As we work through various scenarios, We have seen a variety of forecasts attempting to estimate the negative impact on industry vehicle production volumes this year. The range is quite wide, from 1% down compared to prior year to a high single-digit decline. As OEMs react to this highly dynamic and fluid environment, we expect significant change to our customers' production volume and schedules as the full scope and cost of the tariff becomes clear. Because of the increased uncertainty due to tariffs, we are not reaffirming guidance at this time. We will provide regular updates as the tariff and production environment becomes clearer. Jerome will provide more information on our tariff playbook later in the presentation. Turning to page 8. In summary, the company continues to lay the foundation for future growth with a technology-driven product portfolio that's well aligned with industry trends. And while tariffs present new uncertainties, I want to remind everyone that this is not the first such cycle that we have been through. We face similar levels of uncertainty at the beginning of the COVID-19 pandemic and the subsequent global supply chain disruptions. Each cycle reshapes global production volumes and mix for the short term before the industry begins to stabilize. We again find ourselves at the beginning of another cycle, and we're working closely with our customers to mitigate tariff impact in the near term while remaining focused on our long-term strategy. I'm confident that our global manufacturing footprint, proven supply chain management capabilities, An industry-leading cost structure and balance sheet will enable us to emerge stronger from this cycle, just as we have done previously. Now I will turn the presentation over to Jerome.