Adient plc

Welcome to Adiant's 2021 earnings call. I would like to inform all participants that your lines have been placed on a listen-only mode until the question and answer session of today's call. Today's call is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the call over to Mark Oswald. Thank you. You may begin.

Thank you, Amanda. Good morning and thank you for joining us as we review Adiant's results for the first quarter of fiscal year 2021. The press release and presentation slides for our call today have been posted to the investor section of our website at adiant.com. This morning, I'm joined by Doug DelGrosso, Adiant's President and Chief Executive Officer, and Jeff Stafile, our Executive Vice President and Chief Financial Officer. On today's call, Doug will provide an update on the business, followed by Jeff, who will review our Q1 financial results in Outlook for the remainder of our fiscal year. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Doug and Jeff, there are a few items I'd like to cover. First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today and therefore involve risks and uncertainties. I would caution you that our actual results could differ materially from these forward-looking statements made on the call. Please refer to slide two of the presentation for our complete safe harbor statement. In addition to financial results presented on a GAAP basis, we'll be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. This concludes my comments. I'll now turn the call over to Doug. Doug?

Great. Thanks, Mark. Good morning. Thanks to our investors, prospective investors, and analysts joining the call this morning as we review our first quarter results for fiscal 2021. I want to take a moment to wish or hope you and your families are staying safe and healthy at this very challenging time for all of us. Let me get started. Let's turn to slide four and begin with a few comments related to our first quarter, specifically adding a strong start to the fiscal year. Remaining laser focused on our priorities combined with relatively robust vehicle production continued to drive improved business performance in the most recent quarter. Q1's adjusted EBITDA of $378 million was up 81 million, or just under 30% year-on-year. Important to remember last year's results included earnings from our interiors, fabrics, and Mercaro businesses, which we divested post-Q1 2020. Adjusting for those businesses, this year's first quarter EBITDA was up $110 million year on year. Equally impressive with respect to the absolute level of earnings was Adiant's adjusted EBITDA margin performance of 9.8% or 7.4% excluding equity income. That's a very strong proof point that Adiant can achieve margins equal to, if not better, to our nearest competitor. No doubt a strong result, but even more impressive when you consider Add-In's consolidated revenue was down about 2 percent during the same period. Add-In's specific launches and impact of portfolio adjustments executed in fiscal year 20 were the primary drivers of lower sales. Also shown on the left-hand side of the slide are Add-In's strong Q1 ending cash balances and total liquidity, which were approximately approximately $1.8 billion and $2.8 billion, respectively. As you can see, Adiant's Q1 financial metrics point to a strong start to the year, and we believe lays a solid path to Adiant achieving its fiscal 21 commitments. On the right-hand side of the slide, we've highlighted a few items that will give you further confidence in the team. These show that in addition to delivering strong quarterly financial results, we are also focused on the future to ensure sustained long-term success. That success will be driven in large part by Adiant's ability to provide world-class products and services to our customers. As mentioned on previous call, Adiant is striving to become the supplier of choice for our customers. During the quarter, progress toward that goal was validated through a number of external awards. Hyundai-Kia selected Adiant as one of their Supplier of the Year 2020 honorees for delivering several flawless launches, excellent quality, and supply chain management. Adiant's new floating seat, pictured on the right-hand side of the slide, won a bronze medal at the prestigious CLEPA Innovation Awards ceremony. I'd also point out that Adiant supplied seats for the winners of the 2021 North American Utility and Truck of the Year, the Ford Smoky and the Ford F-150. In China, Daimler presented our BJA joint venture with the Loyal Companion Award, essentially recognizing Adiant for being a reliable supplier for Beijing Daimler for the past 20 years. We are among three suppliers who received the award from Daimler. who just delivered its 3 millionth car in the market. And in Thailand, Daimler also presented us with Supplier Performance Excellence Award, the only seat supplier for this award. Again, I mentioned this recognition only to provide proof points that our team continues to execute on many fronts, spanning across operations, products, and customer relationships. When properly executed, we believe These focus areas will continue to drive value for all of Addy and stakeholders. Speaking of driving value, we understand that a commitment to positive environmental, social, and governance-related business practice strengthens our company, increases our connection with our shareholders, and helps us better serve our customers and the communities in which we operate. Adiant's commitment to operate its business in an environmentally responsible manner was recently outlined in the