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.

At this time, if you would like to ask an audio question, Please press star followed by the number one on your telephone keypad. Again, that is star and the number one. We will pause just a moment to compile the Q&A roster. Your first question comes from the line of Luke Tronk of FAIR. Please go ahead. Luke Tronk, your line is now open.

Sorry about that. It was on mute. Thanks for taking the question. Sasha, maybe just start with the forward-looking question. You mentioned in the script your expectation of returning to a cadence of growth in China. I'm just wondering how should we think about that into 26, especially through the year, and especially thinking about the materiality of the CDC wins into the back half of 2026? Thank you.

Yeah. Hey, Luke. If you think about our business in China, it has, as we discussed, stabilized in Q3, and we expect that to continue into Q4. And there are launches in China in starting Q4, but also more into 2026. I think we have about 20 new model launches happening next year, but it is predominantly back half loaded. especially with those two high-performance compute smart core launches, which are also very high value. We expect to be able to outperform customer vehicle production in China next year. Now, today, as we stand, I think S&P Global is forecasting customer production volume in China to be lower next year, but I believe it's still too early. to call that, and I think there will be some changes. I'll know more. I'll be in China next month, and we'll have much better visibility into it. But overall, our expectations are that we will be returning to a growth over market performance back in China next year.

Got it. And then for my follow-up, just circling back to Nixperia, Jerome, I appreciate your comments on the direct impacts. What about the indirect impacts and just latest intel on what your customers are telling you what their production related risk might be?

Yeah, I'll take this and maybe just provide some more context. Jerome already discussed a bit in his remarks, but I think this is a question that might be on everyone's mind. So let me just take this opportunity and give you more context. So Nexperia is ex-NXP, standard parts division, right? It used to be part of NXP and therefore in automotive was widely used given how NXP was prevalent in automotive. But sold to Chinese investors in 2017 and then eventually this company, FinTech Semi acquired it in 2019. And I would say, About 60% of their business is in auto, and they make very, I would say, inconsequential but very needed components, things like transistors, MOSFETs, diodes, and virtually every single automotive electronics component has one or more of these parts in use. So that's the usage situation. Now, what happened was on account of this issue between Nextpedia, the Chinese owners, and the Dutch government, and the actions that were taken on September 30th by the Dutch government, that has kind of resulted into this escalation between the governments now. It's become a little more of a diplomatic role. The short of it is from October 4th onwards, supply from Nexperia China essentially stopped. And that's going into all of these automotive components that I mentioned. Now, as Jerome mentioned, they've taken this or applied for an export permit, but I think this will require more of a government level intervention and resolution, which would happen any moment. I know that and this is also I think public information that the commerce ministers of both sides are in talks to try to find a solution. So they're hopeful that this is imminent and gets resolved. Now, specifically about the impact. Now, most suppliers tend to hold anywhere between two to three weeks of parts inventory on hand. and maybe another week in transit and at the OEMs. So we're already into the third week now. And therefore, the criticality of this with every passing day will become higher. Now, Visteon has had, since the last semiconductor crisis, a higher level of semiconductor parts inventory, just learning from our experience. And I would say that we probably have a little more cushion than our peers in the industry. At the same time, we are looking for alternate parts and also redesigning some of our products to be able to accept parts that are not strictly pin-to-pin compatible. However, all those things do take some time and that cannot be turned very quickly like what we might be required to do. If within the next week or 10 days the supply does not resume. So we are hopeful that that this thing will be resolved in that time frame and that we will not be required to impact our customers production. But I believe regardless that Vistion is probably not going to be the first one to impact our customers, given where we stand with our inventory and our ability to find alternate parts. Hopefully, this gives you a little more context, and this is a developing story, so we will have to just watch this space very closely.

Yeah, really helpful. Thanks for that, Tash, and I'll leave it there.

The next question comes from the line of detail. It's TD Cowan. Please go ahead.

Great. Thank you. Good morning, everyone. Just curious if you can comment on just how some of the shifts in revenue and some maybe seeping into 2026, others maybe being more kind of one time in nature, it may be influencing your thinking on the 5% CAGR target through 2027 as well. How we should think about BMS directionally into 2026? Yeah.

