Visteon Corporation

Good morning. I'm Chris Doyle, Vice President of Investor Relations and FP&A. Welcome to our earnings call for the first quarter of 2026. 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 Statements in our earnings material for more detail. Presentation materials for today's call were posted this morning on the investor section of Visteon's website. Joining us today are Sachin Lawande, President and Chief Executive Officer, and Jerome Marquet, Senior Vice President and Chief Financial Officer. We've scheduled 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. Visteon delivered a solid start to the year with first quarter sales coming ahead of our expectations. Net sales were $954 million, up 2% year-over-year, despite lower industry and customer vehicle production. New product launches and customer recoveries more than offset the anticipated headwinds from lower BMS volumes and vehicle discontinuations at Ford. Growth over market in the quarter was 3%. Adjusted EBITDA was $104 million, broadly in line with our expectations. During the quarter, we saw elevated semiconductor costs, while the associated recoveries from customers are expected to be weighted more to the later part of the year. Adjusted free cash flow was negative $23 million, primarily driven by normal seasonality and higher inventory levels. We continue to maintain a strong balance sheet with net cash of $385 million, providing ample flexibility to execute our capital allocation strategy. New business wins were just over $1 billion, led by cockpit domain controllers and digital clusters. A key highlight was our high-performance compute win with SAIC in China, a third customer for AI-based smart cockpit systems, reinforcing our first-mover advantage in this emerging technology, similar to our early leadership with Smartcore. Q1 was a busy quarter for operations, with 20 launches across 11 automakers. including on several high-profile vehicles, underscoring our continued execution excellence in a dynamic supply chain environment. Finally, we continued to return capital to shareholders. During the quarter, we returned $40 million through share repurchases and dividends. Overall, the quarter reflects a good start to the year with strong execution across all parts of our business and continued progress on our strategic priorities. Turning to page three, This page shows our Q1 sales performance by region, representing a solid start to the year with balanced global customer demand. In the Americas, demand for cockpit electronics was strong, driven by ramp-up of recently launched products, including new display programs with Nissan and GM. We also benefited from one-time customer recoveries related to prior EV volume declines. Offsetting these were the anticipated headwinds from vehicle discontinuations at Ford and lower BMS volumes due to changes in EV policies and incentives. In Europe, we benefited from strong ramp-ups on several successful vehicle programs. Key contributors included a curved panoramic display referred to as a digital stage, combining a 12-inch digital cluster and a slightly larger center information display on the Audi Q3, digital clusters and displays on the Renault 4 and 5 EVs, and digital clusters on the new Nissan Qashqai and Juke. These programs supported Q1 sales growth despite a weak vehicle production environment. The engineering services acquisition from last year also contributed modestly to our sales in Europe. In rest of Asia, India was a strong market for Visteon. with ramp-ups of a new smart core system for Mahindra and a digital cluster for TVS, a leading two-wheeler OEM. We also launched new digital cluster programs with Nissan and Mitsubishi for Japan and ASEAN markets, offsetting a Mazda program roll-off. In China, policy reset and demand pull forward late last year led to lower Q1 vehicle production, particularly in the price-sensitive segments. Our sales were in line with expectations, supported by greater exposure to higher value segments that are less affected by policy changes. We also benefited from several recently launched programs, including the new cockpit domain controller with Zeker, an upgraded digital cluster on the Toyota Corolla, and a new digital cluster on the Toyota Frontlander. The year-over-year decline in our sales has reduced significantly versus prior quarters, and is now tracking more in line with customer production volumes. Looking ahead, we have multiple launches in the second half that are expected to drive modest growth in China this year, followed by a more meaningful step up in 2027. In summary, we started the year very well with stable global demand for cockpit electronics and new product launches offsetting the expected headwinds, primarily from lower BMS volumes. Turning to page four, Q1 was a busy launch quarter with 20 new products launched with 11 car makers and on some strategically important vehicles for our customers. This page highlights a few key programs. We marked a significant milestone with our first launch for Toyota's Lexus brand on the fully redesigned Lexus ES, a flagship model leading the next generation electrified lineup for Lexus. Our driver display is standard on all trims globally, reinforcing Visteon's role in advancing premium in-cabin experiences with Toyota and contributing to our growth with this customer. We also launched a digital cluster on the first-ever Infiniti QX65, a mid-sized luxury SUV from Nissan for U.S. and Middle East markets. This new vehicle is a key part of Nissan's turnaround strategy in the U.S., and