Lear Corporation

Good morning, everyone, and welcome to the Lear Corporation third quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. At this time, I'd like to turn the conference call over to Tim Brumbaugh, Vice President, Investor Relations. Please go ahead.

Thanks, Jamie. Good morning, everyone, and thank you for joining us for Lear's third quarter 2025 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.leer.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 LEER'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 10-K 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 third quarter and provide a business update. Jason will then review our financial results and provide an update on our full year 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. Now please turn to slide five, which highlights key financial metrics for the third quarter of 2025. There delivered $5.7 billion of revenue in the third quarter, an increase of 2% from the third quarter of 2024. Core operating earnings were $241 million, and our total company operating margin was 4.2%. Adjusted earnings per share was $2.79, and our operating cash flow was $444 million in the quarter, one of our strongest operating cash flows in our history. Our third quarter financial performance was at the higher end of our expectations. Despite the significant impact of a cybersecurity incident that disrupted production, for one of our key customers, Jag Land Rover, for the entire month of September. Excluding the impact of Jag Land Rover disruption, total LEER third quarter core operating earnings and operating margins would have been higher than the prior year. Jason will provide the additional details on the impact of this disruption to our third quarter results in our full year outlook. Slide six summarizes key financial and business highlights from the quarter. As a reminder, our strategic priorities continue to be extending our global leadership position in seeding, expanding margins in these systems, growing our competitive advantage and operational excellence through IDEA by Lear, and supporting sustainable value creation with disciplined capital allocation. The momentum of positive net performance we delivered in the first half of the year continued through the third quarter. contributing 50 basis points to seeding and 95 basis points to each system's margins. This performance was remarkable, considering the third quarter of 2024 was also a very strong, making a very tough comparison for the year. It is a testament to our commitment to operational excellence and the benefits we are capturing from our investments in digital tools, automation, and restructuring. Through the third quarter of the year, we delivered 70 basis points of net performance in seeding and 105 basis points in eSystems. Our operating cash flow of $444 million was one of the highest third quarters in Lear's history, second only to the third quarter of 2020, which was skewed by working capital fluctuations resulting from the impact of COVID. Our strong cash flow generation allowed us to accelerate our share repurchases, which totaled $100 million for the quarter, while maintaining our dividend of 77 cents per share. The solid momentum we experienced in the quarter enabled us to raise the midpoint of our full-year free cash flow outlook. Had it not been for the impact of the Jagdan Rover disruption, we would have further increased the midpoint of our revenue and free cash flow and increased our operating income outlook. We continue to extend our leadership and operational excellence through IDEA by LEAR initiatives. To advance our employees' understanding and applications of digital and AI technologies, we have launched the LEAR Fellowship Program with Palantir. This 12-week intensive training will engage 90 LEAR team members from across functions, including IT, engineering, finance, and purchasing, empowering them to harness AI capabilities to address real business challenges. This is the first such company-focused fellowship program for Palantir. They are excited to work with Lyra because our company-wide commitment to use digital and AI tools to rapidly improve our business and manufacturing process and further improve our cost structure. I couldn't be more excited about the potential of this program, and I will be directly involved to gain the firsthand view into the transformative possibilities of these tools that they offer. We continue to win new business in both segments, In these systems, we have been awarded approximately $1.1 billion of business year to date. This is the fourth year of the last five years where Leary Systems has generated over $1 billion of business awards. In seeding, we won new business with several automakers, including awards with BMW, Ford Motor Company, Nissan, Hyundai, and Jag Land Rover, as well as awards with key Chinese domestic automakers. Our modularity strategy continues to drive new business. In the quarter, we won four Comfort Flex Awards, including a Conquest Award with Hyundai and awards with BMW, Leap Motor, and Ceres. During the quarter, we took operational control of our second joint venture in China this year. The joint venture supplies key programs for Ceres. Consolidating this joint venture is expected to add approximately 70% $75 million to our reported revenue for 2025, and a significant growth in 2026. In these systems, key business wins include eight WARE awards, among which are Conquest Awards for Stellanus and four awards with Chinese automakers. We also received two new electronic awards for power distribution boxes on Ford Motor Company's F-Series trucks. For the third straight year, Lear led the J.D. Power USC Quality and Satisfaction Study with seven top three finishes. And our customers continue to recognize us for our dedication to quality and performance. Ferrari honored Lear with their highly coveted Fearless Organization Award, recognizing us as a trusted supplier due to our commitment to transparency and reliability and dedication to quality. Nissan also recognized Lear for our industry-leading quality by granting us their 2025 Global Quality Award, as well as their 2025 Global Quality Award in North America. During the quarter, we published our 2024 Sustainability Report, providing an update on our commitments to sustainability and governance. Slide 7 provides an update on the key metrics to track our progress on expanding margins and generating long-term revenue growth. In seating, we won