Hi, Dave. Let me take this first and then I'll invite Jerome to add anything that I might have missed. But when we think about 2026, although it is too early to really be specific, let me share some of the puts and takes as we see it right now. First of all, S&P Global is forecasting vehicle production at our customers to be down next year, 3% to 4%, mainly in North America and China, but I do expect that to be revised as many of our customers that have been impacted by all of these things that we have discussed on the call will likely try to recover that lost production next year. So we will have to, again, wait and watch how this develops. But my expectation is that it won't be as negative as S&P Global has the outlook today. Now, when it comes to the two main headwinds we've faced this year, namely China, They will play out differently as we go forward. So first, China, as we discussed also in our prepared remarks, will start to come back to growth based on the launches that we discussed, including the high performance compute launches. And this growth will continue going forward into 2027 as we have additional launches coming in On top of you know the ones that I just mentioned. Now with BMS we will have to still wait and see how this develops, but at least in 2026. Our expectation is that given the headwinds that EV space, especially in the US, I expect our BMS revenue to continue to see some decline next year and then maybe stabilize from that point and we will have at that point also better be on the path for modest growth and later in 2028 we also have our first power electronics products that launch so you know our strategy for VMS and electrification in general is to track with market we expect the market to increasingly outside of China take a multi-energy approach when it comes to vehicle powertrains. And yes, the growth expectations have been calibrated significantly lower compared to where we were a couple of years ago. We still do believe that after this lapping that will occur hopefully by 2027, we expect electrification to also continue on a modest growth trajectory. Now, as we think about 26 and 27, the other big after the one that we have discussed previously is that launches with Toyota and we have several launches, more than a dozen launches that are sort of split between 2026 and 2027. And therefore, the full year impact will be most felt in 2027. And that's where we see that step growth occur in our revenue as we go forward. We'll be talking a lot more about this on our fourth forum call as we usually do, but I thought I would share with you some of the things that we see as we stand to waste.

Now, that's super helpful. Thanks so much, Sachin. As a quick follow-up, congrats on the new business booking momentum this year. Is $7 billion sustainable, Sachin, next year and beyond, or maybe there's some one-time wave in there this year?

So let me first explain what's the reason behind this so that there's a better appreciation for what we are seeing and how and why we think that higher levels would be sustained. So the main driver of our wins even last year and certainly this year has been our success with displays and the investments that we've been making since 2018 have continued to put us to more complex, larger displays for automotive. Now, this has helped us win new business, especially in the US and Europe, at a time when coating activity has been lower than normal, especially for the electronics. And the reason for that is that the OEMs in these regions have been adjusting or have been forced to adjust their new vehicle launch plans in response to the sudden change in the auto Ford EVs. Now in Asia, OEMs there don't have this situation and therefore we're seeing a opportunity for our full suite of products, including the cockpit electronics products, and therefore we are winning smart core and smart core HPC currently in Asia. Now I expect these OEMs in Europe and US resume sourcing activity for the electronics very soon as well, because otherwise they will be noncompetitive, especially against the Chinese counterparts. So and that's what's reflected in our wins this year. If you look at Q3 here today, about 40% of the wins were Europe or 25% in the Americas. And then Asia made, you know, 33% And on top of that, and this is really what what is the reason why I think this is going to be sustainable. Our initiatives with commercial vehicles and two wheelers have also contributed to higher new businessmen growth. In fact, this year I think we have more than doubled. Our new business wins in absolute dollar values over last year and prior to that it was a very small portion of our overall in a business. So all of these, I think, are sustainable. And as we have demonstrated this year in an environment that is pretty challenging, we seem to be able to win more than our fair share of the opportunities out there. It just speaks to the strength of our product portfolio and our cost competitiveness.

Terrific. That's very, very helpful. Thank you.

Your next question comes from the line of Dan Levy, Barclays. Please go ahead.

Hi. Good morning. Thank you for taking the questions. Jerome, I wanted to start with the question on the margins. And maybe you could just talk about the one-timers. And when we just add up everything for the year, how much is it? What's the right jumping off point when we're going to start to do our bridges into 26? And then You know, the other thing that I think that's relevant here is we know there's been a number of EV programs that have been delayed, canceled, and there's going to be some OEM recovery payments to suppliers. Maybe what is the magnitude of potential recoveries down the road?

