Adient plc

And thank you for standing by for the 80th first quarter fiscal 2022 conference call. At this time, all participants are in a listen only mode. After the presentation, we will conduct the question and answer session. To ask a question, please press star and then one. This call is being recorded. If you have any objections, you may disconnect at this point. Now I will turn the meeting over to your host, Mark Oswald. You may begin.

Thank you, Operator. Good morning, and thank you for joining us as we review Adiant's results for the first quarter fiscal year 2022. 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, Jeff Stafile, our Executive Vice President and Chief Financial Officer, and Jerome Dorlak, Adiant's Executive Vice President of the Americas. On today's call, Doug will provide an update on the business, followed by Jeff, who will review our Q1 results in Outlook for the remainder of the year. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Doug, Jeff, and Jerome, 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 the financial results presented on a GAAP basis, we will 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. Thank you to our investors, prospective investors, and analysts joining the call this morning as we review our first quarter results for fiscal 2022. Turning to slide four, let me begin with a few comments related to the quarter. As we anticipated heading into the quarter, the ongoing supply chain disruptions related to semiconductors and the resulting customer production stoppages combined with elevated commodity prices continue to impact Etienne's first quarter. As the quarter progressed, it was encouraging to see signs of stabilization emerge for certain of these headwinds, specifically the softening of steel prices and the less volatile call-offs from our customer production schedules. Despite the green shoots that began to appear, the overall narrative has not changed. We continue to operate in a very challenging environment. This is evident when looking at Adiant's first quarter EBITDA results, which contained approximately $185 million of temporary operating efficiencies and commodity headwinds. Adiant's key financial metrics for the quarter can be seen on the right-hand side of the slide. Revenue for the quarter, which totaled $3.5 billion, $500 million compared to last year's first quarter adjusted for portfolio actions executed in 2021. As a reminder, the supply chain disruptions that have resulted in significant downtime at our customers began in late Q2 of 2021 and did not impact last year's Q1 results. Adjusted EBITDA for the quarter totaled $146 million. and as pointed out on the slide, included approximately $185 million in lost volume temporary operating inefficiencies and premiums. Again, primarily driven by chip shortages and unplanned production stoppages. At the end of December 31st, cash balance totaled just under $2.1 billion and included approximately $625 million in net proceeds collected as the final payment associated with Adyen's strategic transaction in China, which closed at the end of our 2021 fiscal year. Despite the continued difficult operating environment, Adyen continues to execute actions within its control to position the company for sustained success. These actions include, but are not limited to, the team's intense focus on launch execution, cost operational improvement, and customer profitability management. Continued progress on transforming the company's balance sheet. As called out on the slide, Etience recently launched 800 million in debt tenders offers targeting any and all of the company's 9% U.S. dollar secured notes with 600 million outstanding and up to 177 million euros, about 200 million U.S. dollars of our 3.5% euro unsecured notes. And finally, we recently issued our 2021 Sustainability Report, highlighting EDIEN's increased commitment to operating the business in an environmentally friendly manner. I'll cover this in greater detail in just a few minutes, but first, in turning to slide five, let me expand on what we're seeing with regard to the current operating environment. In the middle of the slide, We've highlighted several of the headwinds the industry and Adiant continue to face. The list should look very familiar as many of these macro headwinds surfaced at the end of our second quarter last year and have continued into fiscal 2022. The most significant influences include ongoing supply chain and semiconductor shortages, which continue to impact production at our customers. Similar to the second half of 2021, These unplanned production stoppages are leading to premiums and operating inefficiencies across the network. For Q1 fiscal 2022, we estimate that supply chain disruptions resulting lost production, operating inefficiencies, premium rate, et cetera, had a net impact on the top line of $680 million and adjusted EBITDA by approximately $185 million. The $185 million EBITDA headwinds for the most recent quarter is modestly better compared to what we saw in Q4 fiscal 21. As mentioned earlier, we're cautiously optimistic that the supply chain disruptions related to the semiconductors are beginning to stabilize. As the first quarter of 2022 progressed, customer call-offs and short-notice production stoppages lessened. That said, by no means are we out of the woods. The operating environment remains very challenging, especially considering the spike in COVID cases, elevated freight costs, and labor uncertainty. Those specific headwinds have not improved. For the full year, we continue to expect production stoppages resulting from supply chain disruptions and temporary operating inefficiencies will look very similar to fiscal 2021. specifically impacting Addient's top line by just under $2 billion and adjusted EBITDA by approximately $400 million. With regard to the material economics, a modest dip in steel prices during Q1 suggested stabilization and hopefully further improvement may be realized as 2022 progresses. For the quarter, Addient's net commodity headwinds totaled $3 million. This result was better than expected, aided by additional recoveries over and above our contractual agreements. Also important to point out, our European operations had locked in pricing for 2021 calendar year. As the negotiated contracts for 2022 kick in during our fiscal second quarter, we're expecting to see more significant impact on your results for that region. Based on the recent steel price movements, the upcoming pricing in Europe combined with the contractual escalators and negotiated commercial terms above contractual