Visteon Corporation

Good morning. I'm Ryan Gazzeri, Vice President of Investor Relations and Corporate Strategy. Welcome to our earnings call for the second 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 Investors section of Visayan's website. Joining us today are Sachin Lawande, President and Chief Executive Officer, and Jerome Rouquet, Senior Vice President and Chief Financial Officer. We have scheduled the call for one hour, and we'll open the lines for questions after Sachin 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 over the call to Sachin.

Thank you, Ryan, and good morning, everyone. VisTune delivered another quarter of solid execution despite a challenging industry production environment. Customer vehicle production declined approximately 5% during the quarter, yet our sales remained essentially flat year over year, resulting in approximately 4 percentage points of market outperformance. This performance was driven by the continued ramp of recent launches, particularly in Europe and India, underscoring the benefits of our diversified customer base and expanding product portfolio. Adjusted EBITDA was $116 million, representing a 12.1% margin, while adjusted free cash flow remained positive. Our balance sheet continues to be healthy, ending the quarter with $650 million in cash, providing flexibility to invest in growth while returning capital to shareholders. Beyond the financial results, we continue to execute on the strategic priorities we outlined at Investor Day. We launched 24 new products across 11 automakers and secured $2 billion of new business awards, bringing first half bookings to $3 billion and keeping us on track for our full year $6 billion target. We also expanded our smart core high performance compute business with another premium brand under the Geely Group. further strengthening our position in AI-enabled cockpit computing and reinforcing our confidence in the long-term growth opportunity for that product offering. Finally, this morning, we announced a $200 million accelerated share repurchase program representing the next step in executing the capital allocation framework we outlined at our investor day in June. Let me now turn to our second quarter sales performance on page three. This slide shows our regional sales performance in what remained a challenging production environment. Customer vehicle production declined in every major region during the quarter, yet our diversified customer base, recent product launches, and disciplined execution enabled us to outperform underlying market trends. Starting with the Americas, sales reflected the headwinds we have discussed previously. Lower customer production reduced BMS volumes with GM, and Ford Vehicle Discontinuations. Those headwinds were partially offset by the continued ramp of Nissan multi-display systems and Volkswagen infotainment programs, allowing us to perform broadly in line with the underlying customer vehicle production. Europe was the strongest performing region. Sales increased despite weaker customer production, driven by excellent launch execution. Our panoramic display program with Audi, multi-display systems with Renault, and the new Mercedes display launches all contributed to strong regional momentum and meaningful market outperformance. In rest of Asia, underlying demand remains strong. Growth in India more than offset currency headwinds and the roll-off of a Mazda program in Japan. Smart core programs with Mahindra, along with infotainment launches with Tata, and continued two-wheeler growth supported another quarter of solid execution. Finally, in China, our sales reflected continued weakness in the value segment of the market following the changes in government policies and incentives and the ongoing loss of market share of international OEMs. However, the premium domestic OEM segment remained considerably more resilient. That's an important distinction because our strategy is increasingly aligned with those premium domestic manufacturers. During the quarter, cockpit domain controller programs with customers such as Zeker continued to build momentum, and with our high-performance compute launches starting later this year, we believe we are well positioned in the fastest-growing portion of the Chinese market. Overall, the quarter demonstrated that while customer production remained under pressure, Our regional execution, diversified customer portfolio, and ongoing launch cadence enabled us to deliver a resilient sales performance and position the business well for the balance of the year. Turning to page four. This quarter was another demonstration of Visteon's ability to execute at scale. We successfully launched 24 new products across 11 automakers, keeping us on pace for another year of high launch activity and providing a strong foundation for second half growth. More than half were display products, reflecting the industry's continued migration toward larger, higher content digital cockpits, an area where Visteon has established clear technology leadership. The Mercedes-Benz S-Class Superscreen, highlighted on the right, is an excellent example. The system integrates two large displays under a single cover lens, creating a seamless premium cockpit experience. It also incorporates advanced features such as switchable active privacy for the passenger display, illustrating the increasing software and engineering content in modern display systems. Importantly, our momentum with Mercedes extends beyond this flagship vehicle. During the quarter, we also launched display systems on other high-volume Mercedes platforms, expanding our premium display technology across the OEM's portfolio. We continued to broaden our customer and geographic footprint in the quarter. We launched a dual display system for Nissan's flagship minivan, the El Grande, a center display for Renault Boreal, Digital clusters with Hyundai in India and multiple additional display programs supporting our growth across Europe and Asia. The quarter also highlighted the progress we're making beyond passenger vehicles. We launched the digital cockpit platform on Royal Enfield's first electric motorcycle, the Flying Flea, as well as a connected digital cluster with Hero motorcycles. These programs demonstrate how we're leveraging our proven cockpit technologies into adjacent mobility markets where digitalization is accelerating and our existing platforms provide solutions at an attractive cost structure. Overall, these launches reinforce several important trends. First, our portfolio continues to migrate toward higher value display and software defined cockpit