Lear Corporation

Good morning, everyone, and welcome to the Lear Corporation's second quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please send to a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Dan Brumbach, Vice President, Investor Relations. So please go ahead.

Thanks, Jamie. Good morning, everyone, and thank you for joining us for LEAR's second quarter 2024 earnings call. Presenting today are Ray Scott, LEAR president and CEO, and Jason Cardew, senior vice president and CFO. Other members of LEAR's senior management team have also joined us on the call. Following prepared remarks, we will open the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.com. Before Ray begins, I'd like to take this opportunity to remind you that, as we conduct this call, we will be making forward-looking statements to assist you in understanding LEAR's expectations for the future. As detailed in our safe harbor statement on slide two, our actual results could differ materially from these forward-looking statements. due to many factors discussed in our latest 10Q and other periodic reports. I also want to remind you that during today's presentation, we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. The agenda for today's call is on slide three. First, Ray will review highlights from the quarter and provide a business update Jason will then review our second quarter financial results and full year financial guidance. Finally, Ray will offer some concluding remarks. Following the formal presentation, we would be happy to take your questions. Now I'd like to invite Ray to begin.

Thanks, Tim. Nice job. Now please turn to slide five, which highlights key financial metrics for the second quarter of 2024. Lear continued its positive momentum, delivering modestly higher revenue in the second quarter compared to last year, exceeding $6 billion. Core operating earnings were flat at $302 million. Adjusted earnings per share was $3.60, an increase of 8% driven by higher adjusted net income and the benefit of our share repurchase programs. Operating cash flow was $291 million in the second quarter, and free cash flow was $170 million, an increase of 8% compared to last year. Slide 6 summarizes key business and financial highlights from the quarter. We generated a quarterly record revenue of over $6 billion in the second quarter. Growth over market for the total company was 3 percentage points, with sales in both segments outgrowing the industry. Each system's growth over market was 7 percentage points, and seeding growth over market was 2 percentage points. During the quarter, we repurchased $60 million of shares and paid $44 million in dividends. We continued to repurchase additional shares throughout our quiet period and have repurchased over $110 million of shares year-to-date. Adjusted earnings per share grew by 8% in the second quarter, driven in part by the benefits of our share repurchase program. In these systems, we delivered our eighth consecutive quarter of higher year-over-year margins by executing our focused product portfolio strategy and improving operational efficiencies. In seeding, we continue to see strong demand for our innovative solutions in thermal comfort. Given the rapid commercial adoption of our new products, today we are introducing our Comfort Flex by Lear modular designs, as well as our Comfort Max Seat by Lear. Comfort Flex and our Comfort Max Seat will showcase the various thermal comfort solutions that only Lear can bring to automotive seating. We continue to diversify our customer base in both seating and e-systems. In seating, we are awarded the complete seat for a new variant of the Geely Zirc, highlighting our continued growth with Chinese domestic brands. In each systems, we are awarded the low voltage wiring for the Volvo EX30 in Europe. The Smart Junction Box Award for Volkswagen and Audi will support the initial volume for their scalable system platform of BEV vehicles. Additional volume will be awarded in the near future. Last week, we closed on the acquisition of WIP Industrial Automation, which we announced during our first quarter earnings call. WIP leverages robotics, artificial intelligence, and vision systems to design turnkey solutions for complex industrial challenges that will help accelerate our automation initiatives globally. Turning to slide seven, I will provide more detail on the progress of our thermal comfort strategy. We remain on pace to meet or exceed our total revenue target of $1 billion from thermal comfort by 2027. The combined capabilities of Lear and the companies we have acquired are leading to an acceleration of new business opportunities and awards, and we are winning 80 percent of the programs we are quoting. We continue to innovate our thermal comfort product offering. Comfort Flex by Lear is a brand architecture of modular designs which combine two or more thermal comfort functions. These designs reduce the number of parts, resulting in less weight and complexity, while improving performance and comfort at a lower cost. For instance, our solution for Volvo, launching later this year, combines heat, ventilation, and massage functions. Our solution for Lucid includes ventilation and massage, similar to our product for Volvo, and adds lumbar functionality. Our third upcoming ComfortFlex design is for a European OEM, includes four capabilities, heat, ventilation, lumbar, and massage. Lear's expertise in complete seat applications allows us to design and deliver a combination of thermal comfort functions for our customers. Our vertical integration and complete seat leadership enables us to integrate our Comfort Flex modules into the trim covers to develop our Comfort Max seat by Lear. Our first iteration of the Comfort Max seat technology is currently in validation with Ford Motor Company. The Comfort Max seat for Ford includes thermal comfort content that was previously supplied by a competitor and will now be manufactured by Lear. This is one of the first examples of our innovative solutions driving conquest opportunities. Initial test results are confirming our estimates that these integrated solutions improve the performance of our thermal comfort components. As expected, the ventilation airflow and the size intensity in the ComfortMax seat is outperforming the traditional design currently in production. Full validation is expected by the end of this year. which will enable our Comfort Max seat to go into production for the first program starting in 2026. Once validated, our Comfort Max seat can be used in additional Ford programs, whether or not Lear is the complete seat provider. Ford is just the first customer to begin this validation. We're in the late stage discussions with three other key customers for our Comfort Max seat. Our Comfort Max seat provides several opportunities for long-term growth. The improved performance and reduced complexity delivers a better value proposition for our customers at a very critical time when they are seeking innovative solutions that reduce costs. This provides Lear with a competitive advantage when quoting just-in-time seed programs. And these Lear modules can be sourced to other complete seed suppliers, driving growth in our component business. Slide 8 highlights Lear's strong position with the Chinese domestic manufacturers. Lear has 30 years of automotive experience in China. Over that time, Lear has strengthened its local presence, built strong relationships with key customers, and has become a clear leader in luxury seating. We have been growing with key established customers such as BYD and Geely, and have supported the launch for other targeted new market entrants like Xiaomi, and their successful SU7 program. Two-thirds of our three-year backlog in China was driven by new business wins with Chinese domestic automakers, some of which is captured in our growing non-consolidated backlog, which increased by 70% to $650 million. This positions Lear to continue growing in Asia as the Chinese domestic OEMs continue to outpace the overall market growth in China. The financial return profile of our business with Chinese domestic customers is in line with our segment averages for seeding and e-systems. As with most programs in our portfolio, the profitability is generally dependent on the level of vertical integration. Chinese domestic OEMs tend to control less of the seed component sourcing, providing Lear with more opportunities to vertically integrate. The Xiaomi SU7 is a good example of that. We have foam and thermal comfort components in addition to the just-in-time assembly. We continue to pursue opportunities with the Chinese domestic automakers, both in China and as they expand globally. In seeding, we continue to win business with BYD and expect to produce about 30% of BYD's seeds within the next few years. Our vertical integration combined with our local engineering capabilities provide a significant opportunity for growth in China as customers look to rapidly implement innovative solutions. For eSystems, our market share in wiring and connection systems in China is similar to our global share despite the elevated competition from local suppliers. We are currently pursuing new opportunities in wire with the Chinese domestic OEMs. Now I'd like to turn the call over to Jason for the financial review.