Visteon Corporation

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 Satchin Olande, President and Chief Executive Officer, and Jerome Rouquet, 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 good morning, everyone. Thank you for joining a third quarter 2025 earnings call. Visteon delivered another quarter of strong operating and financial performance demonstrating the strength of our business while continuing to execute on our long-term strategy. Sales for the third quarter were $917 million, coming in slightly below our expectations, primarily due to the impact of the unplanned production shutdown at JLR. Excluding this impact, sales were broadly in line with our forecast. We had good visibility into customer production schedules going into the quarter, And while there were some minor percent takes across programs, they largely offset each other. Year over year, we continue to see strong momentum in our cockpit electronics business with solid growth in Europe and in the Americas. This was offset by lower sales in China and for BMS in the U.S. due to the anticipated headwinds from the challenging macro environment for global OEMs in China and for electric vehicles in the U.S. Adjusted EBITDA was $119 million, representing a margin of 13%. And adjusted free cash flow for the quarter was $110 million. We're maintaining our full year guidance, which Jerome will walk you through in more detail shortly. On the sales side, we're trending below the midpoint of guidance as a result of several temporary industry headwinds. Importantly, despite these headwinds, Our adjusted EBITDA and free cash flow are forecasted to remain strong, supported by continued operating discipline, commercial execution, and the impact of our cost reduction initiatives. From an operational viewpoint, the team delivered very well. We launched 28 new products, improved our profit margin through productivity measures, and secured $1.8 billion in new business during the quarter. We continued to build momentum with our product portfolio, winning multiple large display programs and adding another high-performance smart core customer in China, strengthening our position in the emerging AI-based cockpit systems trend in the industry. We also resumed capital returns to shareholders with the payment of our newly initiated quarterly dividend with more capital returns planned in the fourth quarter. Turning to page three, Our Q3 sales came largely in line with our expectations, excluding the temporary production shutdown at one customer in Europe. In North America, cockpit electronics continued to perform well and came in ahead of expectations. The impact of tariffs on customer demand remained minimal, and we benefited from the ramp-up of several recently launched programs with OEMs, including Ford. BMS sales were down significantly year over year with GM and Stellantis, reflecting the very different environment for EVs in 2025 compared to 2024. While retail EV demand surged ahead of the expiration of the $7,500 tax credit, production levels remained steady as OEMs worked through the elevated dealer inventory. Sequentially, BMS sales came in modestly higher. Overall, in the Americas, strength in cockpit electronics helped partially offset the year-over-year decline in BMS sales. In Europe, our sales were flat year-over-year. We saw solid gains in cockpit electronics on ICE hybrid as well as battery electric vehicles across multiple customers, including Mercedes EQ and Renault R4 and R5 EVs, the Puma transit and transporter vehicles from Ford, and the Peugeot 208 and 2008 vehicle models that offer a choice of powertrains. Our sales in Europe also benefited from our recent engineering services acquisition, partially offsetting some of the strength of the production downtime at JLR, where operations were halted for the entire month of September due to a cyberattack impacting our Q3 sales by approximately $12 million. In the rest of Asia, excluding China, we continue to make progress on our strategic initiatives to diversify our customer base and expand into the two-wheeler market. In Q3, sales benefited from ongoing traction in the two-wheeler market and from the recent launch of our digital cluster program across multiple car lines with Mitsubishi. Offsetting these were declines in vehicle production at a few of our customers in the region. In China, third quarter sales declined year over year as expected, primarily driven by negative vehicle mix with Geely and the ongoing market share loss of global OEMs partially offset by new product launches. On a sequential basis, however, sales remained stable, supported by key programs including the new Buick GL8 with GM, Toyota Corolla, and a cockpit domain controller with Geely. We believe this performance represents a baseline level for our China business from which we expect to return to growth in the coming years. Turning to page four, we launched 28 new products across 10 different OEMs in the third quarter, underscoring the market fit of our product and technology portfolio, as well as our program execution capabilities. These launches spanned a broad range of vehicle segments and geographies, and were featured on several flagship vehicle models, reinforcing the trust our customers place in our ability to execute and deliver these complex systems. Some key highlights include an audio infotainment system on the Ford Super Duty and a multi-display system for the Chevy Corvette AGM. Large displays are becoming key requirements in all regions. We launched a new dual display system on the Renault Boreal, which is a C-segment SUV based on the Dacia Bigster for markets outside of Europe with first launch in Brazil. In two-wheelers, we launched digital clusters across three models with TVS in India, our first with this OEM. TVS is the third largest two-wheeler manufacturer in India with annual sales of about 3 million vehicles. This is also the first introduction of an all-digital cluster by this OEM. highlighting the growing trend of digitalization in the two-wheeler market. In commercial vehicles, we introduced a smart core-based cockpit system for off-road construction equipment with Volvo that enables advanced features such as dig assist for excavators and load assist for wheel loaders that delivers high excavation accuracy in a fraction of the time compared to conventional methods. These systems use multiple sensors and highly accurate GPS technology to run sophisticated software algorithms on our proven SmartCore platform. Lastly, we launched an upgraded SmartCore cockpit domain controller on the refreshed Zeker 001 luxury electric vehicle. The 001 has been a successful vehicle for Geely with over 300,000 sold since its introduction in 2021 and the latest version will be offered in six countries in Europe besides