Yes, sir. Good morning. Thanks for your question. The margins, I would say, have been very strong throughout the year. We've pretty much always exceeded our consensus, or let's say the consensus or our guidance for the margin percentage standpoint. Q3 was no different. We were at 13%. Even when you normalize this, we were at 12.5%. So slightly above what we had indicated in previous quarters. I think the strength of the margin is coming from all the initiatives that we've been working on for the last few quarters. And it is largely around product costing. We spend a lot of time making sure that our products are competitive in the market from a cost standpoint. That includes one theme that we've talked a lot about, which is vertical integration. We've also spent a lot of time on productivity in manufacturing, but as well in engineering, especially with AI, which has recently helped us as well to be pretty efficient on the engineering side. So if you step back and look at our margin, we'll be able to finish the year with margins that are slightly over the midpoint of our guidance. And in fact, we'll be close to half a billion in EBITDA for the full year. That includes about $30 million of one-timers. We've had about 25 in the first half of the year and 5 So it was lower, five in this quarter. These recoveries are generally related to, as you mentioned, lower program volumes that we've seen. or various recoveries on, for example, inventories that we had in excess because of, again, a volume being lowered, a program being lowered in volume. So these are kind of the main reasons. So I would definitely back that out as we go into 2026. Now, equally, there's always some level of recoveries.

uh from uh in that nature uh as we go into uh any any year yeah maybe i can help uh also provide more context because um you know our exposure and to evs is very different than many of our peers because we are essentially for now at least uh really focused on electronics and and the capex and other requirements for bms is significantly different as compared to, say, a traction inverter or something that is very specific to an EV. So in the grand scheme of things, our investments and therefore recovery are much smaller as compared to what you might hear from some of our other competitors or peers.

Great. Thank you. As a follow-up, I wanted to ask about your Toyota exposure. And I know this is a question that's come up in past calls. And I think the number is something like 10% of revenue potentially in 27 or 28, whatever that may be. 28, yeah. 28. Yeah. Maybe you could just talk about the launch cadence ahead and the line of sight. And the confidence that this will ultimately start to become a dominant piece of the revenue that could offset maybe any continued mixed headwinds, which may linger.

Yeah, no, I'll take that one. So you're absolutely right. We've been obviously very successful with Toyota in terms of business wins recently. And we have a pretty gradual trend. um a set of launches as we go into 27 and it's uh it's going to increase obviously uh in numbers and as well in dollar terms so for 25 we'll uh we'll launch two programs overall in 26 five and then in 27 seven uh program so that shows you a little bit the acceleration that we have as we go into 27 and That's the reason why we've been talking about 10% of our sales going into 28. So it's a fairly significant ramp based on what we've won recently. I think the good news as well with Storioda is that we keep on getting very good engagement with this customer and there are still opportunities. So obviously that would go beyond 28 and further. But it's been a very successful story.

I think we need to maybe just give you more context on the opportunities even beyond this. And having said that, with these launches, 2028, we expect, as we said earlier, about 10% of revenue. But these are essentially two product lines that we currently are engaged on. It's the cluster and displays. And we have opportunities even within those two product lines to get on other vehicles, this is still less than 50% of their vehicle platforms and models, so there's still plenty of opportunity for growth. On top of that, we are engaged with them on discussions regarding electronics, right, and given my prior comments about how we see the industry rapidly evolving to use of more and more advanced software-driven features and AI becoming a very dominant theme or a trend, I think we are very well positioned to support this customer, this OEM, in their ambitions with respect to addressing some of the gaps that they have in their portfolio. So for us, this represents much more than just the immediate, the 2028 sort of horizon opportunity that we have discussed. So we will continue to explore more opportunities as we go forward.

Great. Thank you.

Your next question comes from the line of Mark Delaney of Goldman Sachs. Please go ahead.

Yes, good morning. Thank you very much for taking the questions. And thanks for the comments on the various product opportunities and your thoughts on the market environment. I'm hoping you can help better contextualize what that all means for consolidated growth in the coming years as you consider share gains with certain Asia X OEMs, Asia X China OEMs, working through the backlog, given the booking strength you're seeing, executing on some of these AI opportunities, but then also some of these headwinds, like in BMS and customer mix. And, you know, to put that all together, how is the company tracking relative to the $4.15 billion revenue target it previously discussed for 2027?