obligations currently forecast a commodity headwinds of about 95 million versus the previous forecast of 125 million. Although moving in the right direction, this remains a pretty stiff challenge for the year. Taking a step back and looking at the overall operating environment, we're encouraged to see green shoots of stabilization for certain of the headwinds. However, the overall narrative has not materially changed, and we're in the midst of a pretty tough operating landscape. As mentioned on prior calls, we're not sitting back waiting for the tide to turn. The team continues to implement actions designed to help mitigate the negative impact of the headwinds. Actions include but are not limited to focusing on operational excellence, driving down SG&A costs, executing both temporary and permanent actions, partnering with our customers to drive innovation and add value to receipt solutions that meet the needs today and tomorrow, and continuing the transformation of the balance sheet. Simply put, we're executing actions within our control to position Add-In for long-term success. Speaking of success and looking to the future, let's turn to slide six. We realize reaching the company's full potential cannot be achieved without firmly integrating sustainability into the core of Adiant's operations to continue to evolve and become foremost sustainable automotive supplier. Adiant's commitment to operating its business in an environmentally responsible manner was recently outlined in the publication of our 2021 sustainability report. Our goal is not only to drive environmental change by lessening the impact that business has on the planet, but also to focus on social and economic change that benefits everyone. At AIT, we'll continue to meet, collaborate with, and participate with organizations around the globe concerning our responsibility and commitment to these efforts. In 2021, commitments include, but are not limited to, The United Nations Global Compact, where Adiant has reaffirmed its corporate responsibility to place human rights, labor, and the environment and anti-contruption considerations at the top of our business mindset. The Science-Based Target Initiative, where Adiant has committed to setting ambitious emission reduction targets to help limit global warming to 1.5 degrees Celsius. The Carbon Disclosure Project, where Adyen reports the company's environmental performance to customers and shareholders. We've included a link to the full report. Please take a few minutes to learn how Adyen is incorporating these policies into our day-to-day operations. Turning to slide seven and eight, now let's take a look at our business wins and launch performance. As you can see, slide seven is our typical new business slide highlighting a few of Adyen's recent wins. The programs highlighted represent a good mix of incumbent wins and new platform wins, especially in the EV space. With regard to incumbent wins, we've highlighted the RAM 1500 Complete Seat business, which is the largest platform by revenue in fiscal 2021. We're excited to continue our partnership with Stellantis in the coming years. An example of all new wins include the all-new Future Crossover EV at Ford. It's worth mentioning EV program wins are accelerating with the new entrants, manufacturers, and legacy OEMs. Addion's reputation as a value-added supplier that collaborates with its customers to drive innovation, reduce costs and complexity, and improve the overall performance for the end-user experience continue to underpin our success with new business awards. Also of note is our recent business wins. include a good mix of JIT, foam, trim, and metals business. As our new book of business continues to launch, we expect to balance in, balance out platforms to further enable margin expansion. Flipping to slide eight, as we typically do, we've highlighted several critical launches that are complete, in process, or scheduled to begin in the near term. I'm happy to report the launch is currently underway. been progressing smoothly. The launches and platforms shown not only impact eddience just-in-time facilities, but also span across our network of foam trim and metals facilities. The team continues to focus on process discipline around launch readiness, has driven a very high level of performance, especially considering the launch load and complexity of launches that are planned for the year. In addition to the number of launches and complexity, the disruption of production schedules continue to present another layer of challenges to the team successfully managing through, again, a testament to the discipline we've instilled around the process. We have no intention of letting up. Before turning the call over to Jeff and turning to slide nine, let me conclude with a few summary comments. As mentioned earlier in my presentation, prepared remarks, and as you know, the macro environment remains very challenging for the industry in Addion. That said, when stepping back and looking to the future, we continue to be optimistic. Reasons for that optimism include, first, the underlying fundamentals of the industry remain solid. Consumer demand is very strong. In fact, this is the only time in my career I can recall the industry being impacted by supply constraints versus demand. Inventories are at historic lows, a good setup for production in the coming years. The mix of vehicles being produced remains robust. And finally, there are a lot of new and innovative products being launched over the next several years. Second, in addition to the underlying fundamentals of the industry, ADDIAN continues to move forward, executing actions we believe will position us to take full advantage of the industry recovery. Our back-to-basics mindset is fully integrated in the business, which enables us to be laser-focused on operational life. Our new business wins continue at a very high level, focusing on profitable growth. It has not impeded our ability to secure future business. As this business launches, it will continue to improve earnings and cash flow. And finally, the transformation of Addiance Balance Sheet remains solidly on track. as the industry recovers and earnings and cash flow improve, that the transformed balance sheet should enable enhancements to our capital allocation strategy. Bottom line, we see significant opportunity for value creation for our shareholders in the coming years. With that, I'll turn the call over to Jeff, and let him take us through Etienne's first quarter 2022 financial performance and provide additional detail on what to expect as we move through 2022.