China. New product launches with customers such as Geely and Chery remain central to our strategy for returning to growth in China. Our Q3 launches illustrate the fit of our products for not only the passenger car market, but also two-wheeler and commercial vehicle markets. Year to date, we have now introduced 65 new products reflecting our continued focus on innovation and discipline program execution. Turning to page five, Q3 was another strong quarter for new business wins, and we now expect to close the year at greater than $7 billion, higher than our initial target of $6 billion. Year to date, we have secured $5.7 billion in new business awards, which is up from $4.9 billion in the same period last year, with wins across 21 unique OEM customers. The product mix is led by displays, which represent more than half of our total awards so far this year, as carmakers seek to refresh and differentiate the cockpit experience even on existing vehicle platforms. Importantly, we also secured $2.3 billion in new smart core, digital cluster, and infotainment programs, despite the relatively slow coating environment as car makers adjust to rapidly changing market dynamics. This strong performance reflects the strength of our product and technology portfolio, which continues to lead the auto industry and help us in expanding into two-wheeler and commercial vehicle markets. On the right side of the slide, you can see a few examples of notable wins this quarter. We won a panoramic display with a European OEM covering both hybrid and battery electric models, launching in mid-2028. This is our first win with this brand, and the display will initially debut in the European market with later expansion into other major markets. Another significant win is for a large dual driver and passenger display for a premium luxury brand. Our product integrates two OLED panels under a single cover glass featuring switchable privacy for the display. Our competitiveness on technology and cost supported by our in-house design and manufacturing capabilities were critical factors in securing this business. In Asia, we continue to expand with the world's largest OEM, winning a digital cluster program for an affordable performance model, another step in deepening our relationship with this key customer. And in China, we secured a smart core high-performance computer program with Cherry, which will enable AI capabilities to enhance the cockpit user experience. Cherry is one of China's leading domestic OEMs and also a leading exporter of vehicles. The product will initially launch in their plug-in hybrid SUV models, followed by the next generation of battery electric vehicles. This represents our second HPC win in China. The first was with Zeker, and when these two programs launch in the second half of 2026, they will be the most advanced systems globally, setting a new benchmark for next generation cockpit products. Turning to page six, Just a few years ago, electric vehicles and China were seen as the two most significant growth drivers for the industry. However, that has changed quite rapidly over the past couple of years, and the industry reality is very different today. EV adoption outside of China has progressed more gradually than many had anticipated, and recent policy changes in the US present additional challenges. In China, the large number of car brands operating in that market has triggered a fierce price war that has raged on for the past couple of years and resulted in notable changes in OEM market share. On the technology front, artificial intelligence has overtaken SDV as the most exciting technology trend, with Chinese OEMs leading the industry in early adoption of this technology. In response, we have taken deliberate steps to broaden our strategic initiatives to address the air pockets in our growth trajectory created by these industry dynamics. I would like to take a few minutes to share how we are thinking about these evolving industry trends and the progress we are making on our broader growth initiatives. Car makers outside of China are launching new vehicle models that offer a choice of powertrain, ICE, hybrid, and battery electric, and with larger displays and advanced cockpit electronics. This is especially the case in Europe as carmakers prepare to compete against Chinese imports. We are seeing strong interest in our large displays and latest smart core technology for these new vehicles. In the third quarter alone, we launched five new cockpit electronics programs for OEMs in Europe and China. and have five additional smart core systems under active development with OEMs in Europe and Asia with launches starting in Q4 of 2025. We are also making progress with Cherry, where we will launch our first display program in early 2026 for the European market. This initial program served as a strategic entry point, enabling us to expand our relationship with Cherry during the third quarter, in the China market with another new business win. Artificial intelligence has the potential to significantly enhance the user experience delivered by cockpit systems. AI-enabled cockpit is an emerging technology trend, and Visteon has positioned itself well with the introduction of the high-performance version of Smart Core and Cognito AI framework, the first of its kind in the industry. In Q3, we secured a second high-performance compute win, this time with Cherry, joining Zeker as the initial customers for this exciting new technology. We have discussed previously our initiatives to broaden our opportunities by focusing on underrepresented car OEMs in Asia, while expanding into adjacent transportation markets of two-wheelers and commercial vehicle OEMs. We're also expanding our product portfolio with new in-house developed products, such as the App Store and cameras for ADAS applications. In the third quarter, we made solid progress. We launched an App Store with Maruti Suzuki in India, our first launch of this product, which now supports over 100 apps that are available for download. We're also working with two additional OEMs for the launch of this App Store in their vehicles in 2026. We also launched multiple products in the two-wheeler and commercial vehicle markets, which I've already highlighted earlier in the call. Year to date, roughly 25% of our new business wins are tied to our strategic growth initiatives, a key reason we now expect to exceed our original new business win target by at least a billion dollars. Overall, we remain confident in the long-term prospects for the business. In addition to our top-line opportunities, We continue to expand margins, generate strong cash flow, and deliver best-in-class returns on invested capital. With that, I'll hand it over to Jerome, who will walk you through the financials in more detail. Jerome?

