Adient plc

Welcome to the Audient Third Quarter Financial Results Conference Call. Participants are in a listen-only mode until the question and answer session. This call is recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mark Oswald. Sir, you may begin.

Thank you, Christy. Good morning and thank you for joining us as we review Audient's results for the third quarter fiscal 2023. 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 Jerome Dorlak, our Executive Vice President and Chief Financial Officer. On today's call, Doug will provide an update of the business, followed by Jerome, who will review our Q3 financial results and 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 and Jerome, there are a few items I'd like to cover. First, today's conference calls 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 gap 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 third quarter results for fiscal 2023. Turning to slide four, let me begin with a few comments related to the quarter. You can see Etienne's financial performance as highlighted by certain key financial metrics in the box on the right-hand side of the slide. Etienne delivered strong and improved year-over-year earnings growth in Q3 fiscal. Underpin by a relentless focus on execution, operational excellence, and better-than-expected production volumes versus internal expectations at the beginning of the quarter. Adiant's third quarter continued to build on a positive momentum established earlier this year. For the most recent quarter, revenue, which totaled $4.1 billion, was up $570 million compared to third quarter last year. Adjusted EBITDA totaled $276 million, up $133 million year-over-year. Important to point out, a non-recurring insurance settlement related to prior period operational losses provided an approximate $20 million benefit to the quarter. And finally, ADDIENT ended the quarter with a strong cash balance and total liquidity of $908 million and $1.9 billion, respectively. Adding its Q3 financial performance combined with its healthy balance sheet enabled the company to return $37 million to its shareholders in the third quarter via share repurchases. Year-to-date through June, share repurchased and cash deployed totaled $1.8 million and $65 million, respectively, leaving roughly $535 million available for future repurchases via the current authorization. In addition to delivering strong financial performance, the company continues to execute actions to position itself for sustained success. A few of these actions include the team's intense focus on launch execution, operational improvement, and cost control. Think of this as overall business performance, which continues to trend in a positive direction. Winning new business across various regions, customers, and platforms is expected over time to strengthen our leading market position, not to mention support improved margins and earnings. The team also continues to provide value-add to add-in shareholders every day, whether it's to our customers, suppliers, or employees. These efforts have been validated repeatedly with numerous industry and customer recognition awards, including most recently Supplier Excellence Award from JLR, Supplier Sustainability Award from Honda, and multiple awards from Toyota, Supplier Diversity Award, Best Supplier Performance Award for our South American operations, and Toyota's Special Recognition Quality Award for our Georgetown plant. Looking at the big picture for the quarter goes well through the first nine months of the year, which encompasses adding its financial performance, operational excellence, business wins, provides you a glimpse at the strengthening marketing position and the earnings power of the company going forward. That's why we're excited about the future. Turning to slide five, a key ingredient of the company's current and future success involves adding its operations in China. The past quarter, Jerome and James took the opportunity to meet with several investors and potential investors in Shanghai to provide an update on Adiant's China business, which we continue to see as a growth engine for the company. No doubt, there has been a lot of headlines reminding everyone that the environment in China has become trickier to navigate given certain geopolitical risks and growing rebalancing. However, expanding new consumption, industrial upgrading, and the speed of innovation presents new opportunities and growth for the market that shouldn't be ignored. Before adding, we continue at a leading market position, and our recipe for success is deeply rooted and underpinned by an optimal nationwide footprint, strong in-house engineering capability, in-depth understanding of China and what's required for a successful seeding business, and a highly recognized organization led by a very capable and experienced management team. The structure of the team enables Adiant to be agile and operate at the same speed as our Chinese customers. Applying this recipe for success positions us well to capture future growth in the market. Just a few stats for consideration. Adiant China has achieved more than 4.6 billion of new business bookings based on program lifetimes in fiscal 23. We forecast Adiant's volume growth over the next five years to exceed market growth by 2x. We've been awarded business from approximately 10 new customers since fiscal 22. And speaking of customers, we expect our current mix of customers to be about 60% local China manufacturers within the next five years. That's up from 40 percent today. Bottom line, we believe our formula, our recipe for success, positions us well to capture future growth in the market. If you've not had a chance to review the presentation, I encourage you to take a look. It's available for download on the investor section of our website. Turning to slide six and seven, now let's take a look at business wins and launch performance. As you can see, slide six highlights a few of Avian's in-process and upcoming launches, and it continues to execute at a high level of launch performance. The programs highlighted represent a good mix of wins across EV powertrains and ICE powertrains, and are diversified across a number of segments, including SUVs, luxury, and mass market, and contain a high level of vertical integration across complete seat, foam, trim, and metals. I'd also like to point out these launches include a number of Adiant's innovative technologies that are being well-received by our customers, including Adiant's new trim styling, sustainable synthetic leather, and various safety and comfort features on the Mitsubishi Triton. Our zero-gravity seat, which increases ergonomic comfort and body pressure distribution on Xiaopeng's MPV, and our proprietary four-way headrest on FAW's Hongqi HS5. Flipping to slide seven, the strong operational execution and launch performance, as well as innovation I just talked about, are the foundations for new business wins. A few program awards are highlighted on the slide. It's noteworthy that these programs include a high level of vertical integration of foam, trim, and metals components, as well as JIT business. We continue to secure a replacement business. We're winning our fair share of new business and leveraging our existing footprint. And we're having success winning business while navigating the difficult macro conditions and related commercial discussions. Before handing the call over to Jerome, Let's look at slide eight and let me continue with a few comments related to our progress in 2023 and initial thoughts on 2024. To begin, Adiant's focus strategy continues to drive the business forward. Our most recent financial and operational results, in addition to our year-over-year results, provide a positive proof point. Despite a number of unplanned obstacles and challenges that surfaced in 2023, Adiant focused strategy enabled the team to navigate through these external speed bumps and further position the company for sustained success. Although we are silently on track to deliver on our 2023 commitments, both operational and financial, we're not resting on our laurels and we're working hard to finish the year strong. It's imperative we enter 2024 from a position of strength Speaking of 2024, the team is currently developing the company's plan, including key planning assumptions that will support the plan, such as global production forecasts, FX, et cetera. Although it's premature to comment on specifics, we do expect Adiant's positive business performance and momentum to continue into the new year, enabling further earnings margin and free cash flow growth and returns to our shareholders. Similar to prior years, the team will continue to develop next year's plan in the coming months with the intent of sharing those details with you when we report our Q4 and full year 2023 results in November. With that, I'll turn the call over to Jerome to take you through Edient's third quarter 2023 financial performance and outlook for the remainder of the year.