technologies. Second, we are successfully expanding across premium and mainstream vehicles and in adjacent mobility segments. And finally, our ability to execute a high volume of complex launches around the globe continues to be an important competitive advantage and supports confidence in our long-term growth outlook. Turning to page five. New business wins totaled $2 billion during the quarter, bringing our first half bookings to $3 billion and keeping us on track for our $6 billion full-year target. Approximately 45% of our wins in the second quarter came from North America, where we added two customers in the commercial vehicle segment, in addition to winning business with our traditional passenger car customers. Asia represented about 30% of bookings, with Europe contributing the remaining 25%, resulting in a well-balanced geographic mix. Importantly, the quality of our bookings continued to improve. Approximately 60% of first-half wins came from our strategic software-defined vehicle portfolio, including smart core cockpit domain controllers, high-performance compute platforms, and advanced display systems. In addition, we secured approximately $340 million of new business in commercial vehicles and two-wheelers, demonstrating continued progress in expanding beyond traditional passenger vehicles. Let me highlight a few of the strategic new business wins in the second quarter. First, we secured another smart core high-performance compute program with another premium brand under the Geely Group. This expands our HPC footprint within the group Adds another premium vehicle brand to our customer base and further strengthens our leadership position in AI enabled cockpit computing, an area where we continue to see significant long term growth opportunities. Second, we made important progress in commercial vehicles. We added two new commercial vehicle customers in North America, including our first integrated cockpit win with a specialty vehicle manufacturer that includes digital cluster, center display, and surround view system. We also secured a surround view system business with a leading global commercial vehicle manufacturer for the North American brands. These wins extend our commercial vehicle strategy beyond Europe and demonstrate that our cockpit platform is increasingly relevant across multiple mobility segments. Third, we've won multiple display programs with an existing customer in North America across multiple future vehicle platforms. These awards support our transition towards software-defined cockpit products with this customer and strengthens our position for future business with this important OEM. Finally, we added a Japanese OEM to our customer portfolio with our first win for a digital cluster program that will launch on multiple vehicles for Japan and U.S. markets. Beyond the immediate revenue opportunity, this represents another important step in broadening our customer base in Japan, a market where we have consistently demonstrated our ability to expand relationships over time. Overall, our first half bookings reinforced the strategy we presented at Investor Day. They are increasingly concentrated in higher-value software-defined cockpit products, expanding into adjacent mobility markets, and continuing to diversify both our customer base and geographic exposure. Turning to page 6, let me turn to our outlook for the balance of the year. The first half demonstrated that our strategy is translating into execution. We delivered $1.9 billion of sales, $3 billion of new business wins, and 44 product launches, creating a solid foundation for both our full-year outlook and our longer-term growth objectives. Looking ahead, we expect Visiteon sales to grow in the second half compared to prior year, supported by the ramp of recently launched programs and a strong second-half launch schedule. This is despite customer vehicle production being forecasted to be down by about 5% in the same period. Our sales are expected to grow in all regions except in Americas. The launch of new cluster programs with Toyota in North America are partially offsetting the headwinds from lower customer production, lower BMS volumes, and the roll-off of a legacy cluster program with GM. In Europe, we expect another period of strong execution with mid-teens sales growth despite lower customer vehicle production. Our recently launched display programs with Mercedes, Audi and Renault are doing very well and we will also start production of our SmartCore cockpit domain controller with a premium German OEM. In the rest of Asia, we also expect mid-teens growth with ramp up of SmartCore program with Mahindra, display launches with Toyota, and ramp up of programs with Hyundai and Tata. And in China, although customer production is forecasted to decline, we expect to return to low single digit sales growth as our first smart core HPC programs launch with Geely and Cherry. Overall, we expect mid to high single digit market outperformance in the second half. While weaker customer production will continue to temper industry growth, Our launch cadence is expected to more than offset those headwinds, supporting sales growth this year while building the foundation for stronger growth in 2027. Turning to page 7. Let me conclude by summarizing what we've accomplished this quarter. First, we continued to outperform the market. Despite weaker customer production across all major regions, our recent product launches enabled us to deliver approximately 4 percentage points of market outperformance. Second, we continued to strengthen the business for the future. We secured $2 billion of new business awards, with the majority aligned to software-defined vehicle technologies and adjacent growth markets, while maintaining a robust launch cadence that supports both our second half outlook and our longer-term growth objectives. Third, we remained disciplined operationally and financially. We continued to make progress, recovering higher memory costs, secured the supply needed to support upcoming launches, and generated positive free cash flow. And finally, this morning's announcement of our $200 million accelerated share repurchase program represents the next step in the capital allocation framework we outlined at Investor Day. Overall, this quarter provided another important proof point that the strategy we outlined at Investor Day is supported by our operational execution. We remain confident in our outlook for the second half of 2026 and in the long-term growth opportunities ahead. With that, let me turn the call over to Jerome who will review our financial results in more detail.