Thank you, Sachin, and good morning, everyone. Consistent with recent quarters, we again delivered strong operational and cost performance, as well as a robust cash generation, despite sales being slightly lower than originally expected. For the quarter, sales were $917 million, a 6% decline from the prior year. We continue to see strong growth in cockpit electronics across the Americas and Europe, along with higher engineering services revenue on a year-over-year basis. As expected, this was more than offset by lower battery management system sales in the Americas and reduced sales in China. However, what we did not expect was the negative impact of JLR unplanned shutdown for the entire month of September, which represented a little over a point of sales. Adjusted EBITDA for the quarter came in at $119 million, and thus scoring our continued focus on operational execution and discipline cost control. Adjusted EBITDA margin was 13%, benefited from our ongoing efforts in product costing and productivity. We did have net positive non-recurring items this quarter, which contributed approximately half a point to the margin. Adjusted free cash flow was $110 million, driven by a robust EBITDA performance, as well as favorable timing of cash flows. During the quarter, we paid our first quarterly dividend, marking an important step in continuing to return capital to shareholders and reinforcing our commitment to a balanced capital allocation strategy. We closed the quarter with $459 million in net cash, giving us the flexibility to continue investing in the business, pursuing technology-accurative acquisitions, while delivering shareholder returns. Turning to page 9. Sales for the quarter were 917 million, down 63 million year-over-year. Customer production volumes remained essentially flat, while growth versus market was negative 5% for the period. Growth over market came in below our expectations for this quarter, driven by a combination of factors. First, production mix was a headwind. Several of our key customers, including Geely and others, saw increases in overall production volumes, but not on the specific vehicle lines where we have content. This diluted our growth over market performance. Second, as we have discussed, GLR was another headwind. Sales with GLR were on track to outpace the customer's production before the shutdown, which impacted the contribution to growth over market. Customer recoveries, primarily tied to prior semiconductor cost increases, reduced sales by approximately 2% year-over-year as those input costs continued to decline. Normal annual price reductions to customers were around 1%, consistent with our historical average. FX provided a modest benefit in the quarter. Adjacent EBITDA for the quarter was $119 million, flat compared to the prior year. However, adjusted EBITDA margin improved by 90 basis points, reflecting strong performance in product costing and productivity, the benefit of one-time items, as well as contribution from M&A. These gains were offset by the flow-through impact of lower sales. Net engineering as a percentage of sales was 6.3% for the quarter and includes the recent engineering services acquisitions we have made over the last 12 months. Excluding the acquisitions, our net engineering expense remains in the 5% range, slightly lower than our original expectation for the quarter. We continue to leverage our platform approach and best cost footprint, while advancing multiple initiatives to improve engineering productivity. At the same time, we are investing in strategic engineering capabilities, including AI applications to support our upcoming high-performance compute launches in China and the development of Cognito AI. Adjusted SG&A was 4.9% of sales, reflecting a healthy balance between ongoing cost controls and targeted investment in key teams and technologies to support future growth. Our normalized margins remained in the mid-12% range, and Q3 provides another data point illustrating the run rate of the business. The sustainable margin performance continues to be driven by the cost initiatives we have undertaken, including product costing, engineering productivity, platform-based product development, and AI-driven process improvements, while continuing to invest in the business. Turning to page 10. Vistion generated 215 million of adjusted free cash flow through the first three quarters of the year. We continue to benefit from a robust level of adjusted EBITDA, converting EBITDA to cash at a 56% rate, still above our 40% target when excluding the working capital inflow. Trade working capital was a net inflow, reflecting lower sales and strong collections, partially offset by higher inventory levels associated with the unplanned shutdown at GLR. Cash taxes were higher compared to last year, driven by continued improvement in profitability across most jurisdictions, as well as the timing of cash payments. Net interest remained a positive contributor, as interest income earned on our cash exceeded the interest expense paid on our debts. We also had an outflow this year related to our 2024 annual incentive program, which was paid in 2025 and at higher levels than the prior year, reflecting the strong financial and operational performance in 2024. In addition to this payout in the first quarter, other changes this year, including U.S. pension contributions and the timing of various other cash flows. Capital expenditures were $88 million, representing 3.1% of sales, and were slightly below our full-year expected run rate. In the first three quarters of the year, in addition to ongoing investments supporting customer programs, we continue to invest in several vertical integration initiatives, as I have mentioned on