our 12-inch digital cluster comes standard in all trim lines of this vehicle. In China, we launched a driver display for the new electric Ford Bronco, developed specifically for that market. The automotive market in China is evolving beyond electrification to highly specialized segments with focus on technology and lifestyle applications. And the electric Bronco is significant for Ford in China, designed to compete directly with local EV manufacturers. India is one of the fastest growing auto markets, and in Q1, we launched multiple products, including a digital cluster with Hyundai, infotainment with Tata, and a center information display with Renault. Hyundai and Tata are already well positioned in India as number two and number three players, and Renault has recently made India a cornerstone of its strategy. India today represents nearly 10% of our total sales, And these launches position us to grow alongside our customers in what will be a key growth market going forward. In summary, we had a solid start in Q1 with new launches that laid the foundation for growth in the coming quarters and underscored Visteon's role in automakers' go-to-market strategies worldwide. Turning to page five, we secured approximately $1 billion in new business during the quarter, As expected, customer sourcing in Q1 was somewhat lighter following a strong finish to last year, and some display opportunities were shifted into the second quarter. Our product portfolio remains well aligned with key industry trends, and our new business opportunity pipeline is strong for the rest of the year. Based on current visibility, we remain on track to achieve our full year target of $6 billion. I would like to highlight a few of the key first quarter wins on this page. In China, we secured our third customer for an AI-capable cockpit system with SAIC Motor for its IM brand. SAIC Motor is one of the largest car makers in China, and IM is their new brand targeting the premium car segment. Automakers in China are rapidly adopting agentic AI to enhance in-cabin experiences, driving demand for high-performance cockpit systems capable of running LLMs and video language models, or VLMs, using the latest silicon such as Qualcomm's fifth generation Snapdragon chips. These high performance systems also enable greater ECU integration, accelerating the shift towards centralized domain architectures. Importantly, Visteon has established an early mover advantage with three OEM wins in this space, more than any other tier one supplier, positioning us very well to take advantage of this emerging trend. Mainstream vehicles will continue to use conventional cockpit domain controllers for affordability reasons, with premium vehicles transitioning to AI-based cockpits. In India, we secured a SmartCore Cockpit Domain Controller win with a European OEM for their vehicles for India and other emerging markets, our first SmartCore win with this customer. The system will power three cockpit displays and support advanced infotainment and entertainment features similar to recent smart core launches in China and India. Beyond strong product market fit of smart core, speed was a key competitive differentiator and the main reason for this win, as the start of production of the vehicle is under 12 months. We also expanded our commercial vehicle business by adding a new customer for digital clusters with a US manufacturer of purpose-built vehicles for defense, delivery, and fire and emergency markets, The 12-inch cluster will feature on their next-generation delivery vehicles, with production starting in early 2028, reflecting the growing adoption of digital cockpits in all kinds of commercial vehicles and not just for heavy-duty trucks. In two-wheelers, we expanded our digital cluster program with Honda to additional models, representing an incremental $100 million of lifetime sales, further strengthening our engagement with the world's largest two-wheeler OEMs. In summary, our Q1 performance was highlighted by strategic wins in key markets, reinforcing our technology leadership, and supporting a strong pipeline that keeps us on track for our $6 billion full-year target. Turning to page six, China, the world's largest auto market, is also the most competitive, with intense pricing pressure in budget and mainstream segments, which Viztion has strategically avoided to protect profitability. Above mainstream, the market is now evolving beyond electrification into more specialized segments centered on intelligence, luxury, and lifestyle. A key area of growth is the emerging premium tech segment, as traditional OEMs compete with tech-first players such as Tesla, Chopin, and Li Auto, with vehicles that combine luxury with advanced technology. OEMs such as Geely, Cherry, and SAIC, who are amongst the largest in China, are defining their premium brands around the convergence of premium design, immersive digital experiences, and most importantly, artificial intelligence. The cockpit is at the center of differentiation, with agentic AI enabling a new level of in-cabin intelligence. Unlike traditional command-based systems, AI-powered smart cabins can understand user intent, reason through complex tasks, and act proactively on behalf of the user. For example, instead of manually entering a destination, the system can anticipate and suggest it based on context or what it hears from conversation. It can also translate incoming messages in real time, draft responses with minimal input, and answer open-ended questions about surroundings, what the driver may be seeing outside the