Thank you Sachin and good morning everyone. We delivered financial results in the second quarter that demonstrate our resiliency in what remains a dynamic operating environment. Our performance reinforces that we continue to make progress on the commercial and cost actions we outlined earlier this year. For the quarter, sales were $960 million, down 1% from the prior year, while outperforming our customer-weighted production, with growth of a market of 4%. It was driven by strong launch execution on customer programs, most notably in Europe and in India. Additionally, we progressed well with our semiconductor cost recoveries in Q2, and we secured agreements with many customers, allowing us to offset the increase in memory cost incurred in the second quarter. Adjacente EBITDA was $116 million, representing a margin of 12.1%, an improvement of more than one point from the first quarter, reflecting the progress we have made with our customer recoveries and efficiency improvements. Adjusted free cash flow was $20 million, positive for the quarter despite an increase in inventory, as we continue to build resilience in our supply chain and the timing of cash settlements of previously accrued tax expenses. In June, we completed the acquisition of an engineering service company for $20 million, further enhancing our functional safety and safety system architecture capabilities. We also returned $16 million to shareholders in the form of dividends and share repurchases. We ended the quarter with 650 million of cash and net cash of 351 million dollars, which allows us to deploy a significant amount to shareholders in the second half of the year. Turning to page 10. Sales for the quarter were $960 million, a decrease of €9 million year-over-year, or 1%, primarily driven by a decline in customer production volumes and a non-recurrence of favourable one-time commercial items in the second quarter of 2025. These headwinds were largely offset by a solid growth of a market of 4% when excluding pricing, customer recoveries and currency. The additional memory cost recoveries we secured with our customers in Q2 were sufficient to offset our normal pricing reductions. Currency impact in the quarter was largely neutral on the sell side. EBITDA was $116 million or 12.1% for the quarter, our best EBITDA margin since Q3 of 2025. This was driven primarily by the recoveries we secured in the quarter combined with strong cost discipline. On a year-over-year basis, EBITDA declined $18 million. As a reminder, and as we noted in our Q2 2025 earnings call, Q2 2025 EBITDA was exceptional and benefited from 10 million of several non-recurring items, mostly commercial in nature. Besides these 10 million dollars, we also had 8 million of negative year-over-year currency impact, mostly driven by the devaluation of the Indian rupee and the Japanese yen, as well as the appreciation of the Mexican peso. These two factors explain in simple terms the year-over-year decline in EBITDA. At a more granular level, year-over-year engineering increased as we continue to invest in the next generation of software-defined vehicle products, mostly for the European, Indian and Chinese markets. The engineering services acquisitions we've made last year, as well as the acquisition I mentioned earlier, also increased our engineering cost-run rate. These additional costs were mostly offset by operational efficiencies. Finally, as cost recovery is a critical component of 2026 results, I would like to provide some more details on this topic. With regards to recovery agreements with our customers, we made meaningful progress in the quarter, consistent with the assumptions embedded in our guidance and highlighted in Q1. We were able to recover most of the memory cost inflation incurred in Q2 with retroactive agreements compensating for the lack of deals with some customers. We continue to meet with our customers and expect to close the agreements that remain open in the second half of the year. Overall, our performance in the quarter was strong when adjusting for currency, was in line with our expectations and represents the sequential improvements that we were anticipating going into the year, driven by recoveries, product costing actions, vertical integration and engineering productivity. Turning to page 11. Adjusted free cash flow was $20 million in the quarter and negative $3 million for the first half. The first half reflects several key dynamics. First, adjusted EBITDA in the first half was primarily impacted by the timing of semiconductor cost recovery negotiations, which are expected to be fully closed in the second half of the year. On the trade working capital front, this line item has been a use of cash for the first half of the year. This has been a deliberate decision driven primarily by specific actions increasing inventory levels to support higher minimum safety stock levels and to allow us to build a better supply chain resilience. Cash taxes were higher in the second quarter due to a one-time tax settlement in India related to prior years. Consistent with prior years and as we expected, the first half of the year generally has more cash outflows for items like the annual compensation, which