Conquest Awards for complete seats in Asia and South America, as well as for seat components with several automakers across multiple regions. In eSystems, we won two Conquest Wire Awards with Stellanus in North America and a third Conquest Award with a key Chinese automaker. Awards for our innovative modular seat products continue to grow. We received four additional awards during the third quarter, including a conquest award combining lumbar and seat suspension for Hyundai. Our other solutions combined heat and our foam comfort layer for BMW, and heat with seat belt reminder functionality for both series and lead motor. These additional wins bring our total to 28 programs for Comfort Flex, Comfort Max seat, and Flex Air products. Our strong relationships with Chinese domestic automakers continued to deliver new business wins. In seeding, we won five complete seed awards with BAIC, Ceres, Dongfang, Leap Motor, and SAIC. Four of our wiring awards in these systems were with Chinese domestic customers. Idea by Lear and our investments in automation generated $20 million of savings in the third quarter. keeping us on track to deliver approximately $70 million of savings for the full year. Restructuring investments contributed approximately $25 million in savings in the third quarter, positioning us to achieve $85 million of savings in the full year. As a result of our strong operating performance, we are increasing our full year net performance outlook from $150 million to $170 million. This reflects the positive momentum in the benefits of both idea by Lear investments and restructuring actions. Our global hourly headcount reduction is 3,400 through the third quarter. Despite an increase in headcount due to the consolidation of our second joint venture in China, we anticipate the fourth quarter restructuring actions will allow us to approach our target by the end of the year. We continue to outperform our scorecard metrics. These strong results are key enablers to improve margins and drive long-term growth in both segments. On slide 8, I'll highlight the strategic opportunities emerging as automakers accelerate their U.S. production plans. We are currently in advanced discussions with a North American automaker who is looking to increase volume on one of their signature platforms here in the United States. We believe the award is imminent, and we will provide an update when it's appropriate. We view this as the first of several incremental opportunities. While estimates vary, the total addressable market for increased US production is significant. Automakers continue to announce commitments to increase their production footprints in the United States. We are currently in active discussions with multiple OEMs, including a luxury European automaker leveraging their existing US facility, several Asia-based manufacturers expanding their footprint, and North American automakers adjusting their portfolio to supply both seeding and eSystems content. Lyra is well positioned to maintain or increase our market share due to this shift. Our strong customer relationships, proven execution, and extensive U.S. manufacturing footprint gives us a distinct competitive advantage. By investing in the automation and designing capital specifically optimized for our manufacturing processes rather than relying on the off-the-shelf solutions, we enhance operational efficiencies and we reduce our costs and we accelerate our speed to market. We remain the only supplier to have launched a full-seat assembly plant in under nine months in the U.S., a testament to our agility and operational excellence. We see the on-storing trend as a multi-year growth catalyst and a compelling opportunity to drive incremental revenue and margin expansion while supporting the administration's goal of increasing U.S. manufacturing. Slide 9 provides an update on two of our key pillars of our Idea by Lear strategy. Our process innovation, leveraging digital tools and automation, is transforming our operations, enhancing our competitiveness, and delivering meaningful value creation. Lear's relentless focus on being the industry leader in technology-driven operational excellence is accelerated by our partnership with Palantir. The LEAR fellowship program is a strong endorsement of our culture to embrace operational excellence. Today, we have over 14,000 users fully embedded on the Foundry platform, driving performance across more than 10 global centers of excellence. We've deployed over 250 digital tools and AI use cases across product engineering, material purchasing, manufacturing, testing, and inventory management. each contributing to smarter, faster, and more efficient decision-making. Over the past seven years, we've acquired eight companies, each focused on advancing product and process innovation. Our global automation and digital team now includes more than 700 specialists. We've developed proprietary AI tools like Vagora, RoboScan, and LearView. The Goros RoboScan uses exclusive algorithms and automation to optimize the cutting patterns for our leather hides. LearView is a vision system that enhances our defect detection capabilities and ensures proper color and motion of our seats amongst other end-of-line function tests. And we built the industry's first automated assembly of our FlexAir, ComfortFlex, and ComfortMax systems to demonstrate our innovative manufacturing capabilities to our customers and eventually to our investors in a production setting. By integrating approximately 80% of our capital, which is designed specifically for our manufacturing processes into our complete seat operations at a 20% to 30% cost advantage, we have a significant competitive advantage in both efficiency and scalability. These efforts are already delivering results. We expect approximately $70 million in cost savings this year with an additional $65 to $75 million of savings annually in 2026 and 2027. In addition to the cost benefits, these initiatives improve working capital and free cash flow. Our product and process innovations improve our underlying cost structure, resulting in stronger financial returns for new business quotes. These tools also enhance the safety, quality, and ergonomics of our world-class operations and improve employee retention. Our digital and automation strategy is not just about operational excellence. It's a key driver of our long-term value creation. Now I'd like to turn the call over to Jason for a financial review. Thanks, Ray.