Adient plc

Welcome to the Adiant first quarter financial results conference call. Your lines have been placed on the listen only mode until the question and answer session. At that time, if you would like to ask a question, you may press star one. Today's conference is being recorded. Now I'll turn the conference over to Eric Dayton. Sir, you may begin.

Thank you, Shirley. Good morning. Thank you for joining us as we review Adiant's results for first quarter fiscal 2024. 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 Jerome Dorlak, Adiant's President and Chief Executive Officer, and Mark Oswald, our Executive Vice President and Chief Financial Officer. On today's call, Jerome will provide an update on the business, followed by Mark, who will review our Q1 financial results and outlook for the remainder of fiscal 2024. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Jerome and Mark, 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 a 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 Jerome Dorlak.

Jerome Dorlak Thanks, Eric. Good morning. Thank you to our investors perspective investors, and analysts joining the call as we review our first quarter results for fiscal year 2024. Turning to slide four, let me begin with a few comments related to the quarter. As we began fiscal 2024, the company maintained its laser focus on business performance, including launch execution and continuous improvement. The team navigated challenges from strike-related production disruptions while maintaining focus on the day-to-day operational execution that is driving the business forward. Despite the challenges in the beginning of the quarter, the focus on operational execution and cash management actions allowed us to successfully navigate any short-term impacts. Turning to Addion's key financial metrics for the quarter, which are shown on the right-hand side of the slide. Revenue for the quarter, which totaled $3.7 billion, was down about 1% compared to last year's fiscal quarter. First quarter. Adjusted EBITDA for the quarter totaled $216 million, up 2%. The UAW strike at certain of our North American customers ultimately impacted Adiant by approximately $125 million in sales and $25 million in EBITDA. Adiant ended the quarter with a strong cash balance and total liquidity of $990 million and $1.9 billion, respectively. We continue to drive the business forward, winning both new and replacement business with customers that are expected to drive continued margin improvement in the coming years. We're demonstrating our ability to add value to customers through our engineering capabilities, manufacturing footprint, and process discipline. At the bottom of the slide, we've highlighted a number of customers and industry awards received in each of our regions in Q1 as proof points of our commitment to delivering excellence. Both the business we have been awarded and the recognition we've received show that our strong business performance, operational excellence, and mindfulness towards sustainability are driving value to add in stakeholders and shareholders, including customers, suppliers, and employees. As the production environment became clearer following the resolution of strike-related production disruptions, the company resumed its return of capital to shareholders through its balanced capital allocation strategy. We deployed 100 million towards share repurchases within the quarter, which Mark will talk more about in a moment. Again, our commitment to return capital to shareholders is an important part of our balanced capital allocation strategy. The last point on the slide shows we've released our 2023 sustainability report, highlighting a number of accomplishments and commitments marking our path toward a long-term sustainable transformation. I'll discuss this in more detail on the next slide, but the achievements that we highlight demonstrate that Adiant has firmly integrated sustainability into the core of our business. Turning to slide five and further on that point, since we began publishing our annual sustainability report four years ago, a lot has changed. As both the environment in which we operate and our ESG development has evolved, our goals have evolved as well. One thing that has not changed is our commitment to have a long-term sustainable transformation focused on limiting our negative environmental impacts on the planet and focusing on social and economic changes to create a better environment for everyone. The sustainability report outlines how we are aligning our strategic priorities to where our sustainability activities can deliver the greatest impact. This includes our ongoing focus on product design to support not only our own sustainability goals, but those of our customers as well. You can see on the slide a number of highlights and accomplishments achieved in fiscal year 2023. I won't read each of these, and there are more highlights within the report, but these examples reflect the milestones as we advance our sustainability mission focused on products, processes, and people. We've included a link to the full report. Please take a few minutes to see the progress we've made in our sustainability journey and the commitments we intend to deliver on in the future. Now turning to slide six. Let's take a look at our business wins and launch performance. As you can see on slide six, we highlight several of the important recent and ongoing launches. Although the production environment in the Americas was disrupted in the quarter, our process discipline and execution enabled us to effectively execute on launches. including launches in our JIT, foam, trim, and metals business that support the deepening levels