publication of the company's 2020 Sustainability Report. As you can see on slide five, Adiant's 2020 Sustainability Report outlines the company's key policies and actions regarding environmental responsibility, people and communities, governance and compliance, and more. Our aim is to ensure that Adiant manages risk in these areas and achieves our environmental, social, and governance goals. We've included a link to the full report. Please take a few minutes to learn how Adiant's incorporating these policies into our day-to-day operations. Turning to slide six, let me provide a few comments on Adiant's recent business wins. On slide six, you'll see a few of our new business wins, which shows that Our continued focus on capital allocation and return on capital when targeting new and incumbent businesses has not limited our ability to secure new business. We've recently highlighted a number of recent program wins here, including the all-new EV program with GM, the Peugeot 3008 and 5008, both new programs for Adyen, and in China, we secured the Lincoln Nautilus program. Not shown, but very important to our portfolio business, the team secured the incumbent GM Traverse and Enclave crossovers, as well as the GMC Acadia crossover, which is non-incumbent to Add-In. Also, it should be noted that our recent business awards include a good mix combination of jet, foam, trim, and metals business. As our new book of business continues to launch, we expect to balance in and balance out platforms to further enable margin expansion. One last point on new business wins, specifically sourcing of the new business. Fiscal 2021 is shaping up to be a higher than normal year for quoting and sourcing new and incumbent business. We expect the outcome to be favorable for adding, which will strengthen the business in the out years. The uncertainty for the remainder of fiscal year 21 is the impact that customer productivity demands on nomination fees required to secure the business. This is not unusual, however, it's worth mentioning considering the volume of sourcing is elevated this year. Flipping to slide seven, we've highlighted several critical launches that are in the process of scheduled to begin in the near term. I'm happy to report the launches currently underway, including the F-150, are progressing well. The second F-150 manufacturing location in Riverside, Missouri, is well underway and progressing up the launch curve as planned. The launches and platforms show not only impact eddience JIT facilities, but also span across our network of foam, trim, and metal facilities. The entire team is performing at a high level as evidenced by our current performance. As mentioned on prior calls, the team has made significant improvements in our launch management over the past several quarters. A strong focus on discipline around launch readiness is underpinning Adian's successful performance. I might add, we have no intention of letting up on this activity. Turning to slide eight, let me conclude my comments with an update on various macro factors we're managing through and are expected to impact the industry and add in in the coming quarters. The list should look very familiar, as many of these factors were highlighted as we entered fiscal year 21. On the positive side, continued monetary stimulus is expected to result in positive economic growth. And the economic growth is forecasted to accelerate later in the year as the number of individuals who are vaccinated against COVID-19 virus increases. All of this is very good news and supportive of the industry. That said, there's several factors we're managing through that are tempering our expectations. They include supply chain disruptions, primarily related to semiconductor shortages, which are resulting in near-term production downtime across the industry impacting Adiance customers. We continue to monitor the situation at this time. It's too early to know if lost production in Q1 or Q2 will be made up before the end of Adiance fiscal year. Putting the temporary production disruptions aside, the current level of global production appears to be supported by improving consumer demand and the rebuild of inventory. Moving on, commodity costs, specifically steel and chemicals, have continued to escalate versus our original estimates. The teams are working hard to help mitigate these increasing costs. Important to remember, even though escalators and agreements are in place to help recover these costs, the agreements do not cover 100 percent of the increase. In addition, the time and method for true-ups vary by customer, resulting in a time lag as to when Adiant begins to receive recoveries. Jeff will provide additional detail on the topic in just a few minutes. A few other items noted on the slide include labor shortages and premium freight in all regions and an elevated launch cadence in the Americas. As mentioned earlier, Adiant's launch performance has improved significantly, and we feel well-positioned ahead of the launches. That said, we're very aware of the hard that lies ahead. We're not taking the current or upcoming launches for granted. To sum it up, our strong start in 2021 provides a solid path to achieving our fiscal 21 commitments. The path appears to contain a few speed bumps, but rest assured the team is working hard to navigate around them. I'm confident EDIM will manage through these obstacles as much as we did in 2020. And with that, I'll turn the call over to Jeff to take us through Addion's first quarter 2021 financial performance and what to expect as we move through the rest of fiscal 2021.