Yeah, again, I think we will not necessarily specifically comment on 27. We will do that beginning of next year, primarily because we need to get a better handle on the underlying volume assumptions as we discuss a lot of moving parts there. But having said that, we are making really good progress with all the initiatives that I have mentioned on this call and previously as well. Starting with Toyota, as Jerome just mentioned, we have these launches. We really have to execute these launches well, which I have no reason to doubt that we would be doing anything otherwise. But the other one that I would like to highlight that also really contributes to our growth in 2027 is the launch in 26 with Honda. This is the two-wheeler opportunity that we have previously mentioned, but fairly significant. And then on commercial vehicles, we have these opportunities that are, you know, with Triton, which is the commercial vehicle group that constitutes MAN, Scania, and Sub in the U.S., as well as Volvo Trucks, which are launching in 2027. So we have in 2027 the situation where China starts to grow, They have this BMS headwind kind of just lapped at that point, so the comparison should be good. And then all these new launches that are kicking in. So we would expect to be in a good position, but I do want to just caveat that by saying this volume expectations we need to get a much better handle on, and that's what we will be focused on between now and end of the year.

Helpful context, Ted. Thanks for that. And the second question was on BMS. And thanks for all the commentary and discussion you already provided there. I did want to understand profit implications for Visteon in that product area over the next couple of years. And given what you articulated around volumes in relation to what customers are now planning for their EVs, how is Visteon operating that business? Is this something that can remain profitable even at BMS sales or low levels in 26 and maybe in 27 as well? Thanks.

Yes, I'll take that, Mark. BMS still represents about 5% of our sales, so it's still a significant contribution in terms of product line. Margins are similar to other product lines, so there's not a major difference. Obviously, the more volume we have, the better, but it's not going to be – say, a mixed impact that we'll see as we go forward. Thank you.

Your next question comes from the line of Joe Spak of UBS. Please go ahead.

Thanks. Maybe just to quickly follow up off that last point, because it was headed down a similar path. you know, that suggests, you know, BMS was like, uh, you know, again, you said, I think 5%, so call it roughly $200 million. Um, so just in terms of, so, you know, investors could get properly calibrated. Um, you know, like, do we think like, you know, it's a couple point headwind and those were sort of things bottom out for 26. And I know it's, it's sort of highly fluid, but like, what, what's your sort of preliminary thinking there? Um, And then related to another topic which came up, which is receiving payments for volume, should we expect that you receive some payments for these BMS shortfalls as well, or have those already started?

Yeah, so I think maybe answer the second question first. So for the BMS shortfall, we do anticipate recoveries at that would be either part of the product piece price or as lump sum as we go forward. Some of that has been reflected in the price already, by the way. So we will continue to monitor the volume and adjust and go back as necessary. And so in terms of the volume itself, We're still looking at the latest information that's coming in from GM. And you have also seen what they have publicly stated. So we believe that it's probably somewhere between 10% to 15% or maybe even up to 20% down sequentially. So we'll have to see whether it recovers in the second half. But in the first half, we do expect to see a drop. And then it will depend on how the underlying demand really holds, right? Because we will be in an environment where for the first time, there are no incentives to drive the behavior. I mean, at the same time, we all know that OEMs will continue to offer their own, but to what extent is yet to be seen. So our expectation of what we would tend to model would be somewhere around 20% to be a little conservative.

20% down in 26% versus 25%.

Correct.

Correct. Okay. Thank you. And then, Sachin, the second question, a little bit bigger picture, but I recently saw you posted about, I think, what you called the intelligence era versus sort of the software era. And I'm just curious to get your thoughts about how your customers are thinking about AI, maybe by region, and how Visian is positioning themselves for that to benefit. And what type of timeframe are we really talking about here? Because some of your customers have, to put it bluntly, historically been fairly slow to adopt some of these technology changes.