of vertical integration in business that we are winning. We are able to successfully navigate the delays caused by strike-related production stoppages at our customers that cause certain program starts to be delayed. The team continues to maintain process discipline, which is key to managing the number and complexity of launches scheduled for this fiscal year. Now turning to slide seven. As usual, several recent new business awards are highlighted here. These new business awards, once again, represent a strong mix of customers, geographies, various levels of electric hybrid and ICE platforms. Important to also note are deepening levels of vertical integration in recent wins. More than 90% of business awarded by sales volume in the last fiscal year contained some level of vertical integration in foam, trim, and or metals. This continues and advances a trend starting in fiscal year 22, driven by our deep expertise in engineering, logistics, purchasing, and operational execution that allows us to drive value for Adyen and our customers when we control a greater portion of the seeding value chain. I'd like to especially highlight a new business sourcing on a BEV program that is supported by our Bridgewater Interiors joint venture. As a reminder, BWI is a successful, diverse joint venture that we have been involved in for more than 25 years. We're particularly proud of this partnership and the competitive advantage that it brings to Adiant, along with our Avanzar joint venture, which is also a diverse JV. We'll provide more details on this win at a later time. Flipping to slide eight, we've talked about the emerging trend that we're seeing in increased seeding content as an opportunity recently. Customers in China specifically have reimagined the vehicle interior around creature comforts like deep recline, long rails, massage, and sound in seat to name a few. Safety features like belt to seat and pelvic crash management are becoming increasingly relevant as the comfort features change the cabin interior configuration. And sustainable innovations like non-leather seating surface materials and low carbon steel are driven by both ESG goals and cost reduction efforts. These trends represent an opportunity for Adiant, but also increase a level of complexity that we will have to manage. As content increases, we see that the JIT assembly environment can become increasingly complicated unless properly managed. We have the engineering capability and manufacturing footprint to take the increasing content features and industrialize them in a way that is cost effective, driving win-win solutions for Adiant and our customers. This is especially relevant as our customers look to offset increasing labor costs at their assembly plants. We demonstrated a few of our strategies for driving process efficiencies to investors recently at our Plymouth Tech campus, as well as at a recent conference. Our ES3 process leverages available knowledge to create opportunities and value for our customers. We can identify opportunities for reducing operational waste, engineering simplification, and network optimization. We use value stream mapping to identify manufacturing processes improvements that we can bring to our customers and industrialize we're able to leverage our world-class manufacturing footprint capabilities to engineer and execute solutions like modular assembly. By leveraging the metals business that we own, we can assemble seat, back frame, and cushion pan modules in our existing footprint and enable labor, freight, and inventory efficiencies that not only reduce carbon footprint, but also cost. It's essential that we own the metals real estate to execute on this particular opportunity. We're able to share these efficiencies with our customer in order to manage the increasing complexity while driving financial benefits. It's important to note that we have modular assembly processes planned to go into production during this fiscal year. We're continually evaluating and improving how we operate the business. The key takeaway is that ES3 encompasses a range of benchmarking, continuous improvement, and VAVE practices that give us the ability to demonstrate opportunities for both our customers and Adiant that enable us to deliver our commitments on business performance. Turning to slide nine now. Heading into the end of fiscal year 23, there were reasons to be cautious and conserve cash. With the strike looming at the time, our strategy was to prepare a balance sheet for a longer-term production disruption in the Americas. As the uncertainty around the length and breadth of production disruption was resolved, we were able to get clear line of sight on our ability to generate cash. With cash on the balance sheet and good clarity around free cash flow for the year, the company returned $100 million to shareholders via repurchases, totaling approximately 3 million shares. Our capital allocation plan remains balanced. We're committed to returning capital to shareholders while also balancing the cash needs of the business. I'll also point out that our ability to improve margins, generate cash, and prudently manage our balance sheet was recognized by both S&P Global and Moody's recently. The company's corporate credit ratings were upgraded by both in recent months. Our balance sheet strength and financial performance also enabled us to amend and extend our term loan B subsequent to the quarter. Safe to say that our confidence in the company's ability to generate cash along with the flexibility we have built into the capital structure, is expected to underpin significant returns to our shareholders. With that, I will turn it over to Mark to cover the financials.