window, for example, delivering a far more intuitive and personalized in-cabin experience. This level of intelligence requires a step change in computing power to run AI workloads far beyond what current cockpit domain controllers can provide. Visteon was the first tier one supplier to develop a high performance version of Smart Core using the newest fifth generation chip from Qualcomm. We also developed the first cockpit specific agentic AI software framework, Cognito AI, to enable the development of use cases like I just mentioned. Our early investments in AI helped establish Visteon as a preferred partner for car makers in China for their AI enabled cockpit systems. These next generation systems carry significantly higher content value, and the business book with the three OEMs thus far is already over a billion dollars in value. We expect more vehicles to be added to the programs after the initial launches, which are happening this year. While China is leading adoption of AI, we see this as a global inflection point. AI will also become a competitive must-have in other parts of the world, accelerated by the international expansion of Chinese OEMs, and drive the next phase of growth for Visteon. Turning to page 7. Before wrapping up, let me briefly discuss our outlook for the remainder of the year. Since issuing our guidance, S&P has lowered its global light vehicle production forecast for our customers by approximately 1.5 percentage points, with most of the impact in the second half of the year. The main reason being the Middle East conflict, and there could be further downside if the facilities persist for longer than anticipated. Production for our key customers is now expected to decline in the mid-single digits year over year. On the supply side, memory remains constrained, as strong demand from AI and data centers limits availability for automotive. Automotive continues to rely on older memory technologies that suppliers are phasing out in favor of newer nodes, creating a structural supply-demand imbalance and driving pricing pressure and tightness in supply. We expect this environment to persist through 2027 before easing as new capacity starts to come online. In this environment, we are proactively managing supply by working closely with existing suppliers and qualifying additional sources. We were able to secure sufficient supply in Q1 through proactive actions, ensuring no impact on our customers. We expect supply to remain tight throughout the rest of the year, with incremental supply from new sources starting to become more meaningful in the second half of the year. On the positive side, customer demand has remained resilient with Q1 coming in ahead of expectations and Q2 schedules indicating continued trend. Importantly, our key launches remain on track. Taking all this into account and based on current data, we are reaffirming our full-year sales guidance despite incremental headwinds in the broader market. We will continue to closely monitor macro and supply conditions and provide updates as the year progresses. Now, I will hand it over to Jerome to discuss financials in more detail.

Thank you, Sachin, and good morning, everyone. We delivered in Q1 a balanced set of financial results in what continues to be a dynamic operating environment. For the quarter, sales were 954 million, a 2% increase from the prior year. We continue to see strong growth with new product launches and benefit from solid commercial execution partially offset by lower customer production and expected headwinds, including lower BMS sales with GM and the discontinuation of several car lines at Ford. Growth of a market was 3%, in line with our full-year expectations of low single-digit outperformance. Adjusted EBITDA was $104 million, representing a margin of 10.9%. As we indicated on the prior call, we expected Q1 to be the low point for EBITDA, with improvement throughout the year as we make progress on customer recovery agreements and cost initiatives. In the quarter, we were impacted by elevated semiconductor costs and the timing mismatch of customer recoveries. Adjusted free cash flow was negative in the quarter, primarily driven by an increase in working capital, particularly inventory, and a 2025 incentive compensation, which was paid in Q1. We continue to execute on our balanced capital allocation strategy, returning $40 million to shareholders with $30 million in share repurchases and $10 million in dividends. We ended the quarter with a strong balance sheet and net cash of 385 million, providing flexibility to deploy capital while navigating the current market environment. Turning to page 10. Sales for the quarter were 954 million, an increase of 20 million year-over-year. Customer production volumes were down 4%, while growth of a market was 3% when excluding pricing and currency. Compared to our internal expectations a couple of months ago, we benefited from higher customer volumes, better pricing dynamics, and additional benefits from EV program commercial settlements. As Sachin already provided details on customer volumes in a quarter, let me provide some additional color on pricing and EV commercial settlements and how they impacted both sales and EBITDA. First, pricing was a headwind of $5 million in a quarter, which was lower than what we typically see. As a reminder, pricing in this environment is influenced by several moving pieces. These include annual and discrete price changes with customers, the unwinding or maintaining of surcharges put in place during the prior semiconductor shortage, and