Adient plc

Welcome to the ADN third quarter 2024 earnings call. At this time, all participants are in a listen-only mode until the question and answer session of today's call. I would like to inform all parties that today's call is being recorded. If you do have any objections, you may disconnect at this time. I would now like to turn the conference over to Mark Heifler. Thank you. You may begin.

Thank you, Sue. Good morning, everyone, and thank you for joining us. The press release and presentation slides for our call today have been posted to the investor section of our website at aviant.com. This morning, I'm joined by Jerome Dorlak, Avian's President and Chief Executive Officer, and Mark Oswalt, 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 Q3 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 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. And with that, it's my pleasure to turn the call over to Jerome.

Thanks, Mike. Good morning, everyone. Thank you for joining us to review our third quarter results. We'll also discuss the drivers for our revised outlook and reiterate our long-term commitment to creating sustainable value for our shareholders. Turning to slide four, which summarizes the third quarter. EDIAN's Q3 results were significantly impacted by the EMEA region, which experienced lower volume, mixed, and weaker commercial recoveries. Americas and Asia performed generally in line with internal expectations. Our specific customer and platform sales have been affected much more than headline industry volume figures. For example, in the Americas, our top programs representing 60% of our volumes are down 8% this fiscal year, while S&P production estimates for the same period are up 3%. In EMEA, we are down 3% year over year versus S&P being down 1% year over year. We believe much of this underperformance is timing related to launches and specific customer inventory management. As Mark will note later in our presentation, we are starting to see signs of progress on certain launches. The Adian team continues to quickly adapt to changing market conditions and declining vehicle volumes that we've seen across the industry. By diligently focusing on the factors that are within Adian's control, the team has continued to execute operationally, driving consolidated business performance. Before turning to Adian's key financial metrics for the quarter, which are shown on the right-hand side of the slide, I want to remind you that prior year's results benefited from recognizing a one-time insurance recovery of approximately $20 million. Revenue for the quarter totaled $3.7 billion, down about 8% compared to last year's third quarter. Adjusted EBITDA for the quarter totaled $202 million, down approximately 20% when adjusting for the insurance recovery. We have a high cash conversion business model that played out this quarter, generating free cash flow of $88 million. At the end of the quarter was a strong balance sheet with ample liquidity that gives us flexibility to manage through a dynamic industry landscape and take advantage of opportunities to create value. In this regard, we remain committed to executing a balanced capital allocation plan and during the quarter, we've returned 75 million to shareholders through share repurchases. This brought the total year-to-date share repurchases to 225 million. We have repurchased nearly 8% of our outstanding shares since the beginning of the year. As I mentioned before, the industry is continuing to experience near-term volume headwinds, giving the reduced customer production environment we are refining our guidance for the remainder of the fiscal year. Let's walk through some of the dynamics influencing this decision and how each region is navigating the challenging near-term macro conditions and the strategic focus in the long term. Turning to slide five. In the APAC region, we have seen top-line sales performance in line with the market. This region continues to be the growth engine of the company, particularly in China, where we continue to perform above market. Business performance there continues to be strong, and as this region's share of portfolio grows, especially in China, this will provide a natural tailwind of mix for Add-In overall. In the Americas, we expect volumes to eventually recover as customers clear excess inventories and make progress on their new product launches. the region continues to be laser-focused on flawless execution with a long-term focus on margin expansion. The region also continues to reduce its third-party metals business, which is underperforming our expectations for returns. In Europe, we are proceeding with increased caution due to declining volume, insourcing, and weakening customer program mix. This quarter, we continue to experience headwinds from customer-driven inefficiencies. Last quarter, we announced a first step in our European restructuring. We are planning additional steps to address the ongoing headwinds in the region to manage costs and capacity. We will have more to share when we provide our fiscal year 25 outlook in November. Overall, we remain confident in maintaining our strong business performance and are focusing on the aspects within our control to enhance our results. Turning to slide six, we are prioritizing winning the right business and executing successful launches. Our business awards this quarter demonstrate further market share growth in China and enhancements to our global customer relationships. I would like to point out the win with GAC, which resulted in part from our innovative capabilities to drive an outstanding customer experience while also maintaining a competitive business case. As you can see on the chart, these WINS are vertically integrated to include complete seat systems that include jit, trim, foam, and metals. This is a key enabler to improving margins. We have highlighted a few launches where we have demonstrated strong launch execution, and we continue to deliver on safety, quality, and on-time delivery metrics. One example of this is the Nissan Armada. Edient has fully engineered the full-size three-row SUV with both a seven and eight passenger capacity. On this program, we have the JIT foam trim second and third row metals. Another successful launch was BYD's first EV program in Thailand, the Dolphin. And the Americas to Toyota launches have been key to our continued success in the region with our Japanese customers, a key differentiator for Adiant. Ultimately, we believe our focus on vertical integration and operational excellence will drive meaningful margin improvements. Including on slide seven, the team is not satisfied with the current results and the status quo. We continue to leverage our core principles, including operational excellence, customer portfolio management, and accelerating automation to improve business performance. Diving a bit deeper into these, let's start with operational excellence. As mentioned on the prior slide, excellence in launch execution underpins our business. The team is focused on operational excellence, streamlining processes, reducing waste, and optimizing resource allocation, coupled with disciplined capital expenditures, including asset reuse. Our cost-saving modular assembly process is in production, and more are planned for launch in the upcoming year. In addition, there is an increased focus on expanding automation. Automation is not new to Addy. We continue to deploy industry-leading tools And now we're expanding artificial intelligence tools with a focus on our metals plants where we have the highest amount of non-value-added indirect labor that we see as right for the picking. Automation continues to transform operations by reducing labor costs, improving accuracy, and achieving repeatable and reproducible results to transform operations for the future. Innovation is also crucial. Not only does it increase seating content, but also increases and enhances customer satisfaction. With respect to that, Adiant recently set up a JV with a local comfort system supplier to industrialize and innovate a mechanical massage system. This is the first ever innovative product in the market that Adiant China and Jinbo have jointly developed. These innovative efforts are collaboratively distributed across all regions. Shifting to our portfolio where we are focused on growth in APAC, specifically China, where we have seen the strongest margins and increasing content opportunity. The strong portfolio that we have built in the region contributes to our expectation of substantial growth and positive mix. In the Americas region, We view the setup as favorable for continued execution and margin expansion. As I mentioned earlier, Adyen's relationship with our Japanese and Asian OEMs is a key differentiator and one thing that makes Adyen, Adyen. We view this as a competitive advantage with these highly vertically integrated OEMs and programs. We continue to progress our plans to exit low margin tier two metals contracts as well in the Americas region. As previously mentioned, we are reviewing the strategic plan in Europe and the need for additional pairing of those operations. And finally, we are committed to being good stewards of capital and executing a balanced capital allocation plan with a focus on return of capital to our shareholders. Similar to prior years, the team is developing next year's plan, which will be finalized in the upcoming months, including assumptions on macro factors such as production, volumes, FX rates, et cetera. We will share the details with you when we report our Q4 and full year 2024 results in November. We remain committed to evaluating all options to deliver incremental value to Addion shareholders as part of this planning process. Now I'd like to turn it over to Mark to take you through our financials and updated guidance.