is paid in Q1. While these items limited cash generation for the first half, we believe we will be able to generate cash to the levels we are guiding to for the full year. And finally, capital expenditures were in line with our expectations as we continued to support new program launches, capacity expansion in India, and the modernization of our IT infrastructure. During the second quarter, we completed the refinancing of our $300 million term loan facility and $400 million revolving credit facility, extending the maturity to 2031 and giving us a flexible capital structure to execute our capital allocation plan. We ended the quarter with 650 million of cash and 351 million of net cash after capital allocation. As we highlighted at our investor day, our current cash levels position us well to deploy capital in a disciplined and balanced manner. Turning to page 12. Consistent with our investor day messaging, we are reaffirming our full year guidance across all key financial metrics. For sales, we continue to expect between $3.625 billion and $3.825 billion and are trending towards the high end of the range at $3.8 billion. Our sales reflect our year-to-date performance, continued progress on customer recoveries, as well as a strong second half launch cadence, partially offset by softer customer production. Our launch cadence includes digital cluster and display launches with our top growing OEMs as well as large smart core CDC and high performance compute program launches in China. With regards to adjusted EBITDA, we continue to expect between $455 million and $495 million and are trending towards the midpoint of the range of approximately $475 million. As mentioned during our investor day in June, cost pressures initially seen in memory are now extending to other purchase components, making it difficult to fully offset inflation in 2026, despite our teams taking further actions to recover and offset these additional costs. In spite of these headwinds, we expect margins to improve throughout the rest of the year, driven by more customer recoveries and the ramp-up of our cost initiatives across product costing, vertical integration, and engineering productivity. Finally, with regards to adjusted free cash flow, we continue to expect between $170 million to $210 million, while trending towards the low end of the range of $170 million and having a good line of sight to the second half cash generation. EBITDA in H2 will support higher cash flow for the remainder of the year as recoveries and cost actions carry margins toward the full year guide. We also expect working capital to improve with some consumption of the first half inventory billed while receiving cash on recovery agreements we secured late in the second quarter. Another significant piece of the second half performance is related to first half items that will not reoccur such as our annual incentive compensation payout, the India tax settlement, and other seasonal cash outflows. Overall, we plan to maintain more elevated inventory levels through the balance of the year, a deliberate choice to protect our customers' launches and production schedules given the current semiconductor and memory environment. Nevertheless, the underlying cash generation capability of the business remains strong and we have good visibility to a robust cash inflow in the second half. Turning to page 13. Thank you very much. At our investor day, we targeted to return approximately $1 billion of cash to shareholders between 2026 and 2029. We also highlighted that we need $150 million of net cash to run the business. Our net cash position at the end of June was approximately $350 million and therefore supports the near-term deployment of $200 million. The ASR is the first step in delivering on our $1 billion target. It allows us to retire a significant number of shares immediately. It demonstrates a clear pace of execution as we repurchase $800 million over the planned period, and it provides what we believe is a compelling use of our capital at current valuation levels. We have intentionally matched the completion window of the ASR with our second half cash generation, giving us flexibility to execute capital returns in excess of the accelerated program in Q4 while maintaining the minimum net cash framework we outlined at Investor Day. Importantly, even after funding the announced program, we maintain a healthy balance sheet and flexibility to invest organically in the business going forward, as well as to pursue discipline bolt-on M&A as we did this quarter with our engineering services acquisition. Maintaining financial strength remains a core pillar of our capital allocation philosophy and a competitive advantage. Turning to page 14. In summary, the second quarter reflects resilient underlying performance in a challenging production environment, continued progress on recoveries and cost improvements, and an important step in delivering on the capital return framework we outlined at our investor day. We remain confident in our full-year outlook and in a long-term opportunity ahead as we execute on the plan that we outlined in June. Thank you for your time today. I would like now to open the call for your questions.