previous calls. These initiatives allow us not only to improve our product costs, but as well to de-risk our supply chain while controlling more of the technology that goes into our products. In the quarter, we paid our first quarterly dividend, approximately $8 million. We ended the quarter with $765 million of cash and a net cash balance of $459 million. In the fourth quarter, we plan to increase our capital allocation to shareholders. In addition to our recurring quarterly dividend of 27.5 cents per share, we will return additional capital through share repurchases. We currently have approximately 125 million of authorization remaining under our existing program and anticipate retiring between 20 and 30 million dollars of shares during the quarter. we may go beyond that range on an opportunistic basis, depending on market conditions. This puts us on track to complete the program by the end of next year, consistent with the plan we laid out during our 2023 investor day. Turning to page 11. Our current outlook remains within the range of our previous guidance. On sales, we are now tracking below the midpoint of the range, closer to approximately 3.75 billion, reflecting the latest customer schedules. First, we are incorporating a reduction in battery management system sales following the elimination of the 7,500 EV tax credits in the US. We expect this headwind to persist into 2026. Second, we have incorporated some continued level of production disruptions at GLR throughout mid-November. Under normal conditions, GLR contributes approximately 10 to 13 million in monthly sales. Finally, we are also adjusting our outlook for our largest customer Ford due to some scheduled downtime resulting from their aluminium supplier plant fire. We believe the JLR shutdown and scheduled downtime at Ford with an estimated impact of 30 to 40 million are temporary in nature and do not reflect the underlying run rate of our business. Focusing on Q4, we anticipate a modest sequential increase compared to Q3. We expect to benefit from new program launches and higher customer production volumes. which we believe should more than offset the incremental headwinds from the aluminum supplier disruption and lower BMS sales. The impact from GLR is expected to be similar in both quarters. For growth of a market, we anticipate improvement in the fourth quarter compared to Q3, despite some of the near-term headwinds. For the full year, we currently estimate growth of a market will land in the low single digits. This is below our previous expectations, largely due to the factors I've outlined already, namely production mix, where customer volumes have increased, but not necessarily on the platforms we support, a decline in battery management system volumes in Q4, and temporary headwinds from JLR, and the disruption caused by the aluminum supplier fire. Our adjusted EBITDA is trending towards the high end of the guidance range. We anticipate Q4 EBITDA margins to be in the mid-12% range, consistent with the run rate we have delivered for the last three quarters. Adjusted free cash flow is also trending towards the high end of our range, if not slightly higher. CAPEX is trending closer to 140 million, slightly lower than originally anticipated, despite our ongoing investment in the business, in sourcing activities, and the expected purchase of land for a second manufacturing location in India to support our growing business there. We continue to actively pursue vertical integration opportunities, and our CAPEX includes investments this year in several areas, including magnesium injections, display manufacturing, and camera assembly. Our outlook illustrates the operational and commercial discipline we continue to deliver on with adjusted EBITDA and adjusted free cash flow well above our expectations coming into the year despite more modest sales performance than expected. The work we've been doing to win new businesses, expand margins, vertically integrate and generate more cash provides a great foundation for the long term. Finally, I would like to flag a developing risk for both Visteon and the entire automotive industry related to recent trade restrictions imposed by the Chinese government on Xperia, a supplier of transistors, diodes, and other discrete semiconductors to Visteon and the entire automotive industry. The trade restrictions prohibits Xperia from exporting components outside of China, is limiting sales within China, and could disrupt production similar to what we experienced in 2021. We understand that Nexperia is currently working to obtain an export license, which has historically taken approximately 45 business days, although details remain uncertain. We hold approximately 30 days of inventory for most affected parts and are actively working to mitigate direct risk to Visteon by qualifying and procuring compatible parts through brokers and distributors. The indirect exposure is hard to estimate, as the Xperia components are widely used across the industry and could materially impact customer production schedules. At this stage, it is uncertain whether this risk will materialize or what the impact would be, and accordingly, this risk is not factored into our guidance for all three metrics. Turning to page 12. Vistion remains a compelling long-term investment opportunity. We expect to benefit from higher demand for more digital content in the cockpit, regardless of powertrain. Visteon is well positioned for long term top line growth, margin expansion and free cash flow generation, while our strong balance sheet provides us with significant flexibility to pursue our capital allocation priorities. Thank you for your time today. I would like now to open the call for your questions.