more recently, customer recoveries related to memory cost increases. During the first quarter, we were able to mitigate a portion of the elevated semiconductor costs through short-term commercial pricing agreements, while we continue to work towards longer-term recovery arrangements. We're making good progress on these longer-term agreements, and we expect that incremental costs will be offset by more permanent recoveries as we move throughout 2026, consistent with the assumptions embedded in our guidance. From a Libida perspective, the lower pricing we achieved with customers in the first quarter, combined with supplier cost reductions and value engineering activities, allowed us to partially mitigate the elevated costs from memory and resourcing actions. The net impact of these commercial activities was a headwind of just over 15 million. Second, the additional benefit to sales from one-time settlements, primarily related to EV programs, was approximately 20 million, while the EBITDA was approximately 10 million, as we closed out supplier settlements as well. As a reminder, our full-year guidance included 10 million of expected one-timers from program settlements, which was achieved in Q1. With this context, let me provide more color on our year-over-year Q1 EBITDA bridge. First, let me remind everyone that prior year results included approximately 15 million of one-time items, which impacts the year-over-year comparison. Second, as just mentioned, the negative impact from all commercial activities, including customer and supplier pricing, was a headwind of 15 million. This was partially offset by the benefit of EV settlements that I also highlighted. The remaining year-over-year decline in EBITDA of approximately 5 million was driven by lower volume, unfavorable FX, and slightly higher freight and logistics, partially offset by ongoing cost initiatives, including vertical integration and engineering productivity. Turning to page 11. Adjusted free cash flow for the quarter was negative 23 million, reflecting the typical seasonality of our business, with Q1 generally being one of the lower quarters for cash flow. In 2026, this dynamic was more pronounced for a few reasons. First, EBITDA in the quarter was at a low point for the year, as expected. Second, we increased inventory levels during the quarter due to normal seasonality, inflation, and as a deliberate action to manage supply chain risk and market volatility. And third, the annual incentive compensation payout is in Q1, reflective of the strong performance last year, and is reported in the line Other Changes. As it relates to the remainder of cash flow items, cash taxes were slightly lower year-over-year, primarily due to lower profitability in the quarter and timing of payments last year. Interest income continued to offset interest expense. Capital expenditures were in line with the prior year and continue to support new program launches. Turning to capital allocation, we deployed $40 million in the quarter through share repurchases and dividends. We ended the quarter with $385 million in net cash and expect to continue deploying capital in a disciplined and balanced manner. Turning to page 12. Turning to our outlook, we are reaffirming our full-year guidance across all key financial metrics, as the strong start of the year will help us offset a softer-than-expected market setup in the second half of the year. Starting with sales, we continue to expect revenue in the range of $3.625 to $3.825 billion, which represents a low single-digit growth of a market. This reflects the strength of our product portfolio, strong customer demand in the first half of the year, and the continued ramp of recent launches, despite the softer than anticipated second half production environment Sachin outlined. Moving to profitability, we continue to expect adjusted EBITDA in the range of $455 million to $495 million, which corresponds to a margin of approximately 12.8% at the midpoint. Compared to the first quarter, we expect margins to improve as the year progresses. This is primarily driven by higher customer recoveries, as well as the continued impact of our cost initiatives, including product costing actions, vertical integration, engineering productivity, as well as resource rebalancing across our global footprints. On free cash flow, we continue to expect adjusted free cash flow in the range of 170 to 210 million. That said, we're currently trending towards the lower end of this range. This reflects our plan to maintain higher levels of inventory as we proactively manage supply constraints, especially around certain semiconductor and memory components. Importantly, our strong balance sheet provides us with significant flexibility to navigate these dynamics. Maintaining financial strength continues to be a core pillar of our capital allocation philosophy. enabling us to invest in a business and return cash to shareholders while managing near-term volatility. We plan to provide a more comprehensive update on our longer-term capital allocation priorities at our upcoming Investor Day. Turning to page 13. Vistion continues to be a compelling long-term investment opportunity. We have spent the last couple of years rebuilding our growth algorithm while executing operationally and commercially throughout a dynamic environment. We remain confident in our long-term opportunity, and we look forward to sharing more with you at our upcoming investor day on June 25th in New York City. Thank you for your time today. I would like now to open the call for your questions.