And you are starting to see this really kind of become more distinct when you look at China than the rest. So the way we see, and we're already very deeply engaged with the Chinese, is that AI is coming in in two ways. So end-to-end ADAS are AI-driven. Today, most of the ADAS uses AI, but it's not end-to-end AI. So that's one big change. The second is AI as a smart assistant on the cockpit. That's the one that we are initially more focused on. And the two wins that we have talked about, one with Zeker, the other now with Cherry, are for this smart code HPC that will bring this AI-based smart assistant for the cockpit. And if you may remember, we talked about our Cognito AI. It was also featured in our CES earlier this year. This is the first software framework of its kind that enables you to run AI, Gen-AI models in the car, not in the cloud. And you see many references today to having, you know, whether it is Gemini, Google Gemini AI or something else. But these are essentially cloud applications that limit how extensive that AI-driven functionality can be offered. But in China, we see that already happening. In fact, the two launches that I mentioned earlier next year well featured this ai models probably from deep seek initially and then on the with respect to the rest of the regions we are seeing a lot of interest in in europe as you can imagine but for for europe the difference that we're seeing is instead of re doing the whole cockpit system to be able to be built on top of ai they're thinking of ai as a accelerator so imagine an ecu that you bring in with minimal changes to existing Cockpit domain controllers, that would enable them to offer some level of AI enabled features. So it's not as extensive as what the Chinese would be able to offer, but it is still better than nothing. And that is seen as a stepping stone towards a full blown AI driven Cockpit. So we are really focused on both those opportunities. One minor thing that is still very relevant that I would like to highlight, it's interesting to note that when you look at the entire cockpit and what the programs in China are doing, they tend to use Qualcomm silicon, but for the AI box as an accelerator, it tends to be more Nvidia. And so we are in the process of really developing solutions for both those architectures, which is kind of unique. I do not expect much activity in that regard from our competitors, especially outside of China. And that should position us well to take advantage of this emerging trend.

Thank you. Your last question comes from the line of Colin Langan of Wells Fargo. Please go ahead.

Oh, great. Thanks for speaking to me. Just to follow up, trying to get all the puts and takes on some of the commentary going forward. I mean, if I think about, you know, you mentioned sort of battery management will be a drag into next year. It sounds like that could be about one point. I assume that there's good news from the reversal of maybe some of the volumes from JLR and the aluminum disruption. Any way to frame maybe the two-wheeler and commercial market help? And I guess the biggest factors we look year over year, you commented that China will turn positive. Is that going to be the biggest sort of help to improving growth over market? Is that reverses? And any way to frame what kind of drag that was to this year's growth?

Yeah. So the two big tailwinds we face next year, one is China, obviously. The other are launches, by the way, in the rest of the markets, primarily commercial vehicles and two-wheelers. So these are kind of net new programs that we will be introducing. So in terms of the growth of our market, we expect China to be positive. and we expect the rest of the market to also be positive as a result.

And in terms of headwinds this year that will reverse into next year, largely because of JLR and Novelis, we've assumed so far in this year revised outlook $30 to $40 million of impact. So you would expect that to be a positive as we go into next year.

And how bad has the China drag been on this year's growth, though?

We generally are estimating that it's about a five percentage point impact. So again, it highlights the fact that, excluding China, and I would say as well, excluding BMS, our cockpit business has been pretty strong, mostly in Europe and the Americas.

Got it. That's very helpful. As we think about margins into 2026, you did note that the 30 million of recoveries is high. What is the normal level that we should be thinking about? Is half of that normal? And then, you know, what other drivers outside of the higher volume, or is it really margin expansion is going to be volume driven, or are there any other cost cutting that we should be thinking about into next year?

Yeah, so in terms of the your first question, I would say half of that is probably a normal run rate and it's generally balanced with potentially negative one timers as well that we may have, but I would say 50% is is probably a good a good ballpark number in terms of margin drivers. So we we've constantly improved margins as we move forward, even with. volumes that were slightly down year over year. So we'll continue to do so. I think some of my previous comments in terms of why we've achieved good margins in 2025 will still be valid as we go into 2026. So volume is definitely going to help, but it's our constant. It's our constant focus on productivity, being engineering, manufacturing as well as product costing and We will start to see pretty significant positive as well as we go into 26, but as well 27 from vertical integration as we are accelerating these initiatives.

Got it. Very helpful. Thank you for taking my questions.

Thank you. Thanks for participating in today's call. I'd like to quickly point your attention to slide 24 in which we highlight several investor relations activities for the fourth quarter. If you are interested in learning more, please contact the investor relations team. Thank you.

This concludes Visium's third quarter 2025 results earnings call. You may now disconnect.